MADRID — Manolo Marbán, 59, is still living in his house in Toledo and going to work in the small pink-and-aqua pet grooming shop he bought here in 2006, when he got swept up in Spain’s giddy real estate boom.Read the rest here.
But Mr. Marbán does not own either anymore. The bank foreclosed on both properties last April, and he is waiting for the courts to issue the eviction notices. For most Americans facing foreclosure, that is the end of it. But for Mr. Marbán and thousands of others here, it is just the beginning of their troubles. When the gavel falls on his case, he will still owe the bank more than $140,000. “I will be working for the bank for the rest of my life,” Mr. Marbán said recently, tears welling in his eyes. “I will never own anything — not even a car.”
The real estate and banking excesses in Spain were a lot like those in the United States. Construction boomed, prices rose at an astonishing pace and banks gave out loans just as fast, often to customers like Mr. Marbán, who used the equity in his house to finance a mortgage for his shop. But those days are over. Spain now has the highest unemployment rate in the euro zone — 20 percent — and real estate prices are dropping. For many Spaniards, no longer able to pay their mortgages, the fine print in the deals they agreed to years ago is catching up with them.
Not only are Spanish mortgage holders personally liable for the full amount of the loan, but throw in penalty interest charges and tens of thousands of dollars in court fees, and people can end up, like Mr. Marbán, facing a mountain of debt. Bankruptcy is not the answer, either. Mortgage debt is specifically excluded here.
“Effectively, you can never get rid of this debt,” said Ada Colau, a human rights lawyer who works for Plataforma, a new advocacy group formed both to give legal advice to homeowners and to push for reform of the country’s foreclosure laws. “Other countries in the European Union also have personal debt mortgages, but you can go to the courts and get relief. Not in Spain.”
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Debtors will start changing their identity, immigrating, working under the table, etc. Student loan debt in the US is also non-dischargeable and the same thing will happen.
ReplyDeleteThere is a tidal shift occurring in the minds of the debt-strapped middle class. They are starting to just walk away from debt. The banks which leveraged future income from all these debt instruments are facing a tsunami.
Spain doesn't have a republican heritage and therefore can't be expected to have reasonable bankruptcy laws for individuals. Her confusion mirrors the Vatican's confusion about aspects of debt, like usury.
ReplyDeleteHere in the Philippines it is actually possible for deeply indebted people to appeal to the banks for understanding and compassion for their debts and to ask for these to be restructured or lessened; and it is no secret that while the banks will blacklist those who have "bad debts", they won't sue all but the worst debtors. (The most that Filipino banks will do is scare small debtors with phony threats.) Since we Filipinos got our emphasis on personal relations ("'who you know' trumps everything else") from the Spaniards, I'm wondering if the Spaniards don't have a similar system in approaching debt.
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