“Chapter 13 Gains in Popularity”, Wall Street Journal Writes

October 27, 2007 7:35 am Published by

            "If people knew they had the Chapter 13 option, a lot of people would save their house."  is the quote in the Wall Street Journal from Mr. T., a man who successfully filed a Chapter 13 bankruptcy petition six months ago.  Mr. T. is now under a debt repayment plan that allows him and his family to stay in their home while they work on paying off their debts.

            As the housing slump continues, the Journal points out, consumer bankruptcy filings are increasing rapidly.  Many consumers are choosing to file a particular kind of bankruptcy claim called Chapter 13, in an effort to stay in their homes.

            With Chapter 7 bankruptcy in Indiana, still the most common type of bankruptcy proceeding, a person must forfeit certain assets.  Those assets are then sold to repay creditors.  Under Chapter 7 bankruptcy in Indiana, the assets could very well include a portion of home equity or even the home itself.  True, in most cases a Chapter 7 proceeding stops foreclosure for awhile, but the relief is often temporary. Fact is, many homeowners who are behind on their mortgage payments and who file under Chapter 7 end up losing their homes.

            How is Chapter 13 bankruptcy in Indiana different from Chapter 7?  In most cases, Chapter 13 puts off foreclosure while the homeowner works out a plan to pay off a portion of the debt, including the mortgage, over time.  How long a time?  Usually three to five years. So why doesn’t everyone who files bankruptcy in Indiana use Chapter 13?  First of all, not everyone qualifies, because Chapter 13 requires the homeowner to have a regular income and to stay current on all new bills.  Second, under Chapter 13, the debtor is under the court’s supervision for three to five years.

            The Wall Street Journal article points out that the people most likely to benefit from Chapter 13 are those suffering a temporary setback, who expect to be able to cover their mortgage payments in the future.  But each situation needs to be carefully evaluated by a bankruptcy attorney, before any bankruptcy petition is filed.  Choosing and faithfully executing the right plan of bankruptcy in Indiana, whether it’s Chapter 7 or Chapter 13, can help people get some breathing room, hopefully enough time to start a new "chapter" in their lives!


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This post was written by Mark Zuckerberg

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