Bankruptcy

The run up in foreclosures over the last few months has many homeowners eyeing bankruptcy as a way out.

While the phrase "what is old is new again" is a thoroughly worn out cliche, it has become a cliche because it is oft repeated and it is oft repeated because there is a great deal of truth and reality found within the words that comprise the phrase. In the case of bankruptcy, this is an old problem that has come back to the forefront of the public consciousness thanks in part to the current mortgage foreclosure crisis that is facing segments of the nation. There has been an alarming increase in bankruptcy filings due to the increase in foreclosures and it has become a headline grabber in the newspapers as well as a campaign issue in the upcoming elections.

On a baseline level, the current issue of mortgage foreclosures derives from the fact that people are unable to afford their mortgages. Because the mortgages have created a situation where the homeowner has had to "max out" on loans to meet mortgage payments, there has been an increase in bankruptcy filings.

The cause of the foreclosures is two fold: first, many borrowers simply borrowed far beyond their affordability. When it became obvious they could not pay, they did not downsize to a smaller, less expensive home. This set them on course for bankruptcy.
The second cause of the foreclosures is the result of predatory lending when the lender purposefully "swerved" the borrower into purchasing a home they could not afford. The third reason is a combination of reasons one and two.

Escaping Bankruptcy Foreclosures

Now that we find ourselves in a problematic situation, how do we get out of it? This is the question posed by many individuals in regards to their current situation. There has been talk of government bailouts, but that would seem like a very slim option. Quite honestly, the public would not be interested in helping out people who dug themselves in a hole. Market manipulation of sub prime lending rates is an option, but a tricky one that may not prove possible.

Filing for personal bankruptcy is an option, but this has become harder in recent years as the rules for filing bankruptcy have become tighter. The other option is to consolidate bills and seek credit counseling. The final is to simply let the foreclosure occur and let the proverbial chips fall where they may. As one can see, there are no easy options in the situation.

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