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WSJ: Chapter 13 Bankruptcies Rise 23 Percent in September

The Wall Street Journal today visits an issue that I blogged about here recently: how Chapter 13 filings are on the rise among troubled homeowners. (I originally wrote about the rise in prevalence of Ch. 13 filings in a discussion of the mortgage cram-down debate on October 7). From the Journal:

Last month, as the nation’s housing slump continued, consumer bankruptcy filings increased almost 23% from a year earlier — representing nearly 69,000 people — according to the American Bankruptcy Institute, a nonprofit research group whose members include bankruptcy attorneys, judges and lenders. Overall, consumer bankruptcy filings were up 44.76% during the first nine months of this year … In recent months, however, an increasing number of homeowners have filed for bankruptcy under Chapter 13 … About four in 10 filers today are filing under Chapter 13 — up from three in 10 two years ago.

The story goes on to provide stories of people who have gone through the Chapter 13 process — subscribers can read the full story. What’s interesting here to me, though, is at the very end of the story; which notes that bankruptcy attorneys are evenly divided on the cram-down issue and cites the following:

Steve Bartlett, president and chief executive of the Financial Services Roundtable, which represents financial-services companies, told a congressional subcommittee that if the law allows debtors to wipe out a portion of their mortgage debt in bankruptcy court, lenders will increase interest rates on future borrowers. “This will dry up credit for many Americans who may not be able to afford these higher rates,” he said.

HW readers know I agree with Bartlett, and I’d guess the even split among BK attorneys is whether they’re representing a consumer or lender.

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