Wednesday, February 3, 2010

MORTGAGE FORCLOSURE - SETTLEMENT CONFERENCES

Yesterday, I was a volunteer lawyer at Nassau Supreme Court for a few hours where a special program was held by the court in which homeowners in foreclosure could meet with volunteer lawyers and certified housing counselors before their next scheduled mandatory settlement conferences. I discovered that some homeowners are wishing to maintain their homes for emotional reasons that makes no financial sense. Here's an example. Homeowner has a gross income of 50K, a home that has a value of 350K,a mortgage in arrears that totals 500K and 200K in other debt (resulting from credit card spending, medical bills, etc.) This is a terrible economy but this can also happen in a good economy. Why pay a bank 5K a month to keep a home that you could probably rent for 2K a month? Why pay 500K for a home only worth 350K? Even assuming you could keep your home in foreclosure, there is still another 200K in debt. These creditors will eventually sue and get judgments. These judgments can be liens against your home and eventually foreclosed on. I write this to say that there is no shame to file for bankruptcy. This is life, not a game of Monopoly. Bankruptcy allows you to start all over again and in the hypothetical case I present, at least the homeowner has a job. I understand emotional ties to your home, I have one myself, but sometimes, decisions must be made that make financial sense, even though your heart says no. Below is a link to a recent article in the New York Times that deals with this issue:

http://www.nytimes.com/2010/02/03/business/03walk.html?ref=business

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