you haven't seen money burn until you are upside down in a mis-timed real-estate purchase.

Just bail and it's no different than having rented.

Its interesting. We own rental properties in Fly Over Country -- all single family homes. With home prices so affordable here we find that most of our good tenants rent only until they can get into a home of their own. We do have a handful who earn enough that they could easily buy their own home, but just don't want the responsibility of home ownership. We don't argue with them about it -- we just keep letting them pay our mortgage down for us.

Unless your mortgagee gets a deficiency judgment against you.

The first two words of this story tell it all.

that nice red bk is going to impress employers, potential spouses, friends, family, loan providers, why just about everyone. oh, you mean walk away and not declare bk ? of course the banks will just chuckle and chalk it up to fate. or they will attach your wages and harass you for years; and a defaulted mortgage is almost as serious as a bk anyway. real life isn't quite the sitcom you make it out to be.

what commandment covers financial fraud, there must be one or two, don't you think ?

dennis Kozlowski must be one of your heroes.

cjm:

No one suffers due to bankruptcy in America--it's a blip. That's why they've moved to make it somewhat tougher to declare.

Given your employment history, OJ, I really don't pay much attention to your views on financial responsibility. cjm is 100% correct on how bankruptcy is treated by the business world. It's like leprosy.

Simply put, with interest rates at an all-time low, it is difficult to see how house values will appreciate any time in the near future(3-5 years). If you buy with a mortgage, like most Americans, the amount of principal paid down in that short-range is miniscule at best.

I'm single. I hate debt. So, I rent a cheap place, that costs me a small percentage of my income. When I move to Florida, I'm renting a cheap place because I have no idea how long I'm going to be down there. My life has enough flux in it that putting down roots is just loopy. I owned a condo once and I ended up paying to sell the place, and was not happy about it.

If I were in a situation where I were married, with kids, and were trying to find the house where I would spend the rest of my life, for all intents and purposes, I would run, not walk, to the nearest realtor. If my income is stable and I intend to hold a property for 10 or 20 years, yeah, I'm not going to worry about interest rates, market fluctuations, the business cycle, or any of that other stuff you see on CNBC or in the WSJ. I'm just going to be concerned about the house, the neighborhood and the schools. I'll hold onto that 5.5%, 30 yr fixed forever, and try to put as little down as possible.

yeah, pity poor Donald Trump...

My daddy isn't a billionaire and I doubt cjm's is. Fred Trump was.

The Donald also borrowed too much for people to allow him to fail. If you are a regular person, you are crushed forever by the banks and credit card companies. If you are Donald Trump, and you borrow several billion, you are essentially their partner and they have too much invested in you to allow you to go belly up. The Fed's regulators do tend to notice multi-billion dollar writeoffs and start asking lots of unpleasant questions, and they have a lot more power to get answers than does any other agency of the Federal government, including the IRS.

bart:

America is populated by small scale Trumps. The reason these guys want new laws is to stop themselves, not the borrowers.

bart. Define cheap.

erp,

I'm paying $850/mo for a 1 bedroom in Bergen County, and I expect to be paying about $700/month for a 2 bedroom in Atlantic Beach, FL. I've found 2 complexes within a mile of my folks which go for that, giving me a swimming pool, central air and a dishwasher with that.

OJ,

Only large-scale borrowers have that kind of leverage. You cannot be a 'small-scale Trump.'

There are millions of them.

the small scale Trumps, if i am interpreting the phrase correctly, are regular people who have hyper-extended themselves financially to speculate in real-estate. their fate won't be the same as the dot.com speculators, it will be much worse. why ? because at least with stocks you are pretty much playing with money you have (i know you can leverage upto 50%) and stocks don't have high carrying costs. the real estate speculators have built a house of cards and it is starting to tumble. of course this might be the first speculative bubble in history that doesn't pop, and keeps on going up for ever, just like it did in japan and hong kong. oops.

cjm:

And they'll start over and be fine--it's America.

The people in America who are 'hurt' the most by bankruptcy (aside from those who actually go through it) are the group closest to filing. They are ones who pay 21+% on their credit, who don't get any bargains when buying new or used cars, who cannot qualify for low mortgage rates, who get no breaks from their banks, and the like.

Which is why they should declare and start over. There's no shame in a bankruptcy in America.

The current 'reform' doesn't void out the credit card debt, so a filing gets them nowhere.

It at least clears everything else.

oj:

So why don't you & the missus "walk away" from your combined "million dollars" of student loans ?

Could it be that there'd be some consequence ?

Once again, you have a firm grasp on half the truth, and are trying to stretch it into a universal truth.

bart:

Michael,

Several points.

1. The bankruptcy reform bill is intensely ugly. Credit card companies go out and get college kids signed up with credit cards even if they have no income. Then, they charge exorbitant interest rates 10 or more points above prime. Interest rates are a function of risk, the higher the risk, the higher the rate. When the credit card companies got their debts exempted from discharge, they have gotten the best of both worlds, high real interest rates and low risk. And the dumbass kids who get bamboozled and stampeded into having credit problems are behind the 8-ball forever. Normally, I don't get upset when the stupid get taken advantage of, but even for me this is over the top. [...]

Posted by: bart at July 29, 2005 07:03 AM

bart:

I agree that there should be more consumer education about credit, but it's not as if there's none now. The people most in need of it are the least likely to listen to it.

I also agree that When the credit card companies got their debts exempted from discharge, they have gotten the best of both worlds, high real interest rates and low risk.

However, it's also clearly true that consumers as a whole were increasingly taking knowing advantage of more available credit, running up debts that they had no intention of paying.
Further, the credit card companies only got partial protection, so it's NOT true that kids who get bamboozled [...] are behind the 8-ball forever.

Anyone whose income is below the median for their state of residence can still discharge their debts, and even those above that level can take advantage of debt restructuring plans.

The truly poor are not affected by the new regulations, and bankruptcy courts aren't going to force middle class families with hundreds of thousands of dollars in medical bills, for instance, to pay more than they can reasonably afford monthly.

The argument that those over the median income level will have to labor in the salt mines forever, to pay for catastrophic debts incurred due to hard luck or bad spouses, assumes that bankruptcy courts will be inhumanly draconian.
Surely there will be cases in which that is true, but those will not be the norm, nor numerous. [...]

Posted by: Michael Herdegen at July 29, 2005 07:46 PM

Michael:

We hired the money.

OJ: You clearly have not comprehended the depth and savagrey of the new bankruptcy law.

Furthermore, in parts of the northeast and california where the real estate bubble is at its frothiest, rent to price ratios have gotten way out of line. The interest on a mortgate may exceed the rent on a comparable property. Then you are clearly better off renting than assuming the risks of ownership.