Bankruptcy Questions Answered

Bankruptcy Filings Hit 1.44 Million in 2009

Bankruptcy filings in 2009 reach 1.44 million as consumers and businesses dealt with unemployment, foreclosure and tight credit.

A total 1,435,425 bankruptcy petitions were filed in the 50 states and Washington D.C. That figure increases to 1,446,967 when Puerto Rico, Guam and the Virgin Islands are taken into count.

Nationwide, the bankruptcy rate was up 32% in 2009 compared to 2008 and reached the highest level since the 2005 bankruptcy law change.

Arizona saw the largest increase in bankruptcy filings in the U.S., with 77% more filings in 2009 than 2008. Nevada and Wyoming followed, each with a 59% increase year-over-year. Nevada had the most filings per capita.

Bankruptcies for the year peaked in October, when 133,365 petitions were filed—the highest amount since October, 2005, when consumers rushed to file before the BAPCPA law went into effect. Filings slowed in November and December, but remained above the 2008 monthly totals.

Posted in 2009, filings, statistics, year in bankruptcy | Comments Off

Is Texting ‘HAITI’ to 90999 a Scam?

Update: 1/20/2010. As aftershocks continue to do damage in Haiti, help is still desperately needed. There's still some confusion on how to donate. Here's what you can do:

• Send a text with the word Haiti in the message. The recipient should be the five-digit number 90999. You should receive a confirmation response. Reply Yes. $10 will be added to your phone bill
• Log on to RedCross.org to make a donation online via credit or debit card (minimum $10) or find a Red Cross location near you.

Watch out for scams that ask you to send your credit card information over text message as well as web sites that prompt you to download software.

In the wake of the traumatic 7.0 earthquake that struck Haiti Tuesday evening, an outpouring of support has been heard across cyberspace. And thanks to developments in technology, donating to important and topical causes is easier than ever. But could a text of support really find you victimized by a scam?

Right now, there are two legitimate ways to donate to Haitian support and relief organizations:

• Text 'HAITI' to 90999: This service was set up by the U.S. State Department. Texting "HAITI" to the number will donate $10 to the International Red Cross, and will appear as a charge on your wireless bill.
• Text 'YELE' to 501501: This will donate $5 to Yele Haiti, a non-profit organization founded by singer and Haiti native Wyclef Jean. A donation to Yele will also appear as a charge on your cell bill. You can also donate larger amounts at Yele's website.

So far, these are the only two legitimate text-to-donate services providing support to Haiti relief, according to consumer watchdog groups. But others may be popping up to take advantage of Americans' generosity.

The Better Business Bureau and the Federal Trade Commission have issued statements warning possible donors to watch out for scams, which tend to pop up after a catastrophe.

The five-to-six digit numbers known as short-codes make it difficult to tell who is on the receiving end of a text. A legitimate charity will not ask you to send your personal information or credit card number through text message.

The devastating earthquake that struck Haiti, the western hemisphere's most impoverished nation, Tuesday hit 10 miles southwest of Port-au-Prince, Haiti's capital and largest city. Haiti's prime minister has issued a statement that hundreds of thousands may have perished in the quake.

The Bankruptcy Blog reports often on consumer affairs and identity theft issues for all consumers, in addition to bankruptcy information.

Posted in 90999, Identity Theft, Uncategorized, haiti, scams | Comments Off

Tenants By Entireties Exemption May Be Lost Because Of Declining House Value And Second Mortgage

I received an email from a man who was considering Chapter 7 bankruptcy to discharge a substantial amount of credit card debt. The man was married. He and his wife owned joint bank accounts with significant balances. His wife had no credit card debt. The spouses were jointly liable on a first and second mortgages on their primary residence. The house was going into foreclosure. The house value may have declined to an amount which is lower than even the first mortgage balance. Question: can the wife file Chapter 7 bankruptcy and protect their joint bank accounts.

Joint bank accounts are presumed to owned tenants by entireties. All tenants by entireties property is exempt in Chapter 7 bankruptcy of one spouse if the debtor spouse and non-debtor spouse have no joint unsecured debt. Usually, the issue is whether the spouses have joint unsecured credit cards or tax liability. In this case, the non-debtor spouse has no unsecured debt either individually or jointly with the debtor. But, there is a problem.

The couple borrowed two separate mortgage loans. Mortgages are secured debts. When they made the mortgage loans the couple had two joint secured debts. The joint secured debts do not jeopardize their entireties bank accounts. The decline in their home value has caused the second mortgage to be unsecured by the house. The legal question is whether the second mortgage is a joint secured debt because it was secured when created, or whether it is now a joint unsecured debt because its security in the house has been destroyed by the declining market.

I think the second mortgage is a joint unsecured debt. The debts should be evaluated at the time the bankruptcy is filed. The second mortgage debt may cause the joint bank account to lose its entireties exemption. As a practical matter, it the debtors have evidence that the house value is even a little bit greater than the first mortgage balance they may be able to protect their joint accounts if the husband files bankruptcy because a partially secured mortgage should be classified as a joint secured debt rather than a joint unsecured debt.

