Archive for March, 2010
Wednesday, March 24th, 2010
Whether or not you qualify to file Chapter 7 depends on your income level relative to applicable median income where you live. The term "income" has special meaning in bankruptcy law, and many people reach incorrect conclusions about their bankruptcy eligibility because they do not understand how bankruptcy defines their "income."
A couple made an appointment earlier this week to discuss asset protection as an alternative to bankruptcy. The couple had over $150,000 of unsecured debts. The wife was unemployed and the husband worked in sales. They told me at the beginning of their story that they were ineligible to file bankruptcy because the husband made too much money. They wanted to know what creditors would do to collect money and if they could protect their salary and their few remaining assets.
After listening to their description of their situation I pressed them to explain to me in more detail why they were ineligible to file Chapter 7 bankruptcy. They explained that the husband’s 2009 income was $100,000 and that they knew this income level was too high to qualify their three person household for Chapter 7 bankruptcy. It turns out that the husband earned most of his taxable income in the first half of 2009. He lost his job in October, 2009. He just found a new job this February that paid a base salary of $50,000 plus commissions. He expected that 2010 commissions at his new job would match his 2009 salary by the end of this year so he was still "too rich" to file Chapter 7 bankruptcy. I told the couple that in my opinion they were in fact eligible to file Chapter 7 bankruptcy based on their income history.
Many people confuse the concept of gross income for tax purposes with deemed income for bankruptcy purposes. When I asked prospective debtors what their income is they frequently give me their IRS annual income instead of their current monthly income. Bankruptcy’s means test considers actual household income only in the six months immediately preceding bankruptcy. Annual income on your tax return is not important in most cases. Reasonably guaranteed future income may be a factor in some cases. Because this husband was not working from October, 2009, through January, 2010, his income for bankruptcy purposes would be below median income assuming he filed in April, 2010. He is "poor enough" to file Chapter 7 bankruptcy even though his IRS taxable income was about $100,000 in 2009 and may be the same in 2010.
The man’s commission income is uncertain. He expects to earn a comparable income in his new position, but his future actual income is speculative above his base salary in a new job. His commissions in months immediately subsequent to his bankruptcy filing date probably will not yet reach his goals. Based on what I know initially about this couple I do not think the U.S. Trustee would consider the filing to be an abuse.
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Tuesday, March 23rd, 2010
Jason Roberts asked: This year President Bush signed a bill to change the bankruptcy law. This will go into effect this October of 2005. The new bankruptcy law will make it more difficult to file for bankruptcy. This may be bad news to individuals who are drowning in debt. On the other hand it is good news to business and individuals that work very hard to maintain good credit and not suffer from profit loss.
When the new bankruptcy law goes into effect it will be harder for anyone to file for chapter 7 and chapter 11 bankruptcy. Filing for chapter 13 bankruptcy will be your most likely option.
What is Chapter 13 bankruptcy? It is an option that is given to those who have any kind of steady income. Basically, anyone who has a job. It is a payment plan and not a way to wipe a way your debt. Which means the days of wiping the slate clean are over. However Chapter 13 does protect your assets. The court devises a payment plan in which you are to pay to a trustee that is appointed by the court. Usually the payments are to be paid off in three years time. There are some exceptions, but that is up to the courts to decide.
So now that the bankruptcy law is changing what are some things people should do to avoid debt?
One very important thing is to never live outside your own means. If you have credit cards don’t use them as if you will have the money every month to pay the minimum balance. Be prepared for the unexpected such as a loss of your job or loss of any other source of income. This is where some people get into trouble. Protect yourself and your assets by being insured. Some people get into debt due to unexpected medical expenses or property damage. When you don’t have a way to help cover these expenses you will find your self in some kind of debt.
Try and keep some money off to the side in case some kind of unplanned expense should arise. Have some kind of back up plan to avoid the need for bankruptcy.
One of the reasons for the bankruptcy law change is because of over use of the system. There are actually some people who pre plan filing for bankruptcy as they abuse their credit cards. It sounds hard to believe, but it is true.
One may ask how this is fair to the people who didn’t do anything wrong and still landed them self in debt? Unfortunately changes in the law aren’t always fair to those who did nothing wrong. As the old saying goes, ” It only takes one bad apple to spoil the bunch”.
The only thing we can do now is become more responsible about our finances. Take more steps to avoid the need to ever file for bankruptcy.
