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.
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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.
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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).
June 1, 2009
Many individuals who file for bankruptcy already have heavily damaged credit due to late payments, repossessions, foreclosure proceedings and judgments. In this case, one of the factors that has driven down that person’s credit is a very high debt-to-income ratio. A bankruptcy may actually help such a person raise his or her credit score by eliminating part of the debt that was throwing off the ratio.
Although a bankruptcy will appear on someone’s credit score for up to 10 years, one’s credit score can be raised almost immediately after a bankruptcy discharge by implementing healthy credit and budgeting habits. There are several things that one can do to rebuild credit over time.
- You may be tempted not to use any credit at all lest you fall back into bad credit habits. This may be necessary if you know that you lack the self-control to use credit responsibly. But if not, you should be aware that your credit score will not go up unless the credit beaureaus see some evidence of responsibly held credit. This is why it is a good idea to get one credit card whose balance you paid off every month. This will help raise your credit score.
- Two types of credit are needed to bring up the credit score. One must develop a history of making timely payments on both “installment credit” accounts and “revolving credit” accounts. “Installment credit” means long-term set payments on a credit account like mortgage or car payments. “Revolving accounts” involve payments on accounts whose monthly payments are determined by one’s current balance, like credit card payments and home equity line of credit payments.
- If you have car payments or a mortgage after bankruptcy, one should consider developing credit using a credit card. Sometimes one of a debtor’s credit card companies may allow that person to keep a credit card after bankruptcy, in exchange for an agreement that some of the debt from that card will carry over after the rest of his debt is discharged. If you pay the balance of the credit card every month, this will slowly improve your credit rating.
- Alternatively, you can build up your credit score by getting a “secured credit card.” This is a credit card with your bank that is secured by an account balance to ensure that the lender can collect on any unpaid bills.
It goes without saying that one must leave behind all of the old habits that lead to high debt in the first place. One must make a budget and live within it. Sometimes this may involve taking on an additional job to make sure that all of one’s financial obligations are met on a timely basis.You may contact our office for a free consultation with an experienced bankruptcy attorney with regard to whether this or another type of bankruptcy may be appropriate for your situation.
Picture courtesy of AskMrCreditCard.com
May 28, 2009
If you have a regular income and, after paying off all of your necessary expenses, you have some money left over to pay down your debts, the court will “restructure” your debts over a 5 year payment plan with little or no interest. The major advantage of this type of bankruptcy is that you will be able to keep all of your assets and will not be forced to liquidate them to satisfy your debts.
100% of secured debt must be paid off or made current during this payment plan. This refers to debts which are secured by a specific piece of property like a car or home. With regard to these secured debts like a mortage, the payment plan will give you time to become current and avoid foreclosure. These overdue amounts must be fully paid at the end of the five year payment plan.
Non-secured debts, on the other hand, like hospital bills, credit card bills, lawsuit judgments and payday loans will only be paid back over the payment plan period according to how much you can afford to pay. When you complete the payment plan, most unpaid balances of these debts will be discharged by the bankruptcy court.
Over the course of the three to five year plan, you will make the ongoing agreed-upon payments to your creditors and they may not try to collect more than they are entitled to under your Chapter 13 payment plan. Once you complete all payments during the five year period, the court will grant you a “full discharge” of your outstanding balances.
However, as with Chapter 7 bankruptcy, the discharge will not absolve you of the obligation to pay certain non-secured debts like child or spousal support obligations, most student loans, and many tax obligations.
Other related Posts:
- Who Should file for Bankruptcy?
- Which Type of Bankruptcy Should I File?
- Chapter 7
- How Do I Rebuild My Credit After Bankruptcy?
Picture courtesy of torontobankruptcytrustee.com
May 27, 2009
In order to qualify for Chapter 7 Bankruptcy, you must pass the “means test.” That means that if your income is less than the median income in your county, you qualify to apply for bankruptcy protection. In order to find out if your income is above or below the median income for your area, please contact our office and one of our experienced bankruptcy attorneys can apprise you of where your income falls in the context of the “means test.” If, however, your income is above the median income for your county, you may still qualify, but additional information that you provide will have to be.
When one files for Chapter 7 bankruptcy, the court appoints a trustee who will collect and sell (“liquidate”) all non-exempt property and distribute the proceeds to the appropriate creditors. Any remaining dischargable debts will be discharged at the end of the process.
The definition of “exempt assets” varies from state to state, but in New York, the following assets are generally exempt from liquidation in Chapter 7 bankruptcy:
- $2,500 in cash and $2,500 in clothing and household furniture, or $50,000 in equity in a home that is located in New York and is the principal residence of the debtor
- a car with up to $2,400 in equity,
- “qualified” retirement plans, such as 401ks and 403b plans,
- up to $600 in work tools
- personal injury compensatory recoveries to up to$7,500 (not including pain and suffering)
- security deposits
Any excess equity in your home or car, above the levels outlined above, must be “cashed out” in order to pay your creditors. It should be noted that certain debts are not dischargable in a bankruptcy proceeding. The following debts are among the most common that generally may not be discharged:
- Child Support
- Spousal Support
- Back Taxes
- Most Student Loans
- Who Should File for Bankruptcy?
- Which Type of Bankruptcy Should I File?
- Chapter 13
- How Do I Rebuild My Credit After Bankruptcy?
Picture courtesy of NateBurnsteinlaw.com