March 15, 2010
The federal government has bailed Wall Street firms out to the tune of $700,000,000.00. This is a form of corporate welfare. The restructuring was done to prevent large Wall Street firms from going bankrupt. Instead of amending the Bankruptcy Law to help these Wall Street firms, the government simply gave them $700,000,000.00 in loans.
Recently, Jamie Dimon of JP Morgan Chase and Lloyd Blankfein received millions of dollars in salary packages. The government bails out Wall Street and the Wall Street tycoons get richer and richer. During this period of time, between 7.1 million and 7.9 million households according to mortgage bond trader, Amherst Securities, fell behind in their mortgage payments and are subject to losing their home.
It is estimated that as many as 25% of all the homes in the United States have mortgages on them that are greater than the value of their home. The term used to describe this situation is calling the home “under water”. President Obama had initially asked that when individuals do mortgage modifications with their banks that the banks restructure their mortgage so they only have to pay an amount equal to the value of their home. The banks have refused to do this. The mortgage modifications by banks in the United States modify the payments but do not reduce the amount that is owed.
The Bankruptcy Law Needs to Be Changed
The United States Constitution reserves all rights to make laws concerning bankruptcies to the federal government. Congress passes all laws that deal with bankruptcy.
Congress needs to strengthen the bankruptcy court’s ability to restructure mortgage loans when individuals file bankruptcy. Congress has already bailed out Wall Street. Now they need to bail out the American homeowner. Unfortunately, the large financial institutions in this country oppose any modifications to the Bankruptcy Law to help out homeowners.
Congress needs to help the American homeowner and modify the Bankruptcy Laws to deal with the issue of restructuring mortgages that are under water. Congress has already bailed out the financial industry to the tune of $700,000,000.00, now they need to bail out the American homeowner!
Should you have questions concerning bankruptcy or mortgage modifications, feel free to contact the Law Office of Elliot S. Schlissel to discuss these matters at 1-800-344-6431 or email us at email@example.com.
Picture courtesy of grassland properties.
The Supreme Court heard arguments on Monday in the case of Milavetz, Gallop & Milavetz v. the United States. The specifics of the case were discussed in a series of articles in the New York Law Journal Monday and yesterday by Marcia Coyle.
The Milavetz & Gallop firm, based outside Minneapolis, Minnesota, along with some of their clients, challenged certain provisions of the amendments to the Bankruptcy Code of 2005, called BAPCPA (Bankruptcy Abuse and Prevention Consumer [credit card company, actually] Act) on First Amendment grounds, only one month after it became law.
The Milavetz firm most prominently challenged provisions of the Code which demands that they place a notice on all Bankruptcy related advertising that indicates that the firm is a “debt relief agency,” thus equating law firms with the fly-by-night debt counselors you hear about on the radio. The firm argued that this is insulting to lawyers and an unconstitutional regulation of true, non-misleading speech.
They also challenged the Code’s new requirement that attorneys representing clients contemplating bankruptcy may not advise those individuals, if they are below a certain income level, to take on any new debt. Milavetz asserts that this rule unconstitutionally interferes with the lawyer/client relationship. It also prevents attorneys from advising clients to consolidate debt by taking out a new loan, a strategy which may help keep some people out of bankruptcy altogether.
Milavetz even said that if the high court doesn’t come down on their side, holding the challenged provisions of the Bankruptcy Code to be unconstitutional, “we will handle no more consumer bankruptcy cases…”
Hopefully the Supreme Court will indeed find these overeager provisions of the 2005 Bankruptcy Code amendments unconstitutional.
Picture courtesy of Milavetz, Gallop & Milavetz, P.A.
As readers know, our office has a significant bankruptcy practice (more bankruptcy information is available there). I addition to the issues Mr. Schlissel addressed yesterday, below are some more frequently asked questions and Mr. Schlissel’s answers. For help with Bankruptcy, or any other matter, you can always contact our office.
Q: How does filing for bankruptcy affect others, like creditors, family members, and co-signors
A: It depends on the type of bankruptcy. If it’s a Chapter 7 Bankruptcy, which is very often called a “straight bankruptcy,” the purpose of that is to eliminate your debts completely. In a Chapter 7 bankruptcy, all of your assets are basically liquidated, except for exempt assets, and distributed to your creditor. Now, if you don’t have any assets, such as a house, chapter 7 is usually the way to go and at the end of the bankruptcy, you have no debts at all.
