Orange County Bankruptcies | Bankruptcy Blog

During the month of August, there were a total of 602 Chapter 7 bankruptcy filings in Orange County, California. The 10 cities or towns with the most filings in Orange County for the month of August were: Anaheim, Costa Mesa, Fullerton, Garden Grove, Huntington Beach, Irvine, Mission Viejo, Orange, Rancho Santa Margarita, and Santa Ana. Chapter 7 bankruptcy filings in Orange County came from people across 41 different cities and towns in the county. These results are comparable to the numbers previously posted for two weeks of filings in August, with 8 out of 10 cities on the list being the same. Only La Habra and Tustin did not stay in the top ten, being replaced by Costa Mesa and Garden Grove.

“Lehman Brothers announced early today that it will file for bankruptcy, becoming the largest financial firm to fail in the global credit crisis, after federal officials refused to help other companies buy the venerable investment bank by putting up taxpayer money as a guarantee, the Washington Post reported. Leaders of the Federal Reserve and Treasury Department decided that Lehman was unlike the investment bank Bear Stearns, whose sudden collapse in March threatened the world financial system, or Fannie Mae and Freddie Mac, whose potential insolvency did the same. Several firms, led by Bank of America and the British bank Barclays, wanted control of Lehman’s investment banking and asset management businesses, but did not want part of shaky real estate and other investments on Lehman’s books, and wanted either taxpayers or other financial firms to assume part of that risk.”

Orange County is home to numerous businesses, ranging in size from the smallest mom and pop stores to multinational corporations. Along with consumers in Orange County, economic troubles have affected small businesses and large corporations alike. While consumers often are able to find relief in Chapter 7 of the Bankruptcy Code, the solution for businesses is more often to be found under Chapter 11 of the Bankruptcy Code.

While a Chapter 7 filing is often referred to as “liquidation,” a Chapter 11 filing is referred to as “reorganization.” This name is appropriate, because the purpose of most Chapter 11 filings is to devise a court-approved plan for the business to repay its creditors. This plan “reorganizes” the debts, however, by reducing the amount of debt owed to some creditors, while completely discharging debt owed to other creditors. This plan may also include attempts to recover assets, cancel various contracts, and other such steps to help put the business back on a path to profitability. Of course, the reorganization plan must be approved or “confirmed” by the court before it will go into effect. Once confirmed, however, the debts that arose before confirmation are discharged, and the new repayment plans and contractual obligations designated by the reorganization plan supersede any such prior obligations.

So while Orange County residents may find their financial difficulties resolved by Chapter 7 or Chapter 13 of the Bankruptcy Code, most of our local businesses that are struggling with debt may be able to turn to Chapter 11 for help.

Chapter 7 bankruptcies, unlike Chapter 13 bankruptcies, allow the debtor to discharge most debts rather than enter into repayment plans. Whether or not one can file for Chapter 7, however, depends on something called the “means” test.

The “means” test is a two-part test that the Bankruptcy Bill of 2005 set forth to determine if the debtor qualifies to file under Chapter 7 of the Bankruptcy Code.

The first part looks at the debtor’s household income over the last six months, averages it, and then compares it to the median income in the debtor’s state of residence. For any of our fellow Orange County residents, then, the California median is the only one that matters. The California median income per year is $46,814, which means that for six months the total median income would be $23,407, for an average of $3,901 per month. If your residence is in a different state, check to see what the median income is here.

If the debtor’s average income is below the state’s median income, then the debtor qualifies – and does not need to go on to the second part of the test. However, if the debtor’s average income over those 6 months is not below the median, then the debtor must pass the second part of the test.

The second part of the “means” test looks at the debtor’s disposable income. This part calculates whether the debtor will have enough disposable income after expenses to pay into a repayment plan. This calculation involves deducting average monthly expenses to see how much disposable income you have per month for the next five years. If you are at this stage, it might be best to have a professional (or someone who knows the formula well) do the calculations for you.

If you need to file bankruptcy and are a Orange County resident, then you will file your bankruptcy at the Santa Ana location of the United States Bankruptcy Court, Central District of California. The address of the Santa Ana Courthouse is:

Ronald W. Reagan Federal Building, 411 West Fourth Street Santa Ana, California 92701

Maps and directions from your specific locations can be found here.

Once you make it to the courthouse building, here are some extra directions:

* Courtrooms: Fifth and Sixth floors
* Chapter 7 Trustee meeting room: Third floor, rooms 3-110
* Chapter 13 Trustee meeting room: First floor, rooms 1-154

Senator Joe Biden, the Democratic Vice-Presidential nominee known for fighting for the middle-class, is facing increased scrutiny for his support of the Bankruptcy bill signed into law in 2005 – scrutiny that stems from work his son did for one of the major companies supporting the bill.

On August 24, 2008, the New York Times published an article entitled, “Obama Aides Defend Bank’s Pay to Biden’s Son.” The article states that a five-year consulting agreement between Hunter Biden and MNBA, a large financial services company, has raised questions about Senator Biden’s objectivity in voting to pass the Bankruptcy bill.

Although no lobbying was done by Hunter Biden on behalf of MNBA, it does not do a great service to Senator Biden’s image as a protector of the middle-class to have his son getting paid six-figures by one of the major companies lobbying in support of the Bankruptcy bill Senator Biden helped pass.

Methinks both sides are protesting too much – I doubt very much that Senator Biden is either in the pocket of MNBA or that he was completely unbiased in his support of the bankruptcy bill. Imagine a Senator from Delaware, a state that makes incorporating more enticing to companies than just about any other, supporting a bill helpful to a Delaware corporation – shocking!

The question is, was Senator Biden biased because he wanted to support a bill that would help Delaware companies, and hence, the Delaware economy, or was the bias more personal – was there some kind of unspoken “quid pro quo” with MNBA? I see no evidence in Senator Biden’s career to suggest the latter, and think it would be strange indeed if he did not work on behalf of companies from the state he was elected to represent. Of course, the bill affects not only companies, but citizens; but citizens are also employees, and companies supporting the bill employ a large number of Delaware citizens, which makes it even more difficult to speculate as to whether any bias Senator Biden had was proper or not. Perhaps in some cases, a man with a track record of honesty and “fighting for the little guy” should be given the benefit of the doubt, no?

Read the NY times article: http://www.nytimes.com/2008/08/25/us/politics/25biden.html