Bankruptcy Questions
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Sunday, March 21st, 2010
Esteri Maina asked:
Declaring bankruptcy is just one of the many methods that victims of extreme debts could openly make use of to survive the collections efforts from the creditors.
So many people not at all desire this method, for it is like shouting to the entire world that you are completely ruined economically.
However, those who file for bankruptcy are normally after the court ruling that discharges all or some of their debts, or gives them a reasonable plan and time allocation to pay back to the creditors.
This nevertheless is a complicated process that requires expert guidance to go through it successfully.
Generally, those who declare themselves bankrupt do so in the courts and to start with;
Let someone ease your Bankruptcy Filing
As mentioned earlier, bankruptcy-filing process is complicated and finding the best lawyer in this expertise will be a plus for a start.
His or her role is offering you guidance all through the procedure and this guarantees safety with the law.
I believe such a professional will begin the process by asking about the nature of your debts and probably how you reached a decision like this one.
If it still looks feasible to him or her, they then compile all this personal information and file the intended petition in court.
Once such documents are filed at the bankruptcy court, a trustee will be delegated to you and his task for one will be ensuring that all the information that is needed is collected from you and is truthful.
Next, alerting your creditors follows; so that they stop all actions they might be taking up against you to get your payments.
Later actions includes meeting the various parties who are involved in your bankruptcy case, together with your creditors and if probable your creditors’ lawyers.
It is possible to file for bankruptcy on your own even if, it is a process that would take a lot of patience and thoughtfulness.
Additionally, bankruptcy filing will depend on the type of debts you owe creditors and where among the chapters of bankruptcy code this is covered.
Chapters of bankruptcy to choose from
If you decide that you want to file for bankruptcy on your own, the first decision you have to make is which kind of bankruptcy you should file for but if you have a lawyer, this is much easier.
As a result, gathering information to be able to locate which one suite you best become an obligation for you.
Commonly, people choose either chapter 7 or 13 of bankruptcy, which are bit different.
If your choice is chapter 7 bankruptcy, you need a helping hand of a professional supposed to take you through this.
Chapter 13 or wage earners plan best suits those with a regular income each month, and they are allowed to select their own repayment plan to the creditors that they deem fair and affordable.
To begin the cases, the debtor files a petition with the bankruptcy court serving the area where the individual lives or where the business debtor is organized or has its major premises or prime assets.
In addition to the petition, the debtor must also file with the court: list of assets and liabilities, current income and expenditures, a statement of financial affairs and a list of contracts to be executed and payable leases.
Note: use the information in this article to widen your knowledge in filing bankruptcy. The real process in the bankruptcy courts may stipulate more requirements not mentioned here.
Bankruptcy Questions
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Saturday, March 20th, 2010
With credit scores, student loans, mortgages, credit card debt, car loans, bank accounts, retirement funds and everything else you have to worry about to keep up with your finances, it’s no wonder if you feel overwhelmed from time to time.
Luckily, the General Services Administration’s Office of Citizen Services publishes a Consumer Handbook for American citizens every year – and, as a taxpaying consumer in the U.S., the book is absolutely free to you. Order your copy at http://www.consumeraction.gov/.
Financial Help at Your Fingertips
If you don't have the time to sort through everything in the 172-page book, here’s a brief look at what this year’s handbook offers:
- Sample complaint letter: The one-page template can serve as a guide when you feel moved to lodge a complaint against those you suspect of unfair or fraudulent practices.
- Corporate consumer office contact information: This section details how to get in touch with organizations and outfits designed specifically to help with whatever concerns or problems you have.
- Car manufacturers and resolution programs: Car questions? This section lists the digits for every manufacturer included in the handbook.
- State government resources: When you need information about local laws or other pertinent information specific to your state or region, this section is the place to turn: it has contact details for non-national government entities.
- Banking: Need help figuring out your account, opening a new account or adapting your saving strategy? Take a look at this section, where you’ll find information for State Banking Authorities.
- Insurance: Unsure where to turn for coverage? Unsure whether you need more insurance? Check out this section, which will give you contact options for State Insurance Regulators.
- Securities: Contact information for State Securities Administrators is offered here.
- Utilities: Need to know more about your utility bills and options for getting power and water in your home? This section lists State Utility Commissions and how to contact them. If you need utility bill debt relief, while this section may help, you may also want to consider bankruptcy.
- Federal agencies: Maybe you’re not sure whether there’s a government entity that can help with what ails you. Check out this section for listings.
