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Many people hesitate to file bankruptcy because they perceive it as shameful, or shady, or unethical.

BANKRUPTCIES SKYROCKETING

Bankruptcy is far more common than it used to be. For the last few years, there have been about 6,000 bankruptcy filings in the U.S. per work day. When you consider that about 32% of these cases are joint (husband & wife) filings, this means that every work day, about 7,920 people file bankruptcy, or 990 per hour. In 2011, a year before this article was written, about 67,660 persons filed bankruptcy in Georgia alone, or about 270 persons per business day. Of course, the fact that it is common does not answer the question, “Is it ethical?” one way or another. Immorality and illegal drugs are common, too, but that does not make them right. Can bankruptcy sometimes be the right course of action?

MANY TRY HARD TO AVOID IT

Going bankrupt is not always something for which to feel shame. Many people filing bankruptcy made every effort to pay all their bills, perhaps even using up savings, cashing in stocks, or borrowing from their retirement to stay afloat and try to work things out first. For very commendable reasons, they may try to keep fighting to pay all their bills– cashing in their life insurance or IRA, borrowing from their 401(k), etc.. But by holding on until the bitter end, they often end up making things even harder on their families (and perhaps harm their credit far more than necessary). But there may come a time when a rational person has to admit that he cannot pay his bills, and finally do something about it.

REASONS PEOPLE GO BANKRUPT

People go bankrupt because of business reverses, unforeseeable loss of job or shortened hours, unexpected high medical bills, heavy emergency expenses, natural disasters, being swindled, and a hundred other reasons beyond their control. And people also go into debt for exercising poor judgment or carelessness in spending. The total picture may include circumstances beyond your control, or circumstances well within your control, or both. Either way, if you have too many creditors hounding you for payment, and you could not possibly pay them all and still pay for the necessities of life, you need help. That is what the bankruptcy courts are for. And you may owe it to your dependents, if any, to provide a more stable home environment.

A FRESH START

When Congress wrote the bankruptcy law, they did not do it to make life easy for crooks and deadbeats. The purpose of the law was, and is, to give people who are hopelessly in debt a fresh start, so they can get their feet back on the ground. They knew that very few people actually intend to file bankruptcy. The U.S. Supreme Court itself has said that a central purpose of the bankruptcy law is to “provide a procedure by which certain insolvent debtors can reorder their affairs, make peace with their creditors, and enjoy ‘a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.’” Grogan v. Garner, 498 US 279 (1991).

It is true that some people try to misuse the bankruptcy laws for selfish personal gain. For example, a young person we know commented that he intended to charge his credit cards to the max, and then file bankruptcy and walk away from his obligations, keeping all he bought. Such despicable conduct is obviously unethical.

COLLECTORS WILL HOUND YOU UNMERCIFULLY

When you don’t have enough to cover the minimum payment on everything, very possibly through no fault of your own, you either get help or you don’t pay the necessities of life, and continue to get deeper and deeper into debt. We have seen countless cases where people whose debts became a problem try to make reasonable, affordable arrangements with creditors only to be slapped with sky-high interest rates, late charges, and “over-limit” fees, or even turned over to collectors. Is it right to regularly charge unconscionable interest rates and exorbitant fees to every debtor who is behind, regardless of the reason? When collectors garnish up to one quarter of a debtor’s wages, which the courts allow here in Georgia, the debtor loses up to one quarter of his ability to pay for the necessities of life for his family all at once, all for past-due credit card charges or some other less pressing matter.

When there is not enough money to pay for your necessary expenses (housing, food, utilities, car, etc.) and also all other bills, then you need to prioritize, and pay the necessities first. Unfortunately, the collectors don’t see it that way. They are paid to pester you constantly until they get payment for their client, no matter what that does to your long-term financial security. Collectors will badger you for payment for a minor bill even if it means that paying them will make you late on your mortgage or get your car repossessed. They don’t care – they are paid to make you pay up. They have learned through years of experience that most people will pay them something just to get them off their backs, even if the money ends up coming out of the necessities. [See our sections on Fighting Bill Collectors and Dealing With Lawsuits.] Bankruptcy can get them off your back and get you some peace.

