Bankruptcy Questions Answered

Posted in Finance | No Comments »

Is Bankruptcy on the Cards?

Posted in Howto | 5 Comments »

FTC Hails Victory Over Abusive Debt Collection Practices

The Federal Trade Commission announced this month that it has settled charges with three debt collectors accused of various types of abusive debt collection. The settlement, which reportedly includes the largest civil penalty ever levied on a debt collection agency, comes in conjunction with future restrictions for the defendants.

Fair Debt Collection Practices Violated

According to the case, the defendants violated terms of the Fair Debt Collection Practices Act, which outlines acceptable behavior for agencies responsible for collecting on debts. These guidelines prohibit a variety of actions, including:

• Contacting a debtor before 8:00 am or after 9:00 pm local time
• Contacting a debtor after receiving a written request not to do so
• Contacting a debtor at her place of work after being told not to
• Calling the debtor with the intent to annoy, harass or abuse
• Contacting the debtor directly when he is known to have an attorney
• Misrepresenting a debt or using deceit to collect money
• Threatening arrest or legal action when neither is an option
• Seeking more than a person legally owes
• Publishing a person’s name on a “bad debt” list
• Reporting information incorrectly to a credit reporting bureau
• Contacting a third party about a consumer’s debt
• Contacting a debtor by embarrassing media (like a post card)

In this case, the men were charged with threatening arrest and legal action when none was warranted as well as using harassment and abusive contact to collect debts. The men in question were senior managers at debt collection agencies and as such either participated in the illegal actions or were responsible for such actions among their employees.

The Settlements

One of the three defendants, Keith Dickstein, owner of Academy Collection Service, Inc., apparently paid a $2.25 million settlement in 2008. The two defendants who settled early this year, Edward S. Bastian and Edward Hurt, were saddled with fines of $375,000 and $300,000 respectively for abusive collection practices.

The fines were suspended after each man paid $7,500, based on their ability to pay; payment of the remainder will depend upon their future compliance with debt collection laws.

Your Consumer Rights

Federal law outlines many protections for consumers. Make sure you have an idea of what consumer rights you have so you can take legal action, if necessary, should they be violated.

Additional Resources

Fair Debt Collection Practices Act (PDF)

Posted in Creditors, FTC, Financial Literacy, debt collection | Comments Off

Tuition May be Tax Deductible This Year

With tax season coming up, everyone is looking for new ways to save, either to get a larger refund or to afford paying taxes owed. Thanks to a new ruling, some graduate students may find extra breathing room come tax time.

The Wall Street Journal reports that, thanks to the persistence of Lori Singleton-Clarke, a Maryland woman, students pursuing a Masters in Business Administration degrees (MBAs) may now find their tuition is tax deductible.

Several aspects of the case could be important to MBA students and others looking to save money this tax season.

• Know the code. The Internal Revenue Service’s tax code is complex and detailed, so knowing where to look for potential deductions can help. Tax deductions for education can be found in IRS Publication 970 (see below).
• Ask for help. If you aren’t tax-savvy yourself, you may want to enlist the help of a professional tax-preparer or commit to learning how to work at-home tax software like TurboTax.
• Stay organized. The WSJ reports that Singleton-Clarke’s case was successful in part because she kept all her paperwork organized and was able to provide adequate documentation for her claim.
• Be persistent. Singleton-Clarke’s case was not always easy, sources note. But she stuck it out and ended up saving herself some serious money – and potentially paving the way for other graduate students to do the same.

Does Your Education Qualify?

Educational expenses eligible to be considered tax-deductible must meet certain specific criteria, including the following.

• Income limits for single and married individuals affect how much tuition can be deducted.
• Parents may deduct certain expenses for children whose education they fund, but only if the parents claim the children as dependents.
• Certain institutional fees (like health care and books) are not considered part of tuition and so are not eligible for the tax deduction.
• Even a single college- or graduate-level class could qualify you for the tax deduction.

A more detailed review of these regulations is available here, or you can browse this year’s version of Publication 970 (below, as a PDF).

Other Tax Concerns

Whether or not you pursued further education this year, stay alert during tax season. Certain predatory loans in disguise tend to crop around this time of year, including RALs (refund anticipation loans) and RACs (refund anticipation checks).

