It seems that the federal government is hedging many of their economic recovery plans on helping people to purchase homes and stay in their existing homes. A good deal of stimulus money has been set aside for helping home owners modify their existing mortgages or first time buyers get into homes; but the rising rates of personal bankruptcy is rocking the boat on home buying and mortgage paying.

Personal bankruptcy has increased this month and we are right on track to have the highest levels of personal bankruptcy in four years when the rules of Chapter 7 bankruptcy changed and many people. This problem is compounded by a large increase in business bankruptcies as well. The American Bankruptcy Institute reports that the total number of bankruptcies in America have risen by 30% over last year; this is a massive blow to the recovering economy as people who have no money to spend are hard pressed to spend anything on stimulating the economy with purchasing.

Needless to say, the more people who file for bankruptcy, the more prospective buyers who will be taken out of the pool of prospective home buyers; these people will join all the other Americans who can’t afford to splurge on a home right now due to their current financial turbulence. While unemployment rates are still very high, this dwindling pool isn’t likely to see a resurgence either; the percent of Americans who are unemployed right now is the highest in over 25 years and may keep climbing.

It may be wiser in the long run for the “powers that be” to focus on economic support in areas that are more directed to the largest amount of the population, those who fall beneath the level of income that could afford to buy a house in the first place. The administration may well be on the right track already with their extension of unemployment benefits but it is likely going to not help people who have had their benefits expire previously.

Hopefully there are some solutions that can be found which will assist people across the country to ride out this tumultuous time with their human dignity relatively intact without creating huge amounts of debt or taxes to deal with later. The next few months will hopefully show some signs of economic upturn beginning, as a little hope can go a long way in the struggle out of this recession.

Learn all about Florida’s Emerald Coast, and the Destin real estate market, at EdKirkland.com. This site has everything you need to get started in the market, whether you’re buying, selling, or investing. Our users enjoy a free home search and extensive information on local communities, such as the Destiny real estate area.

“In the wake of the recent and very substantial changes to the nation’s bankruptcy laws, the most significant beneficiaries are likely to be commercial landlords.” So says Warren R. Graham, a bankruptcy lawyer with 25 years of experience, much of it representing both landlords and tenants in large Chapter 11 reorganizations.

“Most of the public attention, in the enactment of the new law, has been paid to consumer matters and credit card debt, given that the prime movers for the new legislation were consumer credit issuers,” says Graham. “But many changes have been made in the area of business bankruptcies, which are profound, and which have received virtually no reportage.” Much of this did not seem so important since the new law took effect in October, 2005, in the midst of a vibrant economy and explosive real estate market. “But,” Graham argues, “with the potential confluence of a weakening economy and softer real estate values, the prospect for commercial lease dispositions in bankruptcy cases is likely to increase dramatically, and soon.”

The new law gives a commercial tenant in bankruptcy 120 days, with a possible one-time 90 additional days, to ‘assume’ or ‘reject’ its lease. After that, unless the landlord consents, the lease reverts to the landlord. “Under prior law,” said Graham, “landlords could get stuck for many months, or even years, as debtors marketed valuable leases for the benefit of their creditors, often at the expense and risk of the landlords. The uncertainty occasioned by being held ‘in legal limbo’ created problems for landlords wishing to sell their properties, refinance, or even, in the case of shopping centers, lease adjoining space, because of ‘cross-default’ and ‘use-clause’ provisions.” This is a particularly important phenomenon in large retail Chapter 11 cases, in which hundreds, or even thousands of leases may be implicated, and the values realized by their sales often determine the success or failure of the reorganization effort.

Graham’s own experience, in fact, includes the representation of one shopping center landlord, whose single lease was marketed out of three separate bankruptcies: W.T Grant, Caldor and Ames Department Stores.

According to Graham, the consensus among bankruptcy professionals is that the jury is still very much out on the benefits of the new law for issuers of consumer credit. It has, in fact, been argued that, even as those entities lobbied hard for the changes in the law, the likelihood is that their recoveries will not be materially enhanced by them. “But there is little doubt,” Graham claims, “that landlords will benefit greatly by being able to rely on a swift and certain disposition of their property interests in Chapter 11 Cases. Next year’s Christmas season may come earlier for retail landlords than for their retail tenants. And the role of Santa Claus may be played by the United States Congress, with bankruptcy lawyers in the supporting roles of his elves.”

E-mail: wgraham@ctswlaw.com