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What Long Term Effects Will High Bankruptcy Rates Have?

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Many people seem to think that go bankrupt is the easy option. On the face of it, it is, but there are a number of stings in the tail of bankruptcy, not least of which is that you are effectively barred from having a mortgage for at least SIX years, and getting credit is likely to be much harder as well.

Remember the banks WILL get hurt as well..

So given yesterdays news where is this leading for the housing market long term, and the wider economy?

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Many people seem to think that go bankrupt is the easy option. On the face of it, it is, but there are a number of stings in the tail of bankruptcy, not least of which is that you are effectively barred from having a mortgage for at least SIX years, and getting credit is likely to be much harder as well.

Remember the banks WILL get hurt as well..

So given yesterdays news where is this leading for the housing market long term, and the wider economy?

Think the bank will have longer memories than 6 years.

It must have some real implications.

Those that have not gone bankrupt will be treated differently for sure, and I think a new stigma may appear with "you were one of the thick ones" label.

A guy in his mid 50s who I see on occasions early evening in a local said he was very poor had nothing to show for his life, he added his asset value up and it came to less than £1000 (most in his pocket) hes worked all his life never went on the dole (he said) I asked him how much debt he was in and he looked bewildered cant afford any of that he said. I explained to him how rich he was as there were millions and millions of people who were £1000s and £1000s in debt with very little asset value they were in fact in minus funds, and, the really sad thing, they believed they could afford more debt.

Edited by Flat Bear

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So given yesterdays news where is this leading for the housing market long term, and the wider economy?

Lots of people keeping billions of pounds of property without paying for it.

I buy 200K of stuff, never intending to pay for it: I'm allowed to walk away (oh yeah , I forget , I've got to pay £20 per month to my creditors) and face no criminal sanction and people think I'm going to be worried about not getting a mortgage for 6 years.

Is this supposed to worry me.?

Especially when property prices are going to be falling nad i'm much too wily to buy anyway.

Edited by Baz63

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Lots of people keeping billions of pounds of property without paying for it.

I buy 200K of stuff, never intending to pay for it: I'm allowed to walk away (oh yeah , I forget , I've got to pay £20 per month to my creditors) and face no criminal sanction and people think I'm going to be worried about not getting a mortgage for 6 years.

Is this supposed to worry me.?

Especially when property prices are going to be falling nad i'm much too wily to buy anyway.

Nu bright thinking from Nu Labour.

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It's an interesting problem. I thought that the banks would start to tighten their credit but they don't seem to be doing much of that. I think there simply is too much money at the source (central banks) for credit to tighten at the moment. Will it change? I don't know when but eventually the easy money has got to end at some point.

It's also worth noting that the bulk of bankruptcies are for people who are renting. Woudl this imply that bankruptcies would have little effect on house prices? Repossessopm may be on the rise but I would guess most of these are in areas where you wouldn't really want to live (up and coming areas :lol: ).

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Many people seem to think that go bankrupt is the easy option. On the face of it, it is, but there are a number of stings in the tail of bankruptcy, not least of which is that you are effectively barred from having a mortgage for at least SIX years, and getting credit is likely to be much harder as well.

Remember the banks WILL get hurt as well..

So given yesterdays news where is this leading for the housing market long term, and the wider economy?

Can you explain how you are barred from having a mortgage for 6 years? I'm not aware of legislation to this effect.

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Many people seem to think that go bankrupt is the easy option. On the face of it, it is, but there are a number of stings in the tail of bankruptcy, not least of which is that you are effectively barred from having a mortgage for at least SIX years, and getting credit is likely to be much harder as well.

Remember the banks WILL get hurt as well..

So given yesterdays news where is this leading for the housing market long term, and the wider economy?

I know of a couple who went bankrupt with their business prior to the new regs coming into force. Everyone expected them to lose their nice big house, their TWO flash cars. Did they - no!

They still have the house, they still have the cars. The people who worked for them mostly lost out and the Govt picked up a bill for a fraction of the wages owed. The couple seem to have not suffered at all.