If you do wind up owing taxes that you can't afford to pay, you can file an extension and possibly work with the IRS to pay your taxes over time. Paying taxes owed is important since they typically cannot be discharged in bankruptcy.

Remember to keep your sensitive information (like bank account numbers and Social Security Number) private!

Additional Resources

IRS Publication 970 (2010)

Posted in Legal Info, Taxes, students, tax deductions, tuition | Comments Off

Too Strange For Springer, Too Weird For Oprah: Debtors Try To Fix A Messed Up Transaction

Bankruptcy debtors do some strange things. A couple came to see me about a debt they forgot to put in their bankruptcy petition. The husband filed Chapter 7 bankruptcy in 2007 by himself without an attorney. The case is closed; discharge entered. Its in the archives. A year earlier, the husband had tried to sell his motor home to a third party. The husband could not deliver title to the motor home because there was a lien on the home. The agreed sales price was $40,000 but the lien was $60,000. The buyers must have wanted the motor home really badly because they gave the husband the $40,000 as long as he promised to pay off the lien as soon as he could.

The husband gave the entire $40,000 to the bank with the lien. He never could clear or pay off the lien with other money. In the meantime, the bank kept deducting the monthly lien payments from the $40,000 until, a few years later, there was no more money. The husband never spent any of the money on anything but the loan payments.

You can probably guess what happens next. When there was no more money left in the fund to make payments the bank repossessed the motor home from our surprised buyers. The buyers paid the agreed price and thought everything was taken care of. Now, the husband wants me to add the aggrieved buyers to his bankruptcy petition even though the case was closed. There are a couple interesting legal issues.

The first issue is whether the husband can add a creditor to his closed bankruptcy. The general rule is that debtors can reopen a case to add creditors so long as the creditor’s claim existed prior to the bankruptcy filing. There is an exception when the bankruptcy estate had non-exempt assets which were made distributed to the creditors of record because, in that event, there would be no way to reallocate the available assets. Fortunately, in this case, there were no assets in the estate available for distribution.

A second issue is whether the buyer had a claim, and whether the buyer was a creditor, when the husband filed bankruptcy. Or, did the buyer’s claim first accrue when the bank repossessed the motor home after the bankruptcy was filed and closed. The bankruptcy Code defines "claim" very broadly. When the buyers took possession of the motor home subject to the husbands promise to pay off the lien I think the husband incurred a debt and obligation to the buyers who in turn had a claim against future performance. I think there was a claim, broadly defined, when the petition was filed and that the husband can reopen the case. I expect that the buyer will contest the motion to reopen. It will be interesting to see what the court says.

Posted in Chapter 7 | Comments Off

Posted in Debt Consolidation | No Comments »

Elliss Bankruptcy a Riches to Rags Story

Financial lessons are often best learned in retrospect, which can make it difficult to tell when you're going down the wrong financial path. Luckily, we can always learn from the mistakes of others.

The Detroit News reports that former Detroit Lions lineman Luther Elliss was forced to file for bankruptcy thanks to a series of bad investments and debts.

While the story is frustrating to hear—Elliss reportedly earned more than $11 million in a five-year period—it is surprisingly common. So how do the once fantastically rich manage to end up in bankruptcy court? Often enough, simply by making some bad decisions.

Elliss, it seems, got sucked into the real estate bubble and ended up with two homes worth less than what he owed on them. Last summer, he and his wife reportedly filed for Chapter 7 bankruptcy to receive a discharge from their debts.

Taking the Long View on Your Finances

While most of us will never command the kind of salaries professional athletes can expect, we would do well to look at how quickly a fortune can disappear.

• Nothing is guaranteed. If the current employment situation has taught us anything, it’s that no job is permanent, but many of us act as if our life circumstances are not subject to change. When making major purchases (homes, cars, schools, etc.) remember that a stretch now could easily become a financial impossibility if your salary changes.
• Listen to the right people. In the Tribune article, Elliss notes that he didn’t listen to suggestions from his wife or adviser—and that it cost him in the long run. Unfortunately, nobody is guaranteed to have your best interests at heart except you, so be very wary when people ask for financial commitments and promise unrealistic returns. On the other hand, know who honestly cares about your well-being and take their advice to heart.
• It's a marathon, not a sprint. Remember that you're in this thing called life for the long haul. There will always be great investments around, so make sure you learn all you can about one—and feel totally comfortable committing to it—before sinking in your hard-earned cash. It's true that you can't win if you don't play, but you also cannot lose.

