President Obama recently introduced an idea that may affect some who are considering filing bankruptcy. In my San Francisco practice as a bankruptcy lawyer, I continue to see changes proposed by the government that change or alter people’s ideas who are considering bankruptcy.

The idea behind the new plan that was proposed last week is to try to get lenders to accept a short sale on a home. Here’s the way the Obama plan works. If you have a home on which you owe more than you can get for it and the bank will agree to the sale, then the government will give some money to the lender and to the seller. The stimulus also gives cash to those who hold second mortgages on the home. One problem with short sales is that even if the primary institution accepts a short sale offer, often the secondary lender will block it.

As an example of how this new proposal works, a homeowner may owe $150,000 on their home and find someone who is willing to pay $80,000. Under President Obama’s plan, those who hold mortgages on the property, including second mortgages, will receive an additional $1,000 and the seller will be given $1,500 in “relocation assistance.”

The incentives are not high. But the administration hopes to get more lenders to accept short sales rather than moving towards foreclosure. One of the problems with allowing properties to be foreclosed upon is the fact that they often lose much of their value due to the fact that when left unattended for a long period of time they are suspect to vandalism.

As a bankruptcy attorney, one thing I always tell clients in the San Francisco and Sacramento Bay area to consider is if they can possibly keep their home, they should do so. Sometimes those who file for Chapter 7 can keep their household and those who file for Chapter 13 certainly intend to do just that—keep their homes.

Bankruptcy is not for everyone but it can be an effective tool for those who are too deep in debt to start afresh. As a bankruptcy lawyer, I always want to ensure that my clients do what is right for them.

If you have any questions regarding bankruptcy please contact the Ranchod Law Group in San Francisco, California, at info@california-bankruptcyattorney.com or at 888-589-1977 for a free consultation.