Foreclosure Spike Expected in Indiana, Despite Improvements

August 10, 2012

Despite recent signs of stabilization in the real estate market, many experts predict that a new wave of home foreclosures is in store for Indiana and other states where lenders have been slow to work through the foreclosure backlog created during the 2011 robo-signing investigations.

Foreclosures dropped off significantly across the country in 2011 due to widespread allegations of improprieties in the foreclosure process. After lenders settled with government officials for $25 billion in early 2012, foreclosure rates spiked again as lenders worked hard to make up for lost time. Now, due in part to variations in state foreclosure laws, the backlog has been eliminated in some states and not others, resulting in widely varying foreclosure rates.

State Laws Affect Foreclosure Rates

Indiana and about half of the other U.S. states have laws that require lenders to seek approval from a judge before foreclosing on properties. Although these laws help ensure that homeowners are not improperly foreclosed upon, they also cause the foreclosure process to be far more drawn out than it is in states that use a non-judicial foreclosure process.

According to a report by National Public Radio, the average foreclosure in Indiana takes 443 days, which is more than 25 percent longer than the national average of 348 days. Because it will take lenders longer to work through the foreclosure backlog in Indiana and other states that use a judicial foreclosure process, these states are expected to experience elevated foreclosure levels for months or even years after rates begin to decline in other areas of the country.

Bankruptcy Can Help Stop Foreclosure

For homeowners facing foreclosure in Indiana and other states with a relatively slow foreclosure process, the delays can provide some much-needed time to weigh the available options and, in some cases, take action to stop the foreclosure from proceeding. One method available to help some homeowners stop foreclosure is Chapter 13 bankruptcy, which is sometimes referred to as "reorganization" bankruptcy.

Unlike Chapter 7 "liquidation" bankruptcy, Chapter 13 generally allows people to keep their homes and other assets while getting out of debt. During Chapter 13 bankruptcy, a person's debts are restructured and the highest-priority debts are paid off over a period of 3 to 5 years according to a customized, affordable payment plan. Any remaining eligible debts are discharged at the end of the repayment period.

Regardless of whether they file under Chapter 7 or Chapter 13, homeowners who file for bankruptcy also receive temporary foreclosure protection from a court order called an automatic stay. An automatic stay goes into effect immediately when a person files for bankruptcy and prevents creditors from taking collection actions such as foreclosure, repossession or garnishment against the filer until the bankruptcy is finalized.

To learn more about preventing foreclosure with Chapter 13 bankruptcy, and to discuss whether it might be right for you, discuss your situation with an experienced bankruptcy lawyer.

Article provided by The Law Office of Andrew L. Kraemer
Visit us at http://www.kraemerlawyer.com