As the residents Tennessee probably know, the ongoing Great Recession has left many people holding the bag on homes that they could not afford. So-called “subprime” lending put many people in Memphis in homes when they may have not been able to own home previously. The problem was that they simply could not afford the payments, and, as some suspect, their creditors knew it.
One Memphis woman moved in to a home in a residential neighborhood, but, when facing foreclosure and repossession of the home because she could not afford payment, she abandoned it. She now lives in a one-room apartment. On the other hand, an investment banking company that purchased her mortgage in 2005 raked in millions of dollars.
On the other hand, those who made these “subprime” loans might argue that those who signed these mortgages freely and voluntarily agreed that they would pay the loan.
In any event, however, sometimes well-meaning people who can afford a home when they sign the loan documents face sudden financial challenges that might cause several missed payments. In these situations, a person may want to consider bankruptcy as a viable option.
While a Chapter 7 bankruptcy ordinarily will not prevent foreclosure, it can at least ensure that a person can walk away from a home without having a lot of extra debt handing of his or her head. A Chapter 13, on the other hand, may help a person save his or her home by giving them an option to make affordable monthly payments to catch up on any arrearage that they owe. Some courts have even initiated special programs that help debtors and mortgage-holders work out reasonable payment arrangements.
Whether the fault of lenders or not, the Great Recession took several people who benefited from subprime mortgages by surprise. For those who are still suffering as a result, a bankruptcy might be able to offer some relief.
Source: Bloomberg, “Wall Street kept winning on mortgages upending homeowners,” Bob Ivry, Nov. 19, 2012