Deficit Net Worth

Many people whose net worth primarily consisted of their homes found their mortgages upside down as a result of the banking crisis of 2008. With mortgages valued more highly than their homes were worth, those homeowners were notionally bankrupt. These people were described as having a "deficit net worth."

This was not unlike people who had sizable stock portfolios when the market crashed. However, a deficit net worth is only an accounting at a given point in time. As long as the assets in question were not liquidated, there is the possibility of future appreciation. That is, they'd get their money back, or rather grow back in to a positive net worth. As those who held onto stocks or property know, the market eventually came back, and some actually re-emerged out of the red, going back in the black.

This process runs similar to the kid from a poor family who inherited his grandfather’s comic book collection, which the grandmother was going to toss out in the trash, only to find a mint condition Amazing Fantasy #15 issue featuring the first ever appearance of Spider-Man. (This issue sold for over $1 million in an online auction.) The family might have been poor for many years, but by holding onto an asset long enough to appreciate sufficiently, he was able to turn their potential deficit net worth into a surplus scenario.