Bankruptcy and Foreclosure
Date posted: 05/22/2008
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Bankruptcies and foreclosures are legal procedures that are generally invoked when an individual's level of debt becomes unmanageable. As such, they can be a marker for high levels of personal debt. Major changes in bankruptcy law passed by Congress in 2004 went into effect in late 2005. For a quick, user-friendly explanation of changes to personal bankruptcy law, click here.
Foreclosure is a legal procedure that involves mortgaged properties. If a homeowner defaults on his or her mortgage, by either failing to make mortgage payments or failing to follow other terms of the mortgage document, foreclosure may be the result. The homeowner relinquishes all rights to the property, and the mortgage lender takes possession of the property. Usually there is a forced sale of the property at public auction; the proceeds of this sale are applied to the mortgage debt.
Bankruptcy is a legal procedure that begins when an individual has more debt than assets. Title 11 of the Federal Bankruptcy Code lists four bankruptcy filings that apply to individuals.
- Chapter 7 - Liquidation: When an individual files for bankruptcy under Chapter 7, all of his or her assets are turned over to an appointed Trustee. The Trustee collects these assets, and 'liquidates' or sells them. The Trustee then distributes the proceeds to the individual's creditors. The debtor can then receive a discharge from some or even all of his or her debts. The trustee or any creditor can bring a motion to dismiss the filing if the debtor's income is greater than the state median income.
- Chapter 11 - Reorganization:
- Chapter 12 - Adjustment of Debts of a Family Farmer with Regular Annual Income:
- Chapter 13 - Adjustment of Debts of an Individual with Regular Income: Instead of liquidating all assets, an individual filing for bankruptcy under Chapter 13 agrees to repay creditors out of his or her future income. Chapter 13 is only available to individuals with regular incomes whose debts do not exceed $1,000,000 ($250,000 in unsecured debts and $750,000 in secured debts). Each Chapter 13 debtor, through his or her attorney, writes a plan, which must be approved by the bankruptcy court. The debtor must pay the Chapter 13 Trustee the amounts set forth in the plan and complete an education course in personal financial management as approved by the U.S. Trustee. Debtors receive a discharge after they complete their Chapter 13 plan.
What this chart shows:
Foreclosure Filings in Larimer County, 1998-2007
Data Source: Trustee Office of Larimer County
What these data tell us:
From 1998 to 2007, the number of foreclosure filings in Larimer County increased 502%. The biggest year-to-year increase in the number of filings occurred between 2005 and 2006. There were 314 more foreclosure filings in 2006 than in 2005, an increase of 33.4%. Foreclosure filings have continued to increase through 2007 with 1,577 foreclosure filings, and are expected to continue to rise through 2008. Financial and real estate industry professionals have attributed much of this increase to a sluggish economy, manufacturing/tech sector job losses, and an increase in mortgage lending. This particularly applies to low-income individuals who are at higher risk of defaulting on mortgage payments.
Data Sources:
- Trustee Office of Larimer County
- Larimer County Assessor's Office
What these data tell us:
From 1998 to 2007, the Larimer County foreclosure filing rate increased 297%, from 3.6 filings to 14.3 filings per 1,000 homeowners. The largest year-to-year increase in foreclosure filing rate occurred between 2006 and 2007. During that period, the rate of foreclosure filings increased by 2.7 filings per 1,000 people. Financial and real estate industry professionals have attributed much of this increase to a sluggish economy, manufacturing/tech sector job losses, and an increase in mortgage lending. This particularly applies to low-income individuals who are at higher risk of defaulting on mortgage payments.What this chart shows: Personal Bankruptcies in Larimer County, 2000-2007
Data Source: Administrative Office of United States Courts
What these data tell us:
There were 1,323 more bankruptcy filings in 2005 than in 2000. This represents a 149% increase in the number of filings. The largest year-to-year increase occurred from 2004 to 2005, when the number of filings increased by 653. From 2005 to 2006, the number of bankruptcies decreased by 1,581 filings, a 72% decrease.Major changes in bankruptcy law passed by Congress in 2004 went into effect in late 2005. Financial industry professionals attribute the rapid increase in personal bankruptcy to knowledge of the impending changes. However, that does not account for the preceding four year trend in which the rate increased each year. Other contributing factors include a sluggish economy, job losses, and a high national level of consumer debt. This chart from the American Bankruptcy Institute shows a correlation between the amount of consumer debt and bankruptcy filing rates.
Further, a past Harvard University study, MarketWatch: Illness And Injury As Contributors To Bankruptcy found that a large number of filers cited medical causes for their financial problems. Most filers who cited medical causes as their reason for filing, owned their home, were middle or working class, and had health coverage at the time of filing.
