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Friday, March 12th, 2010

Supreme Court: Bankruptcy Law Doesn’t Violate Lawyers’ Rights

A case decided by the Supreme Court this week settles a question of attorneys' free speech rights raised by a Minnesota law firm concerned about restriction in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), according to the Washington Post.

Here are the pertinent details:

  • The law states that bankruptcy lawyers are prohibited from advising clients to take on more debt before filing for bankruptcy. In theory, the restriction is meant to prevent advice that would lead to actions that might constitute fraud under U.S. bankruptcy laws.
  • The question raised by the Minnesota law firm was one of free speech for lawyers. Apparently, the firm suggested that the aforementioned restriction amounted to an unconstitutional violation of the free speech rights of bankruptcy lawyers.
  • The court decided that the law was not, in fact, unconstitutional, and that lawyers can give their clients any advice that does not promote defrauding the bankruptcy court.
    • Filing incomplete or inaccurate information
    • Attempting to pay a "favorite" creditor in full before filing for bankruptcy
    • Failing to disclose assets or expected income
    • Attempting to “give away” assets before filing

    • The Broader Issue

    While the law firm’s concern with free speech may seem piddling here, in the context of bankruptcy cases, it has merit. In some cases, as the WSJ article points out, taking on certain kinds of debt immediately before a bankruptcy filing could benefit both the filer and his or her creditors.

    For example, refinancing a troublesome mortgage to better allow a debtor to make payments could benefit all parties. The Supreme Court Justices reportedly acknowledged the truth of this and agreed that taking on more debt can, at times, be the wisest decision for a potential bankruptcy filer.

    But, the court noted, the law can be read to mean that bankruptcy lawyers are restricted only from giving their clients advice that would lead to bankruptcy fraud.

    What Constitutes Bankruptcy Fraud?

    Bankruptcy fraud is a serious matter – in fact, it can lead a court to throw out your case (and thus eliminate your chances at receiving a debt discharge) and earn you fines and jail time. This is one reason why working with a bankruptcy lawyer can be helpful.

    Bankruptcy fraud includes:

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Posted in Setting the Record Straight about Bankruptcy | 5 Comments »

Wednesday, February 10th, 2010

The Right Time to File Bankruptcy?

A refreshing article published recently in the Kalamazoo (Mich.) News underscores the role bankruptcy plays in helping filers overcome debt and draws attention to the oft-neglected question of when is the best time to file.

The article points out that too many people try to avoid filing bankruptcy at all costs and wait until they are financially desperate to file. Unfortunately, this is not always a good plan, as it may mean that filers use up retirement accounts (which are often exempt from creditors in bankruptcy court) and set themselves back for their post-bankruptcy life.

The article provides a helpful list of warning signs that filing for bankruptcy may be a good option sooner rather than later:

  • Borrowing money to pay debts: Whether you're using one credit card to pay another, relying on payday loans or hitting up family and friends for cash, this is a bad sign.
  • Dipping into retirement funds to pay debts: Again, your qualified retirement savings will likely be safe in bankruptcy court and heavily taxed if you take it out early. And once you spend that money, it's gone.
  • Falling short of minimum payments: If you cannot make even a minimum credit card payment each month, bankruptcy may be a good option.
  • Selling your goods to pay debt: If this is a one-time thing and you're shedding appliances you can do without, you may be fine. But if you're consistently scouring the house for stuff to trade for cash, you may be in trouble.
  • Getting contacted by bill collectors: Phone calls and mailings from your creditors, especially when they start to add up, can be halted by bankruptcy's automatic stay.
  • Having your wages garnished: If creditors are going straight to your employer to collect on debt, take it as a warning sign.
  • Dealing with increased tension or stress: Money can be tough on your home life. Whether you're having trouble sleeping, fighting more or just generally stressed out, you may need a serious solution for your debt.

