I don't think there is one American that doesn't have an opinion of what happened back in September 2007. The financial meltdown affected just about everyone in the US, one way or another. Back in 2005, Congress amended the bankruptcy code to eliminate people who they felt were abusing the system by being serial filers. It was apparent that they thought the people filing bankruptcy were just doing it to clear the books and just do it all over again. I'm sure there were a lot of those people out there, but I believe it was more the exception to the rule than the rule. Congress did what they felt was necessary to make it mainly tougher to file Chapter 7 bankruptcy. At that time, I don't think they knew or were just weren't paying attention to what was coming. Now, most people are patting themselves on the back saying that it was obvious that it was going to happen. The question I have is, Why did so many people get caught with their pants down if they knew it was coming? That's where the old expression comes into play, hindsight is 2020.
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When it first happened, many felt that this was financial Armageddon or the beginning of the end. That was at least until the first stimulus came out to rescue us. When that one didn't work, we needed phase 2 to avert a disaster. Then came QE1, QE2, the twist and now QE3. With all this going on, Main St., America was filing bankruptcy because they had no other choice. The crazy thing was, what Congress did made it next to impossible for some people that needed to file Chapter 7 bankruptcy to file. Now they were forced to file Chapter 13 bankruptcy because their income was too high to file Chapter 7. For the people that sat on the edge of qualifying, many of them failed at the Chapter 13 process.
With all this going on, the housing market imploded and many Americans lost their homes to foreclosure. The government stepped in and offered loan modifications for those trying to save their homes from foreclosure. The program was a complete failure with a 5% approval rate. So it took the wisdom of a bankruptcy lawyer to figure out how to use a bankruptcy filing to benefit individuals in this situation. A Bankruptcy lawyer figured out that a person filing Chapter 13 bankruptcy could afford to keep their home as long as they only had to pay the first trust deed. It was apparent that the values of many of the homes nationwide were no longer worth what was owed on them making them underwater. When times were good many Americans took out seconds and thirds for home improvements burying them further in debt. The bankruptcy lawyer pushed in court to strip the liens from the second and third because they no longer were secured by the property. This scenario was replicated across the nation and most courts now allow individuals filing Chapter 13 bankruptcy to strip liens on seconds and thirds in this situation.
This put a new face on Chapter 13 bankruptcy and showed its many other benefits. Chapter 13 became recognized for what it is and its ability to be flexible with the individual's life over the 3 to 5 year payment timeframe. For many, being put in a Chapter 13 is no longer a curse for the benefit. People upside down on their houses should consider speaking with a bankruptcy lawyer to see if filing bankruptcy under Chapter 13 has benefits for their situation.
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