Overall in 2012, bankruptcy filings are down a little over 14% across the nation, while chapter 13 bankruptcy filings are up.
Bankruptcy data collected for the 2012 year suggests that bankruptcy filings fall less where chapter 13 filing rates are higher in relationship to other types of bankruptcy filings. Out of all the 90 bankruptcy districts, only the District of Alabama showed an increase in overall bankruptcy filings. The District of Alabama has a much higher number of chapter 13 filings in a percentage comparison to other bankruptcies than any other bankruptcy district in the nation.
Here are some reasons that chapter 13 bankruptcies might be up across the nation while overall bankruptcies are down:
One of the reasons for this new phenomenon in bankruptcy filings might be explained by the effects the 2005 bankruptcy law changes are now beginning to have on filers after the Great Recession ended. It is much harder today to qualify to file a chapter 7 bankruptcy because of the 2005 law changes where a means test is used to determine who qualifies to file a chapter 7. Under the existing circumstances, it is much easier to file a chapter 13 as more people go back to work.
Another reason people might be filing chapter 13 bankruptcies when chapter 7 bankruptcy filings are naturally declining is because of the enormous amount of potential foreclosures still in inventory. As people go back to work, and as their homes formally go into foreclosure, the only alternative they may have of saving their homes is to file a chapter 13. While there is an indication that the chapter 13 filings reflect historic patterns rather than mirroring foreclosure distress in the real estate market, only time will tell if the reasoning will stand up to the scrutiny of the statistics.
Filing a chapter 13 bankruptcy is for wage earners who need to reorganize their financial structure and protect their assets. You can literally protect most all the assets you can afford to keep by filing a chapter 13. You can also strip second mortgages in a chapter 13 that you cannot necessarily do in a chapter 7 filing.
In a chapter 13, you make a 3 or 5 year plan that allows you to make payments on all secured debts, and on part or all unsecured debts. Any non-exempt unsecured debts not paid out over the plan is discharged. These are all advantages for filing a chapter 13 bankruptcy. These advantages may be driving the decision of bankruptcy filers when they file for bankruptcy protection.
Finally, chapter 13 bankruptcy costs can be built into the bankruptcy plan so that the bankrupt filer does not have to come up with all the costs for filing. Amongst those costs is the cost of a bankruptcy attorney. A chapter 13 bankruptcy can be very complicated and hiring an attorney to help you file may be a wise decision. Ask your attorney how you can build his or her fee into a chapter 13 bankruptcy plan.
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