A New Beginning

It's important to understand that filing for bankruptcy does not mean admitting defeat or failure. Rather, it is a proactive and difficult decision you must make to save your financial future. Filing for bankruptcy can:

  • Help you save your retirement fund so that you’re not destitute or a burden on taxpayers in your golden years.
  • Give you a chance to start over financially and the knowledge you need to make better decisions in the future.
  • Stop stressful contact from creditors.

Of course everyone's financial situation is different, and this post is not meant as advice for any one situation. If your finances are at their breaking point, considering contacting a local bankruptcy attorney for an evaluation.

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Posted in Setting the Record Straight about Bankruptcy | 2 Comments »

Monday, November 9th, 2009

How Health Care Affects Filing Bankruptcy

Health care costs and filing bankruptcy rates are more closely related than you might think. Check out this chart that shows the skyrocketing costs of health. These costs could be driving many people to file bankruptcy.

Filing bankruptcy and the influence of medical care costs

Filing bankruptcy and the influence of medical care costs

Skyrocketing health care costs have many people considering filing bankruptcy.

Add this infographic to your site:

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Posted in Bankruptcy and the Economy | 2 Comments »

Tuesday, September 29th, 2009

5 Reasons to File Chapter 13

This guest blog entry was written by David Chang of Chang & Carlin, LLP. Chang & Carlin offer bankruptcy and real estate legal services for Chicago and its suburbs. Read David Chang's blog at http://changandcarlin.blogspot.com/

Many debtors view Chapter 7 bankruptcy as the "better" type of bankruptcy to file, and that Chapter 13 is forced upon them by the courts. However, filing bankruptcy under Chapter 13 has many benefits.

Here are 5 major reasons why people may choose file for Chapter 13 bankruptcy:

  1. Chapter 13 has protections designed to stop a foreclosure or repossession.
  2. Chapter 13 bankruptcy can protect an asset that would otherwise not be protected in Chapter 7, and would be sold to pay creditors.
  3. The debtor makes too much money to file for Chapter 7, and would not be able to file otherwise.
  4. The debtor has recently had debts discharged in a Chapter 7 case and is not eligible to file again.
  5. Chapter 13 can consolidate debts that would not be dischargeable in a typical Chapter 7 bankruptcy case.

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Posted in Setting the Record Straight about Bankruptcy | No Comments »

Wednesday, September 9th, 2009

Bankruptcy Filing Jeopardizes Prize Money Destined for the Blind & Deaf

Months after winning $1 million on a game show, Georgia’s state superintendent of schools and her husband reportedly filed Chapter 7 bankruptcy.

However, this isn’t a story of why they filed; it's a story about what happened afterward.

In fact, according to the Atlanta Journal-Constitution, Superintendent Kathy Cox was selected to appear on Fox’s “Are You Smarter than a Fifth Grader?” partly because she wanted to play to win money for Georgia schools.

Unfortunately, getting her prize money to the children of Atlanta hasn’t been as easy as she hoped.

Background: She Wanted to Spend Winning on the Blind & Deaf

Sources indicate that Cox planned to donate her TV winnings to three state-run schools for children with vision and hearing impairment.

And, as the first person ever to win the top prize of one million dollars on “Fifth Grader,” it looked like the schools would be receiving some cash.

The Filing Bankruptcy Twist

But, three months after her winning, Cox’s husband filed for Chapter 7 bankruptcy protection, largely because of debt his construction company accrued.

In a Chapter 7 bankruptcy:

  • A filer’s non-exempt assets can be liquidated. The money raised from the liquidation sale is then distributed among the filer’s creditors to cover debts.
  • The trustee determines how to distribute funds. A bankruptcy trustee, who is a federal employee, makes decisions about how much money goes to which creditors.

In the Coxes’ situation, their trustee has reportedly sued the Coxes and Fox Broadcasting Corporation in an attempt to get the prize money paid to the Coxes’ creditors rather than the schools.

Indeed, most state bankruptcy laws consider cash above a certain amount to be a non-exempt asset and therefore destined for the filer’s creditors.

Naturally, a protest has been scheduled and people on both sides of the debate are fervently determined to fight for their cause.

