What's Your Story Idea July 17, 2009, 9:14PM EST

After the Foreclosure: Downsizing and Doubling Up

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The idea for "After the Foreclosure: Downsizing and Doubling Up" came from BusinessWeek readers Pres Winslow (left), a career counselor in Winslow, Ariz., and Adam Dawson, a second-year MBA student at the University of Michigan.

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California: Foreclosure Epicenter

Like Henning, many people going through foreclosure have to leave behind belongings or sell them on the cheap. Real estate agents typically recommend their clients find another residence before foreclosure filings adversely affect their credit to the point that they can't rent. "Clients are doing the right thing [trying] to move out as quickly as they can," says Valerie Torelli of Torelli Realty in Orange County, Calif., the U.S.'s foreclosure epicenter. California had some 500,000 foreclosures in 2008, 115,000 more than Florida, second on the list. In her work, Torelli sees lots littered with furniture and, sometimes, pets still locked in their owner's former home. Many people leave their belongings because they can't afford to move them, she says.

Charlotte Jensen and her husband, Dennis, of Glen Allen, Va., declared bankruptcy in May 2008, about a year after they borrowed against the house to consolidate debt. That added an extra $900 onto their monthly mortgage payment. Almost immediately, Jensen says, the housing bill became too much to manage and they were forced to move to an apartment. "Truth be told, we should have never been allowed to refinance," she says. "It put all our eggs in one basket, and it was a very expensive basket we couldn't undo." The couple agonized over the decision to sell their grill and riding mower, two signature representations of homeownership for many people. "It was like some big symbol of our failure," says Jensen.

The Jensens enrolled their 8-year-old son in a new school and say they try to shield him from the reality of the family's bleak financial situation. To protect herself and her husband from the raw emotions that bleed into discussions about economic hardships, Charlotte Jensen says she began referring to her family as Jensen Inc. "As you can imagine, we had to make some very painful decisions," she says. "It is an approach I still use, and I am convinced it has kept my marriage together." Jensen admits that moving in with her father would help Jensen Inc.'s bottom line, but she's concerned about her son and his schooling. "He has two smart parents with good careers who made poor decisions," she says. "It is not fair or healthy to him to shuffle him around." There's also the issue of their two golden retrievers. Her father extended an open invitation for her family, but not to the pooches. She hopes to avoid a merger of households,

Squatting at the Realtor's Place

Making the transition from ownership to renting—and the new strictures that can bring—can be tough. For example, the foreclosure crisis is also spawning a severe abandoned pet problem in many areas. "No one is going to rent with three dogs," says Torelli, who often has to put pets up for adoption after they've been abandoned by foreclosure victims. The Arizona Humane Society, which covers the hard-hit Phoenix-Scottsdale metro area, saw a 100% increase in abandoned pet calls between 2007 and 2008, and is on pace to match the 2008 numbers.

Animal abandonment falls under the animal cruelty umbrella, and 3,046 of the 7,979 cruelty calls last year were for abandonment, society spokeswoman Kimberly Searles says. While not every abandonment call is tied to foreclosure, "you can tie the numbers in," Searles says. "There's a correlation, obviously." In August 2008, California amended its animal abandonment law to require that anyone who finds a discarded animal in a foreclosed property report the pet to animal control.

On the other side of a pinched homeowner, Jason Stevenson, 27, and his girlfriend Kristin Garrison, 28, of Las Vegas, have been relatively lucky. On May 28, the bank foreclosed on their landlord's single-family house, which they were renting month-to-month. The couple was waiting to close on a short-sale property of their own, but by mid-June the landlord kicked them out and they were essentially homeless—and still waiting to learn whether the short sale will happen. "We started packing boxes with nowhere to go," Stevenson says. With the only other option being the street, the couple's realtor—who is helping them purchase the short-sale—is letting them stay for free at her former home, which she is now trying to sell.

Spielberg is a reporter for BusinessWeek.