Archive for January, 2009

House Passes Stimulus Bill, But Without Bankruptcy Provisions

Friday, January 30th, 2009

The House of Representatives passed the $819 billion stimulus bill on Wednesday, a monster bill that allots money towards major infrastructure, education, health care, & unemployment concerns. One concern it does not address, however, is stemming the tide of foreclosures. From the Colorado Independent:

“Congressional Democrats hoping to use the economic stimulus package to force lenders to refinance troubled mortgages have met an unlikely opponent: President Barack Obama.

Many Democrats, including Obama, have long-supported the strategy of empowering bankruptcy judges to alter the terms of primary mortgages to prevent foreclosures. But White House officials have said they don’t want the bankruptcy provision in the stimulus bill for fear of alienating Republicans, most of whom oppose the change…Housing advocates have long-pushed to empower bankruptcy judges to reduce, or “cram down,” the balance of primary mortgages, as well as other terms of the loans, to keep homeowners from suffering foreclosure. That legal avenue is currently available for loans on commercial property, yachts, vacation homes — almost anything but primary mortgages, which were singled out for exception under bankruptcy law.”

Although both President Obama and Speaker of the House Nancy Pelosi have made it known that bankruptcy reform is a priority, and that they will make sure to attach bankruptcy reform provisions to a bill that is a “sure-fire” pass, it is unclear how many homes will foreclose in the meantime — and how many more residents of Riverside County and San Bernardino County, from cities like Rancho Cucamonga and Corona, will seek a bankruptcy attorney because of it.

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Redlands Bank Insolvent, Will Likely Close Doors Soon

Monday, January 26th, 2009

Insolvency and bankruptcy is not only affecting multi-billion dollar corporations and their hot shot bankruptcy attorneys. The town of Redlands, located in San Bernardino County, is known for it’s quaint downtown area, as well as it’s boutique shops and family-run restaurants. So word that its very own 1st Centennial Bank is insolvent, and likely to close, is more than just another business news item for these residents. When politicians talk about trouble on Wall Street hurting those on Main Street, they are talking about towns like Redlands. We will keep you updated on whether 1st Centennial files for bankruptcy, and if so, what chapter of the code their bankruptcy attorney advises them to file under.

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Circuit City’s Bankruptcy to End in Liquidation

Friday, January 16th, 2009

After filing for bankruptcy in November, Circuit City will now have to shut down completely and liquidate its’ stores and assets after failing to find a buyer. Only a week ago, according to the New York Times report, there were two potential buyers in talks with Circuit City, but it was not able to reach an agreement with its creditors and lenders in time.

From the New York Times online:

“The demise of Circuit City, while not surprising given its declining sales, is part of a radical shift taking place in American retailing. Weak chains — unable to weather the freeze-up in consumer spending, and choked by tight credit markets — are shuttering their doors.

Last year, a raft of retailers including Boscov’s, Sharper Image, Mervyns, Linens ’n Things, Whitehall Jewelers and Steve & Barry’s filed for bankruptcy protection. This week alone, Goody’s Family Clothing and Gottschalks Inc. also filed. Many more retailers are expected to follow suit as they run out of working capital or are unable to finance their debt. But emerging from bankruptcy is harder than ever because of changes in the bankruptcy code and vise-like credit markets.

Indeed, Wall Street analysts said in November that the prospects of long-term survival for the Circuit City were bleak. Months of declining sales during the recession sent the company over the edge, although its problems go back a decade, from buying cheap real estate leases in inferior locations to laying off its most experienced sales staff. The latter saved money but cost the company employee morale and countless customers.

When the retailer filed for Chapter 11 bankruptcy in November, its shares had lost more than 90 percent of their value since the beginning of 2008.

The company is still awaiting final approval of the liquidation from federal bankruptcy court.”

As Circuit City stores will now be shut down, Inland Empire residents should make those last few trips to their nearby store. Circuit City locations in Riverside County and San Bernardino County are in the following cities: Rancho Cucamonga, Montclair, Moreno Valley, San Bernardino, and Temecula.

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Chapter 7 Bankruptcy Filings in Riverside County & San Bernardino County, December 2008

Friday, January 9th, 2009

Bankruptcy lawyers are needed in many cities, but perhaps in some more than others.

The Riverside County and San Bernardino County cities with the most chapter 7 bankruptcy filings for the month of December, 2008, are as follows: Corona, Fontana, Moreno Valley, Murrieta, Ontario, Rancho Cucamonga, Riverside, San Bernardino, Temecula, and Victorville.

Riverside County and San Bernardino cities that also had a high number, especially considering their relative population, include Chino, Chino Hills, Hemet, and Menifee.

The total number of Chapter 7 bankruptcy filings in the Riverside Bankruptcy Courthouse, for the month of December 2008 was 1,254.