There's an old bit of financial wisdom that summarizes pretty much every other guideline for handling money: spend less than you make and save the rest. It's easy to get drawn into upgrades and status symbols and all the rest, but at the end of the day (or the lucrative career as a professional athlete), financial stability is often worth the sacrifices of getting there.

Posted in Bankruptcy News and Events, Financial Literacy | Comments Off

Hiring Has Not Picked Up: A Look at Unemployment Claims Stats

The number of newly laid-off workers seeking unemployment benefits unexpectedly rose last week, further evidence that the job market recovers at a very slow and bumpy pace. California, Texas, Florida, Pennsylvania, and even Georgia have experienced the highest recent increases in unemployment claims.

Wall Street economists had expected a small drop, but according to the Labor Department, initial claims for unemployment insurance actually rose by 36,000. An analyst from the Labor Department said that much of the increase is due to the administrative backlogs left over from the holiday season in the state agencies that process the claims.

Regardless of the ups and downs shown week to week, the economy is not consistently generating net increases in jobs. After adding only 4,000 jobs in November, which was the first increase in nearly two years, in December employers cut 85,000 jobs. Many economists say the four-week average of claims will need to fall to below 425,000 to signal that the economy is close to generating net job gains. Unfortunately, the four-week average rose for the first time since August to 448,250.

The number of people continuing to claim regular benefits dropped slightly to just under 4.6 million. However, this data does not include millions of people who have used up the regular 26 weeks of benefits customarily provided by states and are now receiving extended benefits for up to 73 additional weeks, which is paid for by the federal government. Over 5.9 million are receiving extended benefits in the week ended Jan. 2, which is an increase of more than 600,000 from the previous week.

These numbers demonstrate that even as layoffs are declining, hiring has not picked up, leaving people out of work for extended periods of time.

California has had the largest increase in claims, with 16,160. Texas, Florida, Pennsylvania and Georgia have the next largest increase. Oregon has had the biggest drop in claims, of 5,784, followed by Iowa, Kentucky, Michigan and Massachusetts.

There are positive forecasts out there as well. Because unemployment claims have been on a steady drop since last fall as companies cut fewer jobs, some economists hope that hiring will soon increase. Another report suggests that economic growth could pick up this spring.

Other economists, however, have been worrying that growth in the economy will stagnate this year as government support programs wind down and unemployment remains high.

Posted in 5 9, Blog, Economists, Georgia unemployment claims, average, benefits, claim, claims wall, dropped, extended, four week, increases, laid off, newly, pick, receiving, regular, rose, seeking, slightly, spring other, street, the, unemployment, unexpectedly, workers | Comments Off

Georgia Personal Bankruptcy Filings Continue to Increase

According to a recent article regarding Georgia bankruptcy published in the Atlanta Journal Constitution, it is nothing new that Georgia has one of the highest bankruptcy rates in the nation. What is new, suggests the AJC article, is who is filing: large numbers of people who have not previously had problems with financial instability.

With unemployment exceeding 10 percent, a real estate market in shambles, and many laws in place which support creditors, Georgia has had one of the highest bankruptcy rates for years. In 2009, and even here in early 2010, the numbers of people in Georgia filing personal bankruptcy continue to increase. These increasing numbers are partially the result of the large numbers of filers who are experiencing financial instability for the first time.

Richard Thomson, a partner at the Atlanta-based bankruptcy law firm Clark & Washington, said his firm is taking on an increasing number of higher-income professionals as clients. These higher-income filers simply can’t pay for all of their assets and possessions – boats, expensive cars, etc. As a result, they are filing bankruptcy as a means to start over, and their possessions are often given up as part of the process. According to Thomson, “They’re just saying ‘Take it. It’s not worth the effort anymore. I can’t keep up with it.”

Susan Blum and I are seeing the same trends here at Ginsberg Law Offices.   While our firm has regularly handled cases for formerly high earners and individuals with substantial assets, we are seeing more and more people who start our meetings by saying "I never in a million years thought I would ever end up talking to a bankruptcy lawyer…."   In many cases, clients who had previously enjoyed a comfortable lifestyle wait until disaster is about to strike before calling our office, perhaps in the expectation that their situations will improve.  And more and more of these clients are turning to a Chapter 7 liquidation rather than a Chapter 13 reorganization.

