Published Sunday, February 7, 2010 @ 12:54 pm

In the Bad Ideas for the Bankruptcy Bound series, you’ve received an introductory look at the many reasons why it’s never a good idea to hide, or attempt to hide, a bankruptcy filing from your spouse. In later discussions we’ve seen how to avoid many of the pitfalls and pratfalls of filing for personal bankruptcy, including transferring property, using credit and avoiding creditors. Here, we’ll expand on why automatic bill payments from your checking account can lead to a loss of precious control for the bankruptcy bound.

Without a doubt, the ease and convenience of having recurring monthly bill payments paid through an automatic deduction from a checking account has made the time-saving process a no-brainer for many time-stretched citizens.  From car payments to credit card bills, automatic bill pay seems a trusty deduction process that avoids snail mail send outs, freeing up time, and peace of mind, to move on to bigger and better things.

But many argue that “free time” is precisely the problem for many cash-strapped citizens.

While auto pay allows for other things, it also frees up space for financial matters to go unnoticed. Precisely the same logic applies in credit card spending: you pay for items without the immediate financial repercussions, and pressing conclusions, that you’re spending money you don’t have.

Not thinking about fiscal matters is not only the exact opposite thing a cash-strapped person needs to do, but it also leads to a continuous cycle of avoiding the painful, but necessary, lessons of budgeting funds and reacting to changing financial circumstances: precisely the same denial of dire financial straits that put so many in a poor economic condition in the first place.

Like a credit card, having an automatic debit of a car payment, or gym fees, or house note, taken directly from your checking account, deprives you of the ever-important opportunity to think, however briefly, about the quality (and quantity) of your spending.  The auto pay acts like a thief in the night, taking from your precious and limited funds without concern or awareness for your balances. Too many of these “takings” can wreck monthly finances and take away a person’s power to prioritize each precious payment.

As such, in addition to making budgeting difficult, automatic bill payments from your checking account also take control away from the debtor—removing any option to determine when to pay which creditor and how much. This small fact can have a major impact on basic needs as auto pay can give your gym membership payments priority over that of your mortgage or car notes.  Not only that, but depleted accounts can mean substantial upturns in interest when credit card bills come due unexpectedly through the auto pay process.

What’s worse, if you’re considering bankruptcy, automatic bill payments can be especially inconvenient in terms of losing track of who’s getting what. Long story short, auto pay plus bankruptcy can mean you unwittingly pay out to creditors from whom your debts are discharged. For example, once you file for bankruptcy, non-exempt bills currently paid by auto pay will be discharged—either through a bankruptcy discharge of the underlying debt, or through a Chapter 13 plan to pay back debt incrementally.  Untracked auto payments can mean your creditors get payments they don’t deserve—especially if it takes transactional time to cease the automatic  debits.

So whether you’re filing for bankruptcy or not, begin 2010 by taking control of your personal finances. Pay your bills with your checkbook, confronting your debt head-on.  After all, it’s your money—treat it like you own it, and remember to “check” before you “spend.”

If you are considering bankruptcy, knowing a qualified bankruptcy attorney can also help you make the right spending decisions, yielding the right kinds of support, information and insights—at a low cost— for a financially viable and secure future.  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Sunday, February 7, 2010 @ 7:43 am

Facing foreclosure.

Escalating medical costs.

High interest credit crunch.

Rising unemployment.

And that’s just January 2010.

While times are admittedly tough for everyone—with the poor getting poorer and even the recently rich and famous falling on hard times—a truly unique phenomenon of the recent global recession and continual economic downturn is how catastrophic it’s been for our country’s middle class, driving many in the majority further and “further from the American Dream” and, in some cases, “directly into poverty.”

As The Huffington Post reported this week in Laura Bassett’s insightful article “Middle Class No More, Families Struggle to Fight off Homelessness,” those in power are not blind to the desperate bind of average Americans: “President Obama, in his remarks to Senate Democrats on [February 3], pointed out that the middle class was hurting even before the recession. ‘Part of the reason people are feeling anxious right now, it’s not just because of this current crisis — they’ve been going through this for 10 years. They’ve been working and not seeing a raise. Their costs have been going up, their spouses going to the workforce — they work as hard as they can. They’re barely keeping their heads above water. They’re trying to figure out how to retire. They’re seeing more and more of their costs on health care dumped in their lap. College tuition skyrockets….They are more and more vulnerable, and they have been for the last decade, treading water.’”

As part of Huff Post’s Bearing Witness 2.0 project, the online aggregator has culled a host of local stories of formerly middle-class folks who are now “struggling to stay afloat.” If you or someone you know is similarly situated, you’re encouraged to e-mail your story.

One such troubling tale is that of construction worker Troy Renault who, along with his wife and five children, has been forced from their 1900 square foot home in Lebanon, Tennesse into a donated 215 square foot trailer nestled in a local campgrounds. The cause of their “slide into homelessness?” Renault lost his job two years ago and the family was forced to make difficult choices. As Renault told Mike Osborne for Voice of America News, “You wind up starting to think to yourself, ‘Okay. Do we go ahead and make the house payment and keep a roof over our head but have no lights and no water, or do you go ahead and keep those utilities on and forego the house payment, and hope that you can get it caught up?’ And it just kept going where it got further and further behind until we wound up losing the home.” Osborne writes: “Tammy Renault says her family is getting a crash course in what it means, socially, to be labeled homeless. ‘It’s being called names. It’s being ridiculed. It’s running into people that have seen you in your highest and are not even speaking to you anymore because they’re too afraid for where you are and don’t know what to say.’

Stories like the Renault’s are made more difficult with the onset of winter, as many former middle class citizens, and now, newly disenfranchised, are forced to make decisions of life or death.  As Steve Neavling reports in the Detroit Free Press, Michigan area middle classers can barely afford heating bills that would keep their families warm in another brutal Midwest winter. “Unemployed and unable to find work, 42-year-old Jim Lowe received a shutoff notice at his home last week and says he’s unable to pay the $174 that’s overdue. ‘It’s definitely a wake-up call,’ Lowe told Neavling. ‘We’re three months behind on all of our bills. I just pray this gets better soon.’ State and local agencies estimate an unprecedented 150,000 metro Detroiters are at risk of having their heat shut off if they don’t receive help paying their bills. The number of people seeking state assistance so far this winter jumped 30% over last year at this time, according to the state Department of Human Services.”

And yet while unemployment, arrears in a mortgage, and other unexpected challenges for members of the middle class may be life-altering, they need not be life-threatening. Bankruptcy provides, in the form of Chapter 13 and Chapter 7,  an undeniable array of options for those with mounting debt and facing foreclosure.

The key is knowing who can help. A qualified bankruptcy attorney can assist proud, but struggling, citizens to conquer their fears of losing it all.  Specifically, the bankruptcy attorneys at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button. We’re here to help.

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Published Saturday, February 6, 2010 @ 12:31 pm

“It’s the same old story,  same old song and dance my friend’ -Aerosmith

Award-winning financial columnist Don McNay recently wrote an online article for The Huffington Post about the perils of overspending, entitled “Like Lottery Winners, Pro Athletes Also Blow Big Money.” In it, the part-time structured settlement consultant who has worked with injury victims, lottery winners and others who receive very large sums of money, has observed that some 90% of them will run through their money in five years or less; within two years of retirement, 78% of NFL football players are bankrupt or under financial stress; and 60% of  NBA basketball players are broke within five years of retirement—all “running through their money faster than a crazed lottery winner.”

In this blog, McNay ponders the question many of us wonder: why are these people so compelled to blow big money?

To answer it, McNay references the Sports Illustrated article entitled, “How (and Why) Athletes Go Broke,” which relays that one reason for the downfall of many pro athletes are the people who are advising them and hanging out with them.  McNay writes:

“You can’t choose your  “friends” by their ability to serve as your Yes-men.  In fact, a true friend will tell you when you are screwing up.  You need friends who like you for who you are, not for your wallet. Professional sports figures attract flunkies for many reasons…. Someone needs to tell sports figures that if a person REALLY wants to be your friend, he doesn’t need to be on your payroll. I have many friends.  But none of them get paid for that ‘privilege.’”

The author also points to a second symptom of this larger-than-life status: an innate overconfidence that the well will never dry up, and that the money will always be there.

“Sports stars also get caught in the same trap that others with big money fall into.  They think the money is going to last forever.  Someone who gets a lottery jackpot or injury settlement is only going to get it once.  As I told one injury victim, “You are only going to get hit by a truck once in your lifetime.  You need to make sure that this money is there for all your lifetime.”

Sports stars often think they will play forever, but the average career of an NFL player is only four years.  The careers end, the money runs out and they are not prepared for the sudden fall.

Sports stars often have an attraction for risk.  A young, professional athlete is the epitome of self-confidence.  Those who make it to the professional ranks were probably stars in grade school, high school and college.  They have never had anything go wrong in their entire lives.

Until they start investing big money. Overconfidence is an affliction that plagues many on Wall Street.  It is the primary reason we are in an economic crisis.  The problem is even worse for sports stars since they generally don’t have the education and experience that the Wall Street crowd has. When overconfidence is combined with lack of knowledge, disaster strikes.”

In these tough economic times, you may be asking why should you care about the downfall of formerly wealthy sports stars and Powerball pickers? The answer is clear: the same principles apply to your money as well as their millions. And no one says it better than McNay:

I would tell a professional athlete the same thing that I would tell anyone….Plan on the money you have lasting for the rest of your lifetime.  Assume you’ll never get another nickel.  Dump all the “friends” and hangers-on.  Don’t be spending to keep up with the Joneses. If they develop and stick to a sound financial game plan, they can avoid being another “same old story.”

If you’re in over your head, consider bankruptcy as way to start fresh. In North Carolina, contact the Law Offices of John T. Orcutt for a completely free debt consultation. Call 1-800-899-1414 today or visit www.billsbills.com.

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Published Saturday, February 6, 2010 @ 8:29 am

As someone facing serious financial difficulty, learning how much money is made by the huge banks to which you owe money can be frustrating. While we understand that we need to be accountable for our decisions, it stings to realize that profit models are often based on customers going into debt. Therefore, we can’t help but a feel a bit had, like the rube who just bought a cure-all tonic from the traveling pitchman selling from a horse and buggy.

CNN.com published an article recently that described what it deemed the “biggest rip-offs” in today’s society. We thought it relevant because knowing how some of these products are sold may encourage you to quit buying, using or subscribing to them and in the process, start saving more money to pay down debt or keep rebuilding after bankruptcy. We’ve summarized a few here:

Text messages
Wow. Rapidly replacing e-mail as the communication tool of choice for everyone under 25, text messaging has seen nothing short of a meteoric rise in usage in just the last 24 months. It’s an entirely new communication vertical, spawning marketing strategies and literally changing the way cell phones are developed and sold.

No doubt you have seen teenagers, maybe even your own, thumbing madly away on their mobile device, ignorant to the world around them. Well, with every OMG and TTYL the cell phone companies are LOL. Really loudly.

Text messages, which are causing cell phone bills nationwide to climb to record amounts, cost wireless phone companies roughly one-third of a cent to deliver. However, they cost you on average up to 20 cents to send and 10 cents to accept. That’s a 6,500 percent mark-up. :(

“Free” Credit Reports
Here’s one that stings. In a time when the nation is collectively reeling from a historic recession, when foreclosures are rampant, bankruptcies booming and no one’s credit rating is safe, several organizations are profiting off of selling you your own personal financial data.

You know the biggest name, Freecreditreport.com. The cheesy songs and redundant commercials sure do hit their target. But what they don’t do is sing honesty. At this site, and others like it, your credit report is not free, it’s simply provided for you in return for a monthly credit monitoring service. It’s like the cable company telling you HD programming is free.

Chances are, if you are worried about your credit report, you can’t afford another $15.00/month. The company is owned by Experian, a credit reporting agency, which means it costs them nothing to give that report to you. Let this sink in: a representative for the company had this to say: “We do realize there are a very small percentage of consumers who genuinely do not understand they have signed up for a credit monitoring service. We work to resolve issues with these consumers on a case by case basis.”

For a truly free report, as provided by law, go to: annualcreditreport.com

Movie popcorn
On the lighter side, it’s no surprise that movie food is expensive. Heck, they don’t even hide it. However, the movie industry is set up so theaters see a very small cut of the ticket proceeds. Therefore, concessions are their true money maker. Popcorn, for example, has a 900 percent mark-up, costing about $.06 to make and around $6.00 to eat. Many theater owners consider themselves to be in the concession business, not the film industry. As the recession continues its grip on the country, watch for more theaters to start offering beer and wine.

If you reserve a night out at the movies for the occasional reward for good financial behavior, skip the concession stand. Sneak in a bottle of water and some gum. Your cholesterol level will thank you.

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Published Friday, February 5, 2010 @ 12:07 pm

Foreclosures have become a plague across the country, sickening the economies of small towns, the general contractor industry and even the commercial real estate industry. No facet of the real estate world has gone unaffected.

Whether your home was foreclosed upon or your mortgage lender granted you a short sale (negotiated permission to sell your home for less than what is owed), it was probably considered a tremendous relief to drop the proverbial financial anchor tied around your neck.

However, thousands of Americans once in the same boat are now finding that the tide is again rising around them, as banks and lenders are coming back months later for the remainder of what is owed on the home. The most common occurrence of mortgage companies coming back for the difference is happening after auctions when a home did not sell for enough money. But it’s also happening after bank-approved short sales.

A woman in Virgina, who legitimately short sold her home after a divorce and her commission income plummeted as a result of the recession, was shocked to receive a letter from an attorney stating she owed the bank another $65,000 months after the sale closed. Called a “deficiency judgment,” the extra amount owed eventually led to her having to file for bankruptcy.

It is a common belief, and in most cases the truth, that a short sale ends a commitment to owing any more money on a mortgage. However, banks are finding a way to come back for more through the use of deficiency judgments. Often, a former homeowner doesn’t get notified of the judgment until months later.

And, believe it or not, some banks will wait until you have become more financially stable before pursuing the deficiency.

Making matters worse is that the practice of short-selling, which is the most common cause of a deficiency judgment, isn’t just a strategy used by those who took out a sub-prime loan or who are facing foreclosure. Homeowners with standard mortgages who simply watched their home value fall can use a short sale, even of just a few thousand dollars, to get out from under their mortgage.

A number of factors also contribute to whether or not your lender will pursue a deficiency. For example, the foreclosure rate of your home state can play a role, as can the presence of any additional liens you may have had on the home, like a home equity line of credit or second mortgage.