What this chart shows:
Personal Bankruptcy Filing Rate (per 1,000 Adult Population) in Larimer County & Colorado, 2003-2007
Data Sources: Administrative Office of United States Courts
What these data tell us:
Larimer County had a lower rate of personal bankruptcy than the State through 2005. From 2003 to 2005, Colorado's rate of personal bankruptcy increased by 61%, from 7.42 filings per 1,000 adult population to 11.94 filings. During this same time, Larimer County's rate increased 57%, from 6.67 filings to 10.49 filings per 1,000 adult population. 2006 marks the first time in years that Larimer County's bankruptcy rate exceeded the State's rate.In 2006, bankruptcy rates decreased significantly for the County (72%) and the State (78%). Bankruptcy officials believe the extreme drop in cases in 2006 was a result of public uncertainty about the impact of the legislative changes made in 2005. Personal bankruptcy filings have slightly increased by approximately 1.4 filings for Larimer County and Colorado, between 2006 and 2007.
Major changes in bankruptcy law passed by Congress in 2004 went into effect in late 2005. Financial industry professionals attribute the rapid increase in personal bankruptcy to knowledge of the impending changes. However, that does not account for the preceding four year trend in which the rate increased each year. Other contributing factors include a sluggish economy, job losses, and a high national level of consumer debt. This chart from the American Bankruptcy Institute shows a correlation between the amount of consumer debt and bankruptcy filing rates.
Further, a past Harvard University study, MarketWatch: Illness And Injury As Contributors To Bankruptcy, found that a large number of filers cited medical causes for their financial problems. Most filers who cited medical causes as their reason for filing, owned their home, were middle or working class, and had health coverage at the time of filing.
Additional Information:
On Compass -
- Employment & Wages by Industry
- Income by Racial Classification
- Median Family Income
- Per Capita Income
- Population Size & Growth
- Poverty
- Reduced/Free School Lunches
- Self-Sufficient Wages
- Temporary Assistance to Needy Families (TANF)
- Unemployment Rate
Outside Compass -
- American Bankruptcy Institute: Scholarly articles on bankruptcy, links to court documents, and bankruptcy news.
- American Consumer Credit Counseling: National non-profit providing consumer credit counseling. Frequently asked questions, tips for financial stability, and other information.
- BankruptcyAction.com: Clearinghouse site for general bankruptcy information. Frequently asked questions, bankruptcy attorneys by state, and related news.
- Consumer Credit Counseling Service: A local non-profit serving Northern Colorado and Southern Wyoming. Specializes in helping low-income families to prevent and manage financial problems and learn money management skills.
- National Foundation for Credit Counseling: National non-profit supporting quality consumer credit counseling. Online debt advice available.
- United States Bankruptcy Court for the District of Colorado: Provides access to information related to the Court, including rules, procedures, fees, forms and online case filing.
Standards or Targets: N/A
Data Tables:
Foreclosure Filings in Larimer County
|
Year |
Foreclosures |
Larimer County Home-owners |
Foreclosure Rate |
|
1997 |
201 |
71,644 |
2.8 |
|
1998 |
262 |
73,363 |
3.6 |
|
1999 |
232 |
75,819 |
3.1 |
|
2000 |
306 |
85,453 |
3.6 |
|
2001 |
350 |
88,669 |
3.9 |
|
2002 |
458 |
93,099 |
4.9 |
|
2003 |
625 |
96,371 |
6.5 |
|
2004 |
780 |
100,212 |
7.8 |
|
2005 |
939 |
104,347 |
9.0 |
|
2006 |
1,253 |
108,208 |
11.6 |
|
2007 |
1,577 |
110,112 |
14.3 |
See chart - Foreclosure Filings
See chart - Foreclosure Filing Rate
Personal Bankruptcy Filings in Larimer County & Colorado
|
Year |
Larimer Bankruptcies |
Larimer Population (Age 18+) |
Colorado Bankruptcies |
Colorado Population (Age 18+) |
Larimer Rate |
Colorado Rate |
|
2000 |
888 |
193,090 |
15,185 |
3,229,225 |
4.60 |
4.70 |
|
2001 |
1,011 |
198,927 |
18,333 |
3,312,928 |
5.08 |
5.53 |
|
2002 |
1,166 |
202,322 |
20,769 |
3,372,722 |
5.76 |
6.16 |
|
2003 |
1,362 |
204,276 |
25,404 |
3,423,690 |
6.67 |
7.42 |
|
2004 |
1,558 |
207,832 |
27,383 |
3,477,428 |
7.50 |
7.87 |
|
2005 |
2,211 |
210,778 |
42,173 |
3,533,340 |
10.49 |
11.94 |
|
2006 |
630 |
215,688 |
9,544 |
3,609,248 |
2.92 |
2.64 |
|
2007 |
951 |
219,569 |
14,854 |
3,683,905 |
4.33 |
4.03 |