I am in Florida folks. I am in Florida to visit family and also to take the possible first steps in opening up a Florida office for my Bankruptcy practice ( I am not yet licensed in Florida.) As I drive around looking at office space, I see new development after new development. Beautiful luxury buildings with huge entrances, valet parking, the whole nine yards. The problem is no one is living there. Most of these places have occupancy rates of about 30-40%. Now, I understand that that may be a generalization, as some buildings here have more occupants, but for the most part, its pretty scarce. What’s even more frightening is that construction on further buildings continues. The developers cant stop because they have to spend the money the banks gave them and they have to pray someone buys…or else.
Ive also spoken to several real estate agents and homeowners here who have discussed the housing crisis in some detail. During those conversations, I figured out quite a large difference between New York & Florida. In Florida, when a homeowner is deep in credit card debt, and he/she also has a mortgage that’s underwater, they simply walk away from the house. They even discuss a “deed in lieu of foreclosure” with the bank, so that they are not responsible for any fees associated with the foreclosure. They give up the luxury place, file for Bankruptcy, and start their financial lives again. Not so in New York…from my experience. In NY, when an individual feels financially crunched, and even if he/she has no equity in that home, chances are they don’t want to walk away. This INCLUDES people who are filing for Bankruptcy and who would therefore not have to pay a penny due to a foreclosure. There is an emotional attachment to a house in New York that isn’t as prevalent here. I again caution that this is simply my opinion, and each case is different, but it seems that many of my New York Bankruptcy clients, even though they know they can’t afford their mortgage, STILL decide to stay and try to “figure out a way” to pay it. You see, the whole point of Bankruptcy is to get you out of a financial jam. Its an option available to those who really need to turn their financial life around, and have no other option. However, if the tool is used ONLY to get rid of credit card debt, and you’re still unsure of how to make payments on your mortgage, then you’re not utilizing the Bankruptcy to its full potential or its intended benefits. I know there is a craze for loan modifications right now, but it is incredibly tougher to do than what people make it seem. Hours of phone calls, paperwork, waiting, aggravation, etc., and you still aren’t guaranteed a modification. In conclusion, what this experience has taught me, other than the fact that New York is way too cold, is that before filing for Bankruptcy, or really reassessing your financial life, keep your emotions out of it. If a home is costing you too much to keep, and you don’t know if you’ll be able to pay for it even AFTER getting rid of your credit card debt in a Bankruptcy, then maybe walking away and starting again may be the answer.