More Chapter 7 Cases Being Filed

According to the National Bankruptcy Research Center, over half of Georgians filing between January and November 2009 filed Chapter 7 Bankruptcy. In a Chapter 7, most debts are wiped out, but so are assets that aren’t protected by exemptions – second cars or vacation homes, for example. 47 percent filed Chapter 13 Bankruptcy, which allows consumers to hold on to a house and car but requires that they repay a portion of their debts generally over a five year period. A Chapter 13 is more or less a reorganization of debt.

These percentages are new for Georgia, which traditionally has been dominated by Chapter 13 filings, as debtors were most concerned about holding onto a house and accumulated equity. Currently, many homeowners have little equity or owe more than their houses are worth, which may be one reason for the spike in Chapter 7 filings.

According to Consumer Credit Counseling Service of Greater Atlanta, one in five consumers receiving recent pre-bankruptcy counseling said avoiding foreclosure was the primary reason for seeking bankruptcy protection. Georgia’s foreclosure process is the fastest in the nation, as it occurs without court or government supervision and takes only a week. A bankruptcy filing is the only realistic option for most Georgians seeking to delay a public auction of their homes.

I (Jonathan) have been representing individuals in Chapter 7 and Chapter 13 cases for over 20 years and I can only remember two or three times when the demand for our services was so high.  The Congressional Budget Office says that the recession is over but I am not seeing any indication that this is true.

Posted in 10, Amp, Assets, Bankruptcy, Chapter 7 Bankruptcy Filings in Georgia, Filers, Foreclosure, General consumer bankruptcy info, Georgia Bankruptcy, Georgia bankruptcy rates, Law, Possessions, and, atlanta based, boats, can’t, clark, clients, exceeding, expect, experiencing, financial, firm, georgia bankruptcy filings, georgia’s, higher income, homes jack, instability, instability with, numbers, pay, percent, problems, process, protection, recent bankruptcy trends in Georgia, seeking, simply, the, unemployment, williams, – | Comments Off

Consumer Price Data Paints Bleary Picture of 2009

The U.S. Labor Department released its monthly Consumer Price Index data, and the numbers confirm what most Americans can already sense: the recession continues to exact its toll. Here's a look at the numbers for the whole of 2009.

Overall: Consumer Prices Up 2.7 Percent

During 2009, consumer prices rose a collective 2.7 percent, a jump that, according to the Labor Department, was led largely by increased energy prices. In other areas, prices actually fell over the last 12 months:

• Food: In 2009, food prices dropped by 0.5 percent, with food consumed at home dropping 2.4 percent and food away from home actually rising 1.9 percent.
• Energy: Here’s where the biggest jump occurs. Energy costs increased 18.2 percent, with a 53.5 percent increase in the cost of gasoline and a 6.5 increase in the price of fuel oil.
• Everything Else: The umbrella category that includes all consumer goods but the two above saw a 1.8 percent rise during 2009, with increases in everything from clothing to cars to medical services.

So how does the overall 2.7 percent increase in prices compare to recent years? Not too well, it seems. In 2008, prices rose a scant 0.1 percent – though both last year’s change and 2008’s were heavily influenced by fluctuating energy prices.

The core inflation rate, which adjusts price rises with changes in income levels, rose 1.8 percent in 2009, the same figure as that for 2008, and a relatively small number.

Weekly Wages Fall

In addition to prices inching up, Americans saw their weekly wages dip by 1.6 percent in 2009, meaning their buying power has shrunk considerably since a year ago. Last year’s drop was the largest since 1990.

While the picture overall is still pretty bleak, there’s a spot of light in all the clouds: commentators note that because inflation has remained modest, the Federal Reserve will likely keep key interest rates low to stimulate borrowing and help the economy pick up vigor.

The drop is purchasing power also points to the 1.44 million consumer bankruptcy cases filed in 2009.

Additional Resources

Department of Labor January 2010 Consumer Price Index Report (PDF)

Posted in Bankruptcy and the Economy, consumer price index, economic data, purchasing power | Comments Off