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Medical Records in Bankruptcy Court

A recent report from the Milwaukee Journal-Sentinel Online describes a potential complication that might arise during a bankruptcy filing. Here’s a look at what happened and what it might mean for other filers.

Your Records in Chapter 13 Bankruptcy

When you file for Chapter 13 bankruptcy, you’re agreeing to the following:

• Committing to a repayment plan that lasts three to five years and satisfies part or all of your secured debt
• Completing two courses (the pre-filing credit counseling briefing and the pre-discharge debtor education course) designed to help you improve your relationship with money and credit
• Making public your records of debts and payments

It’s the last item on this list that has proved problematic. In the case of some Wisconsin bankruptcy petitioners, it seems, debt and payment information in medical bills that became part of the public record included details about doctor’s visits, procedures and medicines they used.

Now, according to sources, several Wisconsin residents have filed class-action lawsuits in state and federal court against Aurora Health Care Inc., the company reportedly responsible for submitting the detailed medical information.

Beyond Embarrassment

Bankruptcy filers who see their medical history become part of public record may have reason for embarrassment, but, according to reports, that isn’t the only reason this lawsuit has gotten attention.

Certain information (for instance, about treatment for past injuries) could prevent a filer from getting hired at a job in the future or pave the way to medical identity theft. And privacy laws often protect the disclosure of such information.

Should You Be Worried?

The good news here is that, while medical records included as part of a bankruptcy filing may have the potential to hurt your career or cause you embarrassment, the odds of anyone besides your lawyer, your bankruptcy trustee and the judge on your case seeing them is slim.

After all, such information appears as part of the loads of paperwork involved with filing a bankruptcy petition – sifting through to find such details would be a daunting task.

Still, this story highlights one more reason why enlisting the help of an attorney when you decide to file for bankruptcy protection can be a crucial element of making sure you receive the protection and fresh financial start you’re seeking.

Additional Resources

2009 Medical Identity Theft Final Report (PDF)

Posted in Bankruptcy Courts, Chapter 13 Bankruptcy, class action, medical bankruptcy, milwaukee | Comments Off

When Others’ Bankruptcies Affect You

Filling for bankruptcy is a major financial decision that can impact all aspects of your finances. But, because of the way bankruptcy protection works, you can also be affected when other people file for bankruptcy, too. Here's a look at how and what you can do about it.

When a Business Files for Bankruptcy

Companies of all sizes file bankruptcy, and that move can affect employees, consumers and the community at large.

A recent article from mlive.com recounts the story of former Delphi employees who were receiving workers' compensation benefits. Since the firm's bankruptcy filing in 2005, though, the group responsible for those payments is in question, meaning that many intended recipients aren't getting their checks.

• Contact a lawyer. If you aren’t sure about your rights or the benefits you’re entitled to, it may be a good idea to have a bankruptcy attorney on your side to ensure that someone is looking out for your best interest.
• Know when you still pay. If you owe money to a company (say, for purchases on an installment plan or a store credit card) that has filed bankruptcy, you may still be responsible for that debt.
• Know when you don't pay. If you bought something like an extended warranty or service plan from a company that has declared bankruptcy, you may be entitled to a refund for part or all of that purchase. It often depends on which type of bankruptcy protection the company enters.

When a Friend Files for Bankruptcy

If a friend or family member files for bankruptcy, you could be affected in a variety of ways, depending on your financial relationship with that person.

• Cosigners: If you co-signed a loan for a person who files Chapter 7 bankruptcy, you may still be responsible for making payments on that loan. In a Chapter 13 bankruptcy, cosigners are often protected. However, it's important to recognize the financial implications of consigning a loan.
• Former spouses: If an ex files for bankruptcy protection, you may be responsible for loans that the two of you initiated together; however, your spouse may still be responsible for child support and maintenance (alimony) payments, since these are typically not dischargeable in bankruptcy court.
• Current spouse: If either you or your spouse decides to file for bankruptcy, it's important to decide whether you'll do so jointly or individually. A local attorney can help you make the final decision, which is usually influenced by factors such as the amount of community property you have and how your debt is allocated.

Additional Resources

Community Debt and Bankruptcy Issues (PDF)

2008 Annual Consumer Bankruptcy Demographics Report (PDF)

Posted in Bankruptcy Information, Setting the Record Straight about Bankruptcy, cosigners, workers compensation | Comments Off

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Free Tool to Calculate Your Median Income for Bankruptcy Purposes

As you probably know, your eligibility for bankruptcy protection is determined in part by your household income.  The Bankruptcy Code requires us to calculate your median income by looking at gross income earned by you, your spouse and any other working member of your household during the 6 months preceding the current month.  We add up all the income and divide by 6 to arrive at a number.  We then compare than number to a median income table provided to us by the Census Bureau and the United States Trustee's office.  This calculation is called the "median income test."

If you are over median, then a presumption of abuse arises as to your eligibility for Chapter 7 and we must proceed to perform additional calculations (these additional calculations are called the "means test.").

