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Western States With Highest Foreclosure Rates Also Had High Bankruptcy Rates

January 15, 2010

As Chino bankruptcy attorneys, we already knew that foreclosure and bankruptcy tend to go together -- one tends to cause the other. The Wall Street Journal illustrated that correlation neatly in a Jan. 7 article juxtaposing personal bankruptcies in the "sun belt" with high foreclosures in those states. The national average increase in bankruptcies last year was 32%, the article said -- but above 50% in the Western states of Arizona, Nevada, California. Not surprisingly, these were also the states with some of the highest rates of foreclosure. Consumer bankruptcy lawyers told the newspaper that mortgage debt helped push some people into bankruptcy by cutting off home equity loans as a source of credit.

The highest bankruptcy rates don't correlate exactly with the highest foreclosure rates. For example, two of the most bankrupt states identified by the Journal were Utah (57% growth in individual bankruptcies) and Wyoming (58.3% growth), neither of which is consistently in the list of most-foreclosed states. And Florida, a heavily foreclosed state, saw its bankruptcies grow by 44.8%, compared to 79.6% in the national record-holder, Arizona. But in the West, states with the most personal bankruptcies tended to be the states that saw housing prices rise and fall to the greatest extremes -- Arizona, Nevada and California. One consumer bankruptcy attorney told the newspaper that his clients were almost always renters a few years ago. But now that prices and equity are falling, he said, more homeowners are forced to consider bankruptcy.

We're sorry to say that our Redlands bankruptcy lawyers see this trend ourselves. As the article notes, the housing crisis can cause bankruptcies by taking away financial tools like refinancing, selling the home or a home equity line of credit. Some homeowners may also file for bankruptcy as a last-ditch attempt to keep their homes out of foreclosure, after exhausting all of their other financial resources. But the reverse is also true: Financial problems that lead to bankruptcy can cause foreclosure even if those problems have nothing to do with the mortgage loan. This might be the case for homeowners who lose a job and can't find another quickly, or those who rack up high medical bills and exhaust their financial resources to pay them.

At Howard Law PC, we represent people from all walks of life and all backgrounds who are considering bankruptcy as a solution to debt they can no longer control. We believe bankruptcy is an extreme step that isn't right for everyone, so our first step in each case is to determine whether another financial service can meet your needs. If that isn't practical, our Carson bankruptcy attorneys will help you determine whether a Chapter 7 or Chapter 13 bankruptcy is better at protecting your assets and discharging the debt with minimal effect on your life. We stand beside our clients throughout this sometimes difficult process, helping them meet their obligations and deal with complications like a creditor who just won't quit calling.

Howard Law offers free, confidential case evaluations. There's absolutely no risk in telling us about your case and learning more about our services. To set up a consultation, please call us toll-free at 1-800-872-5925 or send us a message online.