The bankruptcy and foreclosure rates in the US have been going through the roof since the bursting of the real estate bubble causing the economic downturn. Back in 2008, the United States saw numbers of Americans filing bankruptcy as a way to stop foreclosure and eliminate large amounts of unpayable debt. Prior to 2007, people were spending like drunken sailors, using the equity of their over inflated home to buy large flatscreen TVs, pools, expensive automobiles, boats and extravagant vacations. At that time, no one thought that it would ever end. I heard young families, that purchased homes at the peak of the market using horrible ARM mortgages, say, "when our loan adjusts and we can afford it, we will just sell it, take the profit and buy something cheaper".
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By now, every American knows how this ended. As these mortgages, many of them negative amortization loans, started adjusting, these young families began losing their homes to foreclosure. The scary thing is, the banks were writing these loans all the way up to June of 2007. This makes you wonder if the foreclosure rate we are seeing now is just the beginning of what's to come. Not only is the real estate market down, but unemployment has been above 8% for over three years. Many of the people that have gone back to work have taken lesser jobs in the fast food industry or the big-box stores to put food on their table. Industry is continuing to leave and go overseas and now the US economy is based more on consumption than on industry.
Today, adjustable-rate mortgages that were given back in 2006 and 2007 are still in the process of resetting. When these loans reset and come off the low teaser rates, the payments of the homeowners could double, making the house no longer affordable for the family. Most of these houses are underwater and the owner has no way out but to walk from the property or have it taken away by foreclosure. I believe this snowball recently just left the top of the hill and will continue to pick up and destroy everything in its path until it hits the bottom. Many of these programs the government has come out with, are just prolonging the agony. Propping up the banks is nothing more than rewarding these institutions for bad behavior. All people facing this dilemma should be consulting a bankruptcy attorney to see what their legal options are.
Recently, many Americans have been filing Chapter 13 bankruptcy as a way of stripping the liens of second and thirds. How it works is, if the person's property is worth less than the first trust deed, the second and third are technically no longer secured by the property. This allows the bankruptcy attorney to file a motion with the court to strip those liens and make the debt unsecured. In a Chapter 13 bankruptcy, debts are paid by priority with secured debts being paid first and the unsecured getting whatsoever left over. At the end of the Chapter 13 payment plan, the unpaid portion of the second and third trust deed will be included in the bankruptcy discharge and wiped out.
As foreclosure rates continue to rise, Americans need to keep a close eye on their own finances and when things get tight don't be embarrassed about seeking the advice of a bankruptcy attorney to find out their options.
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