The Underlying Issues

Part of the reason for the hullabaloo and confusion is that the various parties can’t agree about whether Cox participated in the game show as a representative of the state schools or as an individual.

The check she received from Fox was allegedly made out to her, which complicates matters.

Ultimately, the judge who presides over the court case between the two parties will have to decide whether the money Cox earned on the show is legally hers or the state’s.

Learn more about filing bankruptcy.

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Posted in Bankruptcy News and Events | 2 Comments »

Tuesday, September 1st, 2009

Michael Vick Filing Bankruptcy, Playing Ball & Moving Forward

If you can, please set aside the dog fighting, the jail time and the infuriating bad-boy behavior synonymous with his name—because Michael Vick’s got a new set of problems.

This fall, as the NFL reinstates him following a high profile, two-year hiatus during which Vick served time in federal prison, the former Atlanta Falcons quarterback finds himself $20 million in the hole.

On August 27, 2009, U.S. Bankruptcy Judge Frank J. Santoro approved Vick’s creditor repayment plan under one condition: that he retain a financial planner to ensure that he successfully emerges from his July 2008 Chapter 11 bankruptcy filing.

Vick has an estimated 100 creditors trying to collect from his past-due bills.

Vick 'Happy' With Filing Bankruptcy Decision

After the ruling, an elated Vick commented to reporters outside the courthouse in his home state of Virginia:

“I'm happy it's over. I can move on with my life. I think my lawyers did a great job. I commend the judge. I commend the creditors' committee, everybody. We finally got it all together. I'm just happy we can move forward.”

Following the court appearance, Vick and his fiancé were whisked away on a plane to Philadelphia for his debut in an Eagles’ preseason game.

Once the highest-paid player in the NFL, Vick now receives a $1.625 million salary for the 2009 season.
This amount may not even cover his legal fees, much less a solid portion of what he owes to creditors.

Michael Vick to Liquidate Assets

The three-time Pro Bowl pick will be forced to liquidate around $9 million in assets, including houses, luxury SUVs, boats and future NFL earnings.

He is allowed to keep only one of several homes, a luxury SUV and other possessions of minimal worth.

Michael Vick Back on the Field … Sort Of

NFL Commissioner Roger Goodell has permitted Vick to play in the final two preseason games of his new team, the Philadelphia Eagles, but not in the regular season.

In his announcement, much to the dismay of some, Goodell also contended that he would consider Vick for full reinstatement before Week 6 of the season.

Vick’s Debt to Be Resolved in Six Years?

Despite not having to pay creditors during his first year with the Eagles, Vick and his financial planner are hopeful that all of his debt will be paid off in six years.

The financial obligations of his Chapter 11 bankruptcy reorganization plan coupled with the 18 months he served in prison for operating a dog-fighting ring sustain Michael Vick’s reputation as an controversial figure in the sports world.

If nothing else, one thing in Michael Vick’s future is certain; for the undeniably talented athlete, winning games will not prove to be nearly as challenging as winning back an extremely contemptuous crowd.

Filing Bankruptcy Information

Are you tired of debt and curious as to how Vick may be resolving his old bills? Learn more about how filing bankruptcy works.

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Posted in Bankruptcy News and Events | 1 Comment »

Monday, August 31st, 2009

Identity Theft Crimes — Have You Been Robbed Lately?

Three men have been indicted for what seems to be the largest data breach and identity theft case ever prosecuted.

More than 130 million credit and debit card numbers were compromised by the hackers, according to Reuters.

It's probably a good idea to check your records to ensure you haven't been robbed of your hard-earned money.

Of the men indicted, one (Albert Gonzalez) was reportedly already in jail for prior hacking-related charges.

Sources indicate that the other two men who were indicted were also responsible for five serious data breaches from 2006 to 2008.

With this crime in the news, it's probably good to go over what identity theft is and how you can protect your assets.

Identity Theft: What the Criminals Do

Identity theft can be a devastating crime for its victims, leaving their credit ruined and causing them to lose serious amounts of money and, in some extreme cases, filing bankruptcy.