- Better Business Bureaus: This section lists the BBBs you may need to contact with consumer complaints or concerns.
- Consumer organizations: Turn here to find out which groups are working to help you – and contact them to see how you can offer assistance.
- Trade Associations: This section offers listings for Trade and Professional Associations mentioned in the handbook.
Posted in Financial Literacy, government help | Comments Off
Saturday, March 20th, 2010
ashtongabriel asked: If you are stressed because of your due debts and want to consolidate them at once, then you need to find out a solution that may help you in getting rid of all debts in an easy and convenient manner. Since due debts are becoming a very common issue, most of the banks and financial institutions are offering debt management solutions, so that their consumers may get suitable solution for managing their due debts. It is widely seen that usually, people do pay proper attention to their due debts until they get multiple reminders from concerned banks and financial institution. There are many people, who are oblivious about the fact that ever increasing debts can cause foreclosure on the hard earned property. Once the property of the defaulter is foreclosed, he or she will be declared as bankrupt and the label of bankrupt can restrict his or her social, financial and legal rights. Since financial institutions are offering more lenient financial services, finding a debt management solution have become easier for all defaulters. For UK residents, getting the perfect debt management solution is quite easy, as there are numbers of banks and financial institutions that offer excellent debt management in UK.
Arrangement of suitable finance is the biggest thing that may restrain a defaulter from settling his or debts. However, with debt management uk, the defaulter can manage to settle his or her debts without bothering for arrangement of finance. In fact, debt management in UK can help people in settling their due debts in an affordable manner. Therefore, if you are one of those people, who are struggling hard to manage their debts, then search for a debt management firm and get effective counseling solutions to pay off your debts.
There is simply no reason behind increasing number of defaulter. However, most of the financial analysts and counselors believe that people can avoid due debts just through paying attention to their credit card bills and bank statements. It is widely observed that most of the consumers spend a big portion their monthly income in settling their due credit cards bills with high late fees. In fact, paying these bills before due date can avoid late fees and other penalties and can enable the consumer to save some money from his or her monthly income. debt management uk services help you to control your debt through consolidated monthly bills and debts.
Debt management UK offers supreme financial benefits, as it reduces the existing interest rate and makes your debts free from all penalties and late fees. Service providers that offer debt management services also negotiate on behalf of the borrower, so that the borrower may get reduced debt amount. If you are planning to hire services of a debt management firm that it is for sure that you will save a good amount every month. Whether you are a homeowner, professional, student or self employed, with these services you can get the most suitable solution to pay off your debts in an effective manner.
Fill This Out For Free Bankruptcy Evaluation!
Posted in Loans | No Comments »
Friday, March 19th, 2010
The FTC has recently settled several cases relevant to consumer protection and financial stability. Here’s a summary of those cases and how they may impact you.
LifeLock Pays $12 Million, Stops Deceptive Claims
Not long ago, LifeLock ran a campaign offering comprehensive protection against identity theft for consumers. However, the FTC reports that 35 states’ Attorneys General challenged those claims, since the protection LifeLock offered was less than stellar.
In its ads, LifeLock claimed that it:
- Guaranteed protection against identity thieves ever getting their hands on subscribers’ information
- Was the first company to offer such complete and comprehensive protection
- Stopped identity theft before it occurred
- Stored all personal data in encrypted electronic files
- Gave access to sensitive information only to secured individuals
- Used “highly secure” protection (physical, electronic and managerial) to prevent fraud
These services were offered for the price of $10 per month. Because these claims somewhat overstated the actual protection the company offered, many consumers lodged complaints and now LifeLock is prohibited from advertising services they can’t actually offer.
Refund Checks Coming to Victims of Health-Related Scams
The company Roex, Inc. reportedly sold a range of products, including infrared saunas and dietary supplements, which they claimed would cure or alleviate symptoms of numerous serious diseases.
But the results didn't match the advertisements, and the FTC has ordered the company to make payments to past customers. The average amount of the refund check is $500.
Consumers who bought products from Roex, Inc. should be on the lookout for these checks, mailed March 5, 2010, and deposit or cash them – they are not a scam. The FTC notes that 5,700 checks were mailed, with a total value near $3 million.
Credit Repair Scammers Settle with the FTC
An Illinois-based credit repair scammer has recently come to a cash settlement with the FTC for falsely indicating to consumers that it could remove negative entries on their credit reports, even if they were accurate and current, which violates federal laws. Some consumers who filed bankruptcy were targeted by the scam.
