Then you can’t blame the Community Reinvestment Act, passed in 1977.  

You can, however, blame the Bankruptcy Reform that was passed back in 2005. 

Here’s the short version:

Before [Bankruptcy Abuse Reform], any household could file Ch. 7 bankruptcy and have credit cards and other unsecured debts discharged. Sidestepping unsecured debts left more income to pay the mortgage. BAR blocked that maneuver by way of a means test that forces better-off households who demand bankruptcy to file Ch. 13, where they must continue paying unsecured lenders. When the means test binds, cash constrained mortgagors who might have saved their home by filing Ch. 7 are more likely to face foreclosure.

Forcing people to pay bills they couldn’t pay only changed which bills they chose not to pay.  In the Christmas spirit, “Are there no prisons?  Are there no workhouses?”  Bah, Humbug, foreclosure is never fun for anybody.

This entry was posted on December 13, 2008 at 10:30 am. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

Posted in Distressed Property by Bridget Magnus Comments Off