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The National Association of Consumer Bankruptcy Attorneys recently released a report into the burgeoning problem of student debt in the country. The report titled The Student Loan Debt Bomb: America's Next Mortgage-Style Economic Crisis?’ contains several findings that are no surprise to any California bankruptcy attorney. However, consumers may be unaware of exactly how widespread the problem has become.

As the report indicates, it's not just college students who are struggling with massive debt. Much of the debt is now being carried by parents who took loans for their college-age students. Loans to parents for the education of their children have increased by 75% since the 2005-2006 academic year.

According to data, federally backed educational loans given to parents comprise up to 10%, or $100 billion of the $1 trillion that is currently outstanding in student loans. Parents now hold an average of $34,000 in student debt, and over a ten-year period, that figure could rise to about $40,000. Among students who graduated in 2010, approximately 17% had parents who got loans for their children.

Another interesting fact that emerged in the report is that borrowing is up not just for the below-24 age group, but also for the 35 to 49 age group. In fact, borrowing has grown substantially for this age group, and this is probably an indication that during a recession, many mid-level professionals had to go back to college to bolster their employment and promotion prospects.

California bankruptcy lawyers note, the report also found that loan delinquency is widespread. Out of the class of 2005 students who began paying back their loans after they graduated, about a quarter became delinquent at some point in time, and about 15% defaulted on their loans. On government loans, the default rate was high as 20%.

California Attorney General Kamala Harris continues to hold out against participation in a proposed foreclosure settlement between lenders and states. Harris has long held that the proposed settlement is inadequate and unfair, and has balked at a settlement that would block any investigation into mortgage loans. Harris had also objected to an earlier version of the settlement that had been proposed in September.

With California's objection to the deal, the value of the settlement would stand at about $17 million. The settlement could benefit as many as 750,000 Americans who could receive checks for as much as $1,800 under the settlement. That number is just 50% of the population that might actually be eligible for assistance under the terms of the settlement.

Since the housing crisis hit, it has been estimated that about 8 million Americans have been affected by foreclosure. California has some of the worst foreclosure problems in the country. But that doesn't mean that state authorities are in a hurry to rush into any kind of settlement.

According to Attorney General Harris, any acceptance of the terms of the settlement would mean that she will not be able to file civil charges against the mortgage lenders who were responsible for the housing crisis in the first place. Many of these mortgage lenders wrongfully foreclosed on properties using a procedure known widely as robo-signing.

In many cases, California foreclosure attorneys have found that companies used robo-signing to foreclose on properties. Under this process, employees used fake signatures to sign foreclosure paperwork. As part of the settlement, many families who had their properties foreclosed on because of robo-signing would receive compensation from the banks.

According to a new study, black Americans are much more likely than whites to choose a more expensive form of bankruptcy filing to root out their financial troubles. These people are more likely to file for Chapter 13 protection, versus Chapter 7.

Chapter 7 filings are less expensive than Chapter 13 filings, and also come with a much higher success rate. In the case of Chapter 13 filings, a person could spend the next several years paying back debt, although this doesn’t automatically make this plan worse than any other.

However, a study that investigated racial differences in bankruptcy filings has found that black Americans are much more likely to be steered into a Chapter 13 filing than white Americans. The disparity was seen even when both the black and white persons were in the same financial situation. Among blacks who filed for Chapter 13 bankruptcy protection, the rate was almost twice as high as for whites.

The trend was seen across the country, but there was an increase in Chapter 13 filings among people in the South. The findings of the study are expected to be published in the Journal of Empirical Legal Studies later in 2012.

California personal bankruptcy lawyers don’t take the results of the study to mean that the disparity is the result of discrimination. Not many studies have been conducted into racial differences in bankruptcy filings, which is why not much attention is paid to any differences.

Choosing the wrong bankruptcy protection plan can be disastrous. It must be mentioned here that each of these plans has its place, and each proceeding has its own benefits and advantages. An experienced California bankruptcy attorney should be able to evaluate your financial situation, and determine the plan that benefits you the most.

2011 ended with some good bankruptcy-related news for Americans, especially Californians. According to statistics from the National Bankruptcy Research Center, personal bankruptcy filing numbers dropped last year for the first time since 2006. The drop was a substantial 12% over 2010.

A total of 1.35 million Americans filed for Chapter 7 or 13 bankruptcy last year. In 2010, a total of 1.5 million bankruptcy filings had been reported. In 2010, one out of every 150 people filed for bankruptcy. Last year, the ratio was one out of every 175 Americans. There was a 7% drop in Chapter 7 bankruptcy filings compared to 2010. Chapter 13 bankruptcy filings were down by approximately 25% compared to the previous year. Overall, last year, there were 5,800 bankruptcy filings per million persons.