And even if a person’s credit problems are all because of previous careless or irresponsible spending, they still need to make some major changes to set things right again. If there isn’t enough money to pay all the bills, something needs to change before they can reform their ways and become responsible. Dodging bill collectors, leaving the rent or mortgage or utilities unpaid, and borrowing from Peter to pay Paul (at ever-higher penalty interest rates) is not the way to a secure future.

GOD HIMSELF FAVORS MERCY FOR DEBTORS

 In the Bible, God Himself commanded to give debtors relief in ancient Israel. This was to be available every seven years (modern American law allows Chapter Seven bankruptcy every eight years):

“At the end of every seven years thou shalt make a release. And this is the manner of the release: Every creditor that lendeth ought unto his neighbor shall release it; he shall not exact it of his neighbor, or of his brother; because it is called the LORD’s release.” (Deuteronomy 15:1-2)

Also, in the New Testament, Jesus told of two cases of a creditor forgiving a person’s debt [Matthew 18:26-27, Luke 7:41-42], in the context of teaching about God’s forgiveness and our duty to forgive one another. Let us not judge ourselves more harshly than God Himself. Sometimes bankruptcy is the best way out of a mess. That’s why God made provision for debt relief for His ancient people, and that’s why the bankruptcy courts exist today. Use them if you need to.

Your credit score before and after bankruptcy, and the prospects of receiving credit after bankruptcy

Many people have the idea that after filing bankruptcy, their credit is ruined and they will never have a decent credit score again. This is not guaranteed to be true. Whether it happens may depend on you.

Even if you vow to never use credit again after filing bankruptcy, you need a good credit score. More and more auto insurance, health insurance, and life insurance providers are taking your overall credit score into account in deciding how much to charge you! You can save yourself a bundle by guarding your credit score, even if you never use a credit card again.

To intelligently plan your credit future after bankruptcy, you need to understand a little about how credit scores usually work. There are three main credit bureaus: Equifax, Experian, and Transunion.  Each of these gives you a credit score, which are usually different though not far apart. You (or prospective creditors) can also obtain a single score which takes all three bureaus into account.

WHAT DETERMINES YOUR CREDIT SCORE

There are many factors which go into determining your credit score. The bureaus are very secretive about exactly what formulae they use (called “algorithms”) to guard against people attempting to manipulate their score. Although no one outside these bureaus knows exactly what is in each algorithm, through years of observation, watchers of the credit industry have learned some general principles of how they determine your score.

GENERAL FACTORS

First, there are some general factors. Do you own or rent? How long have you lived at the same address? (Someone who has had five addresses in three years is generally assumed to be less reliable than someone who has had the same address for fifteen years.) How high a percentage of your income is taken up by your mortgage? A mortgage payment that is 60% of your income will count against you; one that is 25% of your income will not. Likewise, how long have you had the same job? And, very important: How close are you to your borrowing limit on each account? Generally speaking, it is best to borrow no more than 15% to 25%  of your borrowing limit on each account. Maxed-out accounts count significantly against you. There are many other factors, but this gives you an idea.

THE BAD NEWS

Next, each month that you are reported as paying late (or not paying at all) on an individual account brings your score down some.  For example, if you are late in paying on two revolving charge accounts, and pay on four others on time, it will bring your score down some.  If you do not pay on three accounts at all, but pay on three others on time, it will bring your score down more. If you do not pay on six accounts at all, it will bring your score down a lot more. Most credit cards, etc. report every month to all three collection agencies as to whether you are up to date or not.  Each and every month you are late or do not pay stays on your permanent credit record for seven years after it is first reported (a separate black mark for each month, for each account).  After seven years, it comes off the record. So, if you get behind on an account and stop paying for three consecutive months, seven years later one negative report will come off your report for each of three months in a row. (Most medical bills are not reported to the credit bureaus until they reach the next stage, below.)

Third, any collection efforts are even worse on your score. If a creditor sends a bill off to a collection agency, that hurts your score a lot. So does each successful collection effort – being sued and getting a court judgment against you hurts your score more, and so does a garnishment or lien to attempt to collect on a judgment.  All three credit bureaus check all courts at least once every three months, and record each of these “public record” events.  Again, each of these stays on your permanent credit record for seven years after it is first reported. After seven years, it must come off the record.

Finally, major negative events hurt your credit most of all.  Foreclosure on your home or other real property, repossession of a vehicle, or bankruptcy each cause a major decrease in your score.  (A “deed in lieu of foreclosure” or “short sale” also counts as a major negative event.)  Also, bankruptcy can stay on your record for ten years! But it should be noted that Chapter 13 bankruptcy does not hurt your credit as badly as Chapter 7 bankruptcy. So much for all the bad news.

