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Monday, October 22, 2007

More Homeowners Filing Bankruptcy to Halt Foreclosure

by Calculated Risk on 10/22/2007 09:20:00 PM

From the WSJ: To Keep Homes, More People Bet On Bankruptcy

As the nation's housing slump continued, consumer bankruptcy filings last month were up nearly 23% from a year earlier -- representing nearly 69,000 people, according to the American Bankruptcy Institute ... Overall, consumer bankruptcy filings were up 44.76% during the first nine months of this year.

In some areas where the real-estate boom was especially heated, the increase in filings has been even sharper -- especially for a type of bankruptcy that allows homeowners to halt foreclosures on their homes.
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In recent months ... more homeowners are filing for bankruptcy under Chapter 13, which staves off foreclosure proceedings while the homeowner works out a plan to pay ...

In California, one of the nation's hottest markets during the recent real-estate boom, the number of nonbusiness Chapter 13 petitions in the second quarter more than doubled from a year earlier ... Over the same period, such filings increased nearly 40% in the northern district of Illinois, which includes Chicago, and 70% in Massachusetts.

"It's a mess," says William McLeod, a Boston bankruptcy attorney who says he is receiving twice as many calls from debtors as he did a year ago. "This is fed right now by real estate, and what's been this mortgage frenzy in the last several years."