U.S. Bankruptcy Court Judge Alan Jaroslovsky has a long history of ably handling major local cases such as the collapse of Health Plan of the Redwoods early this decade and others.

But the Chapter 11 reorganization filing by North Bay real estate investor and businessman Clem Carinalli presents a particular challenge because of the potentially far-reaching impact of the case on the community at-large.

In fact, this case is as much about Santa Rosa as it is about Mr. Carinalli.

Mr. Carinalli – himself a local product – financially supported a broad range of community groups including aspiring young farmers, agencies serving those in need and local schools.  In turn, the scores of other community members and financial institutions who invested and benefited financially with Mr. Carinalli themselves generously supported the community as well.

Until the last few years, real estate in Sonoma County and the North Bay performed fabulously as an investment for nearly five decades, with only minor periods of declines. The current downturn is far worse than any in memory and has seriously damaged a primary source of local wealth in ways no one imagined possible. In case after case, public officials are compounding the impact of the recession by delaying and rejecting solid projects that would create jobs.

Mr. Carinalli spent months trying to stay out of bankruptcy court, negotiating with creditors on an orderly approach to paying them back over the next several years.

Now that he has been forced into court with $165 million in debt, the most judicious approach would be to move cautiously with a plan to liquidate properties and repay creditors over time so they can recoup, say, perhaps, 70 cents on the dollar of their investments. Actually, given the fallout for investors from Wall Street to Main Street, that is, unfortunately, an all-too-common figure.

The worst that could happen for him, his investors and the larger community would be a forced fire-sale of properties at precisely the weakest point in the real estate market.

If that happens, no one benefits.