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More Americans filed for bankruptcy protection in March than during any month since the federal personal bankruptcy law was tightened in October 2005, a new report says, a result of high unemployment and the housing crash.

Federal courts reported over 158,000 bankruptcy filings in March, or 6,900 a day, a rise of 35 percent from February, according to a report to be released on Friday by Automated Access to Court Electronic Records, a data collection company known as Aacer. Filings were up 19 percent over March 2009. The previous record over the last five years was 133,000 in October.

“Even with the restrictive new law, we’re back up over where we were before the law changed,” Mike Bickford, president of Aacer, said in a phone interview Thursday from his headquarters in Oklahoma City. He faulted the stagnant economy, saying a surge in bankruptcies generally follows economic contraction by 6 to 18 months, and he pointed to March as a historically busy month for bankruptcy filings.

Other experts point out that filings invoking Chapter 7 of the bankruptcy code, a simple and inexpensive option, are rising faster than more complex Chapter 13 reorganization filings, under which consumers repay a portion of their debts so they can keep their homes, suggesting that more homeowners are simply walking away from underwater mortgages.

“Fewer people are trying to save their homes,” Katherine M. Porter, a University of Iowa law professor and bankruptcy expert, said in an interview by phone on Thursday. “They realize their payments are not affordable, and bankruptcy judges do not have the power to adjust the mortgages to make them more affordable.”

Statistics from the United States Trustee Program, the Justice Department office that oversees bankruptcy cases, show that Chapter 7 filings as a percentage of all bankruptcies have increased to about 73 percent in 2009 from about 62 percent in 2006-07. Of the 158,141 bankruptcy filings in March, 118,505, or 75 percent, were Chapter 7s and 38,241 were Chapter 13s, the Aacer report says.

“We think that means fewer and fewer families think they’re really going to save their homes,” Professor Porter said. “They don’t have any equity, so why try to keep up with their home payments?”

The nation’s high unemployment rate is one more reason for people to choose Chapter 7, Professor Porter said. “To file Chapter 13, you need ongoing income, and to the extent we have more people who are unemployed, they can’t use Chapter 13 because they don’t have that income to pay into the plan,” she said.

Finally, Professor Porter said, March is the high season for bankruptcy filings because many people in financial distress get a tax refund check that they can use to pay the $1,500 to $3,500 that a bankruptcy lawyer charges.

“People use their tax refunds to pay their attorney fees,” she said.

Doug Vaughan revealed thousands of dollars worth of cars and jewelry that were previously unknown Thursday at his personal bankruptcy hearing.

The disgraced realtor who investigators said is the mastermind of a massive “Ponzi scheme”, had to take tough questions from the people he’s accused of ripping off, but his answers were almost always the same.

Most of the investors coming out of the federal courthouse in downtown Albuquerque, Thursday afternoon, were not happy.

“He’s answering one or two insignificant questions but basically he’s invoking the fifth”, Investor Phil Dougan said.

Vaughan did that on the advice of his lawyers, whom he turned to repeatedly as some of his 600 investors and their lawyers grilled him.

“It doesn’t make it any better when you come in with your own attitude, but I think he is getting bad advice now, I don’t think he would do this if he was on his own I think he would answer it,” Dougan said.

Attorney for several investors, William Davis, said the investors felt betrayed.

“You trusted him and made investments with him and now it turns out that the friend has been misusing your money, at least that’s the allegation,” Davis said.

When the real estate mogul did answer questions, he had some surprises for the court.

“He identified a number of assets today. $100,000 worth of jewelry, a corvette, and there are other assets that we are going to try and recover for the creditors.” Davis said.

Vaughan said he also has a Harley and a Ferrari, which he’s looking to sell. He said he will keep his Jaguar, since it’s his only transportation.

He told the crowd that he hasn’t made payments on his massive, multimillion dollar home in the heights since filing for bankruptcy in February.

Vaughan says he has only taken in $3,000 as income since the filing, but did reveal that he has spent some time recently traveling to Las Vegas.

“He said the tickets were a gift from a friend he had conveyed some assets to he had said,” Davis said.

That friend that Vaughan says gave him the $1,500 trip as a Christmas gift, is the same friend Vaughan gave a car and home to.

