A U.S. Bankruptcy Court trustee in a different state was interviewed for an article that we thought Lakewood, Colorado, homeowners struggling with their finances might find rather interesting. Like many Americans, too many Coloradoans are upside down in their mortgage. That means they owe more on their home than it is currently worth, and in some cases way more than it is worth.
One of the biggest mistakes the trustee, who is also an attorney, sees in personal bankruptcies is homeowners who file for Chapter 7 bankruptcy not taking advantage of the fresh financial start by turning over the keys of their homes to the mortgage lenders.
What these individuals do is "reaffirm" their mortgage of say $200,000 on a home that is valued at $100,000. Sometimes they gamble the bank will not appear on their doorstep and evict them through foreclosure. People do get 'emotionally attached' to their homes for a variety of reasons, sometimes because they simply do not know where they are going to live if they lose it. A personal bankruptcy offers a fresh start, and that is exactly what these individuals should take advantage of, the attorney said.
That's his recommendation, however only one-third of the cases he sees actually take that step. The bankruptcy code allows it, so why not take advantage of the opportunity to begin anew if you are filing for Chapter 7 bankruptcy? It can not only reduce your stress, but give you some breathing room to readjust your financial attitude so you can move toward a brighter tomorrow.
The trustee is also agitated about the current student loan crisis, which unlike home, auto loans and credit card debt, can only be discharged in bankruptcy under very specific circumstances. He thinks the crisis will only get worse and eventually result in a class of "indentured servants" who work solely to pay off their student loans.
Another problem he sees looming is increasingly higher credit card debt. When he has clients under the age of 30 he will check to see how many children they have and whether or not they receive support for those children. He said invariably they do not receive any support and have anywhere from $50,000 to $100,000 in credit card debt. He counsels these individuals about the dangers of getting sucked into credit card debt and steps to avoid it if at all possible.
Source: Chicago Tribune, "Bankruptcy often finds people at their lowest point, and trustee Phil Martino sees plenty of mistakes and regrets," Becky Yerak, June 23, 2012