Wake Up Call

Many individuals seeking some debt relief through bankruptcy filings will have a difficult time after October 17th. The credit card industry will finally get their way once the new bankruptcy law reform is enacted. This reform will prohibit many debtors from filing Chapter 7 (which allowed individuals to keep certain exempt property – i.e. real estate mortgages) as a means of protection from creditors.

Those whose incomes are above a certain median range will be most likely affected. Such individuals will be denied the Chapter 7 (liquidation) option and will be forced to file a Chapter 13 (reorganization) or some repayment plan. So what does this all mean?

This is not good news to some of the home buyers who have financed through some exotic methods such as interest-only and ARM financing. As the interest rate environment changes, such borrowers will find it difficult to make monthly payments. Some people will feel the harsh reality of real estate speculation and irrational credit abuse.

After October 17th, people that have considered filing for bankruptcy will find it extremely difficult to find protection from creditor collection efforts. I’d hate to speculate how everything will play out, but it appears that there will be a wake up call. People should have taken some serious considerations before buying the American dream. As they say, “Easy come… easy go.”