Bankruptcy Trends and the New Shadow Economy

Personal bankruptcy filings in the US continue to rise in 2010.  Some experts believe we are on pace to exceed 1.7 million filings by year’s end, which is close to the all time record of about two million filings in 2005 before the Bankruptcy Reform Act took effect.  The revisions to the code were intended to curb the number of filings by making the bankruptcy process more restrictive, burdensome and expensive.  At the time, powerful bank and credit card lobbies persuaded Congress to pass the changes to reduce so-called abusive filings.  Few bankruptcy attorneys and judges thought the reforms were a good idea, and now in the wake of the lingering recession and housing crisis, it seems more clear than ever the changes were “bad medicine.”

But the bankruptcy filing statistics only hint at the real depth of the problem.  Perhaps even more troubling is the growing emergence of a group of Americans who are in serious financial distress but can’t be helped by filing for bankruptcy.  This group of debtors are forced into what is known as the “shadow economy” or informal bankruptcy.  It is common now for young adults facing crushing student loan debt and a hostile, shrinking job market.  Under current bankruptcy law, student loans are very rarely discharged.

Another situation where individuals facing financial hardship fail to file for bankruptcy involves homeowners trying to hang onto their homes in the face of lower wages, declining market values and higher monthly mortgage payments.  Chapter Seven is simply not very helpful in this circumstance.  Chapter Thirteen can help homeowners catch up on mortgage arrears but does not offer a complete solution to the problem.  A complete solution would entail granting bankruptcy judges the power to modify the mortgage principle.  However, recent reform efforts in this direction have failed, even though these changes have the potential to avert the tidal wave of foreclosures that have rocked the financial sector over the past three years.

For further reading on this topic, see this recent article from USA Today, “Only a fraction of those in need file for bankruptcy.


S.O.S. — Save Our Shelter!

The Sacramento County Animal Shelter needs your support today!  Due to massive budget cuts, the shelter is desperately trying to keep it’s doors open.   

License your pets now with no late fees thru June 30th!

or DONATE TODAY!

Your donation is tax deductible and can be made online, by mail or in person.

As one of the largest shelters in California, the Sacramento County Animal Shelter cares for more than 15,000 stray, abandoned, abused and neglected animals every year, and urgently needs your help to continue providing care and services to the animals and people of our community.

You donation makes a difference!

Sacramento County Animal Care

3829 Bradshaw Road

Sacramento, CA 95827

(916) 368-7387 (PETS)

For more information on the SOS campaign, click here.

__________________

— Michael   

07-07-07, Divorce Rates and Upcoming Charity Events!

This past Saturday was 07-07-07 of course, and all around the world, couples in love were tying the knot at a frenzied pace hoping to gain an extra lucky edge for their marriage.  According to Theknot.com, a popular wedding site, the number of marrying couples was estimated to be 31,000 in the U.S. alone which is twice as high as the average summer Saturday.  While this type of “insurance” against failure may strike some as grasping at straws, it might not be a bad idea given the relative frequency of divorce in this society.  After all what can it hurt?

Related to this, how many times have you heard that “50% of marriages end in divorce!”  This idea has become so commonplace, it’s practically accepted as The Gospel now.  There’s no doubt many marriages do fail.  However, statistically it’s not as simple as that.  It’s better to compare the annual rate of divorce in a population over time to get a truer picture.  The National Center for Health Statistics determined that for 2005, the divorce rate in the United States was 3.6 per 1,000 members of the population with forty-six states and the District of Columbia reporting.  The same agency reported that the marriage rate for the same year was 7.5 per 1,000 of population.  This is the source of the popular 50% statistic cited above.  However, it is erroneous to conclude the divorce rate is 50% because the people getting married are not the same people getting divorce in the vast majority of cases.  Although these two figures seem related, and our mind wants to “connect the dots” they cannot be used together to calculate the divorce rate.  In 2003, the divorce rate was 3.8 divorces per 1,000 so in fact, the incident of divorce has dropped slightly.

I was curious whether California’s average was higher or lower than the national average but unfortunately the Golden State is no longer reporting it’s divorce information to NCHS.  The last year data is available for is 1990 when the rate was 4.3, only slightly higher than the current national average.  By far, the state with the highest divorce rate is Nevada where the rate is 11.4.  I suspect a transitory population lured by the promise of plentiful jobs and relative high wages in the booming Las Vegas area and high incidence of substance abuse and gambling addiction factor into this astonishingly high number.  Surprisingly, the state with the lowest rate was New Jersey coming in at 3.0 per 1,000.  If you can stand the urban decay, smog, grime, toxic contamination and toll roads, and you want something more concrete to maximize your chances of marital success than “777”, move to the “Garden State.”  A chart based on Census data that compares the divorce rate in all states can be found here.

If you already know are one of the “unlucky” ones and wish to get out of an unhappy marriage, please contact me.  I can provide you with solid representation in your divorce matter at a reasonable cost.  I have been practicing in the area of family law for nearly fifteen years in the greater Sacramento area.  My cases have ranged from simple “no contest” cases to complex matters with couples that were highly conflicted over custody, support or property division issues.


Looking for something to do?  Here are some fund raising events for worthy causes coming up soon in the Sacramento area:

Saturday, July 14, 2007 at Raley Field — Swing for the Cure to benefit Susan G. Kormen.  Bring out your business or organization to help raise money to find a cure for breast cancer.  Part of each packet sold goes to the Sacramento affiliate.  This is sponsored in part by Chevron.

Saturday, July 21, 2007 at the American River Parkway — Eppie’s Great Race to benefit Sacramento County Therapeutic Recreational Services (TRS).  This annual event gives you the chance to run (5.82 miles), bike (12.5 miles) and paddle (6.35 miles) from Sacramento to Rancho Cordova.  It’s advertised as “The World’s Oldest Triathlon.”  There’s also a Kid’s Duathlon at 10:00 a.m. sponsored by Kaiser Permanente.  TRS provides training in leisure, social, community and independent living skills to individuals ages five and up with mental, physical, developmental, emotional and sensory impairments or special needs.  Even if you can’t race, there’s opportunities to help with the race including setting up, paperwork, working in refreshment stands and more.  Contact the TRS at 916-381-0255 or via e-mail at saccotr@sacparks.org for more information.

Saturday, July 28, 2007Chefs for Charity “Sip & Savour” Event to benefit the Virginia Tech Foundation.  Local area chefs with big hearts are sponsoring this function.  The evening will consist of a tapas recipe challenge, gourmet food and wine tasting reception, live cooking demonstration and silent auctions with a truly impressive assortment of good including limited artwork, entertainment and sports collectibles, designer jewelry and ladies accessories, exotic getaways and more.  Live music will be provided courtesy of Sacramento’s “Inner Soul Band.”  Tickets cost $30.

— Michael

Michael W. Crosson, Attorney at Law
Family Law, Bankruptcy, Small Business Matters & Intellectual Property
Representing clients in the greater Sacramento area, including Placer, Yolo & El Dorado Counties