Consumer bankruptcy filings in 2008 approach 1,000,000
It wasn’t supposed to be this way. When Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005, the idea was to reduce the number of personal bankruptcy filings. This was to be accomplished by making it more difficult to qualify for a Chapter 7 bankruptcy for higher income debtors. The “means test” was introduced as the requirement that had to be met before a Chapter 7 could be filed. In actuality, however, most debtors seeking to file bankruptcy do indeed pass the means test, and are therefore not forced to file under Chapter 13 of the Bankruptcy Code.
Although the number of bankruptcy filings fell just after the Bankruptcy Bill of 2005 went into effect, the recent economic crises have driven the numbers up this past year in a big way. Chapter 7 bankruptcies filed from June 2007 to June 2008 totaled 934,009, an increase of more than 28 percent from the 727,167 petitions filed from the same period during the previous year.
I know you’re hurting, Orange County. But you’re not alone…
For more information: Personal Bankruptcies on the Rise
Orange County Retailer Files for Bankruptcy
3 Day Blinds, a custom retailer of window shades and blinds based in Anaheim, has filed for bankruptcy under Chapter 11 of the Bankruptcy Code. In January, the retailer closed down stores in four Orange County locations: Costa Mesa, Mission Viejo, Orange and San Juan Capistrano. Now that it has filed bankruptcy, it will also be closing stores in Brea, Irvine, and San Clemente. While the company will keep its showroom in Huntington Beach, the business will be reorganized to focus on selling products online and through its’ design consultants, who visit people in their homes. 3 Day Blinds set up shop in Orange County 30 years ago, with it’s first location established in Laguna Hills.
For more information: “OC Retailer Files for Bankruptcy”
Bankruptcy Code Favors the Rich in Orange County?
Imagine two debtors. Debtor #1 owns a yacht in Huntington Beach and a vacation home on the Mission Viejo lake. For his residence, Debtor #1 lives in a penthouse apartment in Irvine, which he rents at a steep price. Debtor #2 is a homeowner, and struggles to make the payments on the mortgage for her small condo in Santa Ana. Both debtors find themselves struggling to make payments of their respective assets, and each debtor decides to file for bankruptcy. Which debtor does the Bankruptcy Code favor?
That’s right, Debtor #1! For while the creditor is forced (under bankruptcy) to modify the terms of payment to help Debtor #1 keep his yacht and vacation home, Debtor #2 is unable to get any help modifying her mortgage payments on her primary residence. Somehow, the Bankruptcy Code has chosen to make modification of loan terms possible for every single kind of item — except the single-family residence.
In a way, then, the Bankruptcy Code serves as a backwards Robin Hood: letting the jet-setting crowd live in their beach houses, while forcing the struggling masses of Orange County to abandon the homes they grew up in.
For more information, read this article on Bloomberg: Buy a Beach House
What is Exempt Property ?
Exempt property are those items that cannot be seized by creditors (or by the bankruptcy trustee), even though you have filed for bankruptcy.
Each state has laws that determine which items of property you can keep, and in what amounts. For the state of California, the following assets may be exempted: Appliances, furnishings, clothing and food needed; tools of trade such as materials, instruments, uniforms, books, furnishings and equipment; health aids, and others.
Some other assets can be kept if their equity falls below certain limits. Equity is the difference between the value of the property and what is owed to the property. For example, a vehicle valued at $6,000 with a loan of $4,000 has an equity value of $2,000. This category includes homestead, vehicles, jewelry, family heirlooms and some types of trust funds and loans.
Although this introduction covers some of the basics, bankruptcy law is complicated. Since each person’s situation is unique, it is recommended that you contact a bankruptcy attorney before deciding whether filing for bankruptcy is indeed the right solution for your particular debts.
Chapter 7 Bankruptcy Filings in Riverside County for September
During the month of September, there were a total of 1400 Chapter 7 bankruptcy filings in the adjacent county of Riverside. The 10 cities or towns accounting for the most filings within Riverside County for that month were: Corona, Fontana, Hemet, Moreno Valley, Murrieta, Rancho Cucamonga, Riverside, San Bernardino, Temecula, and Victorville. Several close runner-ups worth mentioning that also produced considerable numbers of filings were Hesperia, Lake Elsinore, Menifee, Ontario, and Rialto. Astoundingly, these chapter 7 bankruptcy filings came from people across 87 different cities and towns within the county, indicating that no area is immune from the effects of a troubled economy.
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