Nov. 28–About everything that could go wrong did go wrong for Ed Yoho.

During the last three years, his wife died of cancer, he lost the job he had held for two decades and he was ripped off by a debt consolidation scam.

“In 20 years, I only missed one payment, but the banks jacked up my cotton-pickin’ credit card rates,” said Yoho, 62, of Modesto. “I was doing fine until they went from 7.9 percent to 23 percent interest. My payments doubled in one month.”

Yoho had tapped his credit cards when his wife got ill, but he couldn’t handle the monthly bills once the interest rates soared. So he sought help from a so-called debt settlement company.

“What a scam that was,” he said. “They took me for $9,600 Â… then they only paid one bill for $2,000.”

That forced him to seek Chapter 13 bankruptcy protection this summer. He was more than $145,000 in debt by then, much of it for a motor home he had purchased in 2005 when his wife was healthy.

“I was trying to hang onto our RV,” Yoho said. But this fall he lost his job managing a Modesto mobile home park, so he knew he couldn’t afford that last luxury. “I called the bank to take the motor home back. I can’t pay for it.”

Yoho is one of nearly 4,400 Stanislaus County residents who have sought bankruptcy protection during the past 12 months.

Bankruptcy filings are at an all-time high as the region’s dismal economy wreaks havoc on personal finances.

“I had no choice but to do it or lose everything I had, along with my dignity,” said Yoho, who is trying to compete for jobs in a county where the unemployment rate is above 16 percent. “I’m on unemployment making one-third of what I was making. Â… Right now in my savings account is $38.”

It’s a sad story in a county filled with sad stories.

Court’s caseload up sharply

Bankruptcies have soared 14 percent nationwide this year, but they’ve increased 26 percent for the U.S. Bankruptcy Court’s Modesto Division, which includes cases from Stanislaus, Calaveras and Tuolumne counties.

“It’s astonishing,” said Wayne Blackwelder, the top administrator for U.S. Bankruptcy Court Eastern District of California, which covers the Central Valley. “We’ve got seven judges straining under the pressure of all these cases.”

Stanislaus caseloads have grown particularly large.

In 2006, when the county’s economy was relatively strong, only 720 bankruptcy cases were filed in Stanislaus. But more than six times that many have been filed in the last 12 months, totaling 4,367 through October.

More than 80 percent file under Chapter 7 bankruptcy, which requires debtors to sell most of their assets and give the proceeds to creditors. About 18 percent filed Chapter 13, which enables consumers to reorganize their financial affairs under a debt repayment plan. Chapter 9, 11 and 12 cases are relatively rare.

Fewer than 3 percent of those who filed for bankruptcy were businesses. Individuals and couples were the vast majority of those who sought the court’s protection.

“People fall into bankruptcy for all kinds of reasons,” Blackwelder said. “The whole system is designed to give you a fresh start.”

Filing called ‘a blessing’

A fresh start is what Linda Grantham of Modesto sought when she filed Chapter 7 bankruptcy two years ago. The 60-year-old widow was laid off from her job in 2007 after working for mortgage companies 25 years.

“I had no work for three years,” she said. “I started using my Visa credit cards to keep my home mortgage current.”

Grantham, who earned more than $4,000 per month during the region’s housing boom, didn’t want to lose her house during what she had thought was going to be a short economic downturn.

“I had a very good credit score,” Grantham recalled. But that didn’t last when all she could find were temporary, part-time, low-paying jobs. She and her late husband had purchased a home in 1992, but she refinanced her mortgage near the peak of the market, taking out equity to buy a car and other things. “Now I’m upside down about $200,000 on my loan.”

Filing bankruptcy, Gran- tham said, “was a blessing because the creditors stopped calling.” Collection agencies “were terrible” to her, calling daily to demand payments she couldn’t make.

“One collection agency was telling me that if I didn’t pay it would send the police,” she said.

While she knew such threats were bogus, the badgering was stressful.

Bankruptcy wiped out Grantham’s credit card debt, but she continues to negotiate for a mortgage modification with her lender. She hasn’t made a house payment in two years. Fortunately, Grantham landed a $250-per-week job as a caretaker, and she soon will start receiving Social Security payments, so she hopes to be able to keep her home.

Applicants ‘run the gamut’

“A lot of times bankruptcy can help people going through foreclosure,” said Modesto attorney Steven Altman. He has handled debtor and creditor legal issues for more than 30 years, including hundreds of bankruptcy cases this year.

Altman said Stanislaus’ housing market crash and soaring unemployment have combined to bankrupt all kinds of folks.