THE GOOD NEWS (SUCH AS IT IS)

But it’s not as depressing as it sounds. A negative mark – whether relatively minor, such as a missed credit card payment, or major, such as a foreclosure – may stay on your record for  seven  years (Chapter 7 bankruptcy stays for ten years),  but how much it counts against your credit score decreases every year. So, a three-year-old negative report does not count nearly as much against you as a similar one-year-old negative report;  a six-year-old negative report does not count nearly as much against you as a similar four-year-old negative report; and so forth.

Also, accounts paid promptly build your score up every month. Just as every month an account that is late counts against you, so every month it is paid on time counts in your favor, though one negative mark can wipe out many good marks.

WHAT GOOD THIS KNOWLEDGE CAN DO YOU

Many just throw up their hands and say, “What’s the use – my credit is already ruined for years.” But this is exactly the wrong way to look at things. There are at least two lessons you can take away from this discussion:

1. STOP THE HEMORRHAGING AND RESCUE YOUR CREDIT SCORE AS MUCH AS POSSIBLE.

When someone has had a major accident, before you can treat the wound or give antibiotics or a vitamin shot, you must stop major bleeding first. Likewise, when you are in financial trouble, you need to stop the major inevitable decreases in your credit score.

ONE WAY OF HANDLING THINGS

Ironically, people of conscience who try the hardest to pay their bills can make their situation far worse, in terms of their credit recovering.  They may keep trying to stay afloat long after their circumstances make declining credit inevitable. For example,  though a family may have good credit up until now, a layoff, an hours cutback, or a major injury or stroke may cut their income to the point that they cannot pay all their bills. Once this is clear, they may make an awful choice: thinking they are “doing  the right thing,” they can “try to hold on and pay everything” even though the facts clearly show that they do not have enough income. As a result, the collection calls and letters start coming in. They rationalize their decision by saying, “Maybe things will get better.” But they rarely do. So they borrow against their life insurance, drain their savings, then drain their 401(k).  The collection calls and letters get worse and worse, and their formerly peaceful home life is turned into a never-ending blizzard of stress, arguments about money, and despair.  Their credit cards get 30 days overdue, then 60, then 90.  Their creditors cut off their accounts and turn them over to collection agencies. They get warnings of lawsuits, maybe even foreclosure; then the next thing you know, they get court judgments against them, garnishment of their bank accounts and salaries, liens, unrelenting collection calls from others, and so on. Finally, they “see the light,” and realize that bankruptcy is the best way out, and reluctantly go see a bankruptcy attorney. But by then, they may have many months of not paying their accounts on their credit record, not to mention several court judgments, garnishments, liens, maybe a repossession or two, or even a foreclosure. All of these depress their credit score much lower than if they had filed bankruptcy earlier. Hence, it takes them much longer to rebuild a decent credit score coming out of bankruptcy.

A BETTER WAY

Let us assume that the family with decent credit which had its income cut to the point that they can no longer pay all their bills takes a long, hard look into the future. They see that with the income cut, starting this month there is no way they can pay all their bills on time, so they promptly go see a good bankruptcy attorney. They file bankruptcy.  Immediately, all lawsuits, garnishments, foreclosure, and repossessions are stopped.  The negative credit reporting ceases. If they file Chapter 7 and have kept up with their mortgage payments and do not have over $43,000 equity (Georgia limits) in their house, there is no foreclosure. If they have not kept up their mortgage, and/or they have more than $43,000 equity in their house, perhaps they can file Chapter 13 and keep their house, if they have at least one income. Either way, when the bankruptcy is over, they start over with a clean slate. They do not have many months of slow or no payment on their credit report;  no court judgments, no garnishments, no repossessions, no foreclosure; and they avoided many rattling months of stressful calls and letters from collection agencies, which would have made them hesitate to answer their phone or even look at their mail. True, they have a major hit against their credit – the bankruptcy.  But because they filed bankruptcy promptly, before their credit score began a major inevitable, irreversible decline, their overall credit score is not depressed nearly as much, and as a result their recovery is much quicker. 

2. THERE IS LIGHT AT THE END OF THE TUNNEL.

After your bankruptcy (wherever your credit score ends up) make absolutely sure you never abuse credit again. Pay every bill promptly, and if you do not have cash, do not buy it. If you were careless before the bankruptcy, learn from your mistakes.

Believe it or not, most people coming out of bankruptcy receive offers of new credit cards. Why? Very simple:  1) They carry high to very high interest rates; and 2) they know you can’t file bankruptcy and get a discharge again for years.

If you are certain you have the self-discipline to control your use of credit absolutely,  go ahead and take a couple of the best of these credit card offers – not so you can go on spending yourself into trouble, but rather so you can begin rebuilding your credit. Here’s how:

With one of these new cards, buy all your gasoline regularly, and nothing else. Then pay the balance in full promptly most months, a few days before it is due, using the money you would have used for gas anyway. Do not pay the balance in full every month; every few months just pay the minimum balance for a month or two, then pay it all off the following month. Even at a high interest rate, this will not amount to much extra. This is to make sure they do not cancel the credit card due to never making any money off you. By doing this, you will create a good regular payment record, and your credit reports will say “pays as agreed” or the like.

With another of the new cards, only buy the groceries you would ordinarily buy, and promptly pay it, too, every month, paying only the minimum once in a while, then paying it off regularly. Two cards reporting as “paid as agreed” every month,  without any more negative reports since the bankruptcy, will gradually bring your credit score up, and the amount the bankruptcy damages your credit will get less and less every month. Regular mortgage payments will also have a powerful effect on your score.

We know of cases where people had good credit but had a major income decline, and then filed bankruptcy promptly before their credit score could decline, and had a credit score in the mid 700’s and were able to buy a house only two years later!  Yes, there is light at the end of the tunnel; when you get a fresh start from your bankruptcy, use it wisely.  Keep plugging away; pay promptly, use credit wisely to build up your score, and sooner or later, you will be back where you belong. Walt Disney, Donald Trump, and Henry Ford all went bankrupt at one time or another, and they rebuilt their credit. You can too.

1. BANKRUPTCY WILL RUIN MY CREDIT FOR TEN YEARS.

Not true. It is true that bankruptcy stays on your credit history for up to ten years at all three major credit reporting agencies, but your credit score is updated and recalculated at least four times a year by these same agencies, based on many factors. (Actually, most people who file bankruptcy already have lousy credit scores.) Credit scores give more weight to the most recent payment history; as reported lateness, collection activity, the date of your bankruptcy, etc. becomes older, how much it counts against you decreases. All negative marks against your score disappear completely after seven years, except for bankruptcy, which disappears completely in seven to ten years.

If you have many overdue reported bills and file bankruptcy, then make all your payments promptly after coming out of bankruptcy, your credit score begins a slow, steady, upwards climb. In fact, by filing bankruptcy, you can stop further negative reports which would depress your score even more, such as lawsuits, court judgments, garnishments, etc.. Depending on your circumstances, you can often prevent mortgage foreclosure and car repossession by filing bankruptcy, which may otherwise hurt your credit even worse than bankruptcy.

Many people are surprised to receive offers of new credit cards after coming out of bankruptcy. (Of course – the banks know you can’t file again for eight years!) The interest rates are often very high, but if you accept a couple of these and only use them for something you can pay off faithfully every month, such as gasoline or groceries, you will develop a much better credit history, your credit score will gradually climb, and eventually you can get cards with decent interest rates. It is not unheard of for people who made all their payments promptly after bankruptcy to have good credit scores as soon as two or three years after bankruptcy. Donald Trump, Henry Ford, and Walt Disney have all had pretty good credit— and they had all previously gone bankrupt! (Trump, three times!)

2. FILING FOR BANKRUPTCY WOULD MAKE ME A DEADBEAT.

Most people file for bankruptcy only as a last resort, after months or years of struggling with bills and bill collectors. Honest, hard-working people can find themselves in a hopeless situation when they lose their job, have unexpected medical expenses, are deserted by their spouse, or a hundred other legitimate reasons for seeking relief via bankruptcy.

One Harvard study concluded that about half of all bankrupting people interviewed got into financial trouble through illness and medical bills, and three-quarters of these had medical insurance at the time! Co-pays, deductibles, exclusions, loopholes, and other out-of-pocket costs were often enough to drive them over the edge, to say nothing of those who lost their insurance coverage when they lost their job.

