Washington Bankruptcy Lawyers: US to Top 1,000,000 Foreclosures in 2010

Washington Bankruptcy Lawyer Many people have been struck hard by the bad economy. Even if they were frugal and saved, bought a house that they could afford, bought a reasonable car that fit their needs and their price range, and put some aside for retirement, after three years of the economy on it head, that could all be different now.

Many families that were realizing the American dream before 2007, whom would have never considered bankruptcy as an option, are now facing foreclosure. This could be following a long stint of unemployment with no prospects and working jobs for far less just so that they can keep the family afloat.

At some point merely treading water catches up with a family and the first ones in line are the bankers who have no problem making a family homeless. While the family lives with relatives or in the car, the creditors are also on their heals looking for whatever they can squeeze out of a stone that is slowly rolling down hill.

Now the reports are showing that for the first time one million homes are going to be lost to foreclosure. That’s not just one million individuals, but families, meaning that millions more adults and children are affected.

Foreclosures

In the first six months of 2010 nearly 528,000 homes were taken over by lenders, a rate that is on track to eclipse the more than 900,000 homes repossessed in 2009, according to data released Thursday by RealtyTrac Inc., a foreclosure listing service.

“That would be unprecedented,” said Rick Sharga, a senior vice president at RealtyTrac.

To put this into perspective, lenders have historically taken over about 100,000 homes a year. A 9 fold increase in 2009 and a 10 fold increase in 2010 does not bode well for the US housing market. The surge in home repossessions reflects the dynamic of a foreclosure crisis that has shown signs of leveling off in recent months, but remains a crippling drag on the real estate market.

The good news it that new homes falling behind in payments and entering the foreclosure process has slowed as banks reluctantly continue to let delinquent borrowers stay longer in their homes rather than adding to the glut of foreclosed properties on the market.

Of course the generosity of lenders is very short as they have stepped up repossessions in an effort to clear out the backlog of distressed inventory on their books. RealtyTrac tracked the number of default notices in 2010 and said that the number of households facing foreclosure in the first half of the year climbed 8% versus the same period last year, but dropped 5% from the last six months of 2009. In all, about 1.7 million homeowners received a foreclosure-related warning between January and June. That translates to one in 78 U.S. homes.

“The banks are really sort of controlling or managing the dial on how fast these things get processed so they can ultimately manage the inventory of distressed assets on the market,” Sharga said.

Its not a happy thought that banks, the ones largely thought to be to blame for the giant financial meltdown causing all of the foreclosures, are also in charge of the market, its pace, and its recovery. One would think that the government would do something about that, but instead individual people are left to seek legal protection for their families from the banks and creditors.

Bankruptcy and Foreclosure

Bankruptcy during a foreclosure can be a very tricky thing that really depends on your particular situation. Even though most consumers only get two options for bankruptcy, chapter 13 and chapter 7, both can be beneficial depending on your unique circumstance. First, both bankruptcy types offer immediate relief through what is called “automatic stay.”

Automatic Stay – This is done the moment the bankruptcy is filed and tells creditors that they must back off and go through the proper legal channels to even contact the filer, let alone collect their debt. This takes the pressure off and may offer a few months more in the house to work things out.

The lender must obtain the bankruptcy court’s permission to proceed with the sale by filing a “motion to lift the stay.” This motion may rob the family of the full three to four months, but even then, the bankruptcy will typically postpone the sale by at least two months. Lenders may even more time if they are slow in pursuing the motion to lift the automatic stay.

Please Note: This timeline and protection could be severely altered if the bankruptcy was filed AFTER the foreclosure notice was issued. Talk to your lawyer if you feel you are about to enter foreclosure.

Chapter 13 – This bankruptcy is for people who are earning a wage and may be able to make payments toward debt, but are now “under-employed,” a term that has been coined in the new economic downturn in which US employers have found a way to hire desperate people and pay them far less than they’re worth for their premium skills.
Chapter 7 – This bankruptcy is a liquidation of assets and is the most popular option for people who actually don’t own a home, but it may be highly beneficial to people in foreclosure because they may just lose their home anyway. At least it allows two things:

A few more months in the home without payments.

The ability to save and pay off other debt during that time.

Please keep in mind that you are only eligible for this bankruptcy if your median income for the last six months does not exceed that of your area. Please talk to you legal advisor about your income and your options regarding chapter 7 bankruptcies.