Recently in Other Bankruptcy Issues Category

Mortgage defaults aren't just for homeowners who can no longer make payments. Especially in states like California, where thousands of mortgages are underwater, even those who can still make payments are opting to opt out.

This decision is referred to as a "strategic mortgage default." For these individuals, the amount owed simply outweighs the benefit of keeping the home. While putting your mortgage payment into default is not a simple decision, and shouldn't be an easy one, sometimes it is the best option given the circumstances.

Then again, sometimes it isn't.

It is very important that any individual or couple considering a strategic default carefully consider their situation and the ramifications of such an action.

Think the number one cause of bankruptcy is job loss? Think again.

According a recent study by researchers at Harvard University, the biggest motivating factor in 62 percent of bankruptcies is actually medical expenses. While this number is not limited to those without health insurance, it seems obvious that a lack of coverage can result in much higher medical bills.

If an uninsured individual develops a rare disease or suffers a serious injury, then bankruptcy may be the only option open to him or her for resolving the debt acquired during treatment. Even for someone who has saved their entire life - without insurance to carry some of the weight, expensive medical procedures can quickly deplete savings.

On April 5, the government will put into action a plan designed to offer homeowners facing underwater mortgages incentive to sell their home below the market value. Banks and other lenders will be encouraged to accept the short-sales as Obama attempts to keep the economy's momentum on track in the coming months.

Underwater mortgages, in addition to unemployment and other economic factors, have had a huge impact on bankruptcy filings across the country. In states like California, where foreclosure rates and bankruptcy filings continue to skyrocket, the government has already promised millions in additional aid to struggling homeowners.

These new funds are aimed at those who have not already been helped by the $75 billion mortgage modification plan and will be available to mortgage owners across the country.

This is separate from the additional aid slated for California. That money, thus far, is only available to states with the highest rates of foreclosure - Arizona, Florida, Michigan, Nevada and California.

Bankruptcy lawyers in California, and across the country, appear to have mixed feelings about being grouped with debt relief agencies under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

That was the Supreme Court's ruling this week in the case of Milavetz, Gallop & Milavetz, P.A. v. United States.

Under the 2005 act, debt relief agencies may not advise consumers to take on more debt in preparation for filing bankruptcy. The worry here is that consumers would be able to, essentially, game the system by incurring debt that would then be wiped out in the event of a bankruptcy.

The question, posed by the bankruptcy attorneys who brought the case, was whether or not the stipulation applied to bankruptcy lawyers and, if so, whether it violated the First Ammendment right to free speech. Further, the plaintiffs questioned whether or not such a restriction would affect the client/attorney relationship by disallowing attorneys to give the best advice possible to their clients.

As a nationa, we may be in recovery mode, but that doesn't mean we're going to see a decrease in bankruptcy filings anytime soon. This February, the American Bankruptcy Institute (ABI) counted 111,693 consumer filings - a 14 percent increase from February 2009, and a nine percent jump from this past January.

Like most of the country, southern California has been left reeling in the wake of mulitple economic blows. Cities like San Diego continue to struggle with massive budget deficits and many citizens are barely staying afloat.

Between 2008 and 2009, the number of Californians filing for bankruptcy skyrocketed, climbing nearly 37 percent. Out of all mortgage owners in California, a whopping 35 percent are underwater. In fact, things are so bad that Obama recently announced plans to help bail out homeowners at risk of foreclosure.

Still, for all of this, things appear to be looking up - according to analysts from the Kyser Center for Economic Research.

San Diego Mayor Jerry Sanders has repeatedly dismissed bankruptcy as a foolish and futile solution to the city's financial agony. On January 31, the mayor submitted a strongly-worded opinion piece to the San Diego Union Tribune, calling the proposed bankruptcy solution a "myth" and "sham."

In recent months, business leaders and government officials have both cited bankruptcy as a possible solution for San Diego's ailing budget, fueled, for the most part, by its massive pension debt.

However, Sanders contends that filing for bankruptcy is not a viable solution to the pension problem and that, at best, would waste millions of dollars and valuable time. In a recent article, the Union Tribune took a look at this claim and found that it was mostly true ... but not completely.

In 2009, 205,705 Californians declared bankruptcy. This was up 37 percent from 2008 and 66 percent from 2007, when the first inklings of a troubled economy began to trickle in.

Today, California has a 12.1 percent unemployment rate - nearly two percent higher than the national average - and thousands of homeowners are faced with mortgages that are underwater. In fact, California is one of five states in which average home prices have dropped more than 20 percent.

In a plan to help struggling homeowners stay in their homes, President Obama has announced a $1.5 billion fund to provide additional support to the hardest hit states, like California.

Next Monday, February 22, the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 goes into effect, severely restricting the ability of banks and credit companies to unfairly charge consumers.

In a country where the bankruptcy rate soared more than 30 percent last year, this could be a huge boon to the general public - as well as a sharp thorn in the side of creditors.

Signed into law last May by President Obama, the main goal of the CARD Act is to ensure credit availability for financially-strained consumers. At the same time, the government hopes it will make credit card terms less complicated, billing fairer and put a stop to unfair rate increases and questionable charges.

San Diego bankruptcy attorneys might just have to stay put a while longer. Although recently released data shows most San Diego area home prices on the rise from last year, the backlog in San Diego foreclosures might still leave lingering effects on San Diego's economy and might even increase Chapter 13 bankruptcy filings.

The highest price-per-square foot increase on sold homes in the San Diego area was in Point Loma, where price-per-square foot increased 45 percent. Of course, only three houses were sold in Point Loma in 2009 and eleven houses in 2008. LaJolla saw a huge drop in price-per-square-foot with a price decrease of 24 percent from 2008.