Here are a handful of tweets from my twitter feed, @creditorlaw:
In the NY Times article about the rising tide of defaulted Home Equity Lines of Credit, one homeowner justifies the reasonableness of his offer to repay 10% of his outstanding debt by boldly saying “It’s not the homeowner’s fault that the value of the collateral drops.”
Yikes…banks share some blame, but all of it? Regardless, this article seems to suggest that the banks won’t be doing anything with this bad debt and are happy to get pennies on the dollar. Don’t forget, in Tennessee, a creditor may have up to six years to sue on defaulted debt and, even then, a judgment is good for ten years. Will these debtors still be broke in ten years?
On another tweet, the Wall Street Journal reports that business bankruptcy filings are down, while consumer filing rates remain high.
My guess? Either through weak guarantors or de-valued collateral, lenders realize that the only way to get paid is to work with the borrower and hope they can right the ship, whether it be selling widgets or selling houses. If they learned anything from quick bankruptcies and worthless judgments in 2008-09, it’s the principle behind “bend, don’t break.”
From the other side of the coin, Credit Slips reports that, even though default rates are skyrocketing, the numbers of consumer of bankruptcy filings aren’t following that same extreme trajectory–in fact, they are tracking the numbers in the pre-BAPCA (2005) days.
This has everybody stumped: why aren’t more people filing Bankruptcy?
This article from the Memphis Commercial Appeal suggests that people aren’t filing Chapter 13s because they can’t even afford Bankruptcy.