Still, because a deficiency judgment can follow you anywhere and lead to the garnishment of wages and serious credit report marks, it is essential for you to make certain that your short sale or foreclosure is indeed the end of your relationship with that lender.

But without a promise in writing, are you really going to trust the lender’s word that your debt has been extinguished? The only way to ensure a lender does not try to collect from you after a foreclosure or short-sale is to coordinate foreclosure through a bankruptcy. In bankruptcy, you can surrender your interest in the property, ending any possible future liability should the property sell for less than your mortgage.

And despite what your bank has told you, you don’t need to short sell your home. Obviously, your credit is already going to take a hit from conducting a short sale, even if you haven’t missed any payments. Going through the hassle of a short sale with no perceivable benefit for you or your family is just senseless. The only beneficiary of a short sale is the lender, who saves on the expensive legal costs of a foreclosure. Do you and your family a favor, talk to a bankruptcy attorney today and discuss your rights under federal bankruptcy law.

In North Carolina, contact the Law Offices of John T. Orcutt at 1-800-899-1414. With convenient offices in Raleigh, Durham, Fayetteville and Wilson, we’re close to you.

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Published Friday, February 5, 2010 @ 10:06 am

Try as we might to understand some the esoteric banking principles that contributed to the recession or give the industry any benefit of the doubt, the folks on Wall Street just keep giving us reasons to believe they are, and will forever be, drastically out of touch with the way the rest of America lives.

Last year, CitiBank, one the nation’s major banking services players, announced a plan to provide customers with a truly free checking account, provided some account usage stipulations were met, in an effort to attract new accounts and to do their part in helping us stave off the effects of the recession. However, come November 2009, an announcement was made that additional fees would be applied to individuals that carried less than $1,500 in all accounts.

The fees were going to be applied to “EZ Checking” and “Access” accounts. The products would allow customers who made at least two monthly online bill payments or used direct deposit to not be subject to maintenance fees and per-check charges.

Needless to say, this did not sit well with a lot of people. Nor did it pass the smell test for the New York State Attorney General’s office. Citing that the bank did not make it known within a reasonable timeframe that the fees would kick-in, Attorney General Andrew Cuomo managed to convince the bank to suspend any impending costs for consumers who had signed up for the accounts.

Those who registered for one the “free accounts” can continue to bank free of charge until the end of January of next year. Despite the case being tackled in New York State, customers across the country are eligible to continue using their accounts without being subject to the announced fees.

Cuomo, in a press conference about the settlement, spelled it out clearly for CitiBank customers. “If you signed up for free checking, the bank can’t change the terms and must extend the offer for a reasonable period of time. We are defining reasonable, in this context, to be for one year.”

The practice of surprising consumers with short notice announcements of interest rate hikes or banking fees is exactly what led to the recently enacted credit card reform. Far too many Americans have been subject to incentives that promise free services and discounts only to have them yanked away at the moment it hurts the most.

There is nothing wrong with a company making money. However, doing so with deliberately vague or misleading tactics is an entirely different story. There is not one in the industry that believes CitiBank intended to continually provide its customers with free checking; not in this economy. And sure, their marketing is most likely perfectly legal. But is it ethical?

These tactics can lead those teetering on financial ruin right over the edge and often into bankruptcy. Worse yet, it can severely disrupt the plans of a person emerging from bankruptcy who was seeking affordable checking options.

Consumers continue to be victimized in today’s post recession-landscape. And while Washington is doing what it can to adjust mortgages, ease bankruptcies and fix unemployment, there seems to still be too many sharks and plenty of guppies. Stay on your toes, folks.

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Published Tuesday, February 2, 2010 @ 3:29 pm

It’s almost February and ‘tis the season for thinking about tax time—even more so if you find yourself considering the benefits of bankruptcy. So, if you believe bankruptcy is the right option to help you start fresh in 2010, in addition to trying to get your 2009 taxes filed in a timely manner, and wondering whether you can discharge any income tax debt in your bankruptcy filing, you may also be thinking about how you can protect your precious tax refund from creditor claims.

But, just in time to file (for taxes and/or bankruptcy), here are some timely tips for protecting your tax refund:

Alter Your Exemptions
If you’re expecting a larger tax refund in the same year you plan to file for bankruptcy, your first best step is to alter your tax exemptions and allowances in the months prior to a bankruptcy filing. Increasing your exemptions now means you’ll receive more money in your paycheck to use throughout the year and less money in the form of a lump sum tax return. In addition to the benefit of being able to apply that money to necessities throughout the year, that’ll be less money available for creditors to seize at the time of any necessary bankruptcy filing.

Apply for Advanced Earned Income
If you receive what’s known as an “earned income” tax credit you can also head off some bankruptcy issues by providing your employer with a W-5.  This special tax form allows you to receive your earned income credit on a monthly, weekly or quarterly basis. And like the tax refund, this process disburses this money directly to you, keeping your money out of government coffers and potentially out the hands of awaiting creditors.

Know Your Refund
While some can’t wait to file, many people time their bankruptcy for a time following the potential for receiving a non-exempt, but sizeable, sum.  As such, when considering your bankruptcy, it’s important to determine what your refund will be. Depending on whether you’re receiving a generous refund, you may consider holding off on your bankruptcy filing until you have had an opportunity to use the refund on your family’s necessities—spending the money on food, clothing, medical co-pays, car repairs, etc., keeping all receipts as you spend.  In the alternative, if you are planning to file for bankruptcy, do not use your tax refund to pay back relatives or friends, large sums of unsecured debt to any one unsecured creditor, or purchase luxury items, all of which could cause a problem with your bankruptcy filing in terms of creditor claims.

Know the Rules for the State You’re In
Your own state’s laws could mean your refund is partially or fully exempt from creditor claims. As a result, it is essential that you consult with a qualified bankruptcy attorney to review your individual bankruptcy situation in and around tax time. This consultation can assure you’ve attempted to protected your precious tax refund from every imaginable angle.

If you are considering bankruptcy, knowing a qualified bankruptcy attorney can also help you with additional tax decisions, yielding the right kinds of support, information and insights—at a low cost— for a financially viable and secure future.  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at http://www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Tuesday, February 2, 2010 @ 2:30 pm

Many of our clients automatically assume they will lose their rental property if they file for bankruptcy. Isn’t that the whole idea of bankruptcy? That you give up everything you have, with a few exceptions, in exchange for getting the debt collectors off your back?

Well, no. Many factors come in to play in determining whether or not you will be forced to sell your rental property, including whether you file chapter 7 or chapter 13, how much money you owe on the property and how much income you receive from it.

Let’s start with chapter 7. If you file chapter 7, you get an exemption for the equity in your primary residence – how much depends on the state you live in – but rental property doesn’t qualify for the standard residence exemption. Therefore, you will only be able to protect the property from sale if you can cover it under your available wildcard exemption. The North Carolina wildcard exemption is $5,000.00 per filer- not much. However, your state may have additional protections if you own the property jointly with your spouse. In North Carolina, if you own the property jointly with your spouse, the property is only subject to claims of joint creditors. If all of your debt is in the name of one spouse or the other, the property may be protected- regardless of the amount of equity. Talk to a experienced bankruptcy attorney, who can examine how you hold title and if you have any joint debt.

But what if you don’t have any equity in the house, or minimal equity? What if, for example, the house is worth $100,000 and you owe $120,000, or even $99,000? The trustee’s job is to determine whether or not there is money for your creditors, not to take away everything that belongs to you. He will determine the property’s worth, then subtract the projected sales costs, selling it and paying taxes on the proceeds. If it’s not worth the trustee’s time and effort, it’s unlikely that he will try to sell it.

With Chapter 13, there are additional caveats and concerns. In general, you should be able to keep your rental property in a Chapter 13 filing. In fact, since the rental property is not your primary residence, you might be eligible for cramdown under chapter 13 – meaning that if you owe more than the property is worth, the bankruptcy judge is able to alter the terms of the mortgage to reflect the property’s current value rather than the amount you originally agreed to pay for it. This could lower your monthly mortgage payments, as well as the long term amount you have to pay to the bank for the property. Cramdown isn’t allowed on primary residences, but it is allowed on other secured debts, including rental property.

Do note, however, that rental property can, under certain circumstances, cost you money. The trustee in a Chapter 13 case will look at all the costs associated with the property – your mortgage payments, plus taxes, insurance, upkeep and repairs. If these costs outweigh the income the property brings in, the trustee may object to your plan on the basis that the money you’re spending on the property should be distributed to your unsecured creditors. In such a case, surrendering the property may be your best option. However, this is a very fact-sensitive issue and depends on how your jurisdiction interprets very complex provisions of the bankruptcy code. Only an experienced bankruptcy attorney can advise you on your specific situation. Bottom line- if you’re deeply in debt, talk to a bankruptcy attorney and get the real facts. In North Carolina, call the Law Offices of John T. Orcutt. Convenient office locations in Raleigh, Durham, Wilson and Fayetteville. Call today: 1-800-899-1414 or visit www.billsbills.com for more information.

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Published Tuesday, February 2, 2010 @ 7:49 am

The Triangle is a well-known national business center. With major universities driving innovation and a healthy collection of global technology and pharmaceutical companies touching all of its borders, history tends to be on our side in times of financial worry. Our area is known for entering recessions late and coming out of them sooner.

However, all those big companies, six-figure jobs and our collective entrepreneurial spirit has not done much to curb the rate of bankruptcies in Wake County, the heart of the Triangle.

The Triangle Business Journal reported recently that in 2009, Wake County bankruptcies grew by almost 37 percent during the last year. The total number of filings, both personal and business, is now at its highest level since 2005, when scores of Americans filed in order to avoid strict legislative changes that added a significant number of legal hurdles to the bankruptcy code.

In October alone of that record year, 1,210 bankruptcy filings went on record in Wake County. The total for 2005 was still significantly higher than 2009’s, coming in at 4,036.

The United States Bankruptcy Court for the Eastern District of the state, which counts all areas from Wake County to the coast, reported 2,961 Wake County bankruptcies for 2009. The year prior tallied 2,170. For the entire district, the court reported 11,592 bankruptcies. A little more than half were individual Chapter 13 cases and Chapter 7 filings totaled 4,532.

There were 142 Chapter 11 business reorganization cases. Chapter 12 bankruptcy, a section of the bankruptcy code pertaining to family fishing and farming businesses, saw only five cases.

In Wake County, where growth has always been a concern, the housing market drove a number of current personal and business financial collapses. Developers, appraisal companies, real estate agents, contractors and mortgage brokers were all deeply affected by the reach of the real estate crash. Many neighborhoods around Wake County remain unfinished, showcasing empty cul-de-sacs with “available lot” signs barely visible through knee-high weed creep and vacant streets that lead to long-settled dirt mounds.

The real estate industry has seen a culling of sales professionals like never before. Many Triangle-area professionals who switched careers to latch on to the real estate sales train found themselves catching it right as the market dropped into a seemingly bottomless valley of recession.

Chief Judge of the Eastern District court, Randy Doub, attributes the rise in part to the housing industry. “Much of it is related to the downturn in the home-building industry. The trend in the filings is upward.”

Wake County, which includes Raleigh, is not the only component of the Triangle that experienced a dramatic rise in 2009 bankruptcies. Durham and Orange, which are blanketed by the Middle District, saw increases of 20.5 percent and 44 percent, respectively. Orange County includes the towns of Chapel Hill and Hillsborough.

The numbers are scary. Being on the front lines, we can clearly see that for many of Americans, not much has changed since the recession began. Jobs simply are not coming back fast enough. The more fearsome revelation is that many positions will never come back; instead, they will remain forever lost in the debris of a shattered U.S. economy.

If you’re one of the many North Carolina residents struggling to find your financial footing, you need to speak with a qualified bankruptcy attorney. Call the Law Offices of John T. Orcutt for your completely free, no-obligation debt consultation. 1-800-899-1414 or visit www.billsbills.com. Convenient offices in Raleigh, Durham, Fayetteville and Wilson.

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Published Monday, February 1, 2010 @ 4:46 pm

You may have read on the blog, or elsewhere, that many are calling our current economy a “middle class recession.” This is because the numbers are way up on bankruptcies filed by those who make more than $60,000 per year, up 6.9 percent from 2008. Bankruptcies on the whole are up 36.5 percent from this time last year.

So why does it matter how much money a person makes when filing bankruptcy? Well, because bankruptcy is often considered an escape route for the financially unreliable or worse yet, “something poor people do.” It’s just not true.

Today, bankruptcies are increasing among people in the real estate profession, namely developers and agents. When the housing bubble dissolved, so did the incomes for a lot of American families.

There are different types, or “chapters” of bankruptcy for a reason. Basically, some versions are better suited to different situations. Chapter 7, for example, is typically filed by those who may have lost a job or for some reason may not have regular source of income. It wipes out all debts, but also mandates a person dispose of their “non-exempt assets” as a way to repay creditors to whatever extent possible. If you have equity in property beyond available exemption limitations, you may have a “non-exempt asset”.  Many states’ exemptions, as well as the federal exemptions, provide some measure of protection for everything from your home to retirement accounts. It is not often the case that a family has assets beyond what available exemptions can protect.  Even if available exemptions do not cover all of a person’s property, Chapter 13 provides a way to pay the equity above available exemptions to unsecured creditors, so that a person may keep his property, if he can afford to do so.

For those who are still earning a living or at least have a source of money, Chapter 13 creates a three- to five-year payment plan. Your plan payment will largely consist of secured debt, like your car and mortgage payments. Because the plan payment can include your attorney fees, Chapter 13 is an attractive option if you do not have enough up-front money for Chapter 7 attorney fees.

Maybe you’re giving some thought to a debt-settlement firm instead of bankruptcy. Sure, it’s natural for you to want to negotiate your way out of debt. Unfortunately, many of these companies position themselves as an alternative to bankruptcy that will save your credit. More often, however, these debt settlement companies end up doing far more damage to your credit than if you had simply filed for bankruptcy from the start. Remember, just because you’re in a “debt-settlement” program, your creditors will continue to report your missed payments to the credit bureaus. A bankruptcy, while causing an initial hit to your credit score, will stop the negative reporting and allow you to rebuild your credit score faster.

Bankruptcy is an organized, legal process with pre-defined results. Debt settlement firms function under very little regulation and ask for payments before all the debts are settled, therefore the incentive to settle the debt is not as strong as if they were paid based on results or after everything is taken care of.  Thus, your “debt settlement” is by no means guaranteed.

