A question

Why can New Century Financial, poster child for subslime mortgage exploitation, file for bankruptcy and thus have its assets protected and maybe not have to pay back all the money while homeowners who are getting foreclosed can’t do the same thing? Just wondering…

(Due to the the recent bankruptcy laws, foreclosed homeowners may well not not be able walk away from it, they may still owe the money.)

  • dj

    In the case of a corporation, in the process of bankruptcy, the shareholders are usually hosed. Their stock will become worthless, and ownership (and control of the management) will revert to the creditors, who get stock in place of the money they’re owed (and usually not as much as they’re owed). Will the creditors keep on the current corporate management? Maybe, if they do well. Otherwise, they’ll be unemployed.

    Everyone loses something. But none of them are likely to become homeless, like the (former) homeowners.

Powered by WordPress. Designed by WooThemes