By JODI SOKOLOWSKI
Buffalo Law Journal

Bankruptcy filings in Western New York are up 27 percent, from 6,166 to 7,857 cases, in the first 11 months of 2007, compared to the same period in 2006. More than 600 households filed for bankruptcy in November in the area.

More bankruptcy cases are expected in the wake of the adjustable-rate mortgage crisis, said Jeffrey Freedman, senior partner at Jeffrey Freedman Attorneys at Law.

"We have seen a slight increase in Chapter 13 (filings) over the past year. Whether that's attributable to the mortgage crisis, I can't really speak to that," said Hon. Carl Bucki, judge for the U.S. Bankruptcy Court for the Western District of New York. "The general expectation is that there will be a rise in filings. How quickly they rise is hard to tell."

Most bankruptcy filings are a result of mortgage problems, job losses, medical expenses, divorce or some combination of those.

Bucki explained that people filing for bankruptcy who want to retain an asset, such as equity in a home, are more likely to file for Chapter 13 protection.

"Chapter 13 is designed to help people rehabilitate themselves from an imminent foreclosure," Bucki said.

A Chapter 13 filing allows a person to keep his or her home and reschedule payments that are in arrears, but the filer must be able to keep making payments.

"You will occasionally see mortgage problems in Chapter 7, but Chapter 13 is really designed to help someone who wants to retain an asset," Bucki said.

In August 2005, the New York state homestead-exemption threshhold increased from $10,000 to $50,000 per person. The exemption protects equity in homes up to that amount for homeowners, whereas in Chapter 7, a bankruptcy trustee can use equity in a home to pay off judgments.

"Because of this exemption law," Bucki said, "it means the value of a bankruptcy filing may be more pronounced than it was before."

Filing Chapter 13 usually won't save a home unless the filer faces temporary income problems, said Freedman.

"We're beginning to see more people trying to meet their mortgage payments by using credit-card advances, which only exasperates their financial problems," he said.