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Sunday, Apr. 27, 2008

Valley attorneys bustling to help people with nowhere else to turn

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As the number of foreclosures surges, people buried under mountains of debt are seeking relief by filing for bankruptcy in ever increasing numbers.

It's the option of last resort for those who see no other way out, say bankruptcy attorneys, whose calendars are backlogged with cases. They describe the people packing their waiting rooms as being from all backgrounds and income levels, reflecting economic upheaval spreading from the housing crisis.

In the Northern San Joaquin Valley, bankruptcy numbers have doubled from a year ago, and tripled from two years ago, federal Bankruptcy Court records show. Although the region leads the nation in foreclosures, bankruptcy filings also are soaring for the rest of the state.

Attorneys who specialize in such cases said that with housing still in a slump, there is no letup in sight.

"It's a problem that's indicative of people being in great need," said Ann Marie Friend, a bankruptcy attorney in Modesto for 14 years. "And unless Congress does something, the peak may still be ahead."

The Modesto district office of the U.S. Bankruptcy Court's Eastern District of California recorded

216 bankruptcies during March. A year earlier, the office had 106, and 63 in March 2006, about six months after federal laws made it more difficult to file for bankruptcy.

Across the Eastern District, bankruptcies also are up, according

to court officials. The Modesto office processes filings for residents in Stanislaus, Calaveras, Mariposa, Merced and Tuolumne counties.

Friend and other attorneys said housing is the principal reason for the rise in bankruptcies. Many of her clients used sources such as credit cards to try to save their homes, but ultimately became part of the spike in foreclosures and had to file for bankruptcy.

"With property owners, they had very bad loans that started to adjust," Friend said of her clients. "The company was not working with them, and they're just walking."

Friend said that she's seeing 10 to 12 new clients a day who plan to file for bankruptcy. "And we're just one office," she added.

She and other attorneys said that many clients were hit both ways by the housing meltdown, because they worked in jobs tied to real estate, such as electricians and mortgage lenders.

But other professions also are affected, said attorneys Scott Mitchell and Tamie Cummins, who opened an office in Modesto 2½ years ago.

All walks of life

Mitchell said he's seen small-business owners, fitness trainers and other non-real estate-related workers filing for bankruptcies, with incomes and backgrounds of all kinds.

"Anything considered an extra in spending right now is feeling it," Mitchell said of the spread of bankruptcies beyond real estate-related businesses.

Mitchell said housing is driving his busy schedule, with some clients showing him figures for loans that are staggering.

"These people made $50,000 to $60,000 a year, and they borrowed $500,000 with an adjustable rate, at the top of the market," he said. "I think both consumers and lenders got caught up in something artificial."

Some people have other reasons to file for bankruptcy, but housing is part of it.

In late 2006, Weston Blades of Modesto was working as a contractor in Iraq when he suffered a heart attack.

While being treated, Blades, 53, learned he had cancer. Then he had another heart attack. He didn't work last year.

Though he said he hopes to have recovered enough to begin working next month, his wife's salary as a pharmacy technician wasn't enough to keep up with their bills.