More Consumers Halt Foreclosures With Chapter 13
Posted Oct 23, 2007 5:28 AM CDT
By Debra Cassens Weiss
Chapter 13 bankruptcies that allow consumers to keep their homes are rising, encouraged in some cases by lawyers who promote the option in press releases and advertising.
Some lawyers are contacting debtors whose homes are already in foreclosure, the Wall Street Journal reports (sub. req.). Also driving an increase in such filings is a 2005 bankruptcy law that was designed to shift debtors away from Chapter 7, which wipes out more debt. In Chapter 13, debtors work out a plan to pay mortgage and other debt over time.
The number of nonbusiness Chapter 13 filings in California has more than doubled in the year's second quarter over the same period a year ago, according to the Administrative Office of the U.S. Courts. At the same time it has increased 40 percent in northern Illinois, including Chicago, and 70 percent in Massachusetts.
Boston bankruptcy lawyer William McLeod told the WSJ he is getting twice as many calls from debtors as a year ago. "This is fed right now by real estate, and what's been this mortgage frenzy in the last several years."
At the same time, overall bankruptcy filings are up nearly 45 percent the first nine months of this year compared to the same time last year. Filings are still lagging behind the number that preceded the new bankruptcy law in 2005, when debtors rushed to beat new filing requirements.