I think everyone's psyche is different. It would be to hard to answer that question for anyone other than myself. As a consumer, would I file bankruptcy? Would I foreclose on my property? No! Would I do what ever it took to save what I had? Would I take on the responsibility to follow through with my bad mistakes? Would I collect food stamps to compensate for earnings lost in order to save my home? Take on a second job? Yes.
Now I realize that there are ALWAYS circumstances that are beyond peoples control. I would never insult anyone by assuming that they could have done something differently to avoid either foreclosure or bankruptcy, but I agree with Carrie when she stated that many people view bankruptcy and foreclosure in the same way as they view divorce. It's easy to get out of if you don't like it anymore. This is an attitude that is running rampant throughout our society. The values that we had 20 and 30 years ago are not with us today. Owning the American Dream with 2.5 children in a marriage that has lasted 20+ years. These values and standards are getting to be the unusual as opposed to the norm.
It is necessary that we get back to the basic standards in life and live for what is right and good. That sounds extremely cheesy, but the reality is, if we do not, all that is left is CHAOS!
"Those are my principles. If you don't like them, I have others"
The question was: If someone is considering letting the bank foreclose on them, would they also consider filing bankruptcy?
To that question, the answer is as I posted.
What is happening in many of the cases of foreclosure, which are based on ARM resets, is that the people bought homes where the equity no longer matches the debt and they CAN'T refinance. Best thing to do is to call your mortgage company and see if something can be worked out, but that doesn't address the direct question. With that in mind, I ask you: What should a person do, if they owe $275,000 on a property that is worth $235,000 and their payments are going up so far, it would be considered payment SHOCK and would be illegal to write the loan in the first place, and they CAN'T afford the new payment?
Are you and others suggesting that they just continue to pay on the mortgage, no matter what the payment is? As far as the bank is concerned, there are numerous mitigating factors involved, like the disparity of the LTV, for one. For the vast majority of the people, there is no way they can afford it, so you are seeing the fallout.
I completely agree with you and deeply sympathize with people who were enticed into homes and mortgages that they wouldn't be able to afford when rates when up. If they can work out a payment or arrangement with the mortgage company and stay in their homes, eventually the value of their homes will go up again.
I suggest they talk to a Realtor to find out if their $275,000 home is worth $275,000 or $235,000 now. I suggest that they talk to their mortgage company to try and work out something else. I suggest they contact one of the many not-for-profit organization for counseling and advice as to what they should do and how the process works. To find out if they need to hire an attorney. The problem with the people stuck in this position is that they are in denial. They are afraid to talk to the bank. They are afraid to look at the possibility of selling their home. But if they just sit and do nothing, it will be too late. The bank will take back the house and evict them. They need to find out the process and the consequences of just letting the bank foreclose on them.
I'm asking if agents who are talking to homeowners considering foreclosure if the homeowners think bankruptcy is a good idea. I venture to guess that the homeowner would say, "No bankruptcy looks bad. I'm going to let the bank just have the house back." I may be wrong, which is why I am asking. Do the people going through foreclosure understand the impact it will cause?
I am asking for an opinion from the pros on perceptions, not legal advice. I am asking the consumers for a look into their thought process. Why should someone pay for legal advice if they could call their mortgage company and work out an arrangement? The reason they are considering foreclosure is because they don't have the money for an attorney. They should talk to a Realtor because they need to know if selling their home is a solution to their problems.
Divorce was an analogy. It used to be that the institution of marriage was sacred - "Until death doest part." Now some people have the attitude that if marriage doesn't work out, you just file for divorce. Several years ago it seemed that people had the same attitude about bankruptcy. Previously, people thought "only losers and bums would dare file for bankruptcy." But then it started becoming an easy way out - OR SO PEOPLE THOUGHT. Then they discovered, as you eluded to, that it can make it difficult or impossible to get a mortgage in the future. So filing bankruptcy is no longer "in fashion". The new mob mentality is as Carrie said, "if it doesn't work out we don't make the payments?"