Personal bankruptcy filings dropped in California too, but the state continued to rank close to the top of the list for the highest number of filings in the year. Last year, Nevada took the top spot as usual for the number of personal bankruptcy filings. It was followed by Georgia, Utah and Tennessee. These states had about 9,500 to 10,000 filings per million adults. In California, which came in at number 4, there were 8,300 bankruptcy filings per million adults. The only significant increase in bankruptcy filings last year was seen in the state of Delaware, which saw an 8% increase in filings.

There was more bad news for California bankruptcy attorneys. Two of California's counties rank at the top of the list of the counties with the highest number of personal bankruptcy filings last year. Riverside County ranked at number 2, and San Bernardino ranked at Number 5.

According to a new study, bankruptcy reform laws have made filing for bankruptcy a more expensive and cumbersome procedure. The study funded by the American Bankruptcy Institute Anthony H.N. Schnelling Endowment Fund and the National Conference of Bankruptcy Judges Endowment for Education found that as a result of bankruptcy reform laws, filing costs have increased for both Chapter 7 and Chapter 13 bankruptcy petitions. The study examined 11,221 Chapter 7 and Chapter 13 consumer bankruptcy filings at random. These findings accounted for about 0.12% of the total consumer bankruptcy filings between 2003 and 2009.

Those bankruptcy reform laws are contained in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The study by the American Bankruptcy Institute found that since those bankruptcy laws went into effect, there has been an increase in debtor attorneys’ fees, filing fees and the debtor education fee. Those increases have been seen for both Chapter 7 and Chapter 13 bankruptcy filings. As a result, California bankruptcy attorneys have found that the bankruptcy filing system has become not just more expensive, but also more complicated to use.

As part of these bankruptcy reform laws, the Bankruptcy Abuse Prevention and Consumer Production Act of 2005 included additional paperwork requirements for debtors. These additional paperwork requirements have meant extra time spent on filings, and a more complex filing procedure. The new requirements have also added to the costs of a bankruptcy filing.
The reform laws also imposed new obligations not just on people filing for bankruptcy but also their attorneys and trustees. These also inflated costs and increased the time required to file for a Chapter 7 or Chapter 13 bankruptcy.

Speculative real estate investors in states like California, who already owned residential properties and took out mortgages to purchase new properties, were responsible in no small measure for the housing bubble and the consequent foreclosure crisis. New research by the Federal Reserve Bank of New York points to the underappreciated role of real estate investors who took advantage of easily available credit to buy residential properties. The role of these speculative real estate investors had not been probed adequately until now.

In states like California, these investors formed a substantial portion of lending activity, and their actions helped push residential property prices up. At one point, the number of these investors was as high as 45%. Between 2004 and 2006, these real estate investors formed a large chunk of mortgage purchases, inflating prices for those who wished to buy homes to live in with their families. As a result, owner-occupants ended up having to spend more to buy residential properties. However, investors were able to benefit from the availability of low and no-down payment mortgages to pick up houses even with these inflated prices.

When house prices began to drop in 2006, many of those speculative investors were also the first to default. Every California foreclosure lawyer knows that owner-occupants are less likely to walk away from a house and apply for a foreclosure, compared to real estate investors who don't live on the property.

The large number of investor mortgage defaults contributed to plummeting housing prices, and vast numbers of foreclosures in California. Many owner occupants found that their homes were worth less than the purchase price, and when the economy tanked, many were unable to meet mortgage payments. This at least partly contributed to the massive foreclosure crisis that affected states like California, Arizona and Nevada the most.

In a victory for California homeowners facing foreclosure, California Attorney General Kamala Harris walked away from settlement talks in September 2011, with Bank of America, JPMorgan Chase, Wells Fargo, and Ally Financial, five of the largest mortgage servicers in the country. “After much consideration, I have concluded that this is not the deal California homeowners have been waiting for,” Harris wrote in a letter to the Associate U.S. Attorney General. “(The) relief contemplated would allow too few California homeowners to stay in their homes.

The talks began following the robo-signing scandal that plagued the mortgage industry with accusations of rubber-stamping when it came to foreclosure paperwork. Over the past 11 months, states have been trying to negotiate a $25 billion settlement that could be passed on to homeowners who have suffered wrongful foreclosures. Some homeowners in California lost their homes despite the promise of loan modifications by lenders who then continued the foreclosure process, often behind the scenes. In other cases, lenders could not prove they had the right to foreclose on a property, yet still evicted the owners.

California carried a lot of clout in these settlement talks because of the sheer numbers of foreclosures hitting homeowners here. New York, another state hit hard by the mortgage meltdown, withdrew from the talks earlier. A big sticking point in the negotiations was the extent to which banks should be released from liability for additional legal claims related to the mortgage crisis if they agreed to the settlement. "It became clear to me that California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated," said Attorney General Harris.

