Over 100,000 consumers filed for bankruptcy in October.  Considering the current economic circumstances, it might seem reasonable for lots of folks to head to the nearest bankruptcy court. In fact, the bankruptcy process was changed in 2005 to assure that borrowers had as few rights as possible, thus discouraging bankruptcies.

“Perhaps most importantly for mortgage borrowers, the 2005 legislation says homeowners must obtain credit counseling and develop a budget analysis in the 180-day period before filing for bankruptcy.”  Of course, within 180 days you could be foreclosed before you can even get to a bankruptcy court.  Now the American Bankruptcy Institute reports that “overall October consumer filing total of 106,266 also represented a 20 percent increase from September. Chapter 13 filings constituted 32.6 percent of all consumer cases in October, a slight decrease from September.  Bankruptcy lawyers continue to report more and more cases for loan modifications and debt settlement, so the financial crisis continues to explode.

Financial stress?   How about a world-wide disaster built on bogus loan applications, predatory mortgage loans, massive prepayment penalties, insurance policies without reserves, grossly ineffective regulation and levels of risk which could not possibly be sustained. And weren’t.  The good news, relatively, is that those who financed with FHA mortgages at least have a shot at financial security. You’re unlikely to go bankrupt with FHA home loans because they prohibit massive payment increases, prepayment penalties or new loan applications which do not include checks for income and employment.  It’s unfortunate that many neighbors did not follow the same course.   > Read Complete Article.

  • Share/Bookmark