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October Bankruptcy Filings Rise Again to Keep Year on Track for 1.6 Million Filings

November 10, 2010

The October data for bankruptcy filings have arrived, and the results confirm predictions made by Riverside consumer bankruptcy lawyers like us. According to a Nov. 2 post on the Wall Street Journal's Real Time Economics blog, individuals' and couples' bankruptcy filings rose 1.4 percent between October and November. This continues a trend observers have seen throughout the year, of bankruptcy filings rising steadily. In all, Americans have filed 1.3 million Chapter 7 and Chapter 13 bankruptcy cases this year, and experts say they expect total filings for 2010 to reach 1.6 million. This would be the largest number since the new 2005 bankruptcy law pushed that year's filings above 2 million. However, the rise in bankruptcies in October was actually half of the rise of October of 2009, suggesting that growth is at least slowing.

Experts typically put the blame for a rise in bankruptcies on the bad economy and the housing crisis. Unemployment is at 9.2 percent, according to the federal Bureau of Labor Statistics, and homes across America are worth less than their buyers owe. Both of these have a major influence on whether a homeowner files for bankruptcy -- after all, you can't pay the mortgage when you've been laid off and have no income. And even if a home isn't in foreclosure, homeowners can't pull out equity or even refinance if they are "underwater." The Journal noted that high unemployment may be responsible for the fact that most bankruptcies are Chapter 7 rather than Chapter 13. Chapter 13 requires a repayment plan, making it a difficult option for people with no income. As a result, Chapter 13 filings were less than 30 percent of all filings, even though the 2005 law was intended to push more people toward that option.

That trend has actually been a mixed blessing for our Los Angeles County personal bankruptcy attorneys. Because Chapter 13 filers make a payment plan, that's generally the best option for people who are trying to keep their homes out of foreclosure. But under the 2005 changes to the law, fewer people were able to choose between the two types -- a complicated income test pushed people with more robust incomes into Chapter 13. These days, many clients are coming to us after losing significant income or gaining significant debt, both of which help restore a choice between Chapter 13 and Chapter 7. We would prefer that this choice be available under all circumstances, but at least this situation gives us the flexibility to choose the best type of bankruptcy for each client. And while Chapter 7 is not as good for saving homes, it can help clients discharge their debts more quickly, which can free up money for mortgage payments in some households.

If you're deep in debt and tired of jumping every time the phone rings, you should call Howard Law PC. Our Fullerton individual bankruptcy lawyers help clients make an informed choice about bankruptcy, and guide those clients who choose to pursue it throughout the process. As we noted above, a Chapter 13 bankruptcy is considered better for saving a home, as well as any other large asset secured by property you'd like to protect. However, a Chapter 7 bankruptcy might be better for clients who don't have property or are prepared to write it off in exchange for having their debts discharged within months rather than three to five years. We sit down with our clients and look at their whole financial picture to make this determination. And of course, we ensure that no mistakes or omissions delay or deny the bankruptcy and its relief from creditors.

Howard Law offers free, confidential case evaluations, so you can meet with us and explain your situation without any further risk. To learn more or set up a meeting, send us an email or call 1-800-872-5925 today.