And one more point on debt settlement agencies: the IRS considers forgiven debt as taxable income. In contrast, debt erased as part of a bankruptcy is not taxable.

Another important point about bankruptcy has to do with timing. It’s key that you don’t file too early or wait too long. Start by simply adding up what you owe and making a simple estimate on what it would take to pay it off yourself. If the discrepancy seems impossible to make up, or would force you to sacrifice your family’s needs just to make a dent in your debt load, then consult an experienced consumer bankruptcy attorney.

On the other hand, don’t wait until the car has been repossessed or the foreclosure notices start arriving. Use your head, remain calm, and speak with an attorney. The bankruptcy concept itself is fairly straightforward.  The process however, requires a good deal of legal expertise.  Engage it wisely.  Take time to understand the basics of filing.

From the Law Offices of John T. Orcutt.  Helping families through bankruptcy since 1995. Call today to set up a free initial debt consultation in one of our 4 convenient office locations. Raleigh, Durham, Fayetteville and Wilson.

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Published Monday, February 1, 2010 @ 4:15 pm

Can your landlord evict you if you declare bankruptcy? That depends on the circumstances. If you’re not behind on your rent, your landlord may never have to know about your bankruptcy. As long as you keep paying your rent, it’s not really his business. A landlord can’t evict you just because you filed for bankruptcy.

If you are behind on your rent, however, the landlord is in a different position. If he’s already completed the proceedings for eviction, the landlord can proceed to evict you, despite the bankruptcy. Some states do not allow you to challenge this procedure. In states where you can challenge it, the proceedings are fairly onerous: you must file a paper stating that state law gives you the right to tenancy if you pay all the back rent, and immediately pay any current rent that is due. Then you have 30 days to pay all the back rent that you owe. If you don’t comply with these regulations, then eviction proceedings can continue. Note, too, that this doesn’t apply in the event that the owner can prove you’ve been doing drugs on his property or damaging it.

If the owner hasn’t yet filed for eviction, you’re in a much stronger position. Once you file for bankruptcy, the court imposes an automatic stay, which prevents the landlord from evicting you. The landlord can, however, apply to the court to lift the stay. In this case, eviction proceedings could begin in 2-4 weeks. You can use that time to look for a new place. Also, remember your rights during this time: the landlord cannot lock you out or remove your property until he gets a court order; he can’t barge in and he can’t threaten you. The sheriff can serve eviction papers, but she can’t arrest you.

If the landlord doesn’t apply to the lift the stay, you will have the length of the bankruptcy proceedings before eviction proceedings resume. Once again, we have the 2005 bankruptcy law to thank for this tilt of the law in favor of the creditor against the debtor. The law specifically allows for a ‘fast track’ proceeding to make evictions easier during bankruptcy.

Note, however, that filing for bankruptcy can still be helpful if you’re behind in your rent. If you owe back rent, that is included as a part of your unsecured debt – to be discharged in a Chapter 7 bankruptcy, or paid out over time or partially or fully discharged in a Chapter 13 filing.  Any rent that comes due after you file for bankruptcy won’t be included in the petition, however, and you will remain responsible for it.

As a final point, there are a few rare cases where your landlord might become involved in your bankruptcy even if you’re current on the rent. If you paid a rent deposit when you moved in, you have to list it as an asset. Unless it’s an extremely large security deposit, however, it’s most likely exempt and the trustee won’t bother with it. In addition, if you’ve filed for Chapter 13 bankruptcy, the trustee will examine your lease. Most likely he will approve it; moving is expensive and it’s not in your creditor’s interest to have you shelling out money to find and move to a new place. You’d only be forced to move in the unlikely event that you’re paying way over market value for your apartment and there are an abundance of cheap places available.

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Published Monday, February 1, 2010 @ 2:14 pm

One thing you may already know about most court proceedings, is that parties usually have the option to represent themselves without the aid of an attorney. This is called appearing ‘Pro Se’, which, in Latin means “for oneself”. In a bankruptcy proceeding, when money is tight, the thought of saving money by cutting out attorneys and their fees can be pretty tempting. But there are many reasons this is a bad idea.

Bankruptcy can be complicated and bankruptcy judges are a picky bunch. They expect that the preparation of the voluntary petition, schedules, or other documents will be done accurately and on time. A bankruptcy attorney can usually prepare the documents in much less time than it would take for you to figure it out on your own. He or she knows what items of personal property should or should not be included on the petition to avoid a dismissal of your case, and how to apply the Means Test to your situation.

Some courts may give pro se applicants some minor concessions or leeway so that the case can be moved along, but they are careful to avoid crossing the threshold of what may arise to the level of the Court doing the job that a litigant – or his or her counsel – should be doing. Also, many different communications are exchanged between a party and the court, the trustees reviewing the petition, as well as the creditors. Your actions, or lack thereof, during this time, can seriously affect the outcome of your petition, and may even lead to the worst outcome- a dismissal of your case.

Normally, when you retain an attorney to handle a bankruptcy, the attorney will contact creditors on your behalf and attempt to stop any embarrassing, annoying, or even harassing debt-collecting activities. Usually this stops the behavior, even though legally, the creditor still has the right to contact you. He or she can also give you advice on seemingly innocuous activities that could negatively impact your case, such as drawing on retirement funds to pay bills.

Then there is the significant issue of knowing the law. Since there are several sets of rules governing bankruptcy proceedings, trying to navigate all the rules at once can get very confusing. All parties to any bankruptcy proceeding must comply with the Local Bankruptcy Rules, the U.S. Bankruptcy Code and the Federal Rules of Bankruptcy Procedure. Failure to do so will result in dismissal of the case or other sanctions. Other important aspects of law can come into play at any time during this process as well, such as statutes of limitations, transfer of assets, or tax issues that can have a big impact on your proceedings as well.

Finally, many bankruptcy proceedings are entangled with other legal issues, such as divorce, civil court action, or foreclosure, which could affect the outcome of your bankruptcy proceeding, and vice versa.

Before deciding to gamble with your future, talk to an experienced bankruptcy attorney about it. You will find the cost well worth it.

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Published Monday, February 1, 2010 @ 10:48 am

The decision to file for bankruptcy is never an easy one, especially where married couples are involved. Spouses must settle issues of dishonesty, mistrust, and frustration–and that’s even before any of the complex steps of collecting necessary documents and filing papers.

But the story for insolvent couples does have a caveat: joint bankruptcy protection. Married debtors can file their cases jointly with one trustee, one filing fee, and one total case. Debtors can bring to the table their joint debts as well as debts they hold only in their name. To be a joint case, the debtors need only be legally married.  And they must be a man and a woman.

Sounds simple right?

Well, for thousands of individuals living in America today, the latter designation raises difficult questions—especially in the growing number of states that recognize same-sex marriage or its legal equivalent (“civil unions”). Yet, as the constitutionality of laws and amendments forbidding marriage equality continue to be litigated across the country, same-sex debtors seeking bankruptcy relief  face even tougher challenges.

Because it is generally accepted that the Defense of Marriage Act (“DOMA”) would preclude the filing of a joint bankruptcy petition by a same sex married couple, these folks face two very different options: (1) make two separate bankruptcy filings, or (2) pursue the right to seek bankruptcy relief as would an opposite-sex married couple. 

While the second option would be a precedent-setting endeavor, fulfilling the true meaning of marriage equality, in reality pursuing this groundbreaking goal is largely antithetical to the larger motivations of most bankruptcy bound individuals, gay or straight: getting out of debt.

In practice, a married same-sex couple will need, more than their heterosexual counterparts, the assistance of a qualified bankruptcy attorney to pull together all of their required financial information;  ensure that it is complete and their disclosures accurate; and research and prepare a case that anticipates a variety of motions attacking the joint filing. Regardless of what “party-in-interest” files the case (as defined by the Bankruptcy Code and common law), the filing will likely be challenged, even before a judge reaches such substantive issues as income, assets, liabilities, and creditors.

In this case, like others for same-sex couples seeking right-giving precedents, while the Bankruptcy Code provides one standard, constitutional arguments will inevitably reveal others that need to be briefed and raised.  Same-sex couples must expect that any decision in their favor will be appealed, perhaps more than once to a US District Court, a Bankruptcy Appellate Panel, a Circuit Court of Appeals, or maybe even the Supreme Court of the United States.  For debtors, this type legal wrangling adds ,ore time, more fees and inevitably more stress to what is undoubtedly an already nerve-racking situation.

As a result, for a married same-sex couple facing the need to file bankruptcy, the next steps can mark a tough decision: file singly or fight the system; seek your family’s financial security or a denigrated group’s fundamental rights; moving forward for your family or moving your family forward.  In the end, changing the current state of the law will take either an act of Congress or one or more very brave and very patient married same-sex couples who find themselves drowning in debt and who–in spite of these debts—also feel empowered to fight the good fight.

The state of marriage equality is not yet where it should be in the United States, and this seriously affects the legal rights of same-sex families.  But until the law changes, same-sex couples need expertise in the handling of their cases.

If you live in North Carolina where same-sex marriage is not legal, but are still considering bankruptcy, the bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Monday, February 1, 2010 @ 10:23 am

If A Wealthy Developer Can Walk Away From The Mother Of All Underwater Mortgages, Why Can’t You?

Rachel Beck, national business columnist for The Associated Press, asked this very question in a recent article upon finding that heavily capitalized developer Tishman Speyer Properties was able to simply “walk away” from 11,232 Manhattan apartments because it couldn’t pay its mortgage, under the guise of “good business,” while at the same time, in the same country, Rick Gilson, a college custodial supervisor in South Dakota, resists walking away from the mortgage on his mobile home, fearing he’ll be considered “a deadbeat.”

As Beck found, “Those two borrowers face the same financial dilemma: Their mortgages far exceed the values of their properties. Yet one gets to walk away without guilt, while the other can’t. Mr. Gilson is scared to dump the mortgage on his mobile home. He owes $31,973, but the home is only worth about $14,000.” “I have 12 years of money put into this property that I will never get out,” said the 50-year-old Gilson. “But I am still paying because this is what I have been told to do. That’s what I think is right.”

As Beck illustrates, up to this point, the focus of the real estate crisis has been on individual Americans facing their own personal mortgage meltdowns. Today, one in four U.S. homeowners (nearly 11 million Americans) are underwater on their mortgages.  While some experts believe it makes sense to walk away if you’re deeply underwater as it’s not necessarily worth it to keep paying a mortgage when they can find comparable rental housing for less, the argument against walkaways is not only a dropping credit score, but that they will wreak economic havoc. Banks will have made more bad loans, will then make fewer loans and home prices will continue to plunge.

Obviously the rules are different, though, for what Beck calls “the walk away of all walk aways.”

That title goes to the 56-building Stuyvesant Town and Peter Cooper Village complex, the largest single-owned residential area in the city. Commercial real-estate firm Tishman and its partner, investment, paid $5.4 billion for the property, hoping to make money by converting rent-regulated apartments into high-priced luxury condos.

Enter the current housing crash and now the property’s value sits squarely at $1.8 billion: a difference not simply underwater, but drowning.  While Tishman has said that it was turning the property back over to creditors to avoid filing for bankruptcy protection, Tishman has failed to restructure $4.4 billion in debt, unable to find another buyer. So, Tishman exits the deal with a mark on its reputation, and yet a conciliatory $33 billion in assets.

Residential homeowners like Rick Gilson don’t have it so easy. With a mobile home that started depreciating the minute he moved in over a decade ago, he rents out the property just to make the payments, living in another home with his wife.

“I get so stressed over this,” Gilson told Beck. “It’s like the elephant in the room and there is nothing you can do about it.”

While the unfair truth is that real-estate tycoons can default on a $4.4 billion mortgage, but dis-similarly-situated individuals can’t walk away from a $31,000 loan, average Americans do have choices.  As homeowners languish waiting for more immediate mortgage help, many are turning to bankruptcy to stop foreclosure and other creditor actions. For reliable bankruptcy advice that you can trust, contact The Law Firm of John T. Orcutt. And to find out more about your bankruptcy options, visit The Law Offices of John T. Orcutt’s “Things to See and Hear” information.

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Published Sunday, January 31, 2010 @ 6:10 pm

As the mortgage crisis continues on, ironically, President Obama seemed right at home at the podium during his 2010 State of the Union address just as millions of Americans face losing their home. As a result, many concerned citizens sought in the President’s national address any signs not only of “hope” or “change”—expressions made famous during his campaign days—but also second year specifics about what a new year would mean for the millions of average Americans, just like them, facing imminent foreclosure.

In that address, the President laid out an ambitious agenda attempting to attack one specific problem from every conceivable angle: the terrible economic squeeze on America’s middle class.  One portion of his plan mentioned helping Americans stay in their homes, retain their home’s value or absolve home debt, as the President works to “lift the value of a family’s single largest investment.”

President Obama revealed he intends to “step up” programs that encourage re-financing for affordable mortgages. Yet, while the President made clear that he would be increasingly busy in his second year on many fronts, many critics charged that his speech, as well as homeowner assistance policies to this point, has been short on specifics of how to put government to work for those average Americans facing the loss of their homes.

Under the President’s current and primary homeowner assistance plan, the Home Affordable Modification Program (or HAMP),  “responsible borrowers” who have unpaid principle balances of less than $729,750 (for one unit) from a mortgage originating prior to January 1, 2009 may qualify for loan modification assistance if your mortgage payment is greater than 31% of your monthly gross (pre-tax) income.

In addition to flack the President received for only providing housing help for the fuzzily defined “responsible homeower,” apparently the plan, as of last month, has been less than successful for even the most responsible of borrowers. According to a recent Treasury Department report, 27 percent of the 650,000 homeowners taking part in the mortgage modification program are now delinquent on their mortgage payments.  In fact, only 1,711 participating homeowners attempting to avoid foreclosure have been able to convert their modifications to permanent status. Homeowners facing foreclosure and needing help to secure a loan modification have been encouraged to visit http://www.makinghomeaffordable.gov.

To clarify, this type of organized modification effort does not constitute a refinance as the President spoke of; it’s simply a retooling of the mortgage, including a term that might be extended or an interest rate that could be adjusted.  Yet last night, the only thing the President said about the help distressed homeowners might get was this:

The steps we took last year to shore up the housing market have allowed millions of Americans to take out new loans and save an average of $1,500 on mortgage payments. This year, we will step up re-financing so that homeowners can move into more affordable mortgages.