What does the breakdown of these talks mean to California homeowners? In the short term, there will be no quick relief from improper foreclosure. Longer term, Harris indicated California will act independently towards relief for California homeowners by moving forward with investigations into abusive mortgage practices that fueled the housing crisis. While one avenue of foreclosure relief for California homeowners may have changed, it’s not the end of the road.

If you are a homeowner facing foreclosure or other financial problems, contact us to discuss a solution.

Many seniors who have waited till their 60s, 70s and 80s to enjoy the best years of their lives are finding that their struggles are just beginning. In 2008, California bankruptcy lawyers found a startling increase in the number of seniors filing for bankruptcy. Now, new data from the US Census Bureau finds that the number of seniors living in poverty, or on the edge of poverty has increased.

According to the data, the percentage of senior citizens who had annual incomes below 200% of the Federal Poverty Level increased from 33.7% to 34.6% in 2010. There were 13.23 million citizens living below the poverty line in 2009, and these numbers increased to more than 13.54 million in 2010. The number of senior citizens living below 100% of the federal poverty level saw an increase from 3.4 million to 3.5 million.

According to the National Council on Aging, there has been an increase in economic insecurity for senior citizens. Additionally, there has been an increase in the number of people who are teetering on the edge of poverty, struggling every day to pay for food, groceries, medicines and rent.

Moreover, current poverty level markers do not accurately measure the number of people who actually live in such poor conditions. For example, the current poverty level markers measure family incomes at consumption levels dating back several decades. These levels therefore do not accurately reflect consumption patterns in the year 2011. What that means is that the number of senior citizens living in poverty could actually be higher.

Senior citizens who wish to file for personal bankruptcy protection may have limited options. The current employment situation is grim even for younger people with updated skill sets, so going back to work may not be a feasible option. Many people choose to sell off assets like houses, which for obvious reasons, is undesirable. A California bankruptcy attorney should be able to advise you about your options and the best route going forward.

The class of 2011 is expected to graduate with record massive student debt of $1 trillion. Clearly, the student debt scenario in this country has gotten out of control, and California personal bankruptcy lawyers are pleased to see that the Obama administration has finally announced proposals to deal with this crisis.

Under the president's plan to ease student loans, some student borrowers will be able limit their monthly loan repayments to 10% of their discretionary income. This will likely begin from next year onwards. The plan covers an estimated 1.6 million borrowers. However, persons who choose a low monthly repayment plan must understand that this also means a longer repayment term.

Another part of the plan that California bankruptcy attorneys find particularly encouraging is that the remainder of the loan may be forgiven after twenty years of repayment. Currently, persons may have their loans forgiven after twenty-five years. Persons in some jobs like nonprofits could even have loans forgiven after ten years.

President Obama's plan will also allow borrowers to consolidate loans through the Direct Loan Program. This will allow them to get an interest reduction of .25% on the Federal Family Education Loans, as well as another .25% savings on interest on the consolidated balance.

The plan will also allow students to compare and review loan packages before they make a decision. Further, under the President’s plan to tackle student debt and encourage entrepreneurship, Gen Y Capital Partners will meet the monthly student loan payments of entrepreneurs, who have entered a federal loan repayment program and started a new business.

Student debt in this country has already reached crisis proportions, not just because of rising tuition fees, but also because students now graduate with massive amounts of debt, but few employment prospects. In the current economic situation, it would be suicidal to ignore this problem until it balloons to critical levels.

Analyzing the results of a new study conducted by the University of Iowa may seem to Los Angeles bankruptcy lawyers like locking the barn doors after the horses have bolted. The study finds that up to 25% of Americans who filed for bankruptcy in 2007 might have been able to avoid bankruptcy if credit limits were still at the levels they were in the 1970s.

The study was conducted by a University of Iowa sociology professor. According to the study, when you look at the number of people who filed for bankruptcy since the housing crisis hit in 2007, and look back at numbers from the 1970s, it is apparent that many of these people would not have been in this position if credit limits were still at 1970s levels.

Back in the ‘70s, a person could not get a mortgage of more than 30% of his or her income. Car buyers could not take out a car loan that required monthly installment payments of more than 10% of their income. In other words, people were loaned money based on their capacity to pay back.

As any Los Angeles bankruptcy attorney knows, things changed dramatically over the next couple of decades. Banks began lending money indiscriminately to people who could not afford to pay back these loans. Banks then immediately started selling off those loans in order to protect themselves.

Many of the people who took loans in 2007, when the housing bubble was at its peak, were high-risk borrowers whose chances of paying back the loans were slim. This has resulted in thousands of foreclosures over the past three years.