The economy is no longer officially in recession, but it remains tough. In Minnesota as in the rest of the nation, the real estate market is still very slow and unemployment remains high. Belt-tightening is the order of the day for many businesses and individuals, as well as government agencies and nonprofits.
One result of these economic conditions is that the profile of people who file for bankruptcy has shifted substantially. A few years ago, consumer bankruptcy often involved people who became over-extended with credit card debt. Today, filers frequently include people with significant assets, such as mortgages in the half-million dollar range.
In a recent interview with the Pioneer Press, Twin Cities attorney Patrick Burns explained some of the implications of this phenomenon. He noted that his firm’s bankruptcy client base includes the unemployed and the underemployed. But increasingly it also includes distressed homeowners – higher-asset individuals among them – who are struggling with large mortgage debts. They are seeking a way to put themselves back on firmer financial footing and considering all the options – including foreclosure and bankruptcy.
To illustrate this, Burns uses the example of a middle-aged couple who might owe as much as half a million dollars on their mortgage on a house that is now worth only $300,000. They may also have taken out a second mortgage. For such a couple, letting the home go into foreclosure might make strategic sense, as would filing for bankruptcy to obtain debt relief on the second mortgage.
In circumstances such as this, moving into rental housing might make more sense than continuing to make payments on housing debt that has become a burden, especially when there is little likelihood of the property regaining its value before the couple is ready for retirement.
If you need assistance with issues involving bankruptcy or foreclosure, contact Patrick Burns and Associates to discuss your legal options.