The problem is that if you file a Chapter 7 bankruptcy and you have a co-debtor, only you are discharged from the debt. At the end of the bankruptcy, the co-debtor still owes the debt. Whatever portion you didn’t pay, or if you didn’t pay anyportion of it, the co-debtor or guarantor owes the balance of he debt. In those situations where there’s husbands and wives or co-debtors, it is very often recommend that they both file for bankruptcy.
In a Chapter 13, you’re entering into a “plan” where you pay a percentage of the amount owed. If it’s a secured creditor which has a lien on your car, or a bank that has a mortgage on your house, very often you’re paying 100% of what is owed to them. If the debt is owed to credit card companies, some plans have you paying as little as 10-15% of what you owe.
In a Chapter 13, there is a stay, or injunction, preventing any creditor from taking legal action against a co-debtor or guarantor. But that is only a temporary form of relief. It doesn’t release the co-debtor for the amount of the debt that is not paid under the Chapter 13 plan.
The law is complicated, even more so than a lot of other areas of law that consumers have to deal with. Not only that, but not all attorneys do bankruptcy work. In fact, most of them do not do bankruptcy. Very few attorneys get involved in dealing with federal proceedings such as bankruptcy.
Q: How long does the bankruptcy process usually take?
A: Chapter 7, from start to finish, will usually take between three and six months. But a Chapter 13 proceeding can take anywhere from three to five years.
Q: What sorts of things do you usually do to help your clients rebuild their credit after bankruptcy?
A: After filing for bankruptcy, most good attorneys talk with their clients about how they can rebuild their credit. If done correctly, you can rebuild your credit within six months to a year after filing for bankruptcy.
When an individual falls behind on their financial obligations, all sorts of negative credit information is placed on their credit report. Filing for bankruptcy can help most people in the long run as they can develop good credit becxause if you fall behind on your mortgage, credit card payments or car payments, your credit score goes way down.
After you file for bankruptcy and you’re discharged, you don’t have any debt. If you enter into an agreement for a secured credit card or something else of that nature, you can rebuild your credit score. People whose bankruptcies I have handled have credit scores of 750 because they have no debt. they are now debt-free and the have been able to reestablish credit and show that they’re making payments to their creditors on a timely basis.
Any good bankruptcy attorney should want to have a long term relationship with his clients and should discuss rebuilding the person’s credit. It’s something we always do for our clients. We feel that it’s part of the process of educating them on how to rebuild their credit after the bankruptcy is complete.
Contact us anytime for bankruptcy help.
Picture courtesy of hrbor.org.
As readers know, our office has a significant bankruptcy practice (more bankruptcy information is available there). Below are some frequently asked questions and Mr. Schlissel’s answers. For help with Bankruptcy, or any other matter, you can always contact our office.
Q: Have you seen a lot of new bankruptcy filings due to the economy?
A: Yes, there has been a significant increaes in bankruptcies, but it is important to understand that the bankruptcy law was amended during the Bush administration. It is more complex, time-consuming and more expensive to file for bankruptcy since the law changed several years ago.
The basic changes were that before filing bankruptcy, one must take an online course. After they file, they must take a second course. The filing requirements are a little more complicated and more detailed as well. For instance, one must have filed tax returns for the last two years in order to file bankruptcy. the record keeping and bookkeeping circumstances of hte filings are also more detailed.
In addition, if individuals have a high income or high expenses, there are detailed requirements that sometimes prevent those individeuals from filing a Chapter 7 bankruptcy. In such cases, they’ have to file a Chapter 13 Bankruptcy instead.
The purpose of the amendments to the bankruptcy statute was ostensibly to prevent bankruptcy abuse, but the reality of the situation was that the statute was written by the banking industry for the purpose of preventing or making it more difficult for consumers to file bankruptcy. It was basically an anti-consumer statute. It makes the process more difficult, more time-consuming and more expensive than it used to be.
Q: What does it generally cost to file for bankruptcy?
A: The cost could be anywhere from $1,500 and up.
Q: How would someone pay for a bankruptcy when they don’t have any money? Isn’t it a Catch 22?
A: Very often lawyers will tell their clients to stop making certain payments. For example, if you have a mortgage on a house and you fall behind, the bank will generally accelerate the debt, meaning that the whole remaining balance becomes due and you can’t make your mortgage payment. At that point in time, the individual is basically saving their mortgage payments because the bank won’t accept their payments.
The same can be true for credit card payments. At some point, it doesn’t make sense to make the payments, so a debtr should just acumulate the money, stop making the payments, use it to pay the administrative expenses of filing the bankruptcy and pay the attorneys’ fees. Also many attorneys will accept payment plans from their clients.