The President never specifically mentioned HAMP, how HAMP might need time to work, or how it could be fixed.  And, most notably for some, he did not mention the word “foreclosure,” at all.

So, as foreclosures continue to escalate, American homeowners may feel that they have increasingly fewer options other than bankruptcy. Of this option, the President had a more definite response, with recent efforts to allow bankruptcy proceedings to renegotiate all debts, including home mortgages.

As American homeowners search for more immediate and specific mortgage help, many are turning to bankruptcy to stop foreclosure and other creditor actions. For reliable bankruptcy advice that you can trust, contact The Law Offices of John T. Orcutt for a totally FREE consultation at 1-800-899-1414.

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Published Sunday, January 31, 2010 @ 6:04 pm

I’ve never known a person who believed that declaring bankruptcy was an easy solution to their problems. I have never heard anyone suggest that bankruptcy should be used as a tool to intentionally shaft creditors out of spite, or to gain power. Nor have I come across anyone who garnered some sort of perverse pleasure in leaving legitimate creditors, be they large companies or individuals, to twist in the wind.

What I have seen is honest, hardworking people from all walks of life: young, middle aged, or nearing retirement age, who stay trapped and buried under a mountain of debt out of a sense of honor and duty to repay it, even with very little prospect for doing so. These people cannot progress in their lives. Their families are strained, their health is often compromised. They have no choices in their lives because of the debt and they are, in effect, slaves to it. Many may slave for years.

These are people who believe declaring bankruptcy is morally wrong. Who do everything in their power to pay their bills and take care of their families.

Until one day, something happens to make it impossible for them to continue to serve the debt. Sometimes a new crisis occurs, such as the loss of a job, a health problem, an elderly parent needing help, a natural disaster, or other calamity. In some cases, that event is the creditor’s demanding higher interest rates, fees, or minimum payment amounts, despite a person’s diligence and timeliness in making their monthly payment, which pushes the debtor to the breaking point.

Any number of things could become the “straw that breaks the camel’s back” which eventually lands the debtor in a bankruptcy attorney’s office feeling defeated and humiliated.

How did bankruptcy become an issue of morality? Well, most US citizens are Christian or have hailed from a Christian, or other strong religious tradition, which teaches a high regard honesty and integrity in one’s dealings with others. The Psalm 37:21 seems to make a pretty blunt case against the morality of the bankruptcy option: “The wicked borroweth, and payeth not again” (Psalm 37:21). Pretty strong deterrent for the faithful, wouldn’t you say?

But what of the idea of being enslaved by debt? Is this any more morally correct? Especially when creditors have had free reign to pile on additional fees and ever increasing interest rates for so long.

Returning to scriptural reference, the writers of the Old Testament recognized and warned against the imbalance of power between a creditor who has it, and debtor, who doesn’t. Deuteronomy 15:1-11 enacted what is essentially the first bankruptcy law. It states that at the end of every seven years, debtors must cancel debts. In 1800, Congress used this as the basis for the first bankruptcy statutes when it said that a person can file bankruptcy every seven years.

Modern bankruptcy laws propose to alleviate the imbalance of power between the debtor and creditor by sheltering debtors and their families through a series of protections, including the discharge of debts and the ability to exempt certain property from creditors.

Bankruptcy does not forgive debt. It grants a discharge to the honest but unfortunate debtor. There is a significant moral difference. A discharge simply prevents a creditor from enforcing the debt against the debtor, as in a forceful taking of the debtor’s property. There is no proscription against a debtor repaying a debt that has been discharged in bankruptcy if he becomes able to do so later.

It is unfortunate that the issue of debt forgiveness is still morally suspect. This brings about difficult policy as well as personal conflicts that are not easily resolved. Scripture does make it clear that a creditor, who is likely in a more powerful position than his debtor, should do everything possible to keep from embarrassing or crippling his debtor, including forgiving the debt. For those uncomfortable about resolving issues scripturally, the question could be settled another way, by asking: as a society, what benefit do we receive when large segments of the population are enslaved to smaller, but more powerful ones?

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Published Sunday, January 31, 2010 @ 5:56 pm

Bankruptcy is not just for people and businesses. Town, cities and other municipalities can file for court protection from creditors as well.

Historically, city government bankruptcies are rare. However, in one of the worst economic situations in a generation, it has become more common. Almost two years ago, as the recession was really starting to collect steam, the city of Vallejo, CA filed for bankruptcy. The Bay area suburb of San Francisco cited that rapidly diminishing tax revenue and the housing crisis was too much for it to handle. Cities rely on the housing market just like the business world. As values fall and the number of people moving away outpaces the number of those moving in, things become challenging in a hurry.

Additionally, a falling tax base makes it exponentially more difficult for a city to pay its employees. Firefighters and police for example, start to suffer in response as pay raises are halted, positions are cut and equipment remains outdated and unavailable. Debates get heated, city leaders lose support and lawsuits get filed.

Now, a couple hundred of miles south, The City of San Diego, one of the nation’s most visited cities and the mecca of all things sunny and 70, is generating a bankruptcy buzz.

After seemingly bouncing back from a number of years under water, many have begun to believe the city’s financial situation to be a sound example of how to turn things around. However, the picture is not as clear as most believe.

A volunteer task force established to address the economic problems of the city, the Citizen’s Fiscal Sustainability Task Force, is not sold on their hometown’s long-term stability, as evidenced in a recent report it published that stated should the city not be able to accomplish a 12-step plan it created, San Diego would “be forced to consider seeking injunctive relief by filing for Chapter 9 bankruptcy protection to allow the city to put its long-term fiscal house in order.”

Chapter 9, according to www.uscourts.gov, allows for the court-structured reorganization of municipalities, which means towns, cities, villages and school districts. Chapter 9 varies quite a bit from the more common chapters of the code, as the law contains no provisions for the surrender or sale of assets or creditor distributions.

Despite the task force’s ominous report, the debate is swelling like the area surf.  Some believe the ongoing discussions to be, as put by San Diego Mayor Jerry Sanders, “… baloney.”

In his January 31 column, the Mayor stated the bankruptcy option was merely a deliberate smokescreen to avoid tackling the city’s serious need for reform. He also stated, “But the truth is talk of bankruptcy impedes progress on real substantive pension reform, and it poisons the climate for thoughtful solutions to our structural deficit.”

Mayor Sanders went on the record in a recent speech to label the bankruptcy discourse as “extremist.” Others who oppose the Chapter 9 option believe the city needs to curb executive pensions and health care and redirect those funds toward infrastructure spending.

Nevertheless, the very task force assembled to look deeply into the checking account believe otherwise. Certainly their input should not so quickly dismissed.

Mayor Sanders’ column went on to include figures arranged by a city attorney who estimated a bankruptcy for the city could cost taxpayers up to $300 million and still not solve the big pension drain. He also cited that Chapter 9 bankruptcies will present added challenges if a judge happens to dismiss the case under the auspices that the city has not done enough before filing.

Stay tuned. Sunny San Diego may start to get cloudy.

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Published Sunday, January 31, 2010 @ 7:38 am

There is so much we do not know about the things that put us into debt. From credit card fine print to car lease agreements and as the last few years have demonstrated, even the most basic facts about our home loans.

To anyone with the ability to fog a glass, it is more than evident that our collective ignorance on these matters is precisely what causes our country to carry so much personal debt. And despite the government’s best effort, whether in credit card reform or mortgage assistance programs, the only way to solve our financial problems is for the American consumer to educate itself as to the practices, jargon and bureaucracy that obfuscate the critical, debt-inducing rules of credit and loan products.

However, education, specifically student loans, is one of the things helping to add weight to America’s debt anchor. They have caused countless bankruptcies and yet remain a non-dischargeable debt under Chapters 7 and 13 unless you can prove that paying them will cause a substantial hardship on your family. As if the bankruptcy itself was not enough hardship.

Those in the student loan profit circle are hesitant to ever address the debt issue in public, despite it’s prevalence on so many household balance sheets.

In a Wall Street Journal column, an expert on the student loan debt problem cited a 2003 report by the Department of Education with some staggering statistics. It stated that default rates for loans that cover 4-year, 2-year and for profit colleges are 25 percent, 35 percent and 45 percent. In simpler terms, around one in three students default on the loans they accepted to pay for education.

Not sinking in yet? Try this: the student loan default rate is higher than credit cards, sub-prime mortgages and even over the counter payday loans. Yet, the issue is never introduced or addressed in Washington circles, even in the midst of today’s middle class stabilization efforts.

Even though the Department of Education (DOE) created and published the report demonstrating the nation’s difficulty in repaying student loans, it later boasted complete confidence in a full return on every loan it issues plus a 20 percent boost in interest and fees on forbearance, adjustments and default penalties.

Now, mix in organizations like Sallie Mae, who buy, issue and oversee billions in student loans and also own collection companies to track down those who can’t pay, and it’s easy to understand just how much money is being made on the back-end of our college diplomas.

The higher-ups in Washington are in on it too, as a number of very common consumer protections that apply to most loan vehicles, such as the bankruptcy code and truth in lending requirements simply can’t be found in the fine print of your student loan. Thus, the DOE is the lone source of control when it comes to student loans, wielding powers over your wallet and financial stability like no other wing of our democracy.

And it’s only going to get worse.

Reuters is reporting that the rate of student loan growth in the last two years is close to setting records, jumping 29 percent. In total, there are now close to 69 million student loan accounts open in the United States. This is primarily because the recession has put so many people back into the classroom to refresh job skills, obtain additional degrees or change careers. Additionally, with so many parents out of work, more children have to apply for loans to cover their schooling.

In total, the country now owes close to $527 billion in student loans. And just about every penny of it will be repaid. Plus interest.

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Published Saturday, January 30, 2010 @ 3:37 pm

This unrelenting economic downturn has been rough on all Americans—whether they be single, dating, engaged, married or widowed. But, as anyone who has ever been married already knows: money can be the main cause of many a marriage’s marital strife. As a result, in this especially difficult economic climate—full of job insecurity, rising mortgage costs, health care uncertainties and other mounting money woes—times have never been tougher for couples pushed to the brink of bankruptcy.  Many are left to wonder, who or what can help?

Yet, no matter how tough the economic tide, laying blame to your spouse for your family’s financial problems can be a dead end road that often leads to, at best, long-term distrust, and, at worst, the dissolution of the entire marriage. As unfortunate as it is that one or the other spouse may be the cause of the couple’s insolvency, fortunately, the power of the Bankruptcy Code can provide hard-hit couples with a clean slate by which to not only discharge their shared debt but also provide a unique opportunity to learn valuable lessons in budgeting and other healthy financial behaviors, together. These lessons include:

Bankruptcy Ends the Blame
Unlike a disgruntled spouse, bankruptcy does not blame either party or search for a decisive reason behind a debtor’s insolvency.  Instead, a bankruptcy filing means an accounting of all relevant debts and responsive solutions to how to discharge them. As a result, this process takes the pressure out of solving previously insurmountable problems with debt and creditor claims, granting a clean slate by which one spouse can be forgiven, another can forget, and both can move forward into a financially viable future.

Bankruptcy Ends Arguments at Their Source
As anyone who is married can attest, marriage and debt can make for a very volatile mix.  Bankruptcy removes divisive topics like debt from most marital arguments—discharging creditor claims and giving the previously cash-strapped couple the chance to begin to save for their next best steps.

Bankruptcy Protects Marital Assets
Bankruptcy shields a married couple’s most valuable assets and precious income using the power of an “automatic stay.”  This court-mandated suspension of creditor claims can shield the marriage by protecting the innocent spouse from the financial indiscretions of the other—preventing wage garnishment, creditor lawsuits, and unwieldy interest fees.   

Bankruptcy Can Sooth Marital Stress
Finally, in addition to wiping away many of the most pressing debts affecting many couples these days—and thereby relieving some of the fodder for arguments and discord—being honest with your spouse, or each other, about a dire financial situation, will provide a healthy framework for your relationship. This honest dialogue sets a perfect stage for a safe financial future and provides a strong marital precedent to overcome other challenges that both husband and wife may face in the weeks, months, and years ahead.

If you are considering filing for bankruptcy to strengthen your union, as well as your finances, knowing a qualified bankruptcy attorney can also help you make the right spending decisions, yielding the right kinds of support, information and insights—at a low cost— for a fiscally viable and secure portfolio.  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Saturday, January 30, 2010 @ 12:36 pm

Another company bites the dust, as the economic downturn takes its latest–and one of few– entertainment victims.

Air America Media ended its live programming operations this week. The company touted as the “only full-time progressive voice in the mainstream broadcast world” acknowledged its Chapter 7 bankruptcy filing in its final broadcast:

It is with the greatest regret, on behalf of our Board, that we must announce that Air America Media is ceasing its live programming operations as of this afternoon, and that the Company will file soon under Chapter 7 of the Bankruptcy Code to carry out an orderly winding-down of the business.

Thank you.

The moral of this radio story?  In tough economic times, bankruptcy affects the best and brightest of us.  It is essential to understand that bankruptcy can work for you…and isn’t a failure… but the possible key to a stronger and more productive financial future. For more information on finding a smooth transition to the next step through bankruptcy visit the experienced bankruptcy lawyers of The Law Offices of John T. Orcutt.

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Published Monday, January 25, 2010 @ 6:57 pm

Ugh. Debt. These days most Americans are sick of hearing the d-word. And who can blame us? Americans are in more debt now than ever before. Avoiding debt seems impossible…there are so many things you can’t even do without credit cards or loans that we now take debt as a matter of course. Despite our negative feelings about debt, Americans want to repay what we owe. In fact, this noble instinct is what keeps some people from filing for bankruptcy when they desperately need to do just that. Not only are people afraid of having a negative impact on their credit scores (which in fact may already be in the basement), they also feel that the right thing to do is pay back debt.

When it is possible, paying back debt is the right thing to do, no doubt about it, but most people who declare bankruptcy don’t end up in a bad situation because they made negligent mistakes or don’t feel like paying; instead, dealing with the curve-balls life throws at us can prevent us from meeting obligations. By the time people opt to declare bankruptcy, they are not unwilling to pay back debt they simply can’t. The thing to remember is that creditors know that and take these factors into account. This is the reason creditors charge higher interest rates when they extend unsecured credit. If bankruptcy is the right decision, you shouldn’t allow misgivings about not paying certain kinds of debts hold you back.

