Bankruptcies Jump as Owners Fight to Save Homes

Popular Chapter 13 staves off foreclosure
By Marcia Greenwood,  Newser Staff
Posted Oct 23, 2007 4:50 AM CDT
Falling housing values and rising mortgages rates have contributed to a rise in consumer bankruptcy rates.   (Associated Press)
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(Newser) – Bankruptcies jumped 23% last month over the same time last year as debtors caught up in the sagging US housing market struggled to save their homes, reports the Wall Street Journal. Homeowners are now increasingly turning to Chapter 13 as an option—which can stave off foreclosure for three to five years as debtors work out their finances. Of last year's filings, about 40% were Chapter 13, compared with 30% in 2005.

Most consumers still file for bankruptcy under Chapter 7, though many debtors lose their homes in the process. But Chapter 13 isn't a strategy that works for everyone. Consumer advocates say the homeowners most likely to benefit are those facing foreclosure because of temporary financial setbacks.