Our San Bernardino County bankruptcy attorneys wrote in January that 2009 saw the highest number of bankruptcy filings of any year since the 2005 reform act. We're sorry to say that March of 2010 set a similar record, with the most bankruptcy filings of any month since the reform bill. In fact, Time magazine reported April 5, March's filings increased 35% over the number of filings in February and 19% since October of 2009, the last month with a record number of bankruptcy filings. Chapter 13 and Chapter 7 filings in March totaled more than 158,000, or about 6,900 a day. The American Bankruptcy Institute predicts that 2010's number of filings is likely to surpass 2009.
The filings for Chapter 7 bankruptcy, which is called "liquidation," are rising higher than the Chapter 13 payment plan filings. This is interesting because the 2005 bankruptcy reform law made it harder to file for Chapter 7 bankruptcy, which allows some debt to be forgiven after the debtor pays as much as possible. The increase in Chapter 7 filings suggests that fewer people have the means to pay back debts using Chapter 13, even under the stricter test. Katherine Porter, a law professor at the University of California at Berkeley, told the magazine that the increase in Chapter 7 filings may also mean debtors aren't trying to hold on to their homes .Chapter 13 is generally considered the better bankruptcy option for people trying to keep a home. Because so many people face long-term unemployment, they don't have the means to pay a mortgage even under a payment plan. Furthermore, Porter said, bankruptcy judges don't have the power to modify mortgages on primary homes, giving them no flexibility and incentivizing troubled homeowners to walk away.
This situation is precisely why our Buena Park bankruptcy lawyers strongly favored mortgage "cramdowns" when Congress was considering them last year. Bankruptcy judges may restructure secured loans for second homes, cars, boats and almost any other property but a primary home. Lenders prefer this situation because it takes away the possibility of a loan modification they can't control, which is why they lobbied furiously against cramdowns. But if Porter is right, lenders' unwillingness to allow cramdowns (or make substantial loan modifications) has actually contributed to lost profits. Ironically, lenders may have helped create a situation for some homeowners where their smartest move is to let the home go into foreclosure. Banks may be able to hide this on their balance sheets, but homeowners in this situation lose all of their investments in the homes and ruin their credit for years.
Howard Law PC represents clients who are considering bankruptcy as a way to deal with debts they don't believe they can pay back. As the article notes, people generally struggle with their debts for two years before they decide on bankruptcy. Our Murrieta bankruptcy attorneys recommend taking action as soon as a sober, realistic assessment (which we can do for you) shows that your debts are larger than your assets. In that way, clients can protect the assets they do have that are untouchable in a bankruptcy, including many retirement savings accounts. We stand by our clients' sides throughout the process, from determining whether bankruptcy is right for you to the day a court declares the debts discharged.
If you feel overwhelmed by your debt and you're ready to seek help, call Howard Law right away. For a free, confidential evaluation of your case, you can reach us at 1-800-872-5925 or contact us through the Internet.