California showed fastest rise in bankruptcies last year

McClatchy NewspapersMarch 17, 2009 

WASHINGTON -- Bankruptcy filings in California's Central Valley filings soared 83 percent last year, according to a new report that sheds yet more light on the nation's unraveling economy.

The increase in bankruptcy filings in Sacramento, Modesto and Fresno was the second highest in the nation, exceeding that in 93 of the nation's 94 judicial districts. Only the federal judicial district centered in Los Angeles County ranked higher.

"The increase really started a year ago," noted Janice Kyle, who works with Modesto-based bankruptcy attorney John C. Kyle. "That's when we really started noticing a difference ... because everyone was losing their job."

The Central Valley's bankruptcy filing increase far outpaced the national average. Overall, the 1.1 million bankruptcies filed in 2008 marked a 31 percent jump over 2007. The grim pace shows no sign of slowing, bankruptcy exports warn.

"It's increasing even more," Kyle said Tuesday, adding that "a great number of cases are mortgage related."

In the three courts that make up the Eastern District of California, 15,594 bankruptcy filings were made in fiscal 2007. This increased to 28,613 in fiscal 2008, according to the Administrative Office of the U.S. Courts.

In the Central District of California, which runs from San Luis Obispo County through Los Angeles and east to Riverside and San Bernardino counties, bankruptcy filings leapt 96 percent last year. Both of the California judicial districts include communities at or near the national top for home foreclosures.

In another sign of the financial times, the number of defaulted student loan cases increased by 10 percent nationwide.

Behind every search for bankruptcy protection there's a traumatic story, some more unique than others.

Last April, for instance, Jesse Adrian Wagner initiated Chapter 7 bankruptcy proceedings. As part of the application, he indicated he had been unable to obtain the credit counseling or complete the personal financial management course that is normally required.

But Wagner had a good excuse, a bankruptcy judge concluded.

"The debtor in this case is incarcerated at the Sierra Conservation Center, and is unable to use the Internet or to make telephone calls longer than 15 minutes," U.S. Bankruptcy Judge Robert S. Bardwil noted last year. "In an effort to comply with the credit counseling requirement, the debtor obtained a list of approved providers, and attempted to contact the 15 credit counseling agencies on the list, but none would accept his collect call."

Even with the increase, there are still fewer bankruptcies than before Congress passed a creditor-backed 2005 law intended to curtail allegedly abusive bankruptcy filings. The 2005 law added "a lot more work" to the previous requirements, Kyle noted. That year, there were over 2 million bankruptcy filings.

ON THE WEB

The U.S. Bankruptcy Courts report

McClatchy Newspapers 2009

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