In home finance circles, especially in Las Vegas, one question that concerns professionals is which works better for homeowners who are behind on their mortgage payments: modification, workout, or bankruptcy? Two researchers, one from the University of Pennsylvania Law School and the other from the Federal Reserve Bank of Philadelphia, answered the question by looking at the experiences of distressed homeowners who filed Chapter 13 bankruptcy in 2001-2002 until the conclusions of their repayment plans in 2007 in New Castle County, Delaware, the state’s most populous county and home of the city of Wilmington. The researchers explored 756 Chapter 13 bankruptcies and drew the following conclusions [http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1223262]:
· Despite filing in Chapter 13, 28 percent of all petitioners were unable to keep their homes, and went through foreclosure.
· Homeowners whose mortgages were six months delinquent before filing bankruptcy had a 39 percent foreclosure rate while those with 12 month delinquencies had a 41 percent foreclosure rate.
· However, compared to people whose houses went through foreclosure without filing bankruptcy, the researchers found that people who filed in Chapter 13 did better nonetheless. Of homeowners whose houses were listed as in foreclosure sale by the New Castle County Sheriff’s Office between August 2011 to August 2002, by 2007 43 percent had been foreclosed upon.
· Bankruptcy adds one year on average to homeowners’ stays in their homes.
· Houses sold in foreclosure for higher prices than what borrowers thought they would fetch, and lenders lost large amounts of revenue.
· Being married and hiring an experienced bankruptcy attorney reduced the likelihood of losing one’s home.
The paper provides lessons for those who own underwater houses in Las Vegas and are considering filing bankruptcy. Particularly, the earlier one files in Chapter 13, the higher the likelihood that one keeps their homes. Secondly, hiring an experienced attorney plays a significant role in helping homeowners keep their homes out of foreclosure. What works in New Castle County, Delaware works just as well in Las Vegas.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.