It’s no secret that many people in the United States have faced foreclosure in recent years. In 2013, the number of foreclosures dropped dramatically, leading many real estate agents to believe that the economy had recovered and things were looking up. The only problem with this is that the number of unemployed continues to rise. Sure, the government says many people have gone back to work, but the jobs that are being filled are low-paying minimum wage jobs. Some people have been forced to take one of these jobs because their unemployment insurance has run out and some have simply stopped looking for work altogether. So I don’t know how anyone could say that the economy is actually improving when the numbers tell a different story. If the numbers tell the real story, this is the calm before the storm and we can expect to see a large number of people file for bankruptcy and lose their homes to foreclosure in the next year or two. This shadow inventory of homes that are in some stage of default or foreclosure now exceeds 5 million nationwide. I think the banks are holding back foreclosure on these properties to shore up the value of the assets they own. If all of these hit the market at the same time, we would see the bottom of the housing market fall.
There has been a lot of buzz about the tax cliff and the expiration of the mortgage forgiveness tax that expired at the end of 2012. This means that people who lose their homes to foreclosure will be responsible for paying income tax on the deficiency of their mortgage that was repossessed. This will put many Americans in a difficult financial situation to pay money they do not have. This is why it has become common to see that people who lose their homes to foreclosure will have to file for bankruptcy as well to remove liability. Initially, most people file for bankruptcy to stop foreclosure in hopes that they can work out a deal with their lender. In some cases it works and in others it is better to give it up and let it go. In our society, people believe that owning a home is a right. That became apparent in the early 2000s when people making $50,000 a year were buying $600,000 homes. In what world does this make any sense? The government pushed it and the banks went along with it and everyone knows how it ended in 2007. All these bad loans were packaged up and sold on the derivatives market. That set in motion a virtual collapse of the banking system in the US that trickles down globally. After everyone thought we would learn from our mistakes, the same thing happens today. The only difference is that it’s not with real estate. Currently, ever since the banking crisis and the Fed has been printing money to buy mortgage-backed securities and bail out banks. In other words, they are using Monopoly money to buy worthless paper. All of this is not going to end well when hyperinflation sets in and drives the housing market to record lows. It’s not if it will happen, but when.
People living on the edge and close to foreclosure should really take a close look at their finances and what’s going on financially. Nothing should be taken for granted in these dangerous times in which we live. For those barely surviving, you should take the time to consult a bankruptcy attorney and see if it’s time to pull the trigger. When it comes to filing for bankruptcy, timing is everything. Even if someone doesn’t need to file now, at least she will have an education from the bankruptcy attorney on how the process works and what to do if she needs to in the future.
