San Diego Chapter 13 Bakruptcies Steadily Rising in 2009
December 18, 2009 · Filed under Bankruptcy
The news doesn’t come as a surprise. Chapter 13 bankruptcy filings in San Diego have steadily increased from the second half of 2006 and have broken quarterly records ever since.
Chapter 13 (visit the link to visit the US Court web site for a Chapter 13 bankruptcy basics page) bankruptcy claims have risen rapidly since the credit crunch that hit America in October 2008. However, although the recession has contributed to more filings, it certainly has not been the only cause, in fact Chapter 13 filings have increased since late 2006 (other than a significant decline in the first quarter of 2007).
The increase in the total number of Chapter 13 fillings for the San Diego area, depicted in the graph above, highlights the trend. Every new quarter there’s on average over 11% increase compared the previous quarter. Over a couple of years that ads up, not only that, there doesn’t appear to be any decline expected on the horizon. (Raw data on percentage change between quarters included below.)
| Date | Q1 | Q2 | Q3 | Q4 | |||
| 2006 | 1,412 | -15% | 1,203 | -14% | 1,032 | -8% | 945 |
| 2007 | 1,108 | 18% | 1,304 | 11% | 1,448 | 9% | 1,572 |
| 2008 | 326 | 437% | 1,751 | 11% | 1,936 | 7% | 2,080 |
| 2009 | 2,314 | 13% | 2,620 |
When you combine both Chapter 7 & 13 the trend becomes more pronounced as Chapter 7 filing exceed Chapter 13 filings by a huge margin (7 to 1 in Q2 2009 and sometimes 10 to 1). You can clearly see in the graph below the stacked combination that’s on a steady rise.
The massive number of Chapter 7 filings compared to Chapter 13 paints a picture on the financial state of individuals, who represent the bulk of those who file for bankruptcy.
Tracking Chapter 13 filings are of particularly interesting to watch in wake of a recession because it provides a glimpse at those who are dealing with liquidation but get to hang on to secured debts and also prevent foreclosure on their homes.
This is in contrast to Chapter 7 liquidations that sees all assets lost in proceedings. When faced with the advent of bankruptcy, are you sure which option is the best for your situation?
If you find yourself as one of the many people looking to file for bankruptcy then pay attention to some important tips from our bankruptcy attorney Cecilia Chen.
Cecilia commented on her experience between Chapter 13 and Chapter 7 filings.
In my experience, I am filing a lot more Chapter 7 cases than Chapter 13.
The recession has also played a noticeable role in the type of filer:
As a direct result of the recession, more and more families simply do not have the income needed to qualify for Chapter 13. Most of my clients are hard-working individuals who do not have the income each month to repay their debts and obligations as a result of illness, unemployment or reduction in pay and hours.
When asked about the expectations for the 2010 period Cecilia suggested:
Government interventions introduced this year will start to disappear, shadow inventory (houses that banks now hold but have yet to put up for sale) will hit the market and mortgage rates will start to rise. We’re not expecting bankruptcies to slow.
Economist Barry Nagassar comments on the upward trend:
The pragmatic affect of claiming Chapter 13 bankruptcy is fewer and fewer businesses are paid for their services and products. It’s important to find solutions to make repayment reality so we limit the trickle down effect from an increase number of bankruptcies.
Everyone can’t claim bankruptcy or nobody would receive payment for services. No payments means no salaries and so forth. This is only a theoretical example, but it does highlight the need to carefully walk through the process of of bankruptcy, deciding whether or not it’s the right decision to make, and how to effectively navigate the proceedings if that’s the route you choose.
Most importantly, you want to ensure you implement measures to prevent the cycle from repeating. That generally means looking in the mirror and making some tough financial decisions for good.
Bankruptcies are an unfortunate reality in our economy today that must be dealt with carefully and professional by someone with experience in the proceedings.
Contact Cecilia Chen if you have further questions regarding Chapter 13 proceedings in the San Diego area.
* All data, not including graphs, are courtesy of RAND California.