What many people don’t even consider is that declaring bankruptcy can actually help you pay back debts. Consider this example: Say you are considerably behind on payments that are secured by your home or your car. In such a situation, filing for Chapter 13 bankruptcy can allow you to reach a compromise between what is feasible and what your creditors expect. In a Chapter 13 bankruptcy, a repayment plan could save your home from foreclosure by allowing you to catch up on back payments. Similarly, a Chapter 13 repayment plan can allow you to catch up on back payments for your car, helping you to avoid losing your vehicle to repossession. In both situations, the creditor is receiving payments for the credit they have extended, and you are working with a plan you can actually meet. This also applies to debts that you would not be able to discharge in a bankruptcy, such as child support payments and back taxes owed to the IRS. A Chapter 13 plan can help you make up for missed payments in the past while easing the pressure of being hassled and worried about never catching up. Eventually, with a good Chapter 13 plan, you are more likely to succeed in getting current on all your required payments.

A strategically timed bankruptcy can also help you in those situations where you may be able to pay off all your debts by selling assets, but you simply need more time. With aggressive creditors hassling you constantly, you may end up selling assets for less than they are worth, just to do so more quickly or to avoid penalties. This could land you with debts still to be paid and no assets to boot. A typical example is if your home is foreclosed on. Your home is not likely to sell for what it is actually worth if it goes through foreclosure. This means that you will no longer owe the mortgage company, but you will also lose the value in your home, if any, that exceeded the value of the mortgage. By declaring bankruptcy and forestalling foreclosure, you reap the actual benefit of your investment and potentially pay back everyone you owe.

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Published Monday, January 25, 2010 @ 6:49 pm

If you are facing some serious financial problems, a guess that you are short on cash is not much of a stretch. Some people hesitate to file for bankruptcy protection because they believe they need to hire a bankruptcy attorney, but think they won’t be able to afford one. While they are absolutely right about the first part–an experienced bankruptcy attorney is essential to a successful bankruptcy–they may be surprised to learn how affordable legal services can be. Still, like most good things in life, the assistance of a qualified bankruptcy attorney won’t come for free; so how can you pay for it?

Don’ t forget that this is the time of year when employers start sending out those W2’s. Like many Americans, you probably use your payroll tax deductions as a kind of savings plan, paying out more than you will owe at the end of the tax year and collecting a nice refund. For people in financial problems, that refund may end up getting spent before it arrives, but before you commit the money to anything else, take a good look at your finances–what better way to spend a small “windfall” than on your long-term financial success and peace of mind? At least read to the end of this article before you even think about getting a “refund anticipation” loan and throwing away good money on debts you can no longer handle.

But wait–If you file for bankruptcy protection, do you even get to keep the funds from your income tax refund? In some cases the answer is no: the bankruptcy court will consider the funds part of the estate and may apply it toward, for example, paying some debts. The bankruptcy court will count the refund as applying to the year when you file bankruptcy and any year ending before that. Thus, someone who files for bankruptcy protection in November 2009 will have to keep an eye out on the taxes he is allowed to file until April 15, 2010. If you are expecting a return, a good way to coordinate your efforts is to consult a bankruptcy attorney early so that you can start to plan for a successful bankruptcy filing.

One way to make sure you will retain the benefit of your year-long sacrifice to the payroll deductions is to elect to apply the amount you are refunded toward the following year’s taxes. Some courts may take a dim view of this tactic, however, so it’s best to run it past your bankruptcy attorney before striking out on your own. A better way to make sure you retain the benefit of your taxes is to time your bankruptcy carefully, so that you are able to put the money to good use before filing. Good timing is essential to a successful bankruptcy, yet another reason the advice of an experienced bankruptcy attorney is essential. An attorney will help you time your bankruptcy so that you can spend the money from your income tax return rather than see it land in the clutches of your creditors.

If you are behind on your taxes, child support or on student loans, the situation becomes a little trickier because the government may be able to hold on to your refund and apply the money toward those kinds of priority debts. If you are in this kind of financial trouble, it is especially important to contact a bankruptcy attorney early so you will know what to expect.
And remember, you do NOT need to rely on a refund anticipation loan to get the money quickly. These loans are a little like payday loans in that they’re a lot like a rip-off. The IRS now allows you to file your taxes online and to sign up for direct deposit of a refund to your bank account, so if you are entitled to a refund you can have it in hand in a matter of days. You don’t have to pay a penny to opt for this fast, convenient method, so before you know it, you could be putting that tax refund toward a very valuable investment: your financial freedom.

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Published Monday, January 25, 2010 @ 6:33 pm

It’s tax season. Which means that for most people, it’s time to realize just how much we give to Uncle Sam every year. For some, the prospect of a refund provides a glimmer of hope that some new money is coming in soon to pay off debts.

Just a quick little note on your tax dollars before we get into the meat of this post: it is actually better to owe just a little bit of money after filing because that means that you have used more of our your own money throughout the year instead of giving it all to the government. Sure, a nice windfall come April is a nice thing. But keep in mind that it’s your money—you’re just getting it later. And, when it comes to investing, “money now” is always better than “money later.”

Because it’s tax season, we thought it important to discuss how taxes and personal bankruptcy can relate to one another. It is possible to use bankruptcy as a way to get rid of large, outstanding tax obligations but it’s not as easy as discharging a few grand in credit card debt.

Chapter 13 bankruptcy in most cases requires you to pay back what’s owed within your monthly payment plan and Chapter 7 rarely allows for the complete expulsion of your tax debts. (If you’re not sure of the differences between Chapters 13 and 7, simply do a search on our blog for each.)

There are, however, some precedents set for removing tax obligations as part of a bankruptcy. Although we encourage you to understand that it is a complicated process and the results are not always what you may be hoping for.

(Understand this post is only scratching the surface. Only in person can we provide a full breakdown of taxes and bankruptcy.)

One reason tax debt and bankruptcy tend to get tangled is that past due taxes can fall into all three categories of debt type: Dischargeable, Nondischargebale priority debts, and Nondischargeable priority debts.

Provided you filed your taxes on time, legally and provide no evidence of tax evasion other than legitimately being unable to pay, you can discharge tax debt in Chapter 7 and 13. Still, what’s owed must be more than three years late and assessed more than 240 days before you file. That means that you were officially declared late and in debt that many days before you filed. This ensures the IRS that you are not declaring just to get rid of a recent tax debt.

BUT (you knew there was one), that 240 day window starts only after the last extension expires, not when the original debt was assessed. Other impediments to that three year time-frame include a 90-day addition if a previous bankruptcy case of yours was still open while you were assessed the tax debt; the addition of any time the IRS was prevented from collecting as a result of a court ordered due process hearing plus an additional 90 days; and any time that a debt assistance professional formally asked the IRS to temporarily halt collection efforts.

Basically, any effort you make to delay the collection of tax debt, even if perfectly legal, counts against your ability to discharge tax debt in a bankruptcy.

The key to bankruptcy and taxes, like all things in life really, is to be completely honest and upfront. Any attempt to hide or even coyly plead ignorance will be considered an attempt to obscure or defraud the court and even worse, the IRS. Not being able to pay your taxes, especially after a mid-year job loss, is a common thing. Don’t make it worse.

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Published Monday, January 25, 2010 @ 8:41 am

Part of understanding bankruptcy is knowing who the professionals are that you will meet and deal with along the way. From your attorney to even your creditors, it helps provide a solid foundation of comfort to actually understand the role of those who are playing a role in your financial future.

One of those individuals is the case Trustee, the most prominent member of the bankruptcy process. And, the involvement you have with the case trustee depends on which chapter of bankruptcy you are filing.

As you may know, the 2 main “chapters” are 7 and 13. Well over 95% of all bankruptcy cases filed are filed under Chapter 7 or Chapter 13.

Let’s start by talking about the Chapter 7 trustee.

In every district in the country, there are 1 or more attorneys who have been appointed to act as a Chapter 7 Trustee. These Trustees are also sometimes called panel Trustees. When you file a Chapter 7 bankruptcy, one of these panel Trustees is assigned to your case.

The best way to think of this person is as an intermediary between you and the Court, an attorney whose job it is to make sure you have told the truth, the truth and nothing but the truth, to make sure that you have disclosed everything you are legally obligated to disclose, and to find and sell any ‘assets above exemptions’.

Fortunately, in our experience, in about 98% of Chapter 7 cases filed, there are no ‘assets above exemptions’ to sell. What does this mean for you? Just that if you file Chapter 7, there is very little chance you will lose any property you don’t want to lose.

As long as you have told the truth, disclosed everything, cooperate, and have no assets that cannot be protected by available ‘exemptions’, your contact with the Trustee should be a positive one.

However, the best approach is to assume that the Trustee assigned to your case is not your friend, so that you stay cautious and alert.

In most cases, you are first introduced to the trustee at your 341 meeting, also known as the “Meeting of Creditors”. Technically speaking, this meeting is held to provide your creditor an opportunity (in most cases, one last opportunity) to ask you questions. However, most of the time, none of the creditors show up, and then, it’s just you, your attorney and the Trustee. At this meeting the Trustee will ask you questions necessary to get to know you and your case better and necessary for the Trustee to carry out his or her duties. (There a number of posts here on the blog about this meeting. Take a look.)

Let’s say you are unlucky enough that your case falls in the approximately 2% of cases with more assets than can be protected. In this case, it is important that you understand that it is the Trustee’s duty to sell or dispose of those assets ‘above exemptions’, and to then distribute the proceeds to your creditors. Basically, anything not considered exempt property must be seized and sold by the trustee.

The type and amount of exemptions are, for the most part, set by the law of the State where you live. There are exceptions. Being set by State law, exemptions vary greatly. However, since in 98% of bankruptcy cases filed, there are no assets not covered by available exemptions, the exemptions statutes are, for the most part, fairly generous. However, make no assumptions in this regard. Always, always seek the help of an experienced, full time bankruptcy attorney. Such an attorney will be an expert in what exemptions are available in your State and how best to apply them. Such an attorney will also be able to tell you what is not protected.

The Chapter 7 Trustee is also responsible for tracking down any gifts you made just before filing, whether or not they were made in an attempt to hide assets or not. For example, if your nephew got a few thousand from you for his birthday the week before you filed bankruptcy, rest assured that your Trustee will be looking to get this money back. And, it’s not even safe to pay back relatives or friends prior to filing. These people are generally considered “insiders”, and, subject to certain exceptions, paying back insiders during the 12 months before filing bankruptcy is a “no no”, which will result in your Trustee being forced to try to get the money back.

Chapter 7 trustees are paid by a commission based on the amount of money they recover, so it stands to reason they’ll work hard to find and sell what property they can.

Now, let’s talk about Chapter 13.

The Chapter 13 Trustee, aka the Standing Trustee, is also first introduced to you at the 341 meeting. However, their role is more about ensuring your income is sufficient to pay your monthly Chapter 13 plan payment and that your proposed Chapter 13 plan is properly calculated. Assuming all goes well, it is then this Trustee’s job to collect from you your plan payment and to distribute it to your creditors.

Like the Panel Trustee, the Standing Trustee is paid a commission. However, unlike a Chapter 7 Trustee, the Chapter 13 Trustee gets his commission not from what he takes and sells, but rather out of the money you send in each month. Chapter 13 Trustees do not sell things. That’s just not his job.

The best way to think of your Chapter 13 Trustee is as the Chief Financial Officer in charge of your Chapter 13 plan. He runs the business of your Chapter 13 case. He figures out what is needed, and then accounts for and distributes the money you send in each month.

Your relationship with your Chapter 13 Trustee will be vastly different than the one you would have with a Chapter 7 Trustee. Chapter 7 Trustees live, for lack of a better way of saying it, for what they can “kill and eat”. Chapter 13 Trustee do not. Chapter 13 Trustees live off a percentage of what you send in each month. The Chapter 13 Trustee only succeeds in getting paid, if you succeed in making your payments. Therefore, as a general rule, Chapter 13 Trustees, at least those who recognize, so to speak, which “side their bread is buttered”, will go everything in their power to help you make a go of it in Chapter 13.

In most cases, as long as you make your required Chapter 13 plan payment, you can think of the Chapter 13 Trustee as more of a friend than adversary. He or she still has to do the job, but doing the job includes doing the best that can be done to make sure you do yours and that you get the full benefit of bankruptcy, all the way to the desired “discharge”.

If all of this is confusing and scary, we understand. Bankruptcy law is complicated and complex, to say the least. Need an expert? In North Carolina, there are many, good, experienced bankruptcy attorneys.

One is the Law Offices of John T. Orcutt, serving 30 counties in middle and eastern North Carolina. John Orcutt offers a Free initial consultation at 4 different locations: Raleigh, Durham, Fayetteville and Wilson. Call toll free to 1-800-899-1414 or visit his website for tons of info on bankruptcy: www.billsbillsb.com .

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Published Monday, January 25, 2010 @ 5:50 am

Is Mortgage Cramdown Back on the Table?

Last week, amidst the hectic flurry of the election in Massachusetts and Obama’s announcement of new regulations on banks, another announcement didn’t get quite as much attention: the Obama administration will revamp the Home Affordable Modification Program (HAMP). The program will be streamlined, making it easier to file the necessary documents; for example, borrowers will be able to use pay stubs as proof of income rather than having to provide tax forms.

One of the most egregious policies is already in the process of changing – right now, the fine print of most mortgage modification contracts allows the lender to deny your application and resume foreclosing proceedings, without even informing you of the decision. It seems likely that the reason for this fine print is the hope that homeowners who don’t know their home is headed to foreclosure won’t file bankruptcy and access all the protections it affords them, including the ability to stave off foreclosure. Starting this months, lenders will have to provide written notification to anyone whose mortgage modification application is denied.

However, economists, mortgage experts, state regulators – basically anyone who knows anything about the subject – all say the same thing: the foreclosure crisis is not going to get any better until some form of principal modification, reducing the total amount a borrower owes on his or her house, is implemented. Nationwide, more than 25% of homeowners are ‘underwater’ on their homes – they owe more than the house is worth. And the government programs to help them have been woefully inadequate. The banks have modified a bare fraction of eligible mortgages – only 750,000 of an estimated 3-4 million eligible mortgage holders have received temporary modified mortgages. And that obscures the real number: only 31,000 have received permanent modifications. Some banks have been particularly reluctant to do modifications. Bank of America, for example, has modified a total of 98 mortgages.

