If you were severely underwater on a home mortgage (i.e. you owed much more on the mortgage than your home is currently worth), would you walk away from your home and mortgage or would you continue to make payments.
When it eventually defaults on its loan obligations, Greece will have done just that. The only difference being that no one can come into Greece and repossess the country itself.
The Greek bonds are unsecured obligations, so of course a bond holder cannot attempt to foreclose on the country or repossess other collateral. And I imagine sovereign immunity precludes suing Greece for the default (although that is an interesting question).
If you “walk away” from an underwater mortgage, you not only lose the house but in the great majority of states are still liable on the note that the mortgage secures. So although a lot of people think the solution to an underwater mortgage is to just walk away, and the clueless media usually reports it this way, this only works in those few states where lenders are not permitted to sue for a deficiency judgment.
Everywhere else the bank can still come after you, take everything else you own and garnish your wages up to the deficiency judgment amount.
You are correct when stating that one is a secured debt obligation while the other is unsecured. But I never said that they were identical financial instruments to begin with.
What I did say is that both the mortgage obligor and Greece were taking identical actions in ceasing all debt payments, were the mortgage obligor to walk away from his underwater mortgage and Greece to default on its bond payments.
As for being held liable on mortgages, the smart mortgage obligor will also concurrently file for Chapter 7 or 13 bankruptcy to expunge himself of that liability. Of course, that raises the issue of the BK remaining on his credit bureau file until it is discharged in 7 years, but that's a different issue altogether.
If you “walk away” from an underwater mortgage, you not only lose the house but in the great majority of states are still liable on the note that the mortgage secures. So although a lot of people think the solution to an underwater mortgage is to just walk away, and the clueless media usually reports it this way, this only works in those few states where lenders are not permitted to sue for a deficiency judgment.
Everywhere else the bank can still come after you, take everything else you own and garnish your wages up to the deficiency judgment amount.
is insolvent - if he has sufficient assets to pay that underwater mortgage, he cannot declare bankruptcy. If he does qualify as insolvent under the Code, then the bank is not going to chase him anyway and walking away from the mortgage without declaring bankruptcy is the best move. Your credit gets trashed either way.
The scenario I was addressing was the underwater mortgage where you have other assets sufficient to pay the debt. The only solution there is to keep paying.
That is not quite incorrect. It is certainly possible to declare bankruptcy even if you do have sufficient assets to make your mortgage payments. You have to pass the income requirements and the "means test". It all depends on the median income of the US state in which you reside, etc.
While you're credit gets trashed, there are varying degrees to one's credit getting trashed. This in turn affects how quickly one can repair one's credit score over time.
The scenario I was addressing was the underwater mortgage where you have other assets sufficient to pay the debt. The only solution there is to keep paying.
regardless of whether he is insolvent. So my post would have been more accurate if I had said he could not get a Chapter 7 discharge if he had the ability to pay his mortgage using other assets.
Here is how it works in practice. If he has the ability to pay his or her unsecured creditors more than $11,725 under the terms of a Chapter 13 plan, his Chapter 7 filing is presumed to be an abuse of the United States Bankruptcy Code. If the presumption is not rebutted, the Code allows the Court to dismiss the case, or, with the consent of the debtor, convert it to a case under Chapter 13.
The means test under the 2005 amendment to the Code does not change this. So if a debtor has assets sufficient to pay his mortgage, he almost always will have money to exceed the $11,725 ceiling. So for all practical purposes, a homeowner with money to pay his mortgage is not going to be able to get a Chapter 7 discharge.
Now I suppose if the homeowner chose to pay his mortgage and default on all his other bills, he could still stay in Chapter 7.
But the point I was making is that bankruptcy relief is not available merely you have made a bad bargain in buying your house at a inflated price. If you walk away in a state that permits deficiency judgments, the bank is going to come after you if you have sufficient assets and bankruptcy will not be available to discharge that note.
That's not quite correct or technically accurate. A person may not necessarily be allowed to file for Ch. 7 if
his income is too high and he does not pass the "means test". Before the BK reform act was passed, the rules were more lenient and subject to greater interpretation, but that's not the case any more.
It all depends on the state where the BK is filed, as well as the size of the mortgage payment involved as well. Thanks to the subprime credit crisis of 2008, there are people who bought homes that were way beyond their financial means with no money down, no income or job verification required (NINJA loans), and interest only payments, with the principal coming due at maturity (interest only bullet mortgages).