I'm trying to get across to the public that FORECLOSURE IS NOT the easy way out!!! It will haunt them. Your life these days revolves around your credit report. Not only will foreclosure, notice of default or bankruptcy hurt you in the future when it comes to getting a mortgage or refinancing your home, it could also prevent you from getting a job or renting an apartment. To an employer or a landlord, it shows lack of responsibility. If you get laid off and stop making your mortgage payments, you might not get another job or another place to live.
HOMEOWNERS: ARE YOU WILLING TO RISK BEING HOMELESS IF YOU STOP PAYING YOUR MORTGAGE? CALL YOUR LENDER NOW AND ASK FOR HELP!!!
The bankruptcy trustee will look at your ability to "re-affirm" the mortgage. In many instances it is a good idea to go bankrupt to save your home. I don't know your financial condition and cannot recommend such, but I would check with a bankruptcy attorney.
There is something else to consider. Bankruptcies, foreclosures and Notices of Default all weight heavy and about the same when you are trying to get a mortgage, so if filing bankruptcy will save your home, I would get some solid advice from a BK attorney.... NOW!
Yes and no. I'm going to oversimplify this as well. Bankruptcy is kind of like the Judge being your mandatory financial planner. He can tell you that you have to sell the house or give it to the bank. He can say you still have to pay all your unsecured debt or he can tell the creditors, sorry your out of luck. And I do think the rules have changed and that they do vary greatly by state. I'm also not an accountant, attorney or any other kind of professional that is required to have a license in order to give advice.
I think you hit the nail on the head!!! The worst part is when they get a divorce, they don't think alimony, having to pay for two residences, possibly garnished wages and going to jail if they don't pay child support. Just like they don't think about how it will ruin their credit, make it difficult to live somewhere else and possibly have to pay the money back or pay taxes on it.
Ok, I'm gonna' look like an idiot here--but, I thought declaring bankruptcy would SAVE your primary residence... Aren't you permitted to keep your home (if you can continue to make the payments) and NOT pay your unsecured debt? Isn't that kinda' the whole idea? I know I'm oversimplifying, but have the rules changed and/or does this vary greatly by state?
If someone ends up in trouble they may not be able to get out of it no matter what they try.
I saw awhile ago many people saying they did not feel they should have to pay for a house when it was not worth what they paid for it. Somehow I suspect if those same people asked about a car they would not say the same thing. Cars are expected to depreciate, but houses are not. The psychology of many who bought was as simple as buy now, sell later, make more money than thinkable. When that did not happen people got upset. They lost their part of the contract for prices going up forever. Being upset they let their partner ( the bank) take the loss.
In USA Today on Nov 2, 2009 they quoted Experian and management consultants Oliver Wyman's statistic that 588,000 borrowers walked away from their homes last year (2008). Did the phrase "STRATEGIC DEFAULT" even exist two years ago?
I haven't been reading (or answering) questions on Trulia in the past year. But when I wrote this it was because people were talking about walking away BY CHOICE. And to some extent it could be construed as fraud. One person was in the process of buying a new house before their stopped payments on their old house appeared on their credit reports.
PLEASE EDUCATE YOURSELF AND ASK FOR HELP.
The good news is the Mortgage Forgiveness Debt Relief Act of 2007 is WAIVING having to pay taxes on what you owed that you didn't payoff for your PRIMARY HOME until 2012. The bad news is that THIS DOES NOT COUNT FOR 2ND HOMES AND INVESTMENT PROPERTIES.
I am NOT an accountant, attorney or any other professional licensed to give advice. Please consult professionals regarding this situation.
More bad news is that according to Forbes, Nov 6, 2009, "What is key is that some states allow mortgage firms to pursue other assets. For anyone who is considering walking away from a mortgage, it is important to check state laws--they could be walking away from much more than a house."
The New York Times on Oct 25, 2009 mentions: "Job seekers can also run into trouble, because many employers check credit reports."
Finally, in this crisis the way to go is SHORT SALES. According to June Fletcher of the Wall Street Journal, October 30, 2009, some lender don't report short sales and applications ask about Foreclosures, not short sales.