Consumer Bankruptcy Filings Rising in Southern California

June 29, 2009 · Posted by Alex

From Curtis Law Group’s blog:

“As reported in the Los Angeles Times yesterday, southern California has seen a dramatic increase in the number of consumer bankruptcy filings of late. The article referenced the mortgage crisis as the culprit, while also highlighting the fact that changes to the Bankruptcy Code in the Bankruptcy Bill of 2005 have seemingly failed to reduce the number of bankruptcies these last few years.

Although the article emphasizes the increase in the greater Los Angeles area, bankruptcies in Orange County, Riverside County, and San Bernardino County have also risen dramatically in the past year, flooding bankruptcy attorneys in southern California with inquiries from debtors about whether they qualify for Chapter 7 bankruptcy, or whether they must resort to Chapter 13 of the Bankruptcy Code for relief.”

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Treasury Department Rejects Proposed Changes Favoring Credit Card Forgiveness.

December 10, 2008 · Posted by Dr. Grey

Banks and consumer advocates recently requested changes that would permit forgiveness of as much as 40% of debt for borrowers who do not qualify for existing programs.  The proposed changes would also have permitted borrowers to defer taxes on forgiveness of indebtedness until after the end of any repayment plan. Current law requires borrowers to recognize and pay taxes on the forgiveness of debt immediately.  The plan would have benefited lenders by allowing them to recognize losses associated with charge offs of unpaid debt at the end – rather than the beginning – of repayment plans.

The change would have also helped borrowers – particularly those in Orange County and Riverside County where qualification for Chapter 7 may be difficult – and who are attempting to avoid bankruptcy by negotiating credit card payoffs.

The Financial Services Roundtable and the Consumer Federation of America, who made the request, hoped such a pilot program would become permanent and that as many as 50,000 people struggling with credit card debt would be involved.

It is unfortunate that the Treasury Department rejected this proposal, as it would have helped residents from Orange County get back on their feet, and possibly avoid needing a bankruptcy attorney.  Until these and other measures are adopted, however, more and more Chapter 7 bankruptcies will be filed in Orange County, from Santa Ana to Irvine to Rancho Santa Margarita.

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During Credit Crunch, Bankruptcy Difficult to Avoid

November 17, 2008 · Posted by Alex

Last month saw a 34% growth in bankruptcies filings, as compared to cases filed in October 2007. According to the New York Times, this increase in the number of bankruptcy filings is due in large part to the specific nature of this particular economic crisis. Besides the usual reasons why people look for bankruptcy protection, such as job loss, medical bills, divorce, the central reasons for the increase in Chapter 7 and Chapter 13 bankruptcy filings during this economic crisis have more to do with the abrupt drop of home values, unstable incomes, and the “credit crunch”.

It seems that more people are turning to bankruptcy lawyers during this economic downturn than during the tech bust because of how the mortgage crisis has affected the lending practices of financial institutions. Essentially, where debtors used to be able to avoid bankruptcy by obtaining more credit, and tried to stay afloat for a while longer, the current “credit crunch” has made it nearly impossible for many to obtain new credit cards, refinance their home mortgages, or get a home equitiy line of credit, due to the banks’ pull back on lending. This has, in turn, driven many debtors to file for bankruptcy that would have otherwise avoided it. This does not mean that many people aren’t trying their best to avoid filing, as seen in a key statistical comparison to the filings in 2001.

In recent studies, it was shown that the typical family who filed for bankruptcy in 2007 carried 21% more secured debt and 44% more unsecured debt than people who filed in 2001, even though average income among those filing for bankruptcy remained static over those six years. So although income stayed the same, debt rose, illustrating the attempt by debtors to put off bankruptcy as long as possible while trying to get back on their feet. Studies also show that filings increased mostly in places where real estate values skyrocketed and then crashed, including Irvine, Laguna Beach, and Mission Viejo in Orange County, as well as Corona, Murrieta, and Temecula in Riverside County.

Although filing for bankruptcy and hiring an attorney is not anyone’s idea of a good time, for many Orange County, Riverside County, and San Bernardino County residents it’s the most sensible solution to get their financial sanity back, and the best path toward a well deserved fresh start.

To read the NY Times article, click here

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Fifteen SunCal-Lehman Brothers Developments in Bankruptcy

November 14, 2008 · Posted by Alex

The number of Sun-Cal Cos. Developments that have faced bankruptcy petitions increased by three this week, bringing to 15 the total of Irvine-based, SunCal-Lehman Brother projects in California that are under U.S. Bankruptcy Court supervision.

The total of SunCal voluntary and involuntary petitions submitted by attorneys reached 15 after the filing of the Northlake development in Castaic and its Oak Valley and Heartland projects in Beaumont, along with a petition against the SunCal Marblehead development in San Clemente.

The involuntary petitions take place when one of the parties, in this case Lehman Brothers, who financially backed up the projects, does not consent to a voluntary bankruptcy filing. Thus, involuntary bankruptcy is the only way SunCal can get their projects into bankruptcy court, in order to get additional financing.

Officials of SunCal also disclosed that involuntary bankruptcy petitions are to be expected within days on the other five developments controlled by Lehman. David Soyka, SunCal company spokesman, said that Lehman has cut off critical funding for their developments since the investment bank had its lawyers submit their petition for bankruptcy in September.

Soyka said that SunCal has lined up a partner willing to provide $75 million. But SunCal’s proposed bankruptcy lender is requiring priority over Lehman’s liens before providing the financing.

Some of the SunCal Cos. Developments filed for bankruptcy are located in the cities of San Juan Capistrano and San Clemente in Orange County. Others are located in Riverside County, in the cities of Yucaipa, Modesto, Rubidoux and Beaumont.

Read a related article at the OC Register.

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Circuit City Files for Bankruptcy, Closes Orange County Store

November 10, 2008 · Posted by Dr. Grey

Circuit City Stores Inc. filed for bankruptcy Monday, November 10th, 2008. The announcement was made approximately a week after the company said it would close 20% of its stores.

Circuit City said it decided to file for protection under the Chapter 11 of the Bankruptcy Code, because it will allow the company to hold off creditors and continue its operations, while a reorganization plan is designed. The company said it was facing pressure from vendors who threatened to withhold products during the holiday period, and that’s why it decided to file for Bankruptcy protection.

James A. Marcum, vice chairman and acting president and chief executive, said in a statement that filing for bankruptcy “should provide us with the opportunity to strengthen our balance sheet, create a more efficient expense structure and ultimately position the company to compete more effectively”.

In Orange County, Circuit City will be closing its Foothill Ranch location.  But don’t fret, Orange County, there are still plenty of nearby Circuit City locations that will remain open.  Stores will remain open in: Irvine, Newport Beach, Laguna Hills, Orange, Rancho Santa Margarita, Fullerton, and Brea.

Some of the other store locations that will be closed throughout the state of California are those located in Pomona, Compton, and City of Industry in Los Angeles County.   Other Southern California stores targeted for closure include locations in Escondido and Vista in San Diego County, and in the cities of Riverside, Murrieta, Moreno Valley and Mira Loma in Riverside County.

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