Written by attorney Lawrence Joseph Marraffino

Consider Chapter 7 Bankruptcy if you are hopelessly underwater on your mortgage.

As a Chapter 7 bankruptcy trustee, Martino deals with fallout from home loans, student loans and credit card debt gone wrong

Some things have been bothering Phil Martino lately as he oversees the handling of personal bankruptcy cases.

The most glaring mistake, the Quarles & Brady lawyer says, is that far too few debtors turn in the keys to their homes when faced with big outstanding mortgage balances. Martino is one of about 30 Chapter 7 trustees in the U.S. Bankruptcy Court in the Northern District of Illinois.

Instead, they either "reaffirm" the $200,000 they owe on a house now worth $100,000, or they roll the dice and hope that the bank doesn't knock on their door and evict them from a home because they're emotionally attached to it or fear they won't find another place to live

"They came to bankruptcy to get a fresh start," Martino said, adding that they should use the court to do just that.

The U.S. bankruptcy code, Martino explains, allows underwater homeowners to give the keys back to the bank. That's the course of action that he recommends in most circumstances when the debtor owes far more than the house is now worth. Martino estimates that only about a third of the debtors that he sees in such housing situations will take advantage of the fresh start.

Gainesville Bankruptcy Attorney Lawrence J. Marraffino

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