Saving Your Home in Chapter 13 Bankruptcy / Michelle J. White, Ning Zhu.

Format:

Book

Author/Creator:

White, Michelle J. (Economist)

Contributor:

National Bureau of Economic Research.

Zhu, Ning, 1973-

Series:

Working Paper Series (National Bureau of Economic Research) no. w14179.

NBER working paper series no. w14179

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2008.

Summary:

This paper examines how filing for bankruptcy under Chapter 13 helps financially distressed debtors save their homes. We develop a model of debtors' decisions to default on their mortgages and file for bankruptcy under Chapter 13 and evaluate the model using new data on Chapter 13 bankruptcy filers. We also examine the effect of allowing bankruptcy judges to reduce debtors' mortgage payments, i.e., introducing "cram-down" of mortgages in Chapter 13. <br> <br>We find that 96% of Chapter 13 filers are homeowners and 79% of filers repay mortgage debt in their repayment plans; while just 9% of filers repay only unsecured debt in their plans. These results suggest that filers use Chapter 13 almost exclusively as a "save-your-home" procedure. But under current law, only about 1% Chapter 13 filers save their homes when they would otherwise have defaulted. If cram-down were introduced, we predict that this fraction would increase to 10%. The cost to lenders of introducing cram-down is estimated to be $264,000 per home saved and $30 billion in total.

Notes:

Print version record

July 2008.