To avoid credit repair scams, keep in mind:
- Accuracy isn’t negotiable: Correct information on your credit report cannot be legally removed for seven years.
- Don’t pay upfront: If someone asks for money before performing a service, watch out.
- There’s no easy fix: Credit repair takes time and diligent effort. Shortcuts will only get you way off the track.
Posted in Credit Repair, Identity Theft, consumer scams | Comments Off
Thursday, March 18th, 2010
Debt collectors in certain areas of the country have begun contacting debtors in more and more harassing ways, according to a recent article from WNEP in Pennsylvania.
This situation is troublesome not only because it can cause fear and embarrassment for debt collectors’ victims, but also because such techniques are illegal.
The Slimy Tactics Reported by Victims
While repeated phone calls from a bill collector may be irritating, some of the actions that are being attributed to collectors are downright appalling:
- Threats of jail time: Some debtors have reportedly been threatened with arrest—even with arrest at their place of employment.
- Insults: Sources indicate that some collectors have taken to belittling debtors about their level of education and their work ethic.
- Cruel suggestions: Apparently, some debt collectors have gone so far as to suggest debtors commit suicide as a way to remedy their inability to repay their debts.
- Neighbor contacts: It seems some collectors have even ducked as low as contacting a person’s neighbors about debts owed.
Clearly, something is wrong here. Debt collectors are not legally allowed to get away with such actions, but unfortunately many consumers aren’t aware that they have rights protected by federal law.
Your Rights and Options
So what exactly are creditors forbidden from doing? Here’s a summary of what actions are prohibited by the Fair Debt Collection Practices Act:
- Harassing a debtor, her family or her friends
- Failing to follow up a phone call with written details about a debt within five days
- Contacting anyone besides the debtor or his lawyer about a debt
- Physically or verbally threatening a debtor
- Suggesting or implying that a debtor can be arrested when she legally cannot
- Lying about the amount of the debt owed
- Contacting the debtor directly when he has known legal representation
- Ignoring a debtor’s written denial of a debt
The collectors mentioned in the story above were breaking the law—but unless the debtors are aware of the laws protecting them, they’re not likely to take any action.
Halt Creditors with the Automatic Stay
If you’re facing aggressive behavior from a creditor, it may be time to consider working with a legal professional. One option for stopping creditor contacts is filing for bankruptcy, which will trigger an automatic stay that blocks all contact from creditors.
Additional Resources
Fair Debt Collection Practices Act (PDF)
Posted in Bankruptcy and the Economy, Creditor Harassment, Creditors, collectors | Comments Off
Tuesday, March 16th, 2010
The hotel chain Extended Stay has been in the news lately, as its senior lenders and several financial firms attempt to pull it out of bankruptcy later in the year.
A $450 million injection of money into the company will, backers hope, be a sufficient component of a proposed plan to exit bankruptcy protection, the Wall Street Journal is reporting. Court papers in the bankruptcy case call on Paulson & Co. and Centerbridge Partners to provide the funds.
Paulson & Co. and Centerbridge Partners will invest $225 million into Extended Stay. This would represent a 22.5 percent stake in the struggling company. Additional money would come from a plan for Extended Stay to raise money via a rights offering. In this offering, the mortgage lenders that hold $4.1 billion in Extended Stay debt will have the chance, according to the Wall Street Journal, “to buy all the shares for an additional 22.5 percent stake plus warrants.”
These holders of Extended Stay mortgage debts will get new mortgage notes valued at $2.5 billion, and they will get a 55 percent stake in the company in the form of stock.
The details of this plan have come to light recently, following the investment agreements that Extended Stay made with the private firms.
Extended Stay filed for bankruptcy last June, following dropping occupancy in their hotels as a result of the difficult economy. The South Carolina-based company owns and maintains over 600 hotels, which are targeted at business travelers and mid-range hotel customers.
Two years ago, the Lightstone Group bought out the company from Blackstone Group LP for $8 billion. Under the new agreement, the entity that manages Extended Stay’s hotels will resign for these duties, in exchange for $30 million.
Following announcements of Extended Stay’s plan to get out of bankruptcy, a rival investor group made the announcement that its own plan would have been a better option than the one chosen.
Starwood Capital had been in the bidding to become the group investing the money in Extended Stay, though Paulson & Co. and Centerbridge Partners were chosen instead.
