Last year, roughly 1.4 million Americans filed bankruptcy. While the reasons would seem to be the obvious culprits, i.e., job loss, divorce and medical debt, a recent survey indicates some dynamic shifts in the forces driving consumer bankruptcy. Those considering bankruptcy were asked to pin-point the most compelling economic stressors, as well as how many people they personally knew, who had filed bankruptcy. These charts illustrate some of the more powerful economic & social trends driving the crisis.

UNEMPLOYMENT, THE BIGGEST PROBLEM IN CALIFORNIA.

Clearly, job loss is a major factor. California’s Employment Development Department revealed data showing a net loss of 9,400 non-farms jobs in July. With the State’s unemployment rates at 12.3%, up 0.5% from July 2009's rate of 11.8%, and more than 2.2 million Californians currently out of work, this is considered both stubbornly high, and yet somehow, statistical evidence that unemployment is finally stabilizing.

With the intertwining downtrend of the Census and federal stimulus, private companies are said to have employed more staffs. However, it seems like the private sector employers look uninterested as far as hiring is concerned.

So, as far as the job picture goes, there seems to be a lot of conflicting messages. Do you see private companies hiring? If so, are they hiring people back at their previous salaries?

THE CREDIT CRUNCH. HIGHER INTEREST RATES & LOWERED CREDIT LINES LEFT CONSUMERS IN THE LURCH.

The credit crunch is clearly an overwhelming factor. Whether clients have lost their jobs, suffered a paycut, or experienced no change in their incomes, many have been hit with hefty credit card payment hikes, dramatically lowered credit lines and no way to bridge the gap. While many people now considering bankruptcy may have attempted to settle their debts through 3rd party, "debt consolidation" companies, this often proves to be futile.

When not attorney backed, debt negotiation companies can appear interested in serving their own interests and NOT their clients. This has resulted in thousands of complaints filed with State Attorney Generals, throughout the country. So, per the Federal Trade Commission, starting on October 27th, 2010, "for-profit companies that sell debt relief services over the telephone may no longer charge a fee before they settle or reduce a customer’s credit card or other unsecured debt."
Don't be surprised to see many of these companies close
their doors, for good.

UNAFFORDABLE MORTGAGE PAYMENTS & NEGATIVE EQUITY.

One in ten U.S. mortgages is in default. Higher mortgage payment resets and mortgages with negative equity are also a major issue, of course. According to experts at the Certified Mortgage Planning Specialist Institute, close to 40% of mortgages in the most troubled states are underwater. Given the anti-deficiency laws (Where the purchaser does not pay any deficit between the sale proceeds and the outstanding loan balance. This was originally intended for mortgage loans that had never been refinanced, but, in California, we rarely see banks bother to chase borrowers, even when cash out or debt consolidation refinancings have occurred.)

In many states, including California, this usually discourages a lender from initiating litigation against you, but they may still try
to 1099 you for the difference. " Filing bankruptcy allows your accountant to show sufficient financial hardship so that a request to release you from this liability can be made. "

For consumers who were also carrying 2nd and 3rd mortgages, bankruptcy may be the only way to address lawsuits stemming from defaults on these "junior liens."

IF YOU'RE READY TO FILE BANKRUPTCY, WE'RE HERE TO HELP.

Nationally in 2009, 1,521,595 bankruptcy filings were made in the US, an increase of 14.8 percent over 2008. In the first half of 2010, total filings in the United States were up 14 percent over first half of 2009; the filings for July were up 9 percent from June 2010. These are five-year records.