Something new and depressing in my neighborhood

[LizW]

We have seen several houses around us forclosed. There was not much way to tell what was happening. They just had the regular "For Sale" sign on the lawn, plus a little sign that said "Foreclosure". At one of them, apparently the people left a lot of stuff when they moved, because a cleaning company came and put out a huge pile of furniture and stuff for the junk people to haul away.

But last week a BIG wooden sign went up in front of a nice house on the main street. It's orange with black writing and says "BANKRUPTCY AUCTION" and it has dates and some other information on it. This house has not been empty, there have been people living there and the yard is nice and the house is well kept.

Do you think this is something that is happening because of the new law? I've never seen a private residence auctioned before.

[SW FL Dem]

1. It happens when the resident has too much equity in the residence

How much equity you can protect varies by state. Some states only allow you to have a little equity, others like Texas and Florida don't have any limits. The excess equity is an asset that is sold by the bankruptcy trustee and the proceeds are paid to creditors.

[RaleighNCDUer]

13. That sounds, at first blush, to be really upside down.

The more equity you have, the more you own and less you owe on your house. So if you are trying to be frugal, and not taking that second mortgage, you risk losing your house, whereas if you do increase your debt and take a second mortgage, you are permitted to keep it.

Whaaa???

[aeolian]

14. That depends on where the cutoff is, I guess

I suppose it was originally meant to keep really rich people from protecting great wealth in equity. What is the cutoff, anyway?

[lastliberalintexas]

15. It's all in the name of paying creditors

We wouldn't want poor little Predatory Lending Corp of America to not be paid back just so Joe and Jane Sixpack can keep their house. And if you have equity, that means money on the sale to pay your creditors. Priorities please!


This is actually one of the few times that Texas is good to its homeowners. It used to be even better, since we were one of the few states to forbid any kind of second mortgage on a homestead, but of course we've abolished that provision. Now we can borrow, borrow, borrow just like the rest of you!

[SW FL Dem]

17. Yep! Those people who don't borrow against their house before filing

BK can lose their house, those that do may end up being able to keep it. Even worse, in states like Florida, under current law, someone can move to the state in contemplation of filing bk, buy a multimillion dollar home for cash and keep it, but some working family who has owned their home for 20 years can lose it if they have more than the allowed equity (which can be as low as 15-20K in some states).

[MuseRider]

2. Happens here too

mostly with farms. Auctioned with the family watching from the yard. This is not new but is certainly more frequent these days.

[getmeouttahere]

3. I'm afraid this is only the beginning...

as those medium-range jobs continue to go overseas, not to mention some of the higher-range jobs.

[Warpy]

4. I've been doing the cardiac rehab thing

walking and biking around my neighborhood, and I've noticed the same. Here, it's the signs pasted in the windows that have said the house has been foreclosed. One such house has been sold. The rest are still empty.

One neighbor just sort of disappeared one night, doing a midnight move. His house has been vacant for over six months.

In the meantime, there are posters and handbills tacked to light poles looking for property to sell to speculators.

[Oreo]

5. Law hasn't gone into effect yet

It could be they're filing bankruptcy now before the law starts.

http://www.moranlaw.net/new_bankruptcy_law.htm <-Lawyers for Morans

Looks like October
Bankruptcy law will change dramatically in October. Bankruptcy relief will not be available to some; will be more limited in scope; and will be more expensive. Debts that are dischargeable under the present law will survive a bankruptcy discharge under the new law.

Who should consider filing before the new law is effective? Those whose debts include any of the following kinds of claims:

* Unfiled tax returns: present law allows discharge of tax liability for tax years ending more than 3 years prior to the bankruptcy filing, even if the returns have not been filed. The new law eliminates this provision.
* Debts incurred by dishonesty: currently, a debtor can discharge, without challenge, debts that the creditor claims were incurred by fraud, breach of fiduciary duty, or intentional malicious acts. This provision has kept credit card companies from disputing the dischargeability of credit card debt. The Chapter 13 "super discharge" will disappear under the new law.
* Trust fund employment taxes: current Chapter T 13 discharges even priority taxes such as the liability of a corporate officer for the withholding portion of employment tax liability if the taxing authority does not file a timely claim. Under the new law, tax liabilities for which no claim is filed will survive the bankruptcy.
* Car loans if the vehicle was purchased in the past two years and is now worth markedly less than the loan balance. The ability to strip down a car loan in Chapter 13, or redeem the car for its present value disappear under the new law on vehicles purchased within 2 1/2 years of the bankruptcy filing.
* Debts arising from a divorce: property division obligations or indemnity provisions will be non dischargeable in Chapter 7 but remain dischargeable in Chapter 13.
* Candidates for "Chapter 20: anyone who needs a "super discharge" now available in Chapter 13 but does not qualify by reason of the debt limits should consider acting immediately to file Chpater 7 so that the Chapter 7 discharge can be entered and a Chapter 13 case filed before October 17th. The new law attempts to limit the Chapter 20 strategy.

[samdogmom]

6. So sad...But, wait a minute I thought the economy was great!

Why is this happening? ** just said that job growth is great and the economy is booming. I'm confused.

[theboss]

7. Where is this happening?

I've always wanted to be a real estate tycoon.

[LizW]

11. Middle-class suburb of Birmingham, Alabama n/t

[orion9941]

8. Same thing in my neighborhood too.

I live in a fairly upscale/trendy neighborhood in my city and you very rarely saw homes up for sale. Now all of a sudden you can go down any block and find 5-6 homes up for sale or foreclosure on each block. At a city council meeting I found out that many of them were people moving because they were laid off and could no longer afford their home with the crappy pay their new job paid them. Either that or they had one of those interest only loans (which are far too popular) and the rate went up and could no longer afford the payments.

[dogday]

9. I have said this before. The Mortgage Companies Have It Great

They lend money make interest and get principal payment. Then they foreclose, so they get the home, and the interest and principal already paid into the property. They are in the rent business now, just really expensive rent.....

[cap]

12. even better than that

the Mortgage companies have sold off the debt that is likely to go delinquet.

[LizW]

10. Thanks for the explainations

It is sad to see people lose their houses. It happened to our next door neighbors, they split and he tried to keep the house and couldn't make it. This was a couple of years ago and the house sold immediately. But lately it seems the foreclosed houses have been sitting empty for months.

[4_TN_TITANS]

16. Same here in TN.....

Not long ago there was a boom going on as people raced to build bigger and newer homes. Now used homes are a dime a dozen. I see so many obviously low income residences up for sale now. Eventhough TN went to * our county was strong Kerry. I feel sorry for the people here being squeezed - we didn't vote for this!!!!

I'm just thankful that all I owe is about $15,000 between car and home payments. We knocked the last of the credit card debt out around the 1st of the year, never to use them again!