Sonoma County Bankruptcy Lawyer Blog

According to the Press Democrat, " the number of Sonoma County residents and businesses filing bankruptcy soared 46 percent, to a record high of 2,264 cases, according to statistics from the U.S. Bankruptcy Court, Northern District of California."

"I've never seen anything like this before," said bankruptcy Judge Alan Jaroslovsky, who has presided over the Santa Rosa-based court for 23 years. "I keep thinking it's got to slack off because everyone who is going to file has already filed."

Instead, even as a nascent national recovery appears to be under way, there are signs the weak local economy is undermining the footing of people who previously considered themselves financially secure.

"The demographics of bankruptcy are moving up," said Santa Rosa bankruptcy attorney David Chandler Sr. "It's starting to affect people with higher and higher incomes. Instead of the Hyundai getting repossessed, we're looking at the Mercedes getting repossessed."

Even scarier, the bankruptcies are driven not by reckless lifestyles but by an inability to handle even the basic expenses of life:

While total filings increased 46 percent, Chapter 13 filings soared by 80 percent, to 438.

A key reason Chapter 13 filings are rising so fast is because they allow homeowners to strip away second mortgages that are no longer secured because the value of the home has dropped below the amount of the first mortgage, Jaroslovsky said.

Burnett provided a typical example. A couple purchases a home in 2006 for $500,000 with no money down. The loan was actually two loans, one for $400,000 from a bank secured by a first deed of trust, plus another $100,000 loan funded by another bank taking a second position on the deed.

The property has since fallen in value to $350,000, leaving the second mortgage holder with no security in the property. But in Chapter 13, this second mortgage can be stripped away on the theory that the loan is now unsecured by real estate, falling into the same unsecured pot with credit cards and medical bills.

Removing this second mortgage can be a tremendous relief to homeowners, often lowering their monthly payments by several hundred dollars.

"If you're in a stable job with a steady income, then this could work for you, and that's what I'm seeing a lot of," Burnett said.

U.S. Bankruptcy Judge Judge Alan Jaroslovsky addressed the Sonoma County Barristers Club in April, laying out for new attorneys top mistakes made in and out of the courtroom. Mistake No. 1, the judge said: having a mentor.

That sure contradicts the conventional wisdom, but Jaroslovsky wasn't saying new lawyers shouldn't seek counsel from experienced lawyers. On the contrary, he advised learning from as many people as possible. But to attach yourself to one lawyer? "It's a huge mistake," the judge said. "You'll never be better than that lawyer." Jaroslovsky said many mentors are not top-notch lawyers or have been coasting on their reputations for many years. And new lawyers have no way to evaluate whether their mentor is a good lawyer or not.

Lawyers should rely on hard work and research to be the best they can be, the judge said. "There's no such thing as too much work or too much research."

One indispensible tool for research is receiving a daily email alert of new appellate cases. In his attorney days, Jaroslovsky won a reversal from the trial court based on a brand new appellate decision he received through the advance sheets. And when the Supreme Court overturned that case, he knew about it before his opponent and quickly settled the matter before the other side discovered Jaroslovsky's case had disintegrated under the new case!

Other mistakes to avoid:

• Don't ever tell the judge something you don't know is true - say "I don't know" if you don't know, regardless of how it makes you look.
• Don't try to convince the judge of something you haven't convinced yourself of.
• Don't bicker with the judge or opposing counsel.
• Never say "with all due respect."
• Don't be irritated when the judge interrupts you with a question. That's a golden opportunity to sway his opinion.
• Stand your ground, but be respectful.
• Research is your upper hand as a new lawyer.
• There's always room at the top

The Chronicle reports that scam artists are moving into the fake-landlord business, finding abandoned homes (there are many) and renting them out. Eventually the realtor for the foreclosing bank comes around kicks them out.

"With a lot of foreclosures, the property sits empty for a long period of time," said Assemblywoman Fiona Ma, D-San Francisco. "What we're finding is that scam artists will come in, change the locks and advertise on Craigslist at a very enticing price. They tell people, if you want to get this deal you need to come back soon with cash for the deposit. People give them the money, sign a lease, get keys and a couple of days later the legitimate owner (an agent for the bank) comes and says, 'What are you doing here?' Then they're out whatever cash they've laid out."

Ma wants to make the crime a felony instead of a misdemeanor -- a good idea.