Perhaps most ominously, rather than reducing the mortgage principal, more than 70% of loan modifications have actually increased the principal, by adding fees and past due amounts to it.

However, last week, Treasury officials quietly acknowledged that something needs to be done about underwater mortgages. The fact is, mortgage companies pretend to be willing to work with the administration to help homeowners with underwater mortgages but they drag their feet every step of the way. As has been discussed many times, the mortgage companies make more money on foreclosures than they do on mortgage modifications. What’s the incentive for them to change their policies and modify more mortgages? Most experts agree that the only viable plan is cramdown, the process that will allow bankruptcy judges to modify primary mortgage loans in bankruptcy court. Mark Zandi, an economist with Moody’s, says that will save 1.7 million homes from foreclosure. That’s not because 1.7 million homeowners will file for bankruptcy but, under the threat of someone else modifying the loans, mortgage companies will finally move to actually do something about the problem.

Cramdown was resoundingly defeated last year: the Senate voted it down; the House voted for it once but defeated it in a second bill; the Obama administration made no effort to fight for it. But economic realities may force a reconsideration. A new wave of foreclosures could destroy the ‘green shoots’ that suggest the economy may be about to recover. It’s nice to see that the Obama administration might finally be willing to help solve the foreclosure crisis in one place well-equipped to deal with it: the bankruptcy courts.

SOURCES:

http://wonkroom.thinkprogress.org/2010/01/22/can-obama-cut-principal/

my/22modify.html?hp=&adxnnl=1&adxnnlx=1264172466-xNYFHGehA+iIfcrPiTGHNA

http://www.calculatedriskblog.com/2010/01/hamp-changes-coming.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+(Calculated+Risk)

http://wonkroom.thinkprogress.org/2009/12/18/bofas-sorry-defense/

http://www.mcclatchydc.com/227/story/80867.html

http://www.huffingtonpost.com/2010/01/20/state-regulators-foreclos_n_429720.html

http://washingtonindependent.com/42220/white-house-silence-paved-way-for-cramdown-crash

http://www.nytimes.com/2009/05/04/opinion/04mon2.html?_r=3&ref=todayspaper

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Published Sunday, January 24, 2010 @ 6:51 pm

The United States has always been a nation of givers. Despite the recession and high unemployment, approximately 80% of Americans continued to give to religious and/or secular charities. This trend has continued in earnest following the recent catastrophe in Haiti. A new survey released by Zogby Interactive found that 64% of Ameircan adults have given or intend to give to relief efforts to aid to the earthquake-ravaged nation. The survey, released on Martin Luther King Jr. Day, found that 33% of respondents have already made a donation.

Perhaps you’re worried that declaring bankruptcy means you cannot donate. But, in fact, bankruptcy laws protect both debtors’ rights to give back. And now for those affected by the recession or for those bankruptcy bound, there’s even more reason to give back to Haiti.

As The Huffington Post reported on January 22, Taxpayers will now be able to write off charitable donations made by the end of February to Haitian relief efforts when they file their 2009 taxes under a bill President Barack Obama signed Friday. Under current law, donors would have to wait until they file their 2010 returns next year to take the deductions. The measure received final approval from Congress on January 21.

The hope is to encourage more donations.  And now is your chance to answer that call.

According to President Obama and Charity Navigator, an independent evaluator working to “advance a more efficient and responsive philanthropic marketplace,” listed below are prominent relief organizations, all of which are in dire need of donations specifically for Haitian relief efforts.

The American Red Cross has a full-time staff in Haiti, providing ongoing HIV/AIDS prevention and disaster preparedness programs. The Red Cross has already pledged an initial $200,000 to assist communities impacted by the earthquake. They seek additional donations to continue providing food, water, temporary shelter, medical services and emotional support.

Clinton Bush Haiti Fund is the unprecedented collaboration effort at the request of President Obama partnering former Presidents George W. Bush and Bill Clinton to help the Haitian people reclaim their country and rebuild their lives through donations of basic needs– food, water, shelter, and first-aid supplies.

Direct Relief International is a U.S.-based organization that provides medical assistance to impoverished nations. Direct Relief has committed up to $1 million to aid emergency response efforts, including medicine, supplies and food.

Doctors Without Borders is currently on the ground in Haiti continuing their mission as an international medical humanitarian organization working to assist people whose survival is threatened by this catastrophe.

Operation USA operates in Haiti, and is sending additional medical aid, water-purification supplies and food supplements to the hard-hit nation.

Convoy of Hope has established a command center just outside of Haiti’s capital where it is distributing food, water and supplies to the victims of the earthquake.

Oxfam America uses advocacy and education to aid areas in need of assistance. Oxfam is coordinating international aid groups to bring emergency water and sanitation services to Haiti.

Partners in Health has launched the Stand With Haiti campaign, bringing modern medical care to this nation and other countries around the world. Partners in Health has worked in Haiti for nearly 25 years and, since the earthquake, continues to provide medical assistance.

The Salvation Army is mobilizing personnel and supplies to assist in the relief effort in Haiti. The Salvation Army has already dedicated $850,000 in direct aid to the country; further donations can be made online or by calling 1-800-SAL-ARMY. The Salvation Army is also collecting $5 dollar donations by text. Mobile phone users in the United States can text the word HAITI to 52000.

UNICEF saw its offices in Port-au-Prince suffer heavy damages in the earthquake, but is ready to provide relief, deploying essential aid such as safe water, sanitation supplies, therapeutic foods, temporary shelter materials and medical supplies– all to assist in recovery efforts.

World Vision has worked in Haiti for 30 years, and is seeking donations to provide victims with food, water, blankets and tents.

Yele Haiti is entertainer Wyclef Jean’s own charitable organization and has established an online donation site to help victims of the earthquake. Through Jean’s Twitter account, the Haitian native also asks his fans to lend a hand, by making a $5 donation by texting YELE to 501 501.

Want to find out more about how the bankruptcy laws protects givers, givers who may end up needing help themselves? Check it out with the Law Offices of John T. Orcutt. In North Carolina, call for a totally FREE consultation. Call toll free to 1-800-899-1414 or visit their website at www.billsbills.com.

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Published Sunday, January 24, 2010 @ 6:37 pm

Most experts agree, even in a financial meltdown, the fastest way to go broke is through payday loans. But if you’re like many Americans, you may be facing the economic crisis head-on, and whether that looks like a missed mortgage payment or hovering health care bills, a payday loan might seem like an easy way to weather the economic storm.

Not so says Gavin Newsom. In fact, the San Francisco mayor best known for making the case for marriage equality has now made his case (on January 22) to those considering payday lending: “a payday loan company is not the solution.”

But, it wasn’t until I truly delved into how these fast cash operations take advantage of people in need that I began to understand the impact payday lenders have on our poorest communities.

With interest rates as high as 400% APR and a two-week loan term that does not give much of a chance for the loan to be repaid on time, payday loans trap mostly low-income borrowers in a cycle of debt. On average payday loan customers are paying back $800 on a $300 loan, costing consumers more than $4 billion in predatory fees each year.”

Now Newsom is taking on predatory payday lenders by providing alternatives. Working with San Francisco’s credit unions, Newsom developed a new program called Payday Plus SF, an alternative small dollar loan with a maximum interest rate of 18% APR.

“Payday Plus SF is latest in a series of successful financial empowerment and financial literacy programs spearheaded by San Francisco Treasurer José Cisneros. This program builds on an initiative the Treasurer and I launched three years ago called Bank on San Francisco, which has helped more than 45,000 thousand unbanked San Franciscans into checking accounts. Seventy other cities and states across the country are already replicating this program locally. And this week, I met with Treasury Department officials in Washington to talk about replicating Bank on San Francisco on a national scale.

Last month, we launched the Payday Plus SF program at 13 San Francisco credit union locations. This first of its kind program is already showing results.”

Newsom says he created Payday Plus SF to help people like Mark Laws, a low-income San Franciscan who found himself in need of emergency cash. Laws was unable to get a credit card and was living paycheck to paycheck with no savings. After the unexpected death of his mother left Laws scrambling for the funds to pay for and attend her funeral. As a last resort, Laws turned to payday lending for the $250 he needed. A few weeks later, high interest on this loan left Laws unable to pay back the balance. To deal with the expense, he went turned to another payday lender and took out another loan to pay off the first — and so on and so on.

The mayor confirmed that Mark Law’s story is typical -– “99% of payday loan borrowers are unable to pay off their loan within the two-week term” -– and the typical California payday borrower will take out 10 loans in a year before they are finally able to repay the original loan.

But with program’s like the Bay Area’s Payday Plus SF, now there’s hope.

“Mark is now one of our success stories — he took out a Payday Plus SF loan, paid off his debts and is now rebuilding his credit as he makes reasonable monthly payments at his local credit union. We may be the first City to do this, but I know we will not be the last. Predatory payday lenders are a national problem. But with no cost to taxpayers, Payday Plus SF shows what can happen when elected leaders, neighborhoods and the financial community come together to help low-income families in dire, but temporary, financial straits.”

For those folks not fortunate enough to live in San Francisco, there are other options. If you’ve already fallen victim to a payday lending scheme, an experienced bankruptcy attorney can end your cycle of endless spending. To get the big picture on how bankruptcy works and how the laws in North Carolina can help you, speak with an attorney at the The Law Offices of John T. Orcutt.

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Published Sunday, January 24, 2010 @ 6:34 pm

A January 22 government report announced that unemployment rates rose in 43 states in December 2009, painting an all too bleak portrait of the job market—even as the economy continues to grow—and leaving many unemployed Americans bankruptcy bound.  This jump in joblessness marked a sharp turn from November 2009’s numbers, when 36 states had actually reported their unemployment rates fell.

This dire financial news hit hardest at home. North Carolina joined South Carolina, Delaware, and Florida as the four states that reported record-high jobless rates last month—marking more tough times for Tar Heels seeking signs of “help wanted.” North Carolina’s jobless rate has now risen to a staggering 11.2 percent with employment dropping by more than 31,000 positions.

These new figures ended a string of five consecutive months where unemployment had either improved slightly or stabilized and have put the state’s jobless rate squarely at 8^th worst in the country.  A dubious distinction in troubled economic times.

According to WRAL News, as bad as the news is, the actual unemployment rate is likely higher, at least according to North Carolina State University economist, Dr. Michael Walden. “The rise in the unemployment rate was expected, and I think the rate could go higher before it declines,” Walden told WRAL.com.  “However, what was unfortunate in the December report was that the rise in unemployment was totally due to a loss in jobs rather than ‘discouraged workers’ coming back into the labor force and looking for work,” he warned. “The labor force number actually fell in December.“If discouraged workers and underemployed workers (those working part-time only because they can’t find full-time work), are included, then the unemployment rate is closer to 20 percent.”

In addition, like so many struggling states, North Carolina also saw sharp drops in restaurant, hotel and other leisure employment, a sign that consumers are still tentative when it comes to post-recessionary travel, tourism and spending. Nationwide, the United States lost 25,000 leisure and hospitality jobs in December. Of those, North Carolina shed 2,600 restaurant and hotel positions — more than any other sector in the state.

“Certainly, it’s frustrating out there right now,” North Carolina’s Employment Security Commission spokesman Larry Parker told WRAL.

And so the frustration continues, sometimes ending in insolvency.  Each and every week bankruptcy attorneys continue to meet with dozens of Americans in financial distress due to employment woes.  Each time those who have encountered job misfortune come into law offices feeling hopeless and at the end of their rope, perceiving no alternatives to their continuing fiscal faults.  Almost every time, however, it seems more and more when these same clients leave these offices, they finally feel some sense of relief for the first time since their joblessness began; they are reassured that the bankruptcy laws as well as the bankruptcy system offers them the possibility of a new start— at an affordable cost—and with it a financially viable and secure future. In short, bankruptcy relief can end worry and stress for jobless Americans, including many North Carolinians, living on a finite financial brink.

 Knowing a qualified bankruptcy attorney in our areas can also help you conquer the effects of unemployment.  The bankruptcy attorneys at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Sunday, January 24, 2010 @ 10:36 am

It’s almost February and ‘tis the season for thinking about tax time—even more so if you find yourself considering the benefits of bankruptcy. So, if you believe you’re bankruptcy bound in 2010, in addition to trying to get your 2009 taxes filed in a timely manner, you may also be wondering whether you can discharge any income tax debt in your bankruptcy filing.

Well, it’s also time for insolvent taxpayers to take heart. When filing for bankruptcy a qualified attorney will compile a list of all of your debts, including credit cards, medical bills, car loans, mortgage debts, lawsuits and even information about stuff that you think you may owe, but for which creditors have yet to come calling.  In this long list of potential debts and inferences of insolvency, the lawyer will also require information about your taxes, including any federal income taxes you may owe, along with income tax due to your state or to any other state where you may have lived.

This comprehensive look at your debts, including your tax debt, is a good thing.  You are not only required by the Bankruptcy Code to include income tax debt in the common Chapter 7 or Chapter 13 case, but also because, in some cases, your tax debt can be minimized or completely eliminated by bankruptcy.

The question of whether your income tax can indeed be discharged by filing for bankruptcy ultimately depends on how old the tax debt is and when you filed that tax return.  In order to be dischargeable, your tax debt for the tax year in question must meet the following conditions:

• The due date for filing your tax return is at least three years ago.
• Your tax return was filed at least two years ago.
• The tax assessment is at least 240 days old.
• Your tax return was not fraudulent.
• You are not guilty of tax evasion.

For example, say you filed your 2005 tax return showing $6000 in outstanding debt on April 7, 2006.   On April 16, 2009, (three years later) that $6000 became dischargeable, meaning the tax debt could be eliminated in a Chapter 7 filing and treated as just regular old dischargable, unsecured debt in Chapter 13 bankruptcy. If, on the other hand, you did not file your 2005 return on time, waiting until December 15, 2009 to do so, your tax debt would not be dischargeable as of today (January 16, 2010) because fewer than two years had passed since you filed your return. In this case, you would simply have to wait to file bankruptcy until at least December 16, 2011.

Not surprisingly, the rules about discharging tax debt in bankruptcy can be confusing. For instance, only “income” taxes can be discharged in bankruptcy, whereas employee withholding (form 940 and 941) and sales taxes cannot.

Also…tax returns filed on your behalf by the IRS do not count for purposes of discharging tax debt.

And…tax debt that is secured by a tax lien may be dischargeable, but may still need to be paid to the extent that the lien is secured by the things you own. 

