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Loan mods. Workouts. Bankruptcy. Which is the best way to save your home?
A recent article, The Homeownership Experience of Households in Bankruptcy by Professor Sarah W. Carroll, of the University of Pennsylvania Law School and Wenli Li, of the Federal Reserve Bank of Philadelphia, provided the first in-depth analysis of the homeownership experience of homeowners in Chapter 13. Its conclusions mirror what most bankruptcy attorneys personal experience has been: Chapter 13 is one of the most effective ways to let you save your home.
The study followed homeowners who filed for Chapter 13 between 2001 and 2002 in New Castle County, Delaware, from the time of their filing to October 2007. (Since most Chapter 13 plans last five years, this was a fair trial period.) After analyzing the data, it found two important results:
First, the Chapter 13 filing was not always the solution: 27.9 percent of filers lost their houses in foreclosure despite filing for bankruptcy. This is typically a result of poor cashflow. If job loss, or illness continues and there is not enough money coming into the household, the house will be lost regardless of filing bankruptcy or not. Many of the homeowners in this group will end up converting their cases to one under Chapter 7, so that they can wipe out any personal liability for the mortgage(s), as well as most of their other debts.
However, when compared with homeowners who did not file, debtors who filed for bankruptcy were able to stay in their homes for, on average, 27.7 additional months, over two years. This figure includes those who ended up losing their homes.
So, if you’re behind on mortgage payments, consider a Chapter 13bit may let you stay in your home a lot longer than other options.
Despite the sometimes negative consequences of bankruptcy, it is possible to overcome the hurdles you may be facing with planning and patience. Contact a Kansas City bankruptcy lawyer at The Sader Law Firm to learn more about filing for Chapter 13 bankruptcy and most importantly, rebuilding your financial life afterwards.
