When Bankruptcy makes sense

[adaughter]

Saw this article in newsweek thought it would be perfect for those contemplating bankruptcy.

http://www.newsweek.com/id/177749?GT1=43002

[jencz]

Thanks for sharing this great article, I have always been a fan of Jane Quinn and feel much better after reading this.

Thanks again!

[Andyman]

Well, it's good to realize I'm not a deadbeat. Being selfemployed in today's economy has been tough. I always paid my bills on time. Divorce and some other things are what ran up my cc debt. I paid on time and with always a little extra in the hopes of finally getting out of debt. Then one month, I was a day late with BofA and Chase. My rates went from 6.5% to 28.99% and my payments went from a total of $220/month to $600/month. No way could I pay that and at 58 I'd never get out of debt. Hence...I filed. My 341 is on the 8th of this month...just a few days away. I'm nervous, sure....but at this point so much is out of my control that I just have to go with the flow.

[albacore44]

Quote from the article :
The next Congress may sweeten Chapter 13 by allowing a judge to reduce (or "cram down") your mortgage principal if the debt amounts to more than the house is worth. That would save a lot of homes. Quote

This is what i'm hopeing for. I have a big HELOC, house way under water and still going down, but not quite enough to do a Lein strip. fingers crossed.

[HHM]

Quote from the article :
The next Congress may sweeten Chapter 13 by allowing a judge to reduce (or "cram down") your mortgage principal if the debt amounts to more than the house is worth. That would save a lot of homes. Quote

This is what i'm hopeing for. I have a big HELOC, house way under water and still going down, but not quite enough to do a Lein strip. fingers crossed.

I wouldn't hold your breath and if you are honestly waiting for that to happen before you make a move to fix your financial problems, STOP. Nothing has been formally proposed about amending the BK laws. And lets assume something gets written the day after Obama becomes president, by the time the legislative process is complete, it wouldn't take affect until Oct 2010 at the earliest.

Back to the article. The best point it makes is to file BK while you have stuff to save. However, as a metric, a person should seriously consider BK if their unsecured debt is more than 35% of their gross annual income.

[albacore44]

I wouldn't hold your breath and if you are honestly waiting for that to happen before you make a move to fix your financial problems, STOP. Nothing has been proposed about amending the BK laws. And lets assume something gets written the day after Obama becomes president, by the time the legislative process is complete, it wouldn't take affect until Oct 2010 at the earliest.

Back to the article. The best point it makes is to file BK while you have stuff to save. However, as a metric, a person should seriously consider BK if their unsecured debt is more than 35% of their gross annual income.

October 2010 ?? Did not think it would take that long since it was originally proposed in the 2008 bail out legislation. If it takes that long the point is moot, since we will already be past the bigger part of the down turn, and it will be way too late to help the masses who will be foreclosed on this year.

[HHM]

I suppose they could move faster if they wanted, but again, nothing has actually been formally proposed. Sure, people have been kicking around the idea of amending the BK laws, but no one has actually written anything and submitted it to committee that I am aware of.

[Phillymanhere]

Two cheers for Jane Bryant Quinn!

I'm sure this article will come as a shocker to folks who are in denial about their financial situation and who have overlooked bk as the right step on the road to recovery. Hopefully the article will reach people who haven't discovered this board, who are in that hopeless situation of overwhelming debt with no likelihood of being able to repay it.

[albacore44]

I suppose they could move faster if they wanted, but again, nothing has actually been formally proposed. Sure, people have been kicking around the idea of amending the BK laws, but no one has actually written anything and submitted it to committee that I am aware of.

Mabee not formally, but I did hear it was proposed in the Tarp legislation by congressional democrats, but was thrown out by the republicans, as part of the compromise to get the Tarp approved. I think that is the basis for the statement in the article by the author.

[albacore44]

I suppose they could move faster if they wanted, but again, nothing has actually been formally proposed. Sure, people have been kicking around the idea of amending the BK laws, but no one has actually written anything and submitted it to committee that I am aware of.

Just saw a congressman on FOX news saying that the Dems have proposed this exact thing as part of the new stimulus package expected to be signed by Obama right after anauguration. It will allow judges to re-write mortgages down to the current value of the home. They want this enacted quickly in order to help stem the tidal wave of forclosures expected to come in 2009.

[albacore44]

Citigroup nears compromise on some home loans

Citigroup nears compromise on some home loans

WASHINGTON (AP) -- Citigroup Inc. is in advanced talks with lawmakers on a plan to let bankruptcy judges alter home loans in an effort to prevent foreclosures, a person briefed on the matter said Thursday

Until now, the banking industry has been ardently opposed to the proposal, which key lawmakers aim to attach to President-elect Barack Obama's economic stimulus legislation.

The so-called "cramdown" proposal has been backed by Democrats over the past year as a potential solution to the foreclosure crisis. An announcement on an agreement could come as soon as Thursday, said the person, who spoke on condition of anonymity because the talks were not yet completed.

The discussions involved Citigroup officials and the offices of Democratic Sens. Richard Durbin, Charles Schumer and Christopher Dodd. They focused on a compromise that would limit the proposal to loans made before the bill is signed. To qualify, borrowers would need to demonstrate that they have tried to have their lender modify their loans.

The talks between Citigroup and lawmakers were reported in The Wall Street Journal on Thursday. A Citi spokesman declined to comment.

Mortgage lenders have long battled against the concept. They say that allowing bankruptcy judges to cut the interest rates and reduce what's owed on troubled borrowers' home loans would raise rates because lenders would have to charge more for loans that could be later altered by a judge.

In an interview earlier this week, a top lobbyist for the mortgage industry vowed to keep such a plan out of the economic recovery bill.

"We think that's an unwise move that could delay the stimulus package," said Francis Creighton, the Mortgage Bankers Association's chief lobbyist.

AP Business Writer Stephen Bernard contributed to this report

http://finance.yahoo.com/news/Citi-nears-deal-with-Congress-apf-14006836.html