Bankruptcy Filings Increase In This Tough Economy, New Bankruptcy Rule Worries Some Couples

Manchester couples thinking about filing bankruptcy may need to think twice. A recent decision from the U.S. Bankruptcy Court in Concord could leave some city residents at greater risk of losing their homes.

“At first, we thought people would start filing during the pandemic. Instead, people thought they’d wait it out and hope for things to get better, and the country has been afloat in federal subsidy dollars,” said Attorney David Osterman. Osterman has been a Manchester bankruptcy attorney for over 30 years.

“For some people, it isn't getting better. The recovery just isn't happening. The bills are piling up and it can feel very overwhelming.”

Inflation has recently topped 9.1%, the highest rate since the 1960s. The costs of groceries, fuel, and electricity are increasing faster than most paychecks. As prices climb higher, bankruptcy starts to look more attractive.

“Normally when you file a Chapter 7 bankruptcy, you get to keep important property,” says Osterman. “Many people are just trying to keep their homes. Each person can keep about $120,000 of value in their home. Sometimes a little more. Historically, a married couple gets to double that.”

According to Osterman, many married couples end up keeping their homes or condos when their home value is less than any outstanding mortgage plus $240,000. Meanwhile, credit cards and similar debts can still be washed away.

But for some married couples, the situation just got worse. In a recent bankruptcy court decision, Judge Bruce Harwood of the U.S. Bankruptcy Court for New Hampshire decided that if a married couple who live in their home are not both listed on the deed to the home, then they might not be able to keep their home after all. In that situation, a couple’s home may be in jeopardy If it is worth more than their mortgage plus $120,000.

Osterman said the new court decision has surprised a lot of attorneys. And that it comes at the worst possible time. House prices all over the country and state have increased during the pandemic. But Manchester real estate prices have skyrocketed. Some homes have nearly doubled in value. Apartment rentals are through the roof and few new housing units are being built.

“That new case changes the way things were done for many decades. Even if the spouse has lived in the home for 20 years. If your name isn't on the deed, one spouse might not get to protect that $120,000. Meaning both spouses could end up losing the house."

“Unfortunately, it's not as simple as just adding your spouse to the deed right before you file for bankruptcy. So, it means some people–if they don’t plan ahead–are probably going to lose their homes,” said Osterman. "There aren't a lot of good housing alternatives. Rents are up too. Fighting to keep someone in their home is almost always the best outcome for everyone–including the bank."

Still, Osterman sees some hope. When asked how things might change, Osterman said that he has heard some grumblings among state legislators that a change to state law might fix it. However, there are no specifics. In the middle of the summer, there won’t be a fix until early 2023 at the very earliest.

“Filing for bankruptcy is a big decision, and most people feel relief when they finally decide to file. Right now, what matters is that if you’re trying to keep your home, you need to talk to a professional and make sure there won’t be a surprise. This is a unique and unfortunate situation, but the legal community is here to guide people through the process. That’s what we do.”

David S. Osterman

Since 1983 David S. Osterman has been assisting New Hampshire residents, and in particular, New Hampshire families, facing difficult legal and financial situations. Admitted to practice law in New Hampshire and Massachusetts, he focuses on the financial difficulties facing the many New Hampshire residents who have not shared in the economic “recovery”.

If you are receiving dunning letters or telephone calls, calls to your workplace, or threats from collection agencies, it may be time to involve a professional who is familiar with the most current laws. If a collection agency has violated the strict Federal or State laws that govern their behavior toward you, a law firm can assist in putting a stop to that abusive behavior.

Information on Attorney David S. Osterman can be found at https://www.bankruptcylawnh.com/ or he can be reached by phone at 603-626-5452