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Citigroup, Senators in Talks to Let Bankruptcy Judges Modify Mortgages

Thursday, January 8th, 2009

From DSnews online:

“New York-based Citigroup Inc. endorsed the proposed Senate bill that would give bankruptcy judges the power to modify mortgages with so-called ‘cramdowns,’ to force lenders to lower the burden on homeowners on Thursday, according to a story in The Wall Street Journal.

The “Helping Families Save Their Homes in Bankruptcy Act” was reintroduced to the Senate earlier this week by Illinois Democrat Sen. Dick Durbin, the Senate’s second-ranking Democrat. Durbin’s been working on the legislation for more than a year.

The deal, Senate staffers told The Wall Street Journal, is likely the first of several measures being crafted this year that propose to trim the principal owed by homeowners underwater on their mortgages.

‘This is the breakthrough we’ve been waiting for, to have a major financial institution support this legislation will create an incentive for others to come our way,’ Durbin told the Journal. ‘I want to congratulate Citi for being open-minded about this [and] playing a major leadership role.’

As written, the bill would allow judges to:

– Extend the length of repayment to lower monthly payments
– Replace variable interest rates with fixed rates
– Waive the bankruptcy counseling requirement for homeowners facing foreclosure to get homeowners in court faster
– Allow judges to waive prepayment penalties
– Maintain debtors’ legal claims against predatory lenders while in bankruptcy

A new component, added as a concession to lenders, would eliminate consumer loan forgiveness for lenders who have violated the Truth in Lending Act during bankruptcy proceedings, and would only subject lenders to fines.

Now that Citigroup has endorsed the deal, lawmakers hope other financial institutions will also offer their support. According to the Journal, some banks have indicated they would support the bill, marking a change of position for the industry, which previously argued cramdowns would raise the cost of mortgages for all buyers and overwhelm bankruptcy courts.”

Bankruptcy judges, and every bankruptcy attorney worth his salt, are hoping this measure passes, for the sake of millions of bankruptcy mortgage holders, thousands of whom live in Riverside County. As Riverside County bankruptcy attorneys can attest, the Riverside Bankruptcy Courthouse has seen it’s fair share of cases that could have been helped by this legislation. Here’s hoping Citibank leads the charge to finally get it done, and finally stem the tide of foreclosures in Riverside County, San Bernardino County, and across the country.

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Bankruptcy Filings Rise, Especially in Riverside Courthouse

Tuesday, January 6th, 2009

From the Californian online:

“More Americans sought to discharge debts in bankruptcy court last year, and the numbers of local debtors entering bankruptcy more than doubled from 2007, according to court filings and local attorneys.

About 1.06 million individuals sought personal bankruptcy protection last year, an increase of more than 30 percent over 2007, according to the American Bankruptcy Institute, a research group based in Alexandria, Va.

A total of 18,900 residents and corporations filed initial petitions at the Riverside division of the U.S. Bankruptcy Court, compared with 8,860 in 2007. The division covers Riverside and San Bernardino counties.

A prominent bankruptcy attorney in Temecula said the increase has been even more dramatic in foreclosure-wracked Southwest County.

Bankruptcies filed under Chapter 11 of the U.S. Bankruptcy Code, which allows a corporation to put off debt while it reorganizes, rose by 530 percent in the two-county district, to 297.”

A Temecula attorney noted that there was a “ripple effect” from the economic distress, especially in construction industry:

“In August, a group of large lenders filed an involuntary bankruptcy petition against Woodside Homes Inc. in Riverside. Court filings showed the Utah-based builder owing some $680 million, including several hundred thousand dollars to local subcontractors. Woodside has built homes in the Wolf Creek development in southern Temecula; Audie Murphy Ranch, its master-planned community of 2,000 homes north and south of Newport Road in Menifee, has been repeatedly delayed.

Other filings included:

– WSR Publishing Inc., a Murrieta company whose monthly Widescreen Review covers home-entertainment products. The company continues to publish in print and at www.widescreenreview.com. Owner Gary Reber said his company’s woes stem mainly from the weakening market for consumer electronics. WSR also had difficulty refinancing some of its debt, Reber said.

– It’s About Time … Scrapbooks & More Inc. of Murrieta filed for Chapter 7 liquidation in mid-December.”

As the Inland Empire well knows, and as bankruptcy lawyers in Riverside and San Bernardino counties can attest, the economic domino effect leaves few industries untouched. With more than double the number of bankruptcy filings in the Riverside Courthouse in 2008 than in 2007, consumers and businesses alike are hurting. Whether you live in Corona or Rancho Cucamonga or Murrieta, your community is not immune from the effects of this downturn. We can only hope that new policies and the stimulus package in the works can prevent the dominoes from continuing to fall.

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