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Consumer Bankruptcy Project

Observations & Issues

Due to the economic crunch and foreclosure crisis, many New York City homeowners are in danger of losing their homes. The Pro Bono Consumer Bankruptcy Project's Chapter 13 Foreclosure Prevention Program is able to provide legal assistance for many of these struggling homeowners. The Program uses Chapter 13 bankruptcy as a method to help save homes from being lost in foreclosure.

Successful Chapter 13 filers are allowed to pay their mortgage arrears over three to five years so they can have breathing room to catch up and avoid foreclosure. Homeowners may also be able to reduce their overall consumer debt, which can help them free up money to cure their mortgage default.

The National Bureau of Economic Research reported in 2006 that 96% of Chapter 13 filers were homeowners. Moreover, the Administrative Office of the U.S. Courts reported that Chapter 13 filings increased over 20% for the 12-month period ending in March 2008 as compared to the prior 12-month period. The increase is a direct reflection of the struggling economy and housing market.

Unfortunately, many homeowners are filing for bankruptcy without legal representation (pro-se) in their desperation to save their homes. Such pro-se filers have a greater chance of having their case dismissed since they often make technical or procedural errors in filing. The Justice Center's new program is important because the staff and pro bono attorneys provide high quality legal advice and services to people who would otherwise have no counsel, thus enhancing the homeowners' chances of success.