The addition of the median income and the means test to the consumer bankruptcy process has made bankruptcy a lot more complicated both for lawyers and for individuals.  I know several lawyers here in the Atlanta area who used to handle bankruptcy cases, but no longer do so because of the complexity of the median income/means test process.  I personally think it is absurd that bankruptcy has become so complicated that a reasonably intelligent person would have almost no chance at figuring out the calculations.  If there was ever a reason to avoid non-lawyer "petition perparers" this would be it.

Click on the link to see the current median income table for Georgia.

In any case, I did find an online tool that will allow you to calculate your median income.   If you are so inclined, you can download this tool as an iPhone app!  While obviously not a substitute for legal advice, this tool, created by a Massachusetts bankruptcy law firm, may help you get a sense of where you stand in terms of Chapter 7 eligibility.

Posted in General consumer bankruptcy info, Kelsey & Trask, Means Test, Median income test issues, online means test calculator | Comments Off

Taxes And Credit Cards

In Florida, we pay our property taxes at the end of the year. On April 15, our federal income taxes for the previous year are due. So, within a 4 to 6 month period we may be hit with property and income taxes. In the last few years, there has been a push by the credit card companies, like Visa, American Express, Mastercard and Discover to allow you to pay your taxes with a credit card.

Don't be fooled they are not doing it because they like you. They are doing it to protect themselves. When the Bankruptcy Laws were changed in 2005, Congress added to the list on non-dischargeable debts. A non-dischargeable debt survives the bankruptcy and is still and owing after the bankruptcy discharge arrives in your mailbox. So, what did our wonderful politicians stick us with this time. Well, Congress expanded credit cards protection. While a separate statute provided the credit card companies protection when people pay income taxes and then file bankruptcy, Congress extended this protection to state and local taxes that are paid with credit cards.

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Taxes And Credit Cards

In Florida, we pay our property taxes at the end of the year. On April 15, our federal income taxes for the previous year are due. So, within a 4 to 6 month period we may be hit with property and income taxes. In the last few years, there has been a push by the credit card companies, like Visa, American Express, Mastercard and Discover to allow you to pay your taxes with a credit card.

Don't be fooled they are not doing it because they like you. They are doing it to protect themselves. When the Bankruptcy Laws were changed in 2005, Congress added to the list on non-dischargeable debts. A non-dischargeable debt survives the bankruptcy and is still and owing after the bankruptcy discharge arrives in your mailbox. So, what did our wonderful politicians stick us with this time. Well, Congress expanded credit cards protection. While a separate statute provided the credit card companies protection when people pay income taxes and then file bankruptcy, Congress extended this protection to state and local taxes that are paid with credit cards.

If you are a little behind on your savings (and who isn't), and you use a credit card to pay your state or local taxes, that debt may be excepted from the discharge if you file for bankruptcy protection. I say maybe for a reason. If you think about this for a moment, you will have given it much more thought than our representatives in Washington, and it is easy to see some potential problem spots for this legislation.

First: What if you take a cash advance on a credit card, and pay your taxes with cash. Is that debt non-dischargeable? Second: What if you have multiple credit cards, and you decide to cash advance one or two and make some payments and then use some of the money to pay your taxes? Is that non-dischargeable? Third: What if you pay your property taxes on a credit card and then continue to make payments on the card without incurring new debt? What part of the balance will be non-dischargeable? Good Question. How would you like to be the debtor or creditor at this trial?

The bottom line is this. When a credit card company is offering a convenience to the consumer, hold onto your wallet, there is usually an something in it for the credit card companies.

This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Dellutri also sits on the Board of American Board of Certification. Mr. Dellutri is also one of the founders of the Bankruptcy Law Network, Debt Law Network, Credit Law Network, and Mortgage Law Network. Mr. Dellutri also writes for the firm's personal injury litigation blog. Mr. Dellutri also writes for the firm's other blogs: www.faircreditreportingactblog.com and www.fairdebtcollectionpracticesactblog.combankruptcy blog.

Posted in Bankruptcy News, Consumer Protection, Credit Card Industry, Credit Cards, Fair Debt Collection, Sign of the Times | Comments Off

Are Insurance Commission Residual Payments Exempt In Bankruptcy?

I was at bankruptcy court yesterday for some of my clients' creditor/trustee meetings. While waiting for my clients cases to be called I listened to a interesting case involving an insurance salesman. The insurance salesman (debtor) told the trustee that his commissions from current sales was declining, but that he had been living on residual commissions for prior year’s sales. The trustee told him that the residual income was not exempt and that the money must be turned over to the trustee. The debtor’s attorney disagreed because, he said, that the debtor was head of household and that commissions from the past sales represent the exempt earnings under the Florida statute that protects head of household income.

In my opinion this trustee is correct and that the debtor’s residual commissions are not exempt head of household commissions. The Florida statute exempts all earnings of a head of household including wages and commissions. Current commissions deposited in the debtor’s bank account within the last six months are exempt in bankruptcy. Bankruptcy courts have protected deferred compensation in some cases. Residual payments are different. The debtor’s right to insurance residuals is a contract right and is a form of account receivable. Residuals are due, not when the agent sells the policy because of current efforts but are due when the insured pays annual insurance premiums to maintain an existing policy. I have not researched the issue, but I suspect that a trustee can reach residual income due when an insured pays continuing insurance premiums.

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