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Bankruptcy can be surprisingly good friend to homeowners in debt

Whether in Tennessee or South Dakota, any homeowner who has worked hard to buy a house for his or her family would find the prospect of losing it to debt heartbreaking. Unfortunately, this has been the reality for far too many homeowners over the last decade as the economy tumbled and people lost jobs and amassed significant debt. One recent study, however, notes that people with massive debt often overlook one perfectly good way to keep their homes: bankruptcy.

According to researchers from a major university, homeowners who filed for bankruptcy were 70 percent less likely to lose their homes to foreclosure. According to the center's research director, however, not all bankruptcy filings are the same. Different chapters under the federal bankruptcy code cater to specific debtors and their needs. Chapter 7 bankruptcy creates an estate from a person's remaining assets and sells those assets to generate revenue to pay creditors. Despite the advantages of Chapter 7, home foreclosure remains a possibility.

Chapter 13 bankruptcy will produce a repayment plan in which a debtor will be able to make manageable payments to achieve debt relief. This type of bankruptcy is the most effective when it comes to preventing a home foreclosure. The NCCC study noted that people who filed for Chapter 13 were less likely to lose their homes compared to people who filed for Chapter 7.

Despite the clear advantages of bankruptcy, the study's director noted that only 8 percent of those who are eligible to file under the bankruptcy code do so even when facing immediate foreclosure. Bankruptcy law professionals, however, understand why: Filing for bankruptcy is somehow seen as irresponsible even though it is a legally sanctioned and court-administered way for a debtor to discharge debts responsibly in order to start over.

Source:, "Bankruptcy Can Save Your Home From Foreclosure," Aug. 16, 2014

Source:, "Bankruptcy Can Save Your Home From Foreclosure," Aug. 16, 2014

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-624-4002
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