There are many options for Arizona homeowners who are underwater

While the economy continues to recover, the truth is that it is not bouncing back at the speed at which many need. Many Mesa area homeowners are still facing foreclosure or are paying mortgages that are higher than the actual market value of their homes.

As the value of many Arizona homes has reduced, homeowners are increasingly feeling helpless in the face of their underwater mortgages--when the amount remaining on their mortgage is higher than the value of their home. Although the government has introduced revisions in the Home Affordable Refinancing Program, it leaves most people unprotected as it applies only to federally insured loans.

In such times, it is important for homeowners to know all of the options that are available to them. They can apply for a loan modification, a short sale, refinancing or bankruptcy. Among the possibilities is also a strategic default, where the house can be returned to the bank through a normal foreclosure on the homeowner's terms, or through a deed during foreclosure proceedings.

One way to halt foreclosure proceedings is by filing for Chapter 7 bankruptcy. The filer will receive an immediate stay on foreclosure proceedings. In fact, filers can often keep the house they live in provided it has a certain amount of equity. Retirement savings and most personal assets are also usually exempt in a bankruptcy.

Many of those struggling with debt may need to take control of their finances and restart their life. Those hesitant to file for bankruptcy or pursue another one of these options due to the stigma attached should keep in mind the potential benefits of beginning their life afresh, away from creditor harassment and the burdens of underwater mortgages.

Source: Atlanta Journal-Constitution, "Nothing wrong with default," Michael R. Bang, March 13, 2012