A veteran bankruptcy trustee says homes are starting to become part of the problem for consumers with runaway debt.
The situation is not as bad as in the early 1990s recession, when the fall in home prices was more extreme than we have yet seen.
But James R.Yanch says many consumers have found their homes are not the panacea for unmanageable debt they might have been a couple of years ago.
“It was unusual for the family home or real estate to be the cause of bankruptcy in the last 10 to 15 years,” Yanch said yesterday. “If anything, it was a solution.”
People could sell their homes at a profit, or convert equity to cash to repay mounting credit-card debt, personal lines of credit and other consumer loans. Some could seek a form of bankruptcy protection known as a consumer proposal, pay part of their debts and keep their homes.
Now a sudden wave of job losses, reduced work hours, pay cuts and vanishing bonuses are combining with falling home prices and sales to make it more common for recent home buyers to lose money when selling a home.
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