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Many people seem to think that go bankrupt is the easy option. On the face of it, it is, but there are a number of stings in the tail of bankruptcy, not least of which is that you are effectively barred from having a mortgage for at least SIX years, and getting credit is likely to be much harder as well.

Remember the banks WILL get hurt as well..

So given yesterdays news where is this leading for the housing market long term, and the wider economy?

Quoting Warren Buffett (see Realistbear's thread)

Dumb lending always has its consequences. It's like a disease that doesn't manifest itself for a few weeks, like an epidemic that doesn't show up until it's too late to stop it Any developer will build anything he can borrow against.

We are living in a time of epic 'dumb lending'. This means that someone can get cleared bancrupcy today and get another mortgage the day after. When the 'dumb lending' season is over however and the lenders have taken a hammering, Bancrupcy will become again the stigma it once was.

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Guest Guy_Montag

Bankruptcy will only have any teeth once the banks get bitten. As long as the banks think the balance of risk means they will make more money lending to bankrupts, rather than not lending to them bankruptcy will mean nothing.

However, once the lenders start to lose a significant sum of money, things will tighten &, I imagine, in 3-4 years time people will struggle to borrow money for far longer than the 2 year minimum.

Either that or it will become like 3 points on your driving licence - meaningless because everyone has them.

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I know of a couple who went bankrupt with their business prior to the new regs coming into force. Everyone expected them to lose their nice big house, their TWO flash cars. Did they - no!

They still have the house, they still have the cars. The people who worked for them mostly lost out and the Govt picked up a bill for a fraction of the wages owed. The couple seem to have not suffered at all.

Little or no equity in the property? - nothing for the Trustee to deal with.

Both flash cars on finance? No equity - nothing for the Trustee to deal with. (Vehicles can be claimed as exempt assets any way though a "flash" car with substantial equity would be sold and a sum sufficient to provide a more modest vehicle provided)

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Large numbers of ex-bankrupts with impaired credit records may reduce the pool of potential FTBs in the years ahead.

It's also worth noting that the bulk of bankruptcies are for people who are renting. Would this imply that bankruptcies would have little effect on house prices? [GS]

On the contrary, owner occupiers are less likely to go bankrupt precisely because their house can be repossessed (or sold voluntarily) to pay off debts. As house prices fall that option will disappear for many. Such repossessions may therefore become self-reinforcing.

I know of a couple who went bankrupt with their business prior to the new regs coming into force. Everyone expected them to lose their nice big house, their TWO flash cars. Did they - no! [TMT]

Limited company? If so, they would normally only be liable to the extent of any personal guarantees they'd made.

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Limited company? If so, they would normally only be liable to the extent of any personal guarantees they'd made.

In which case it would be a Liquidation Not a Bankruptcy. Mind you if they're dumb enough to give a PG it could be both!

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Large numbers of ex-bankrupts with impaired credit records may reduce the pool of potential FTBs in the years ahead.

It's also worth noting that the bulk of bankruptcies are for people who are renting. Would this imply that bankruptcies would have little effect on house prices? [GS]

On the contrary, owner occupiers are less likely to go bankrupt precisely because their house can be repossessed (or sold voluntarily) to pay off debts. As house prices fall that option will disappear for many. Such repossessions may therefore become self-reinforcing.

I know of a couple who went bankrupt with their business prior to the new regs coming into force. Everyone expected them to lose their nice big house, their TWO flash cars. Did they - no! [TMT]

Limited company? If so, they would normally only be liable to the extent of any personal guarantees they'd made.

Your probably right, except when everyone has taken leave of their senses for years on end and borrowed against their home to fund their bikini waxes, and all of a sudden find they are out of a job or have had to take a 5K cut in pay. Here is the ODPMs repossession action data.

http://www.odpm.gov.uk/pub/144/Table546Exc...b_id1156144.xls

117K people with morgage repossession actions. Basically a 50% jump since last year (77K) and the highest since 1992. The only years that have higher records since 1990 are 1990, 1991 and 1992. Of course we have no data about 1998 and 1999 I couldn't tell you how they compare but since most situations can be graphed to a bell, this looks like the start.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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