Finally, hiding one's financial assets isn't terribly too difficult if you have access to the right lawyers and accountants. It happens all the time.
Here is how it works in practice. If he has the ability to pay his or her unsecured creditors more than $11,725 under the terms of a Chapter 13 plan, his Chapter 7 filing is presumed to be an abuse of the United States Bankruptcy Code. If the presumption is not rebutted, the Code allows the Court to dismiss the case, or, with the consent of the debtor, convert it to a case under Chapter 13.
The means test under the 2005 amendment to the Code does not change this. So if a debtor has assets sufficient to pay his mortgage, he almost always will have money to exceed the $11,725 ceiling. So for all practical purposes, a homeowner with money to pay his mortgage is not going to be able to get a Chapter 7 discharge.
Now I suppose if the homeowner chose to pay his mortgage and default on all his other bills, he could still stay in Chapter 7.
But the point I was making is that bankruptcy relief is not available merely you have made a bad bargain in buying your house at a inflated price. If you walk away in a state that permits deficiency judgments, the bank is going to come after you if you have sufficient assets and bankruptcy will not be available to discharge that note.
with the "dismissal" of the petition or its conversion to chapter 13 as explained in the last post.
The means test or your income has nothing to do with whether you can file for Chapter 7, so I cannot agree with your statement that
"A person may not necessarily be allowed to file for Ch. 7 if
his income is too high and he does not pass the "means test"."
Warren Buffet can file for Chapter 7 tomorrow and the clerk will allow that filing, even though his income and the means test make him ineligible for a Ch. 7 discharge. But once that calculation is made, the court will dismiss the case or convert to Ch 13.
But otherwise I agree with your post.
When I said "filing", I meant it in the sense that the filing petition for BK had a 100% chance of being approved, in the belief that any BK lawyer worth anything would know before filing whether a petition for BK would be approved or not (the BK tests are fairly straightforward and simple).
But you are technically correct in that it is possible for a BK lawyer who didn't know what he was doing to file a BK petition and not have it approved. I should have made that point more clear.
Thank you for having this discussion without taking anything personally. It's refreshing to know that there are a few persons on the TER boards who can have discussions like adults.
The means test or your income has nothing to do with whether you can file for Chapter 7, so I cannot agree with your statement that
"A person may not necessarily be allowed to file for Ch. 7 if
his income is too high and he does not pass the "means test"."
Warren Buffet can file for Chapter 7 tomorrow and the clerk will allow that filing, even though his income and the means test make him ineligible for a Ch. 7 discharge. But once that calculation is made, the court will dismiss the case or convert to Ch 13.
But otherwise I agree with your post.
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be sued on a default under certian conditions. Suit could be brought in International court.
If you think US courts are slow, wait until you see the International courts in action. Those international court-filed suits could take years to resolve. Just going through the list of creditors will be an undertaking in and of itself.
As far as I can tell, the bondholders are a bunch of rich people. Why should an entire country be held hostage by a few thousand rich people? Fuck 'em.
I know quite a few middle class to poor people in the US who own US treasuries. I'm sure the same could be said for those in Greece as well.
The Greek Willy's need cash?
How do you say go fuck yourself in greek?
Hence, that is why I believe Greece will be kicked out of the EU when it defaults.
How do you say go fuck yourself in greek?
It's not automatic. And the EU can't kick them out under the current treaty.
They could choose to leave but no one knows how that would work.
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I don't believe I ever said, nor implied, that it would be automatic. But for all practical purposes, I don't think it is feasible for Greece to participate in the EU going forwards after a default. It would be like demanding to have a vote in an exclusive private country club and being allowed to participate in club fucntions but not paying your members dues (or the IOUs that you handed out for that matter).
They could choose to leave but no one knows how that would work.
-- Modified on 2/1/2012 10:17:06 AM
The Greeks would probably want out and the EU would rather they stay in. If the Greeks remain in and still have the Euro, debts will be paid in Euros, bank loans, house loans, business loans. This is where the real problem lies in all of this, not in the "Greek Bonds" Greek Bonds are small change.
The CDS are 90%+ collateralized. Meaning they are already paid in one form or another. Plus in the US they are subject to "Mark to Market". US banks have already marked them to zero.
