About one in every 10 Texas homeowners are delinquent on their mortgage and facing a possible foreclosure. Currently, the percentage of Texas homeowners who are delinquent and facing a possible future foreclosure is 10.3 percent, only slightly less than the national average of 10.44 percent. Last year, a record 61,000 homeowners in Texas lost their home to foreclosure and that number is feared to increase this year. Many analysts and “experts” lament the current foreclosure crisis; but fail to recognize the power of bankruptcy in reducing the foreclosure rate in Texas and nationwide.
All of our non-bankruptcy efforts to stop foreclosure have failed abysmally. HAMP, state programs, begging and pleading with uncooperatively and shamelessly greedy mortgage servicers have all had little positive impact on the foreclosure rate. Many homeowners facing foreclosure who have tried all other means without success have turned to bankruptcy for the relief they need. If it wasn’t for bankruptcy, we would probably have a foreclosure crisis more on the level of the Great Depression or worse. Our legislators need to look at the power of bankruptcy and how it can help stop foreclosures if we truly want to abate this crisis. How can bankruptcy reduce the foreclosure rate?
- Bankruptcy forces mortgage servicers to the negotiating table. Without bankruptcy, homeowners have very little leverage and find themselves waiting on mortgage servicers to get back to them. But with bankruptcy, mortgage servicers are forced to at least consider ways to avoid foreclosure.
- Bankruptcy gives the homeowner time to catch their breath and see things clearly. Because of the automatic stay, the debtor in foreclosure doesn’t need to worry about their home being snatched out from under them while negotiating with the mortgage servicer. This fact alone can give them the peace of mind needed to think through their situation clearly.
- Bankruptcy gives the homeowner a chance to catch up on payments and bring their mortgage current. Outside of bankruptcy it can be very difficult for a debtor to win reasonable repayment terms for their delinquent payments. But in Chapter 13 bankruptcy, a homeowner can repay delinquent payments over the course of 3 to 5 years.