Consumers should know that there is indeed a way out. They should speak with an attorney who will be able to educate them on how to accumulate money even while they’re in debt in order to file the bankruptcy.
Contact us anytime for bankruptcy help.
Picture courtesy of Adam Stradt.
August 17, 2009
If you have already completed your Chapter 13 payment plan or Chapter 7 bankruptcy proceeding, and have received a discharge, you will hopefully be in good shape to begin a new financially unencumbered life. You will hopefully have taken our advice and attained financial health. But life does not always cooperate with our plans and so you may need to know whether you can refile for bankruptcy protection again.
In the event that this does become necessary, it is worth noting that a second (or third or fouth) Bankruptcy filing is possible and may be advisible, based on circumstances. However, time limits do apply.
The waiting period after a Chapter 7 Bankrutpcy discharge is 8 years for another Chapter 7 discharge, but only 4 years for a Chapter 13 discharge. However, if you received a Chapter 13 discharge, the waiting period is 2 years for another Chapter 13 discharge and 6 years for a Chapter 7 discharge.
Picture courtesy of markettalk.
August 14, 2009
David Ingram, of the LegalTimes blog, reported on some startling statistics about sharply increased bankruptcy filings this year over last year.
While overall bankruptcy filings are up 35%, the numbers for Chapter 7 liquidation filings by individuals and Chapter 13 filings by companies are much starker. Chapter 7 filings are up 47% and Chapter 11 filings by companies are almost double what they were last year, at 91% according to the U.S. Bankruptcy Courts.
While this information may certainly take away some of the stigma that individuals who are in need of bankruptcy protection may feel, it represents a startling indication of the financial difficulties many people are facing.
For more information on Bankruptcy, you can read any of the following recent articles on the topic:
August 12, 2009
Many people have loans or debts where a friend or relative has guaranteed or co-signed a loan. In these situations, individuals considering filing for Bankruptcy are often concerned whether any discharge of indebtedness would absolve co-signors of their responsibility for the debt.
Generally, Bankruptcy discharge does not absolve a co-signor or guarantor of the responsibility to pay a creditor for any deficiency owed by the party who filed for Bankruptcy. Creditors can still go after a co-signor for any unpaid balance after a Chapter 7 Bankruptcy discharge. Similarly, under a Chapter 13 repayment plan, at the conclusion of the payment plan, a creditor can still go after a co-signor for the difference between the amount paid under the payment plan and the original contract amount of the debt (the “deficiency”).
A Chapter 13 Bankruptcy filing stays actions by creditor against co-signors during the pendency of the Bankruptcy case, but this is not the case in a Chapter 7 Bankruptcy.
The Ninth Circuit Court of Appeals explained that “[g]enerally, discharge of the principal debtor in bankruptcy will not discharge the liabilities of co-debtors or guarantors.” Explaining that “[t]he bankruptcy court ‘has no power to discharge the liabilities of a bankrupt’s guarantor,” the court clarified that “‘[t]he bankruptcy court can affect only the relationships of debtors and creditor. It has no power to affect the obligations of guarantors.’”
The New York Appellate Division further clarified that “a defendant’s liability as a guarantor generally is not impaired by the discharge of a principal’s obligation in a bankruptcy proceeding and, thus, plaintiff may seek recovery from defendant notwithstanding [the debtor’s] bankruptcy petition.”
The exact language of the agreement in which the co-signor or guarantor took on the obligation is important. If the co-signor only assumed the obligation to pay the debtor’s indebtedness where the debtor himself was still obligated to pay the loan, then the debtor’s discharge would probably absolve the co-signor of her obligation to guarantee the loan as well, pursuant to the terms of that original guarantee. But where the guarantee never says that the co-signor’s obligation is contingent on the primary party’s obligation, or where it states explicitly that the co-signor is obligated regardless of any discharge of the primary party’s indebtedness, the creditor can still go after the co-signor for any amount still due.
Based on these rules, it is imperative that anyone who would like to help out a business associate, family member, or friend by co-signing a loan or guarantee should carefully consider whether they are willing and able to pay that person’s debt off if the person who asks for help becomes unable to fulfill his financial obligations or files for Bankruptcy.
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 Underhill, at id. (citations omitted).
 Culver v. Parsons, 777 N.Y.S.2d 536, 538 (N.Y. App. Div. 2004).
 First National Bank of Scotia v. Proem-a-Net Economics Corp., 652 N.Y.S.2d 405, 407 (N.Y. App. Div. 1997).