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Around the country, both Chapter 7 and Chapter 13 bankruptcy filings have decreased significantly. Though this sounds like a sign of economic recovery, it could indicate other trends at work as well. Read on for more information about what to make of this drop in bankruptcy filings.

Lack of Assets

Bankruptcy is a mechanism to protect assets, like wages, bank accounts, and houses, from creditors as much as possible by stopping the creditors’ seizure of the debtor’s assets or setting up a payment plan. However, if a person has none of these assets, there is no point in filing for bankruptcy. An unemployed person with little cash and a house that is worth less than what he or she owes may be hounded by creditors, but they won’t receive payment because he or she simply has nothing with which to pay them. Sadly, the decrease in bankruptcy filings may simply mean that more people do not need to file because they have no assets to liquidate or organize through bankruptcy court proceedings.

Foreclosure Back-Up

Clients who file Chapter 13 bankruptcy will sometimes do so in order to stop the bank from foreclosing on their home and to set up a payment plan that will allow them to keep the house. Though foreclosure rates are still high, some banks are opting not to foreclose on homeowners but instead to let them stay in their homes. Banks are already having difficulty selling previous foreclosures, and they don’t want more empty homes. More and more banks are working with homeowners to establish loan modification plans, which alter mortgage terms to create payments that will allow homeowners to stay in their homes, in some cases eliminating the need for bankruptcy filing.

Though the number of bankruptcy filings has decreased, bankruptcy is still many families’ best option for dealing with skyrocketing debt. If you need to protect your assets by declaring bankruptcy, call Cutler & Associates, Ltd. today at (847) 282-4899. Our Illinois offices will help you file the type of bankruptcy that is right for you.


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