Sonoma County Bankruptcy Lawyer Blog

Have you thought about walking away from your home? For many Santa Rosa, Petaluma and Rohnert Park homeowners, that has to be a kitchen-table discussion these days. The Santa Rosa Press Democrat reports that some 31,000 Sonoma County homes -- 29% of all homes -- are underwater.

That leaves people trapped in "negative equity" -- unable to sell and with little chance of ever breaking even on their loans.

Compared to the country, Sonoma County is running slightly worse. The U.S. has 29 percent of homes underwater.

All of this seems to indicate that there will be no shortage of distressed homeowners, who will have to face the prospect of walking away or trying to protect the home in a Chapter 13. I would challenge homeowners to take a careful look at whether preserving a home really makes sense, or if you crunch the numbers, renting is a better option.

Of course, every case is different, the other debt loads have to be considered and so on, but the depth of the equity crash in this county is sobering.

Bankruptcy Tips with Richard C. Koman, bankruptcy attorney in Santa Rosa CA.
Bankruptcy can only be used once every eight years so if you're going to file, you need to make sure this is the right time to file.
Two kinds of bankruptcy: Chapter 7 and 13. Chapter 7 is a full discharge of debt. Chapter 13 is really a payment plan where you use disposable income to pay off creditors.
The reason Chapter 13 is popular is that if your house is under water, the second loan can be stripped away and that can mean you can afford to keep your house.

The steps of bankruptcy: Specifically, you need to take a prefiling consumer education class, after filing there is a meeting of creditors where the trustee asks you questions about your assets and debts, and there's one more class after that, the debtor financial education class. After that you'll get your discharge in 3-4 months.

And of course everybody can always go to richardkoman.com to find out more about these steps.

How does this effect my credit? People coming in to talk about bankruptcy always ask that and the answer is, isnt your credit pretty much destroyed? If you look at bankruptcy as a curtain coming down, on one side you have all the late payments, nonpayments, writeoffs and the risk that the person is going to file. After the curtain comes down, all that debt has been wiped out so you can afford a little new credit and you can't file for eight more years. You can easily start to rebuild your credit. A few years down the road you start looking like a pretty good customer instead of a pretty bad one.

"I'm numb," is how Bankruptcy Judge Alan Jaroslovsky describes the number of debtor petitions in his Santa Rosa courtroom. According to the Santa Rosa Press Democrat, there were more than 5,000 filings last year, triple that of just three years ago.

"The driving factor is real estate," said Jaroslovsky. "Real estate values are going down and they're not coming back."

In Chapter 13, debtors create a five-year payment plan in which unprotected income goes to pay off creditors at a reduced rate, perhaps 50 cents on a dollar. In such a plan, you may be able to keep your home by paying off the arrears during the life of the plan. Chapter 13 filings have gone up almost fivefold since 2007.

If you're thinking about bankruptcy to hold onto your home, think long and hard. If your home is seriously underwater, do you really want to be making payments with no prospect of equity? Will you be able to make the plan you set up?

On the other hand, if stripping your second would make your life easily affordable and you're willing to make some payments to creditors, Chapter 13 could make sense.

Chapter 7 or 13? Shoot me an email or call me to discuss the options.

By Richard Koman, Sonoma County-Santa Rosa-Petaluma bankruptcy and debtor attorney ("We are a debt relief agency")

Back in 2009, Congress considered trying to save homes by changing the bankruptcy laws to allow judges to "cram down" homeowners' principal balance on their primary residence. Great idea, which passed the House but died in the Senate.

America being what it is, bankruptcy judges can cram down principal on lots of goodies, like vacation homes, but not the roof over your head. Since Congress is apparently not going to challenge the banks on this inequity, the National Association of Consumer Bankruptcy Attorneys has a radical new proposal that just might work for troubled homeowners in Sonoma County and around the country.

Continue reading "A proposal to save Santa Rosa homes - without a cramdown" »

I'm the first one to tell potential clients that filing bankruptcy is not a moral failing. Perhaps I should ask people if they're intending to run for office, though. The Press Democrat has been giving city council candidate Juan Hernandez a hard time over his two bankruptcy filings.

Hernandez and his wife filed for Chapter 13 bankruptcy protection last years, listing $156,000 in liabilities and just $59,000 in assets. $67,000 of those liabilities are unpaid taxes, which aren't dischargable and being repaid through a Chapter 13 plan.

Continue reading "Santa Rosa, CA candidate twice filed for bankruptcy" »

Everyone knows bankruptcy is going up, but the numbers released by the U.S. Courts on Friday are pretty shocking.

The big picture: Consumer filings up 21 percent from a year ago, and Chapter 7 filings up 25 percent. Chapter 13 filings are up 10 percent.

Drilling down into California, we find the state definitely in the top 10 but not the worst-off. Nevada was No. 1 in Chapter 7 filings with 8.71 filings per 1,000 residents and a whopping 11.23 per 1000 people in all types of filings.

California came in 6th (5.05 per thousand) in Chapter 7s, 13th (1.44 per thousand) in Chap. 13s, and 7th overall.

In California's Northern District court, which includes the Bay Area, filings were up 39 percent, not quite as high as in the Central District, which includes LA, where filings were up an amazing 48 percent.

2009 was a record year for bankruptcies, with a record high of 2,264 cases in Sonoma County alone. According to a Santa Rosa Press Democrat report from April, Chapter 13s are a growing part of bankruptcy here, as people look to save their homes.

Key reason: Homeowners can strip the second mortgages on their underwater homes, while entering a payment plan to cure arrears on the first mortgage, while staying current on the first. As a result, many homeowners are able to modify their loans on the first.

The story features a typical Chapter 13 story, Robert and Jennifer Campbell, who were able to strip their second mortgage in a 13 and drive their credit card debt to minimal amounts under their plan. Campbell,a photographer, couldn't do a Chapter 7 because he would lose his 1969 Helio Courier airplane -- the kind of personal property for which there is no exemption.

A Chapter 13 allows Campbell to keep his property, strip the second and save the house -- maybe. The article points out that just the $500,000 first mortgage is plenty to keep Campbell up at night