It is believed the European banks have not marked the Portugal, Irish and Greek debt to market. That is why US banks won't lend to European banks. Thus, the ECB set up a lending facility where European banks could borrow for 3 years at 1%.
Greek banks have been broke for 4 or 5 years. Loans they have made have all been discounted to other European banks. That is, sold similar to MBS's.
If Greeks leaves those loans will be paid in Drachma or Tree Bark or whatever.
The CDS are 90%+ collateralized. Meaning they are already paid in one form or another. Plus in the US they are subject to "Mark to Market". US banks have already marked them to zero.
It is believed the European banks have not marked the Portugal, Irish and Greek debt to market. That is why US banks won't lend to European banks. Thus, the ECB set up a lending facility where European banks could borrow for 3 years at 1%.
Greek banks have been broke for 4 or 5 years. Loans they have made have all been discounted to other European banks. That is, sold similar to MBS's.
If Greeks leaves those loans will be paid in Drachma or Tree Bark or whatever.
I can agree with your economic analysis of the ramifications of Greece and the EU. I had shifted my analysis to a political one. Simply put, the other EU member nations will not tolerate Greece being allowed to remain a member of the EU after it defaults on its loan obligations.
The CDS are 90%+ collateralized. Meaning they are already paid in one form or another. Plus in the US they are subject to "Mark to Market". US banks have already marked them to zero.
It is believed the European banks have not marked the Portugal, Irish and Greek debt to market. That is why US banks won't lend to European banks. Thus, the ECB set up a lending facility where European banks could borrow for 3 years at 1%.
Greek banks have been broke for 4 or 5 years. Loans they have made have all been discounted to other European banks. That is, sold similar to MBS's.
If Greeks leaves those loans will be paid in Drachma or Tree Bark or whatever.
your right politically, but only among the general populace, the unwashed man on the street. And they may get some lip service from their leaders.
But privately, Greek pull out of the EU and off the Euro is really where the danger is. Portugal may follow that Greek solution.
Germany can't write a check to cover all the cost .The Governments in Germany, France, Portugal and Italy could all fall. If that happens all bets are off.
Under the EU Treaty they can't force Greece out and to change that they need 100% votes from the 17 members and Greece gets a vote.
It's hard to imagine italy portugal and spain being a hard ass is too
They know they would be next
Don't forget Ireland. They all comprise the PIIGS group of the EU.
They know they would be next
Not only will Portugal follow Greece out of the EU potentially, but so to Ireland, Italy, and Spain (the so-called PIIGS group of the EU). All those countries are in dire financial shape, with Greece being the worst and in the headlines the most.
You're also correct that Germany and France simply cannot cover the costs of Greece leaving the EU, not to mention the rest of the PIIGS countries.
Greece may not be forced out of the EU but there's practically no reason for them to stay when no other EU country will work with them or support their initiatives upon their defaulting on their loan obligations.
But privately, Greek pull out of the EU and off the Euro is really where the danger is. Portugal may follow that Greek solution.
Germany can't write a check to cover all the cost .The Governments in Germany, France, Portugal and Italy could all fall. If that happens all bets are off.
Under the EU Treaty they can't force Greece out and to change that they need 100% votes from the 17 members and Greece gets a vote.
It will take a couple of years to pull off.
1. Keep Greece and the rest of the PIIGS in the EU
2. Give time for the European banks to write down their debt and get as healthy as possible.
3. Support the debt using the ECB and firewall funds as much as possible.
4. Then at some point write off the Bonds in the ECB of the PIIGS allowing the countries to stabilize.
5. Write off some of the IMF loan(s).
No one is talking about this in the press because it would bring down governments, Germany and France. The really big argument in Europe is do we do this now or wait. Take the loss now and then we can get to something better.
Unemployment in the EU is 10.4% with some countries at 20%, Spain. Germany is 4 to 5% but has been on the rise. If Europe goes into recession it will probably trigger or force the decisions.
Some countries are in recession/depression but not Germany or France.
Yes, your plan would work theoretically. The problem is that none of the PIIGS have the political discipline to pull off what is required on their end to make this plan work.
Add to that the political uncertainty and resolve of the economically stronger EU member nations to carry the PIIGS on their backs (economies) and what we have is a political union that is destined for collapse.
Economic theory is great but, much like in the US, it takes a back seat and is sometimes held hostage to the political environment and reality (e.g. the US losing its AAA credit rating thanks to political infighting, among other political things).