But regardless of the reason for needing help, most people who end up in bankruptcy sincerely want to pay all their bills, but just can’t- and creditors who won’t work with them in a reasonable manner don’t help any.

3. EVERYONE WILL KNOW I HAVE FILED FOR BANKRUPTCY.

Your creditors will find out, but usually, if you don’t tell anyone, no one else is likely to find out. When famous people or big corporations bankrupt, the nosy media sometimes report it, but with some 68,000 Georgia residents filing bankruptcy every year, it’s usually just not very newsworthy. Bankruptcy court records are public, but typically no one outside of the debt industry goes rooting around in them. If you want to keep it as quiet as possible, just keep it to yourself.

4. I’LL LOSE EVERYTHING I HAVE IF I FILE BANKRUPTCY.

Wrong. Most people keep most or all of their personal property; and 401(k)’s, IRA savings, and SSI or Social Security payments, if applicable, are not touched.

In Chapter 13 bankruptcy, you can generally keep everything, in return for paying what you can afford on your debts for either three or five years after meeting your day-to-day living expenses. You can even keep your house and car, even if the payments are months overdue, as long as your Chapter 13 provides a way for you to catch them up in three to five years after cutting down on payments for less important debts.

In Chapter 7 bankruptcy, you do not have to make any payments, but are forgiven all of your debts except for a very few exceptions, the most common being child support and student loans. You can keep your house and car if your payments are current and you do not have too much equity in them. Unless you have a lot of expensive art, antiques, etc., you can usually keep all your personal effects and property, up to certain limits, through a system of exemptions. (95% of Chapter 7 clients do not have to give anything up.) If you have a lot of valuable personal property or real estate other than your residence, or you have too much equity in your residence, you can usually file Chapter 13 instead.

5. I WILL NEVER BE ABLE TO OWN ANYTHING AGAIN.

Wrong! You can own anything you can afford after bankruptcy. Some people can qualify for an FHA mortgage at good interest rates as soon as two years after bankruptcy, as long as they don’t get into trouble with their credit again. Among the famous people who have filed for bankruptcy and later gone on to own things are Donald Trump, Henry Ford, H.J. Heinz, Walt Disney, Ulysses S. Grant, Charles Goodyear, Milton S. Hershey, Harry S. Truman, Mark Twain, John J. Audubon, P. T. Barnum, Ted Nugent, Nelson Bunker Hunt, E. Howard Hunt, and Abraham Lincoln.

6. YOU CAN’T GET RID OF BACK TAXES IN BANKRUPTCY.

This is only partly true. You still must pay the latest three years’ federal and state income taxes, but income taxes older than three years can be wiped out. Also, business owners cannot escape overdue withholding or sales taxes, regardless of age.

7. YOU CAN ONLY FILE BANKRUPTCY ONCE.

No, you can file Chapter 7 every eight years, and a Chapter 13 right after a Chapter 7 or another Chapter 13. (Hopefully, once will be enough!

8. BILL COLLECTORS MAY STILL HARASS ME AFTER I FILE FOR BANKRUPTCY.

Absolutely wrong! Creditors are not even allowed to contact you without permission as soon as your case is filed. Foreclosures, wage garnishments, and repossessions are stopped in their tracks. If you are being sued, and a court date has been set, the creditor’s lawyers must immediately stop all proceedings. No more collection efforts may occur on any account. If a creditor attempts to collect from you after you file, you have the right to sue him for cash damages! The Federal Bankruptcy Court Judges do not hesitate to punish creditors who ignore the Bankruptcy laws.

9. IF I FILE BANKRUPTCY, IT MAY CAUSE MORE TROUBLE AND STRESS IN MY FAMILY.

Every family is different, but just the opposite may be true. It may be that the major sources of stress and discord in your marriage are the unpaid bills! Constant collection calls such that you hate to answer the phone, continual dunning letters that make you hate to look at the mail, threats of foreclosure or repossession, lawsuits, and wage garnishment are all very stressful for most people. Even in families without major debt troubles, finances are always one of the top three causes of arguments.

Decent people want to pay all their bills, and this horrible treadmill of excessive debt is not only discouraging but very stressful, if not infuriating. Once you recognize the need to finally do something about the situation, filing bankruptcy can bring peace back into the home — the phone stops ringing, the threats and demands stop, foreclosure and/or repossession may be prevented, and you are given breathing room to get a fresh start.