It was also reveled in court Thursday that Vaughan lost $31,000 gambling in Vegas last year.

Vaughan’s real estate company also filed for Chapter 11 bankruptcy protection and had a separate bankruptcy hearing Thursday morning. Vaughan did not show up for that. An executive from the company did and he answered questions.

The Supreme Court on Tuesday made it easier for people who say they cannot repay their student loans to receive bankruptcy protection. But the case arose in an unusual way, and the ruling is unlikely to have a broad impact.

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Times Topics: U.S. Supreme Court | Student LoansThe case involved Francisco J. Espinosa, an airline ramp agent who took out four student loans in 1988 and 1989 for a total of $13,250 to attend a trade school in Arizona. Four years later, he filed for protection under the bankruptcy laws, proposing to repay the principal over five years without interest.

Neither Mr. Espinosa nor the judge who approved his proposal followed the procedures contemplated by the law. Chapter 13 of the Bankruptcy Code allows student loans like Mr. Espinosa’s to be discharged only if a bankruptcy judge finds that repayment would impose an “undue hardship.” But the judge in his case made no such finding.

Nor did Mr. Espinosa notify his lender in the way required by law, which calls for the service of a summons and complaint like those in a civil lawsuit.

But the lender did receive notices from the court about Mr. Espinosa’s proposal and the court’s approval of it. Although the loan was the only debt Mr. Espinosa listed in his proposal, the lender did not object or appeal.

Mr. Espinosa finished paying the principal back in 1997, and the bankruptcy court then discharged the interest he would have owed. Years later, the lender tried to re-open the case.

The Supreme Court’s decision on Tuesday rejected positions advanced by the federal government, more than 30 states and the student loan industry. The lender in Mr. Espinosa’s case, United Student Aid Funds, warned in a brief that a decision in his favor would “open the floodgates” to allowing others to avoid paying their debts, including “taxes, domestic support obligations, drunk driving personal injury and death liabilities, and criminal fines and restitution.”

But the court, in a unanimous decision by Justice Clarence Thomas, resolved the case on a narrow ground. It was undisputed, Justice Thomas wrote, that there had been legal misfires along the way in Mr. Espinosa’s case. The issue before the court, he said, was whether the lender had waited too long to object to them.

“The bankruptcy court’s failure to find undue hardship before confirming Espinosa’s plan was a legal error,” Justice Thomas wrote in the case, United Student Aid Funds v. Espinosa, No. 08-1134. “But the order remains enforceable and binding on United because United had notice of the error and failed to object or timely appeal.”

The rules allowing cases to be re-opened in extraordinary circumstances did not apply here, Justice Thomas wrote, as they do not “provide a license for litigants to sleep on their rights.”

Many people find themselves buried in debt; mortgages, credit cards and medical bills that appear to be endless. There are debt solutions to stop the landslide. Common reasons for spiraling debt include job loss, unforeseen emergencies, divorce and overspending. There are three primary options for an individual facing financial hardship and bad debt: debt management, debt settlement and bankruptcy.

Getting back on the right track can appear to be almost impossible, and individuals need to be aware that there are many scams and unethical advertisements for services that actually worsen their situation. To solve your debt problems, you need to understand your options and then seek out legitimate providers of debt settlement or bankruptcy services. In North Carolina, it is illegal for anyone other than a North Carolina licensed attorney or a non-profit organization to offer debt settlement services.

Harassing collection calls and billing notices can create high levels of fear and anxiety, and individuals will impulsively sign on with a pseudo-debt service without any research. High fees and fine print, which states that the fees must be accumulated first before paying $1.00 towards your debt, can make a bad financial situation even worse. Be wary of these illegal service providers- do your homework, ask for references, check that they are licensed to practice law in the State of North Carolina.

Currently, the North Carolina Attorney General is actively prosecuting fraudulent debt service providers and individuals illegally engaged in debt settlement practice.

About the Author: Joseph M. Bochicchio, PLLC. is a licensed Charlotte, NC Bankruptcy Lawyer with nearly 2 decades of experience in finance and law. His Charlotte Debt Settlement Law Firm is committed to providing legal and ethical guidance for North Carolinians facing financial hardship.