As a result, if you’re considering bankruptcy in 2010 and are concerned about the tax implications, including when to file, whether you can keep your tax refund, whether your tax debt is dischargeable, and any other factors in your personal circumstances that might require consideration, it’s important to speak with an experienced bankruptcy attorney who can competently guide you on the right path to the best result.

The bankruptcy lawyers at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Sunday, January 24, 2010 @ 10:25 am

So the impact of your bankruptcy is settling in. You have mixed emotions but underneath, feel confident that it was the right thing to do. The phone has stopped ringing, the mailbox delivers good news (for the most part) and best of all, you can sleep again.

Now that it’s time to get back on track, saving money should be a top priority. And one way to do that is by examining what it takes for you to keep a roof over your head every month, even if you managed to avoid foreclosure. Today, thanks to the real estate crisis which saw developers nationwide building new home homes and apartment communities on every plot of improvable land, it is a buyer’s market. Or in your case, it can be a renter’s market.

Apartments today are not what they were 20 years ago. Heck, they’re not what they were 10 years ago. Amenities like multiple pools, saunas, movie theaters, free Internet Access, fitness facilities, online rent payments and adjacency to high-end retail and entertainment districts make apartment living a very attractive and value-driven living option.

It’s important to put aside for a moment the aura of home ownership. There is without doubt pride in being able to maintain a home. The neighbors, yard space, security—all elements that many consider part of the American Dream.

However, the “dream” is not really home ownership. It’s about seeking a sense of accomplishment and the ability to create opportunity. But that’s not what happened.

Because home ownership was at one time a rare thing, a symbol of iconic Americana, it became the physical manifestation of our desire to experience those concepts. We somehow believed the signing of a mortgage was tantamount to everything our grandparents came here for.

However, the “dream” continued to manifest, morphing into a distorted, material facade of success–yet another symbol of where we like to position ourselves within society. And through the fog of that notion we watched the American Dream derail and plow violently through the psyche of the masses.

Now, as we learned in the crash’s aftermath, people are just happy to be under a dependable roof. And that’s a good thing; because maybe now we’ll realize that upon examination of our cost of living, we’ll realize just how much money we spend on what we were told was the culmination of the American Dream: owning a home.

The point here is that the housing crisis helped facilitate a historic financial demise. It was the marketing of home ownership in the face of viable, more than suitable alternatives in the the apartment market that led hundreds of thousands of Americans into foreclosure. Now all that’s left are faint apologies and the drive to get the Dream back on track.

Today, apartments are plentiful. Nice, well-kept three and four bedroom flats with multiple bathrooms, tile floors and clean carpets. In fact, according to new industry report, there have not been so many available apartments in three decades. The national average vacancy rate (the percentage of vacant apartments of total available) is 8 percent, which is the highest number the reporting agency has ever published as a country-wide statistic.

So do you know what that number means for renters? Savings.

A high vacancy rate means landlords are willing to negotiate to the fill their vacant units. In other words, renters have the upper hand. And for someone trying to save money and build a life after bankruptcy, renting should be a serious consideration, regardless of your current living situation.

Know someone who would also benefit from filing bankruptcy? Keep in mind that the Law Offices of John T. Orcutt offer a totally FREE consultation out of 4 offices conveniently located in North Carolina: Raleigh, Durham, Fayetteville and Wilson. The number is toll free 1-800-899-1414, or suggest they visit the website at www.billsbills.com for information about just about everything there is to know about bankruptcy, how it works and what it means.

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Published Sunday, January 24, 2010 @ 8:18 am

Brent T. White, a law professor at the University of Arizona, has a provocative new study out, “Underwater and Not Walking Away.” He points out that as many as 32 percent of all homeowners are ‘underwater’ on their mortgages – they owe more money than their houses are worth. The media has produced a series of articles decrying homeowners who simply stop paying on these ‘upside down’ mortgages as irresponsible and even obscene. In fact, White notes, less than three percent of people whose primary residences are foreclosed on are people who could have continued to pay their mortgages. There are no discernible difference in foreclosure rates in places where housing prices have dropped steeply. Rather, foreclosure rates closely track unemployment rates, suggesting that it’s generally people who lose their jobs and are no longer able to pay their mortgages who lose their homes to foreclosure.

This is true even when it would make more financial sense for people to walk away. Nationwide, housing prices have dropped 30 percent since their peak in 2006; in some cities, drops have been much steeper. Parts of California, for example, have seen drops of 65%. The result is that many people could pay rent on a new house at only a fraction of their monthly mortgage. Homeowners in this situation could save tens of thousands of dollars by walking away. So why don’t more of them do so?

Emotions of fear, guilt and shame come together to encourage people to act against their own self-interests, White argues. There’s a concerted message being put out not only by the banking industry, but also by the government, the media and even non profit consumer counseling agencies that ‘good people’ live up to their responsibilities and don’t walk away from their obligations. That message is allowing the banking industry to shift not only the responsibility, but also the consequences, of the housing crisis entirely onto the shoulders of homeowners.

Certainly there are some negative consequences to society of walking away – foreclosures tend to cluster in neighborhoods, and neighborhoods with a large number of foreclosed homes often become run down and dangerous. But what about the consequences to society of staying and struggling to pay these huge mortgages? Doesn’t that empower a banking industry that made poor decisions and led the economy into this trap?

White points out that in a stable housing market, a house should be about 15 to 16 times the price of a year’s worth of rent. In some markets, the average mortgage being written was 38 times the price of a year’s rent. Shouldn’t the bankers, experts in housing prices, be held to some account for writing these kinds of mortgages and letting housing prices get out of control?

The guilt, shame and fear that White writes about seems to apply only to consumers. We see this echoed in the way people think about credit card debt and bankruptcy. When consumers are unable to pay their debts, they are somehow shirking their responsibilities; when banks can’t pay what they owe, they find themselves ‘undercapitalized.’

This isn’t to say that financial irresponsibility should be more acceptable. However, maybe we need to rethink the way we hold consumers to a higher moral standard than lenders, and instead force the same financial accountability on all parties.

If you’re considering letting your house go, protect yourself from deficiency liability by filing for bankruptcy. For more information, visit our website www.billsbills.com and call to set up your free initial debt consultation. Serving North Carolina families since 1995, the Law Offices of John T. Orcutt.

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Published Saturday, January 23, 2010 @ 7:15 am

You know your creditors: those nice folks who give you something you want — goods, services, or money — in exchange for your promise to pay them back at a later date.  In practical terms, a creditor can be a credit card company, a bank, a hospital, your local dentist, or any person or company to whom you owe a debt.

But, in these unfriendly economic times, [exactly] what happens when you can’t or won’t pay back that debt? What should you do when your creditors come calling? Can you keep creditors at bay or are you bankruptcy bound? Conquer your fears of dealing with your debt and remember the bankruptcy basics necessary to keep you from a creditor crunch.

Remember: Filing a Lawsuit Against a Debtor is not a Creditor’s First Choice
Keep in mind, creditors normally don’t want a lawsuit any more than you do. In fact, a creditor will not normally file a lawsuit against you until after many months and sometimes years of pursuing you for non-payment. Plus, creditors know that even if they file a lawsuit, it can be quickly neutralized by your bankruptcy filing—dispensing with your unsecured, and in some cases, even secured debt.

To Answer or Not to Answer
When you fail to respond to a creditor’s lawsuit, the creditor will gain a default judgment. This judgment will give the creditor the right to take certain collection actions against you, which could include seizing your bank accounts or garnishing your wages. In the alternative, if you respond to a creditor’s lawsuit—providing an “answer”—it can buy you precious time to secure more savings or take an excellent opportunity to file Chapter 7 or Chapter 13 bankruptcy.

The Consequences of Judgment Day
A judgment is a judicial order that, if it is not obeyed, will invoke legal consequences.  In extreme cases, a failure to pay a judgment filed on behalf of your creditors could result in a bench warrant issued by the court for your arrest. Keep in mind, only bankruptcy can help you avoid this type of judgment.

Settling What Constitutes A Settlement
Creditors file lawsuits because they simply want some kind of payment and, in the process, are often willing to settle for a lesser amount for repayment. Yet, while creditors want these types of settlements, it’s important to make sure your settlement offers are in writing.  Additionally, you should also be wary of so-called “debt settlement” firms who claim they can settle your debts for pennies on the dollar. Remember: you don’t need a firm to settle your debts…creditors filing lawsuits often offer settlement amounts; but the forgiven debt may be taxable. In the end, keep in mind that debts settled or discharged in bankruptcy are not taxable.

Worried About Wage Garnishment?
As mentioned, any creditor who wins a judgment against you can also garnish your wages or seize your bank accounts.  Only bankruptcy can stop your wages garnishment or a bank seizure order to raid your valuable accounts.  If a creditor seizes your wages or accounts after you file bankruptcy, you do have legal recourse and it’s even possible to get those assets back.

Knowing a qualified bankruptcy attorney can also help you conquer your creditors and face your financial fears, yielding the right kinds of support, information and insights—at a low cost— for a viable and secure future.  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Friday, January 22, 2010 @ 7:59 pm

Harvard law professor Elizabeth Warren met with David Axelrod, one of President Obama’s senior advisors, Wednesday night. On Thursday, President Obama announced sweeping new restrictions on the largest banks: they will no longer be able to operate hedge funds and new policies will restrict how large a bank can be. Obama also called for an end to the obscene profits and enormous bonuses at firms that claim any additional fees or taxes would have to be passed on to consumers.

Is there a connection between Warren’s meeting and Obama’s proposed reforms? And, more importantly, could an increased role for Warren in Obama’s administration be good news for people who would like to see better bankruptcy laws and more bank and lender accountability?

Possibly yes, to both. Warren is an expert on bankruptcy who has spent two decades studying not just the economics of bankruptcy but its effect on real people. Her landmark study in the 1990s showed that the majority of people who declare bankruptcy do so not because of profligate spending but because of unexpected life events like divorce, loss of a job or enormous medical bills. Warren admits that it was not what she expected to find, and that this study changed the focus of her research. Her book The Two Income Trap: Why Middle Class Mothers and Fathers Are Going Broke, builds on this idea, pointing out that core costs, like mortgages, health care, transportation and child care have all increased enormously over the last few years. In addition, if families are living paycheck to paycheck on two incomes, they have twice as much chance that one of the breadwinners will lose their job, and then send the family spiraling toward poverty.

Warren has been an outspoken advocate for better bankruptcy laws, and testified against the bill in the hearings before it was passed in 2005. Last year, she was appointed chair of the congressional oversight panel appointed to investigate TARP (Troubled Asset Relief Program). Under her direction the panel has published easily-understood reports calling attention to the Treasury’s failure to ensure that taxpayers receive a fair deal. She’s also proposed a Financial Product Safety Commission, along the lines of the Consumer Product Safety Commission. This commission would be able to regulate financial products like mortgages and credit cards based on fairness, simplicity and appropriate risk. President Obama is insisting that any overhaul of financial rules include this commission; rumors are swirling that he will appoint Warren to head it.

That would be the banking industry’s worst nightmare. The major banks argue that The Financial Product Safety Commission would bring us back to the 1970s, with double digit interest rates and a sharp dip in available consumer credit. But it seems likely that most bankers are more concerned over limits to their bonuses than limits to the average Americans access to credit. Appointing Warren would tell the banks that Obama is serious about regulating banking abuses.

Obviously, the commission hasn’t been created yet, and Warren hasn’t been appointed to run it. But it’s hard not to see that only good things will come of having a powerful advocate for the financial distressed given such a role.

From the Law Offices of John T. Orcutt, helping North Carolina families get out of debt for over 15 years. Call today for your free initial debt consultation. 1-800-899-1414.

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Published Friday, January 22, 2010 @ 5:58 pm

Recent bankruptcy news includes a headline about industry icon MGM filing a prepackaged bankruptcy, which, relative to the movie industry, may carry as much as impact as the General Motors and Chrysler filings had in Detroit.

However, operating with excessive debt is not a new concept in the film industry. In fact, it’s how most filmmakers get started. One has only to ask the nearest independent movie director how he’s funding his latest effort and your likely to hear the words “Visa,” “Mastercard” and “American Express.”

Today, access to the credit market is slowly changing the small film market. Just a couple of years ago, aspiring directors and producers would have little fear about maxing out their credit cards because of the prospect of a major studio discovering their unpolished cinematic gem and putting it on screens across the country.

Hollywood is rife with stories of how the one-time small-time filmmaker thrived on friends’ couches and ramen noodles while making their “dream project.” With banks squashing credit limits and destroying all but one copy of the vault key, the creative collective in California is afraid that the recession is also hampering the future of film, not just the unemployment rate.

And, for those who took the credit card route to financing their films before the recession tsunami swept ashore, bankruptcy has become their best route back to dry land.

On the eve of the Sundance Film Festival, the crossroads of all things independent and Hollywood, little known movie makers are working harder than ever to see their dreams realized turned into record weekend box office gross. Thankfully, those behind the now red carpet event have found a way to deal with the recession’s toll on the individual director by creating a new category called “Next” that is only for those films made on little to no budget. This year, six pictures were selected.

In 2003, two documentary filmmakers made it to Sundance with a piece about children and spelling bees. They used to the limit 14 different credit cards to pay for the travel and production that went into the movie. One of the filmmakers said in a CNN.com article, “Over the course of several months, we hit the road, using our credit cards to fund the project … Then we’d come home between shooting the film, pay down some of the debt and resume shooting.” Their film, once picked up by a major studio, made $6 million.

In this credit drought, some indie producers are turning to a new loan concept powered primarily by the Internet called “crowdfunding.” One site in particular, www.indiegogo.com, allows filmmakers to propose their idea to whomever comes on to the site. They can include clips, story ideas and other production updates. Donations can be of just about any amount. Currently, the site boasts 2,300 projects and more than $200,000 in funds raised.

Crowdfunding has become a big hit with movie folks because it establishes a fan base early on that could eventually contribute marketability and in the end, butts in seats.

Still, the lack of credit has saved a lot of independent filmmakers from going too far into the hole. David Spaltro, a low-budget filmmaker, amassed $150,000 in debt on a total of 40 different credit cards.

“My credit score looks like a batting average. And that’s being conservative,” he said. The film was finished in 2008 and since then, he has been able to pay off a substantial amount of what he owes.

Wow, talk about a horror show.