“We’re seeing more people I would have defined as affluent or middle income who are filing now,” Altman said. Filers “run the gamut from people in their 20s to those in their 70s. It cuts through all economic spectrums.”

Falling home values are one big reason.

When people get into financial trouble, Altman said, traditionally they could borrow from the equity in their homes to help them through. But since Stanislaus’ homes are worth less than half what they were five years ago, few homeowners have equity left.

Loan payments from first and second mortgages now overwhelm many homeowners, especially those who have lost jobs. Foreclosures are at record highs, but filing for bankruptcy protection automatically puts foreclosure on hold.

“Chapter 13 is a potential lifesaver for a lot of people who are over-leveraged with a second mortgage,” Altman said. If a home is worth less than what is owed on its first mortgage, he said, those in bankruptcy can have their second mortgage converted into an unsecured debt. “If you complete your bankruptcy plan, your second mortgage goes away.”

Bankruptcy also can enable homeowners to spread out payments on their past-due mortgage debts, “but the court can’t restructure the first mortgage,” Altman said.

That means that while it may delay foreclosure, bankruptcy won’t necessarily stop it.

Increasingly, homeowners don’t even want to save their homes.

“They owe so much more than their property is worth that it’s in their interest to let it go,” said Judge Robert Bardwil, one of two judges assigned to the bankruptcy court in downtown Modesto. “It’s striking just how underwater properties are Â… so we’re seeing a lot of homes going back to lenders.”

Bardwil said the flood of bankruptcies is “an unfortunate consequence of the economy” and the result of years of easy-to-get credit.

“Credit was freely given, and it’s coming back to haunt both sides,” Bardwil said.

Credit counseling required

To help those in credit trouble, people are required to get financial counseling before filing for bankruptcy.

Counseling helps them understand what bankruptcy can and cannot do to help them, said David Johnson, director of bankruptcy counseling for ClearPoint Credit Counseling Solutions. The nonprofit has offices in Modesto and elsewhere in California, plus 10 other states.

“If there is an option other than filing bankruptcy that will have a less negative impact on them, then we make sure they’re aware of it,” said Johnson, whose low-cost service is certified by the U.S. Justice Department.

Bankruptcy laws changed in 2005, and now they require filers to get financial counseling about family budgeting and cash flow.

“That’s new for some people. They never had budget training. Their parents didn’t have it, either, and so it wasn’t passed down to them,” Johnson explained. Counseling gives debtors “an actual idea of what they spend Â… by tracking their expenses for a month to see where the money really is going.”

Cell phone and cable TV bills, designer clothes and cappuccinos may eat up more than financially strapped families realize. Such optional expenses must be controlled to keep out of debt, Johnson stressed.

“It’s all about making short-term sacrifices to reach long-term goals,” he said.

The mandatory bankruptcy counseling tries to teach people how to set goals and save money.

“If people seek help early enough, they can reorganize,” Altman said. But too often debtors take the “ostrich approach to life” and hide from trouble rather than be proactive.

Altman said economic stress causes emotional strain on many people: “They think they’re failures and it lowers their self-esteem. Â… People are ashamed, so that’s one reason they don’t seek help earlier.”

Those who seek bankruptcy protection can file on their own or hire an attorney to help. Altman said the minimum attorney fee is $3,500 for consumer bankruptcies and $5,000 for businesses.

Blackwelder said 20 percent of those who file in Modesto’s bankruptcy division do so without a lawyer, but he doesn’t think that’s the best choice.

“Those who get a lawyer do much better,” Blackwelder said. “It’s very hard to be successful in getting a discharge, meaning the debts that can be erased are erased. I would definitely hire a lawyer.”

Bee staff writer J.N. Sbranti can be reached at jnsbranti@modbee.com or 578-2196.

To see more of The Modesto Bee, or to subscribe to the newspaper, go to http://www.modbee.com/.

Copyright (c) 2010, The Modesto Bee, Calif.

Distributed by McClatchy-Tribune Information Services.

For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit www.mctinfoservices.com.

A service of YellowBrix, Inc.

<a href="http://www.americanchronicle.com/articles/yb/152807096tag:news.google.com,2005:cluster=http://www.americanchronicle.com/articles/yb/152807096Sun, 28 Nov 2010 11:03:36 GMT 00:00″>Modesto bankruptcy court filings rising at almost twice US rate

Frugal Living Guide Modesto bankruptcy court filings rising at almost twice US rate

Media Release Mangalore, Oct 21: