Typically, consumers who are behind on their mortgages but hoping to stay in
their homes invoke Chapter 13 bankruptcy because it puts creditors on hold,
giving borrowers time to put together a repayment plan.

Given that a Chapter 13 bankruptcy involves the oversight of a court, the
findings in Ms. Porter¹s study are especially troubling. In July, she
presented her paper to the United States trustee, and on Oct. 12 she
outlined her data for the National Conference of Bankruptcy Judges in
Orlando, Fla.

With Tara Twomey, who is a lecturer at Stanford Law School and a consultant
for the National Association of Consumer Bankruptcy Attorneys, Ms. Porter
analyzed 1,733 Chapter 13 filings made in April 2006. The data were drawn
from public court records and include schedules filed under penalty of
perjury by borrowers listing debts, assets and income.

Though bankruptcy laws require documentation that a creditor has a claim on
the property, 4 out of 10 claims in Ms. Porter¹s study did not attach such a
promissory note. And one in six claims was not supported by the itemization
of charges required by law.

Without proper documentation, families must choose between the costs of
filing an objection or the risk of overpayment, Ms. Porter concluded.

She also found that some creditors ask for fees, like fax charges and payoff
statement fees, that would probably be considered ³unreasonable² by the
courts.

Not surprisingly, these fees may contribute to the other problem identified
by her study: a discrepancy between what debtors think they owe and what
creditors say they are owed.

In 96 percent of the claims Ms. Porter studied, the borrower and the lender
disagreed on the amount of the mortgage debt. In about a quarter of the
cases, borrowers thought they owed more than the creditors claimed, but in
about 70 percent, the creditors asserted that the debt owed was greater than
the amounts specified by borrowers.

The median difference between the amounts the creditor and the borrower
submitted was $1,366; the average was $3,533, Ms. Porter said. In 30 percent
of the cases in which creditors¹ claims were higher, the discrepancy was
greater than 5 percent of the homeowners¹ figure.

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