Daily Archives: December 29, 2009

Foreclosures And Bankruptcy

Mortgage delinquencies, people behind at least 3 months on their payment, continued to climb according to Fannie Mae.

BANKRUPTCYcourt

The Calculated Risk blog reports the results, with a graph that points to nothing but trouble for homeowners, the mortgage delinquency rate having more than doubled over last year, and still going up.

More delinquencies, means more foreclosures, means more houses for sale, increased supply, means lower prices for all houses, putting more homes underwater, in that they will be worth less than what is owed on them, leading to, more foreclosures.

And, why pay full price for a new home, when so many homes are effectively on sale at discounted prices, having been foreclosed?

New home sales down, also bad for the economy, and j0bs, which people need so they can make their house payments and avoid foreclosure.

At least some commentators, Wenli Li and Michelle J. White, believe the 2005 bankruptcy law reforms also increased foreclosures.

Chapter 13 bankruptcy does stop foreclosure, but does not force changes in the first mortgage on a home you live in.

So, if your home is worth a lot less than you owe on the first lien, and you have no second mortgage, it might not make sense to file that Chapter 13 bankruptcy to stop a foreclosure and catch up on the missed payments.

Now, if there is a second, or second and third lien, on your home, and, your home is worth less than what is owed on the first mortgage, in Chapter 13 you can lien strip, or avoid, that second or second and third mortgage.

Then, Chapter 13 might make sense.

As always, get the facts:  what is your house worth, that is, what would someone pay you for it, right now, without painting it or fixing it up in any way.

How much do you owe, total, on your mortgages?

And, make a realistic monthly budget of what your income and necessary living expenses are, to see what is left for mortgage payments.

And consult an experienced attorney.

Foreclosures and Bankruptcy

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