Faced with crushing debt from various sources, more and more Kern residents are throwing in the towel and declaring bankruptcy.

Nearly twice as many people in the county filed for personal bankruptcy protection in the 12 months ended March 31 as compared with the same period a year before, court records show.

Bankruptcy lawyers say the problem reflects an avalanche of financial trouble, from the mortgage crisis to layoffs to changes in lending practices to insufficient health insurance.

Bankruptcy experts do not expect a slowdown in new cases any time soon, partly because the economy remains sluggish but also because they say consumers will continue to limp along with unmanageable debt until they just cannot keep up with their bills any longer.

“The vast majority of people are simply trying to hang on, and I think that the situation — the economic situation and the housing and the employment — has made it extraordinarily difficult for consumers to keep a roof over their head,” said Maureen Thompson, legislative director for the National Association of Consumer Bankruptcy Attorneys.

Kern stands out

The situation appears to be worse in Kern than it is across the nation as a whole.
Some 3,105 Kern individuals filed for personal bankruptcy protection in the 12 months ended March 31 — a 92 percent increase over the year before.

By comparison, Fresno County’s total was up 73 percent, while the national increase was 32 percent, court data indicates.

Discussions about what’s behind those numbers typically touch on the housing market and credit card company practices.

“I think the majority of the problem was made by, you know, lenders who made loans without giving them much thought,” Bakersfield bankruptcy lawyer Pat Kavanagh said.

He pointed not just to the mortgage industry, with its interest-only loans and variable rates at the height of the housing market, but also to credit card companies that have hiked interest rates, raised fees and cut borrowers’ debt limits.

But the general economy hasn’t helped. Many workers not laid off outright have had their hours cut or been put on furloughs.

Phillip Gillet, another bankruptcy lawyer in town, said many of his clients have racked up staggering credit card bills just trying to save their home as they cope with diminished income.

“They were using their income to try to make the house payments, and they were using the credit card” to pay for food and other essentials, he said.

Maintaining standards

Essentials aren’t the only costs that contribute to a bankruptcy filing, Thompson said.

“The way people have maintained their standard of living is (by using) credit cards and home equity loans and equity in their home — or expected equity in their home,” she said.

No doubt consumers overspent, Kavanagh said. But he added that it wasn’t always their fault.

“I think some (consumers) were exuberant — irrationally exuberant,” she said, “and some were ripped off, and some were unfortunate.”

Bakersfield bankruptcy lawyer Cindy Scully said she has noticed a shift over about the past year.

Fewer people are filing for bankruptcy protection because they were hurt in the housing bubble, and more are filing because their work hours were cut.

Scully said she worries that the effects of the filings will continue to ripple through the economy.

“That all has a trickle-down effect, you know?” she said.