Consumer Bankruptcies Poised to Climb in 2012

Posted January 25, 2012 in Bankruptcy by Courtney Sherwood

Photo: http://www.flickr.com/photos/42787780@N04/

It looks like 2012 will be a busy year for bankruptcy courts, even though filings dropped last year for the first time since 2006.

Experts say that big banks are starting to overcome some of the legal wrangling and court proceedings that slowed foreclosures last year. With last year’s 11.6 percent drop in consumer bankruptcy filings apparently linked to the 2011 slowdown in foreclosures, bankruptcies seem almost certain to rise.

If you are struggling to pay your bills – and especially if you’re worried about losing your home – you should talk to a bankruptcy attorney soon, said Jeffrey Wells, attorney with the Law Offices of Jeffrey B. Wells in Seattle.

“Too many people go to attorneys on the eve of foreclosure, when it’s too late to do any pre-bankruptcy planning,” Wells said. By planning ahead, you are more likely to keep your car, protect your home and avoid headaches when you get to bankruptcy court, he said.

You may be able to strip off a second mortgage or home equity loan by filing Chapter 13 bankruptcy, Wells said. “Lenders, more often than not, will not contest that if they see that the property is under water,” or worth less than the amount owed on the home.

Wells has also seen some people opt to turn their homes over to the bank by filing Chapter 7 bankruptcy, which involves liquidating assets. Condo owners should think twice about taking this step, Wells said, because the bank might wait as much as a year or two before taking possession of the property. Until it does, condo owners must pay their monthly association dues, and a recent change in federal law means that condo dues will not be wiped out in Chapter 7.

Wells also recommends selecting an attorney who understands the nuances of these different filing options. “Bankruptcy is fairly specialized, with its own laws and separate courts, so go to attorneys who do nothing but bankruptcy.”

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