1. Keep Greece and the rest of the PIIGS in the EU
2. Give time for the European banks to write down their debt and get as healthy as possible.
3. Support the debt using the ECB and firewall funds as much as possible.
4. Then at some point write off the Bonds in the ECB of the PIIGS allowing the countries to stabilize.
5. Write off some of the IMF loan(s).
No one is talking about this in the press because it would bring down governments, Germany and France. The really big argument in Europe is do we do this now or wait. Take the loss now and then we can get to something better.
Unemployment in the EU is 10.4% with some countries at 20%, Spain. Germany is 4 to 5% but has been on the rise. If Europe goes into recession it will probably trigger or force the decisions.
Some countries are in recession/depression but not Germany or France.
Forget the fact they gave their word to pay it back. Giving your word doesn't really mean anything to you, eh.
Oh, wait, you are a liberal, I should have known.
Well, it was the Republican party's display of political brinksmanship which factored in heavily into S&P's decision to lower the US's credit rating to AA+ from AAA. One could say that they are equally as disinterested as the Dems in our countries reputation when it comes to repaying debt obligations.
Oh, wait, you are a liberal, I should have known.
This is Greece. Start a new thread or stick to the subject.
You changed the subject first by bringing "liberals" in your post. If you can't defend your supposition, then don't try to obfuscate the issue by changing the subject.
If you default on a home loan in the US it will fall into one of two categories based on where you live. For instance in AZ which is a non-recourse state the ramifications of mortgage default is different than states that are recourse.
A person can default in AZ, walk away and the lender has no additional recourse. They foreclose on the house but have no further claim on the debtor. The debtor could be a multi millionaire but the mortgage lender has no right to anything but the house or property. Yes the debtor will take a hit on his credit rating, but that's it.
BTW the homeowner's in AZ and all non-recourse states pay for this right. There is a small fee calculated in every mortgage in AZ based on the value of the property. It is paid every month and hidden in the interest rate.
So I'm watching TV and they are interviewing a couple who are walking away from their underwater mortgage. The guys says "Don't you feel guilty about this?" Not once did the people say; "Hell no, I paid for this right."
You are correct. Much depends on a state's laws regarding homeowners' rights, usury, etc.
A person can default in AZ, walk away and the lender has no additional recourse. They foreclose on the house but have no further claim on the debtor. The debtor could be a multi millionaire but the mortgage lender has no right to anything but the house or property. Yes the debtor will take a hit on his credit rating, but that's it.
BTW the homeowner's in AZ and all non-recourse states pay for this right. There is a small fee calculated in every mortgage in AZ based on the value of the property. It is paid every month and hidden in the interest rate.
So I'm watching TV and they are interviewing a couple who are walking away from their underwater mortgage. The guys says "Don't you feel guilty about this?" Not once did the people say; "Hell no, I paid for this right."
I know, you're "above" counting such trivial things and have an "important" agenda. But, to everyone else, you are a narcissitic, out of control, bigmouth. And I even agree with about a third of what you say, but that's not the point. You really just don't get it, do you? Keep up the fine work.
I don't care about trivial things like post count in a thread. I care even less about what others think about me. I care even less whether you agree with my opinions or not. Fortunately, I will never meet you in real life, and that is all that really matters (hence why I do not care if you post as an alias or not).
Deflect it, and for the most part, when it's so obviously a real trolling post, don't even click on it..
Since most of them are ONLY to bait you, if they can't do it, because you don't even click on the post, they'll quit.. I think you're a pretty intelligent guy, and agree with you enough to where I don't understand how you like Obama (but I do understand why you don't like republicans)..
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It must be the kind of board it is, I can see why it happens.. All this chest pounding is like a mating call
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Thanks for the good advice.
As for Obama, he's the lesser of the available evils. If and when a better alternative shows up, I'll support him/her.
I don't dislike the Reps personally. They've just been responsible for the recent economic troubles. The Dems were responsible for the S&L crisis in the 1970s, so there is plenty of blame to go around.
Since most of them are ONLY to bait you, if they can't do it, because you don't even click on the post, they'll quit.. I think you're a pretty intelligent guy, and agree with you enough to where I don't understand how you like Obama (but I do understand why you don't like republicans)..
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It must be the kind of board it is, I can see why it happens.. All this chest pounding is like a mating call
-- Modified on 2/3/2012 2:39:49 PM