No one in his or her right mind would ever want to declare bankruptcy unless his or back is against the wall. But if the situation becomes dire, bankruptcy can and will help you financially and give you a "fresh start" in life. There are many reasons why people ended up filing for bankruptcy. A major reason that can cause someone to apply for bankruptcy is the inability to pay for the house that he or she owns because it is just too pricey. Some people (I am a prime example) purchased their homes at the height of the real estate market. The problem is not so much that they purchased their homes at the highest price possible, but the problem is that they purchased the house that they CANNOT pay for.
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Like most people, I did not appropriately create a budget and estimated that I could pay for the house. Years went by and I was just merely able to afford this house I had purchased. In the fall of 2008, with the collapse of the financial market, my whole world fell apart too. After my wife was laid off from work, I ended up being the only income provider of the family. We had just enough to pay for everything as a 2 income family, but with the loss of one job, we were having a hard time paying for things. In order to "prioritize" the various debt, I started being delinquent with some payments in order to pay for the "true essentials" of our every day living. Sometime in mid 2009, I consulted a bankruptcy lawyer and decided that filing for bankruptcy shelter is my best alternative.
What I have learned from this mistake
Do not stretch yourself too thin. Buy a house you can pay for. You should not buy a house just because you have the down payment for it. It should not matter if you can put down 10%, 20% or even no money down, you should be concerned that you can afford this house from month to month. If you are buying a house with no money down but with a monthly payment of $2,500. If you can pay upfront of 20% as a down payment, that could reduce your monthly payment to just $2,300. The difference is only $200 per month. In the grand scheme of things, that $200 should not make or break you. Instead of worrying about the down payment on the house, you should be concern about the $2,300 or $2,500 monthly payment.
Only if you can afford the common expenses and the monthly mortgage payment, then you should think about buying the house of your choosing. There are some other questions you should really ask yourself before purchasing a house that can make a big ding in your financial status, and thus increases your chance of declaring bankruptcy:
If you are a multiple income family, and someone loses the job, can you still pay for the house? Are you paying for the real estate taxes yourself, or is it included in the mortgage payment? If you have to pay for it yourself, can you come up with this tax responsibility on a quarterly basis? Are you guessing that the real estate market will proceed to thrive and you can just flip the home for a tidy profit in a few years? If there is an unusual one time expense (like a big medical bill), can you afford to pay for it?
If can comfortably pay for all the numerous "special" expenses besides your normal monthly expenses such as food, utilities and entertainment, then you should certainly be a proud homeowner. Owning a house is a great way to amass wealth over the years. It is essential for you to budget every possible expense associated with the ownership of a house. One missing expense can snowballed into a bigger issue and put you on the path to bankruptcy. In the case if do find yourself in a financial bind with a house that you cannot afford, you should look to apply for bankruptcy to get permanent relieve from the creditors.
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