Now, the group is saying in court that it offered what it called a "binding offer" to sponsor the reorganization plan that Extended Stay will put in place. According to Starwood, it claims that its offer would provide "substantially greater" value to Extended Stay creditors, and that Extended Stay would have access to more cash than it will under the current plan.
Specific details of the Starwood offer were not filed in court. They did present their plan to object to Extended Stay’s current plan.
In January, Starwood claimed that it was being frozen out of the bid process. It said also that they were not getting the information that they needed to make a competitive bid, and that Centerbridge and Paulson were.
Starwood Capital led the restructuring and expansion of Starwood Hotels and Resorts Worldwide back in the 1990s. They cited this experience in the hotel management business to support their claim to investment rights in court.
Posted in Bankruptcy and the Economy, extended stay bankruptcy, extended stay hotels | Comments Off
Monday, March 15th, 2010
Benjamin Brook asked: When it comes to the word bankruptcy it normally leaves a bad taste in anyone’s mouth. For those that do no know what bankruptcy is it is the only way out financially if you are stuck in loads of debt and have no way to pay creditors.
There are three ways a person can go into bankruptcy which are:
1) Voluntary assignment. This is were insolvent persons make an assignment of all their assets for the general benefit of creditors.
2) Involuntary assignment which is when a creditor files a petition in a provincial court for a receiving order against the debtor’s assets.
3) Deemed bankruptcy which is when a proposal in bankruptcy under the Bankruptcy Insolvency Act has failed
Relief from Bankruptcy
Bankruptcy is definitely a serious thing and can cause an array of problems, but bankruptcy debt relief is possible. One of the first steps to bankruptcy debt relief is to understand what happens to your life after bankruptcy. Specifically in terms to how long bankruptcy lasts, if a person has been declared bankrupt before, within the past fifteen years, then they will not be automatically discharged.
If it is the first time for being declared bankrupt however, then discharge may be automatic, what this means it that there will be a release of the bankrupt from most of your debts owed at the date of the bankruptcy. There are a few exceptions to this though including debts coming from fraud and fines.
Also on the topic of bankruptcy debt relief is the issue of assets that were obtained before discharge. This is important because this will largely determine how much money is going to be available after bankruptcy. When discharged there may still be assets that were owned either when the bankruptcy began or which were acquired before discharge. This may include property of insurance for example.
Think About the Future
Bankruptcy debt relief is a very important topic to discuss, but more than anything it is important that people are aware of how to stay out of debt in the future. After all, many people go to incredibly hard work to get out of debt but then just fall back into the same hole again in the future. This is not only going to be frustrating and devastating to a credit report, but also it is much harder to get out of debt the second time around.
Debt does not bring anything positive, and can really be repressing on a person’s life, because it means that they may not be able to do many of the things that they would like to.
Fill This Out For Free Bankruptcy Evaluation!
Posted in Personal Finance | No Comments »
Saturday, March 13th, 2010
Practicing Consumer Bankruptcy Law is very interesting work. Usually, I get to tell bankruptcy clients good news. Sometimes, I have to deliver bad news about their bankruptcy cases. In a recent case, a young man purchased his first home several years ago, and naturally, the value of the home has dropped significantly. He tried modification and was turned down flat (The mortgage is held by a securitized trust). That wasn't the bad part.
The bad part, as you can tell from the title is that he had his Grandfather co-sign for the loan. So, during the course of the bankruptcy when this young man couldn't get the lender to modify, he asked me: Can I short sale the property, and if so, what will happen to me, and what will happen to my Grandfather? These are both excellent questions.
Here is my advice: Yes, as an option, you can do a short sale. Of course, since you are in a Chapter 13, we will need the Judge's permission, and I will have to file a motion with the Court to allow same, but that is not a problem. I don't believe that the Judge will require any additional items from you other than a signed contract. With regard to the deficiency and you, the answer is simple, your debt will be included in the bankruptcy and you will ultimately receive your discharge, so, no problem.
The problem is: How will a short sale on your primary residence hurt you or hurt your grandfather? As to your grandfather, we have to look at a whole new set of issues. Since this property is not his primary residence, any deficiency that is still owed to the lender will have to be dealt with. This can come in two forms: First, they can pursue him for a deficiency balance. In other words, they can sue him for the remaining balance owed on the promissory note. As I have explained in the past, it's kind of like having two fish on a hook and one gets away. The lender still has one fish to reel in (Grandpa)
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