Bankruptcy and Foreclosures

The really smart people at Credit Slips made a good point the other day about homeowners in bankruptcy. Mortgages are the only loans that bankruptcy cannot modify! So it is possible to discharge or modify all your other debts, but if you can't make your mortgage payment, you're still outta there. I did not know that.

So pay your mortgage first, folks. And talk to the mortgage company when you first get into trouble, because if you get to bankruptcy, it may not help.

More Children have Experienced Bankruptcy than Divorce

...according to Harvard Law Professor Elizabeth Warren, author of the books All Your Worth and The Two-Income Trap. (Hat tip to We Need to be Debt Free where you can find her hour-long lecture The Coming Collapse of the Middle Class. She explains why middle class families with children are perched precariously on the edge of solvency. )

Warren notes that most of us know a number of people who have been through divorces, but we don't know about the bankruptcies, even though there are more of them. People hide the reasons for life changes (we're moving in with Bob's parents because of their health or we're moving away for better job opportunities) when in fact bankruptcy is the cause.

Bankruptcies are more common among parents than any other group. According to Warren, a specialist in bankruptcy, creditor and debtor law, it isn't because people are irresponsible. Most bankruptcies, she says, are caused by either job loss, family breakup, or unexpected health problems of a wage earner or family member so that one wage earner must stay home to nurse the patient. Doesn't exactly make a person feel safe.

Hmmm.

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