Sometimes relationships will deteriorate further if you do not file for bankruptcy! We have seen bankruptcy (when needed) help relationships far more than hurt them in almost every case where we had feedback. Working together for a brighter financial future is better than dealing with relentless debt collectors and trying to decide what bills you can afford to pay, all while getting deeper in debt.

10. FILING BANKRUPTCY WOULD BE CONTRARY TO MY DUTY TO GOD.

Ordinarily, it is true that your Biblical duty is to pay your debts. However, most people considering bankruptcy are unable to pay all their debts, because of layoffs, medical bills, or a hundred other unforeseen situations. God does not expect you to do the impossible. True, ideally it may be that you should have prepared better or been more careful with debt, but what’s done is done and you may need to get off the debt treadmill now. That’s why He put a bankruptcy provision right in the Bible! In the Old Testament, God commanded to give debtors in ancient Israel relief. This was to be available every seven years (modern American law allows Chapter 7 bankruptcy every eight years):“At the end of every seven years thou shalt make a release. And this is the manner of the release: Every creditor that lendeth ought unto his neighbor shall release it; he shall not exact it of his neighbor, or of his brother; because it is called the LORD’s release.” (Deuteronomy 15:1-2)

Also, in the New Testament, Jesus told of two cases of a creditor forgiving a person’s debt (Matthew 18:26-27, Luke 7:41-42), in the context of teaching about God’s forgiveness and our duty to forgive one another. Jesus also said, “For ye have the poor with you always” (Mark 14:7), showing it is a normal part of the human condition for some people to have financial problems. Let us not judge ourselves more harshly than God Himself. Sometimes bankruptcy is the best way out of a mess. That’s why God made provision for debt relief for His ancient people, and that’s why the bankruptcy courts exist today. Use them if you need to.

Links

Quality Christian Websites

If you’re going to waste a lot of time online, it might as well be at excellent web sites!

People with inquiring minds, beware – It is easy to spend many hours perusing these. (Needless to say, we do not necessarily endorse or agree with everything on these sites.)

Have you worried that filing bankruptcy may brand you as a failure and ruin your financial future? Then just read this list of famous people who had to file bankruptcy for themselves or for one or more of their businesses (some before modern bankruptcy codes were adopted), many of them before they became very successful. Notice that it includes four U.S. Presidents!

The bankruptcy laws were established to give you a fresh start in life, not to ruin it.

If you cannot afford to continue making mortgage payments on your house, you may choose to stop making payments and surrender the house in bankruptcy, since by doing this, the lender can never sue you for any lack of payments. But this does not completely solve your problems with the house. Until such time as the lender actually forecloses and sells the house to someone else, you remain the legal owner, even though you may not have made a mortgage payment for a year or two.

It is not uncommon for a lender to wait from 4 months to a year or two to foreclose. Even after they foreclose, they may not record the deed for even longer after that. No one can make you move until they file a “Dispossessory Action” (eviction), and no one can do that until the house is actually foreclosed on and the deed is transferred to a new owner or back to the lender. (And this is often not done for months after foreclosure.)

If there are HOA or condo fees, as the owner you are responsible for them – the bankruptcy only wipes out the fees that were due before your case was filed, but not after. You will be billed (and probably sued) for them until a new deed is filed.

Also, if your HOA or condo or municipality requires you to keep the lawn mowed, and you don’t, it can do it and charge you for it. If the property deteriorates, the municipality might condemn the property and could even tear it down as a safety hazard…and charge you for the demolition.

And, if someone slips on an icy walkway, as the legal owner, you’re responsible; so keep it insured until the bank actually forecloses and the deed is actually transferred. If your insurance was paid along with the mortgage, contact the insurance company and tell them to bill you separately, or the bank may put into effect “forced placement” insurance at a much higher rate which they can collect from you after bankruptcy. Or, you may find it better to put a new, separate policy in place. (The bank’s forced placement insurance protects only the bank, not you.)

You can often live in the property “rent free” until they foreclose and force you to move, and save up the money you would have paid for rent to give you a financial head start with your new house later. Some people who already have plans to move just rent out the property for a low rent until the foreclosure occurs – just enough to pay the HOA or condo fees, keep it maintained, and pay the insurance.