“I’m numb,” is how Bankruptcy Judge Alan Jaroslovsky describes the number of debtor petitions in his Santa Rosa courtroom. According to the Santa Rosa Press Democrat, there were more than 5,000 filings last year, triple that of just three years ago.
“The driving factor is real estate,” said Jaroslovsky. “Real estate values are going down and they’re not coming back.”
In Chapter 13, debtors create a five-year payment plan in which unprotected income goes to pay off creditors at a reduced rate, perhaps 50 cents on a dollar. In such a plan, you may be able to keep your home by paying off the arrears during the life of the plan. Chapter 13 filings have gone up almost fivefold since 2007.
If you’re thinking about bankruptcy to hold onto your home, think long and hard. If your home is seriously underwater, do you really want to be making payments with no prospect of equity? Will you be able to make the plan you set up?
On the other hand, if stripping your second would make your life easily affordable and you’re willing to make some payments to creditors, Chapter 13 could make sense.
Chapter 7 or 13? Shoot me an email or call me to discuss the options.