So how does this crime work?

  • Individual identity theft: When a thief steals the information of an individual or a single company, he or she can use it to make everyday transactions, take cash out of the bank, take out loans or get a job (particularly if the person is not a U.S. citizen). Victims of individual identity theft generally have great difficulty setting their affairs in order after they’ve been targeted.
  • Group identity theft: When hackers target an entire database of personal information, the potential for damage is much greater. In this particular case, the hackers apparently planned to sell the personal information they stole from corporate databases to other criminals.

This particular incident involved data breaches at the card processor Heartland Payment Systems and the retail chains 7-Eleven and Hannaford Brothers, Inc.

Preventing Identity Theft

Information crimes have risen with the popularity of computers and the Internet – but so have protections against them.

For example, the security code on the back of your credit cards can prevent fraudsters from using your info by creating a clay imprint copy of your credit card number (at the checkout, say).

Here are some actions you can take to keep you and your personal information safe:

  • Shred your sensitive mail. While some large-scale identity crimes occur in the digital realm, individual identity theft still results from thieves sifting through sensitive documents in the trash.
  • Guard your numbers like gold: Don’t give out your SSN or credit card numbers unless you’re sure you have to. Whenever you’re asked to give out your SSN, demand an explanation of why it’s needed.
  • Check your credit report: Regular checks of your credit report (at www.annualcreditreport.com) will reveal whether anyone has been using your information besides you. Then you can take steps to stop the criminals.

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Posted in Financial Literacy | No Comments »

Thursday, August 27th, 2009

Can High Testosterone Levels Lead to a Person Filing Bankruptcy?

Ok, ok, maybe it's not that dramatic... but a new study shows that high testosterone may lead to reckless spending.

A recent study by researchers at the University of Chicago and Northwestern University has discovered that men and women may shop differently for biological reasons – and those reasons could also determine how you execute all major financial decisions.

Background: Testosterone & Risky Behavior

Scientists have known for some time that testosterone, the male sex hormone, is linked to risky behavior.

And, when the economy collapsed after what can be considered very risky behavior in speculative financial markets, researchers began to wonder whether financial behavior had any specific link to testosterone levels.

The Study: Business Students Make Decisions

The researchers noted that, while about 57% of male MBA students choose high-risk financial careers after graduation, only about 36% of female MBA students do.

Researchers chose about 500 male and female students pursuing their Masters in Business Administration (MBA) for their experiments.

After measuring testosterone levels in everyone, researchers found that about 90% of women and 31% of men had relatively low testosterone.

Researchers then offered participants a choice between a guaranteed monetary award and a high-risk lottery option with a potential for higher payoffs.

The Findings: Testosterone Leads to Risky Business

Perhaps unsurprisingly, the researchers found that those with higher levels of testosterone (10% of women and 69% of men) tended to choose the higher-risk financial options.

The Lesson: Partner Up for Big Decisions

So what does all this teach you as a consumer? A few lessons.

  • Know thyself. While you may not want to actually check your testosterone levels, consider your history of financial decisions. If you have a past filled with risky moves, consider forcing yourself through a cool-down period before making major money decisions.
  • Partner up. Studies have found that married couples tend to be more risk averse than single people, but even if you’re not settled down, you could benefit from a second opinion. Consult with a levelheaded friend when you’re considering major decisions.
  • Question that gut instinct. It could, after all, just being a hormone flowing through your veins, promising a thrill if you take the plunge.

... purchase the full study

Are you reading this and nodding your head?

If you've been overspending thanks to high testosterone, or if you've just fallen behind on the bills, it may be time to examine whether filing bankruptcy could help you.

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Posted in Bankruptcy News and Events | 9 Comments »

Wednesday, August 26th, 2009

This Week in the U.S. Economy: Bernanke Second Term, Consumer Confidence & Home Prices Rise

The past seven days have been fairly significant for the United States, economy-wise.

Here’s a brief summary of three major stories you should know about.

