Sonoma County Bankruptcy Lawyer Blog

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