Study shows racial variance in Chapter 13 bankruptcy filings

Everyone has seen the commercials: the promise that by calling this number, immediately, all your financial woes will be lifted.  All your questions will be answered.

Many have fallen for the trap.  Many have filed for Chapter 13 bankruptcy when doing so was not a good option.  Perhaps they should have filed Chapter 7.  The mistake is quite common.  It is even more common among African Americans living in Chicago.

According to a study released this month by Chicago’s Woodstock Institute, filers in mostly African American Chicago communities disproportionately choose Chapter 13 compared to peers from predominantly white neighborhoods:  47.9 percent compared to 32.8 percent.

Pursuant to Chapter 7, debts are discharged after the liquidation of assets (other than their homes, vehicles and other exemptions). But a majority of low-income filers do not have any non-exempt assets. Chapter 13 requires a commitment to a plan of payments to creditors for up to five years before the remaining debt is discharged.

According to the report, many file for Chapter 13 because they fear they would lose their homes if they filed for Chapter 7.  However, many Chicago bankruptcy attorneys would likely advise low-income workers to file for Chapter 7 . Aside from the advantages inherent in Chapter 7 to protect assets, the filing usually cost much less then Chapter 13.

However, there are reasons why a filer would choose Chapter 13 over Chapter 7.

Some people file for Chapter 13 because of their larger incomes. Others choose 13 for the reason it allows the rolling of past-due mortgage payments into the creditor payment plan.

The report does not attempt to draw conclusions as to which African Americans are more likely to file Chapter 13.  Chicago bankruptcy lawyers s are equally perplexed by the phenomenon.  What they tend to agree on is that many of these low-income workers are simply not receiving good advice.

Chicago foreclosures drop in March compared to last year but dramatically rise from February

Chicago has recently received a bit of good news concerning its ultra-volatile real estate market.  In March, the city’s foreclosure filings fell 15.7 percent from last year.  However, the drop was not quite as positive as one might expect because filings still jumped 23.1 percent from February of this year. Given the large jump from February, many Chicago attorneys specializing in bankruptcies and foreclosures , warn that news, though positive, should be read with a bit of caution.

RealtyTrac, a nationwide market watch company issued the findings.  The report also shows foreclosure filings at a three-year low across the country.  The news is good but RealtyTrac also warns that the real estate market still faces huge problems and concerns.

According to the report, Chicago area bankruptcy filings fell 28.2 percent in the year’s first quarter compared to last year.  This year’s quarter also dropped 22.5 percent from last year’s fourth quarter.

In March, 10,821 homes declared bankruptcy in the Chicago area, falling from 12,830 in March 2010. Approximately one in ever 350 homes file. The state ranks as the eighth worse in the country with one in every 439 homes filing in March; the total was 12,053 in March.

Nationally, the number of homes receiving filings during the quarter dropped 26.9 percent to 681,153 from a year earlier and fell 14.8 percent from the fourth quarter of 2010.

Given that bankruptcies are still a pervasive problem in Illinois, bankruptcy lawyers and government officials still warn of possible declines in the real estate market, especially in Chicago.

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