Ben Bernanke: Nominated for a Second Term

President Obama took a break from his vacation on Tuesday to announce his re-nomination of Benjamin Bernanke as Federal Reserve Chairman.

If approved by the Senate, Bernanke will serve his second four-year term.

Since the economy hit the skids in 2007, Bernanke has:

  • Lowered the main interest rate to near zero and funneled almost a trillion dollars into U.S. banks to mobilize credit
  • Handled the financial crisis with “calm and wisdom,” according to Obama
  • Been criticized by legislators for reacting too slowly when early warning signs of trouble in the mortgage market showed themselves.

Bernanke is a Republican. Read his statement of acceptance.

Consumer Confidence Rises Above Expectations

The Conference Board published numbers showing that consumer confidence in August is up substantially from July. Specifically:

  • The Consumer Confidence Index currently stands at 54.1 ---  in July, it was 47.4 (a level of 90 is required for consumers to be considered “optimistic”)
  • The Present Situation Index rose from 23.3 in July to 24.9 this month
  • The Expectations Index rose from 63.4 last month to 73.5.

Economists look to these numbers in part because the United States has a very consumer-driven economy, meaning that long-term recovery will depend largely on the behavior of the average shopper.

Home Prices Jump in First Quarter

The latest report from the S&P/Case-Schiller Home Price Index shows a 2.9% increase of housing prices in the first three months of the year.

Though a small gain, the move is an important landmark: the first increase in home prices in three years.

This is good news, but not great: home prices are still down 14.9 percent from the second quarter of 2008, but that’s better than where they stood three months ago, at 19.1 percent below.

The rise could be a sign that bad times are over, but may just be a temporary upswing.

--Even though there's some good economic news to report, many Americans are still hurting. If you're having trouble making ends meet, it may be time to think about filing bankruptcy.

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Posted in Bankruptcy and the Economy | 6 Comments »

Thursday, August 20th, 2009

Old Bankruptcy Stigma Dropping Off As Celebs Turn to Filing Bankruptcy

Bankruptcy in its simplest form is a recovery and relief task meant to heal and reprise a business or person back to a baseline stable for success.

The problem is it carries such an emblem of failure that the term is most often uttered with lowered eyes and sunken shoulders.

Bankruptcy is not the End of the Road

This is by no means is a final destination or label which should be branded on one’s forehead for life.

It is a sign for redirection, and a chance to start over- or move on.

Even those we idolize have filed bankruptcy.

In glancing at a recent article on Bloomberg.com, there in black-and-white is news that shows even the bright lights of Hollywood, the loud cheers of Shea Stadium or the brotherly love of Phillies fans can't save our stars from having to file for bankruptcy.

Celebrities and Bankruptcy: Dykstra, Baldwin, Trump

In the article, All-Star baseball great Lenny Dykstra is recorded to be filing bankruptcy under chapter 11 due to owing $10 to $50 million.

Then there is Stephen Baldwin, whose failed apprenticeship trials and inability to use his celebrity status to get him “out of here” has led him to filing bankruptcy.

Times are tough, even for our idols and it seems as though they will not be getting easier any time soon.

This economic blunder is even affecting such major banking institutions as JP Morgan Chase.

Bloomberg’s article mentions that “steeply rising filings by consumers are hurting commercial banks. JPMorgan Chase & Co., the second-largest U.S. bank, predicted more losses on consumer loans last month.”

In the same article JPMorgan’s CEO Jamie Dimon was resound in his thoughts of the current state of affairs.

Dimon doesn’t expect the credit card business to formulate a profit in 2009 or 2010.

In fact, the company augmented its loss projection for prime and subprime mortgages.

Not good news for those who lean on such institutions for stability in an otherwise unstable time.

Truthfully, examples of filings by celebrity figures, major business institutions and those who appear to have it all are interchangeable.

Just ask Donald Trump and M.C. Hammer.

The difference now is that more of the country is bound by these ties which otherwise were seen to connect only "the less" than rather than "the more of".

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Posted in Financial Literacy, Uncategorized | 4 Comments »

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