I read an interesting article called “Filing Bankruptcy: 9% Rise in Personal Bankruptcy Filings with Chapter 7 More Popular than Chapter 13”, which discusses the rising interest of Chapter 7 over Chapter 13 bankruptcies.
In the article, the author correctly states that the Bankruptcy Law was amended in 2005 to make it more difficult for some people to file Chapter 7s and to steer these people instead into Chapter 13s. Generally, Chapter 7 involves the discharge or wiping out of ones unsecured debts (credit cards, medical bills, etc.), while Chapter 13 involves paying off ones debts over time.
The new law was intended to prevent some Chapter 7s in cases where the debtors have higher incomes, because presumably they could afford to pay off some of their debts. The author of the article comments that in fact the opposite has happened: Despite the new law, more people have filed Chapter 7s since 2005 due to the significant housing slump and deep recession and fewer have filed Chapter 13s then expected.
Historically, Chapter 13s have been used to save ones home from foreclosure because through it one could pay off his arrearage over 3-5 years. In my opinion, a reason for the decrease in Chapter 13s in Ohio is due in part to the implementation of the mediation program in foreclosures. Mediation permits an individual to get out of foreclosure by negotiating in court directly with the bank without the need for a Chapter 13. I would refer the reader to the 10 questions and answers where I discuss the strategic use of mediation to defend oneself in a foreclosure. In Ohio, Chapter 13s will continue to take a back seat in foreclosure defense while foreclosure mediation I believe will become increasingly popular.
Attorney Eli Tamkin is a Cleveland bankruptcy lawyer. He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.