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Published Thursday, January 21, 2010 @ 11:50 am

The latest chapter in the Obama administration’s attempts to make lenders modify mortgages is to send SWAT teams – no, I’m not kidding, really, SWAT teams – into the call centers of major lenders to try to ensure that they follow the proper procedures and actually modify loans. Seriously, wouldn’t it be a whole lot easier just to pass cramdown and allow bankruptcy judges to modify mortgages than to try to sweet talk, bribe or otherwise convince bankers to do it on their own?

Because they’re not. Making Homes Affordable, the program implemented by the government last May, is designed to encourage banks to modify the loans of homeowners who are having trouble making mortgage payments. Mortgage companies are reluctant to do that, however: they make more money in interest and fees when a mortgage goes into foreclosure, than they make from the government when they successfully modify it. The government had hoped to have 3-4 million mortgages modified by the end of last year. As of mid December, the count was at 750,000 – the vast majority of those were still in the trial stages.

The news reports of lenders dragging their feet are backed up with anecdotal evidence from homeowners, who report that they call the lenders over and over, file and refile the same documents, and then call back, only to be told that no one knows anything about their case. Lenders counter that people don’t send them the requested documents. Really? Desperate homeowner, one last shot at keeping their home, and they can’t be bothered to fax some papers? The lender argument is a little hard to believe.

Hence, the SWAT teams. These are teams of three people, sent into the call centers of the seven largest loan servicers to make sure that the bank representatives are giving accurate information, filing forms properly, etc. Experts are not impressed – many say the initiative is unlikely to work. Some have called for putting permanent government observers in the call centers. They note that private insurers already have their people inside the call center, to help prevent the loans they’ve insured from going into foreclosure.

Unfortunately, neither temporary nor permanent government observers in the call centers seems likely to work. This is another initiative – like the ‘foreclosure hall of shame’ that was supposed to embarrass the lenders into modifying loans – that the banks will evade and ignore until the administration acknowledges it isn’t working and moves on to something else. The fact is, lenders aren’t going to modify substantial numbers of mortgages until they are forced to. Unless an initiative like cramdown is passed, which takes the decision to modify or not and how much out of the bank’s hands and gives it to a neutral party, foreclosures will continue to rise.

Fortunately, homeowners finding it difficult to pay their mortgage may have another option to save their home: bankruptcy. Your bankruptcy attorney will return your phone calls, keep your files organized, and not make you fax documents four or five times. In addition, he or she will help you map out a plan that will lead you to financial freedom. The Obama administration may sincerely want to help homeowners. But as long as they expect bankers to do it out of the kindness of their hearts, you’re probable better off filing for bankruptcy.

Brought to you by the Law Offices of John T. Orcutt. Providing North Carolina homeowners real foreclosure relief since 1995. Is your lender not working with you? Call today and find out how a bankruptcy can save your home. 1-800-899-1414. Convenient offices in Raleigh, Durham, Fayetteville, and Wilson.

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Published Thursday, January 21, 2010 @ 7:45 am

According to a January 8 article in the Huffington Post, lack of confidence in the recent economic recovery led employers to shed an unanticipated 85,000 jobs in December 2009—even as the unemployment rate held steady at 10 percent.  While it may seem strange that unemployment rates flatlined as American jobs continue to disappear, the explanation is even more disconcerting; in truth, the rate would have been higher if more people had been looking for work instead of ending their search because they can’t find jobs.

As the Huffington Post reported: “The sharp drop in the work force – 661,000 fewer people – showed that more of the jobless are giving up. Once people stop looking for jobs, they’re no longer counted among the unemployed. When discouraged workers and part-time workers who would prefer full-time jobs are included, the so-called “underemployment” rate in December rose to 17.3 percent, from 17.2 percent in November. That’s just below a revised figure of 17.4 percent in October, the highest on records dating from 1994.”

Many had hoped the latest Labor report would support the premise that the economy had actually begun to rebound, gaining jobs for the first time in two years.  As such, the divide between the have nots and notions from economic “experts” continues to grow as Main Street unemployment once again negatively contrasted Wall Street perceptions of economic improvement. “One word sums it up: Disappointment,” Jonathan Basile, an economist at Credit Suisse told Huffington Post. The drop in the labor force, Basile said, “tells me that Main Street doesn’t believe there’s a recovery yet, because they’re not out looking for jobs yet.”

As it is, the unemployment rate holds steady at 10%.

In terms of job creation, the bar is now a bit lower for a “happier new year.” Friday’s report caps a 2009 considered another terrible year for U.S. workers. The economy has lost more than 7.2 million jobs since the recession’s beginnings in December 2007. And while layoffs have slowed, they have hardly ended, with December’s numbers providing another staggering reminder.

“The economy is in a rough situation,” Labor Secretary Hilda Solis acknowledged in an interview with The Associated Press. She said she thinks companies are reluctant to ramp up hiring because they’re waiting to see what new stimulative steps the government will take to provide relief.

In an attempt to offset these negative numbers, President Obama has presented $2.3 billion in tax credits that Congress has already approved to create 17,000 green jobs.  Meanwhile, Congress is considering a “jobs bill” that would contribute $174 billion in unemployment benefits. Our nation’s leaders understand that if jobs remain scarce, consumer confidence and spending will continue to flag, slowing the economic recovery.

While recent reports of the nation’s financial future remain nothing short of bleak, the good news remains that through bankruptcy laws, borrowers facing unemployment can take their future into their own hands, stop drowning in health care, consumer and mortgage debt, and begin on the road to a more viable financial future.

Every week bankruptcy attorneys continue to meet with dozens of Americans in financial distress due to employment woes.  Each time those who have encountered job misfortune come into law offices feeling hopeless and at the end of their rope, perceiving no alternatives to their continuing fiscal problems.  Almost every time, however, it seems more and more when these same clients leave these offices, they finally feel some sense of relief for the first time since the job recession started; they are reassured that the bankruptcy laws and the bankruptcy system offers them the possibility of a new start— at an affordable cost—and with it a financially viable and secure future. In short, bankruptcy relief ends worry and stress for many jobless Americans living on the financial brink.

For reliable bankruptcy advice that you can trust, contact The Law Firm of John T. Orcutt. And to find out more about your bankruptcy options, visit The Law Offices of John T. Orcutt’s “Things to See and Hear” information.

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Published Wednesday, January 20, 2010 @ 11:34 am

In this special series, entitled “Bad Ideas for the Bankruptcy Bound,” we’ll introduce what to avoid when bankruptcy is your next, best step.

Love may move mountains,
but money can crumble the strongest marriage.
– Ron, Lieber, The New York Times

Everyone who’s married knows: money can be a primary cause of marital strife. As a result, in this especially difficult economic climate—full of job insecurity, rising mortgage costs, health care uncertainties and other mounting money woes—many debtors who have accumulated all kinds of debt without the knowledge of their spouse are sometimes tempted to file for bankruptcy “secretly” and avoid sharing the financial “bad news” with their spouse.

Regardless of the fiscal reason, this path can lead to losing it all with your better half. While one petitioning spouse doesn’t mean the other has to file for bankruptcy also, it’s assuredly never a good idea to hide a filing from your husband or wife. Here’s why:

Disclosure of Your Debts is Inevitable
While married people like you have a legal right to file for bankruptcy by your lonesome, what you don’t have readily available is any way to keep the news of your bankruptcy filing from your spouse. When you stop paying your creditors in anticipation of your bankruptcy filing, inevitably these same creditors will begin calling and writing your home—the same space you share with your unknowing spouse.  Remember, the bad news of your insolvency can come from you or them, with a bit less sensitivity from the latter.

You’ll Need Your Spouse’s Support
Married folks who file for bankruptcy must provide information regarding their spouse’s pay, last year’s tax returns, proof of retirement and an array of other information that might require your better half’s information and input.  Keep in mind, your requests for this information will ultimately raise your spouse’s suspicions and the likelihood of your spouse finding out—one way or another.

Joint Accounts Automatically Get Your Spouse Involved
Filing for bankruptcy means that if your spouse’s name appears on any of your debts—such as joint credit cards, mortgages, or the like—they’ll find out the hard way when creditors pursue them for an alternative way to get paid.  In addition, if your spouse is using one of the forms of credit that will be included in the bankruptcy filing, you’ll need to tell him or her to stop using this credit before you file—another reason your spouse will be alerted to your insolvency.

Don’t Risk More Stress in Insolvency
Obviously, hiding your debts from your spouse is dishonest. Hiding your bankruptcy from your spouse, as you’ve seen, is almost impossible.  Both non-disclosures will add unnecessary stress and strife to your relationships. And amid these harsh economic times, life can be tough enough without all of this interpersonal withholding.  The first step to a fresh financial start together, is being honest about your bankruptcy with your spouse. Don’t forget, there is no more ruinous a financial move than a divorce and no greater road to divorce than fiscal dishonesty.

Knowing a qualified bankruptcy attorney can also help lessen the marital stress of bankruptcy, yielding the right kinds of support, information and insights—at a low cost— for a financially viable and secure future.  A good bankruptcy attorney can also dispel the many myths and stigmas of bankruptcy, offering truthful information about this powerful form of debt elimination. The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Wednesday, January 20, 2010 @ 9:34 am

The traditional media industry is hurting. Specifically, hard news print vehicles, newspapers mainly, have been decimated by the rise of the Internet and a rapid decline in advertiser spending as a result of both new media opportunities and of course, the recession.

The most recent indication of America’s tilting favoritism toward all things online, the publishing parent of newspapers like the Denver Post and San Jose Mercury News is expected to petition for bankruptcy in the next few days. MediaNews Group, Inc. isn’t saying much about the details but those “in the know” believe it could happen as soon as Friday.

As of today, it is suspected the company is working on ways to operate the restructured organization. It is widely believed that William Dean Singleton, the top executive, will retain control along with current president Joseph Lodovic IV.

The idea that current management will remain in control is surprising to many in the media industry for a couple of reasons. Primarily, it is rare for a corporate bankruptcy to not include massive management shifts. Additionally, Singleton is considered a member of newspaper industry’s “old guard.”

Because so much of traditional print media is being outpaced by the speed of online news and the flexibility of Web-based advertising, most expect a bankruptcy to spark a refreshed approach toward embracing contemporary industry trends, especially when close to 80 percent of the company’s revenue stems from ads being placed within the pages of its newspapers.

However, Singleton has a plan to tighten the operation through an aggressive consolidation effort that he hopes will lead to a more streamlined company that can better sustain profits and manage debts. More than likely, he will work to bond newspapers in Minnesota’s Twin Cities and in Southern California, where there is no shortage of regional print news outlets. And because only the holding company is declaring bankruptcy, the financial situation for many of its newspapers should remain stable.

The company also expects that the majority of its newspapers’ employees will be unaffected. However, consolidations cannot succeed without the elimination of redundant positions. For example, how many high school sports copy editors does one newspaper need? Or press technicians?

Currently, MediaNews owns 54 daily newspapers throughout the country and also has stakes in broadcast media outlets.

MediaNews’ bankruptcy will be yet another example of a corporate pre-packaged bankruptcy, a method of bankruptcy that entails substantial pre-planning and settlement talks with creditors before officially presenting a plan to the court. The idea is to enter and exit bankruptcy in very little time, as the pre-packaging enables the court to merely approve, in some cases, only the most minor legal facets of the bankruptcy.

Reports are showing that the company’s plan involves debt for equity swaps, which probably helps explain why Singleton will remain in charge. Creditors that will soon own parts of the company instead of its debt are going to be more confident with a seasoned leader than new blood. The company is expected to reduce its $930 million debt to a much more manageable $165 million.

One of the company’s largest investors, the most recognized newspaper company in the world, Hearst Corp., will lose close to $400 million as result of the bankruptcy. MediaNews is said to be working closely with Hearst on the situation.

There is no telling what lies ahead for the newspaper industry. However, there are not a whole lot of reasons to be optimistic, as MediaNews’ filing is one of seven that has occurred within the last 54 weeks. The Los Angeles Times and Chicago Tribune are notable examples.

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Published Tuesday, January 19, 2010 @ 3:02 pm

So you’re drowning in debt and desperate for a way out. A friend or relative asks if you’ve considered a 401k loan. “They’re quick, simple to qualify for, and here’s the best part: you’re paying the interest to yourself.” Sounds like a brilliant solution, right? Why pay 25% interest to a credit card company when you could be paying 6% interest to yourself?

Stop. You want to think long and hard before you take out a 401k loan, especially if you’re already in debt.
Fayetteville debt relief,
The most important thing to know is that, in bankruptcy, your retirement savings – 401k accounts, pensions, 403b accounts, traditional IRAs, Roth IRAs and even plans for small business owners and the self employed – are protected from your creditors. That bears repeating. If you declare bankruptcy, you keep all the money in your retirement accounts.

If you’ve taken the money out in the form of the loan, however, your creditors can take that money.

Moreover, failure to pay back a 401k loan comes with serious drawbacks. If you lose or change jobs, you have to pay back the entire sum within 60 days. If you’re unable to make payments on the loan – or the lump payment in the case of changing jobs – you’re required to pay all taxes on the outstanding money, plus a 10% penalty.

In addition, recent court cases have determined that because you’re paying the money to your own account, a 401k loan cannot count as debt, and is not part of the Means Test. This means that you could be tipped into a Chapter 13 plan even if you’re spending significant amounts of money repaying a 401k loan. If you’ve already borrowed the money, though, don’t despair. It’s true that it might bump you into filing Chapter 13 rather than Chapter 7. However, while the Means Test is very similar to the disposable income formula in a Chapter 13 bankruptcy, there’s one important difference and that’s the 401k. You’re allowed to both contribute to your 401k in a Chapter 13 plan, and to repay your 401k loan, and take both as a deduction on the means test. This means your plan payment may actually be lowered if you are making a 401k repayment.

There may be times when 401k loans aren’t a terrible idea, even if you’re facing bankruptcy. It might make sense, for example, to take out the loan in order to catch up with mortgage payments before you file bankruptcy. But this is a situation where you should really discuss the pros and cons of your actions with a bankruptcy attorney before undertaking the loan. One important rule of thumb: it doesn’t make sense to take the loan out to repay unsecured debt, debt that will most likely simply be dismissed in bankruptcy.

One final note: not every 401k plan permits loans for any reason. Some plans restrict them to specific purposes, such as first time home loans, medical expenses, college tuition or mortgage payments. Before even considering this option, you need to make sure it’s available to you.

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Published Tuesday, January 19, 2010 @ 2:56 pm

No doubt in the last several years you’ve heard the phrase “Too Big to Fail” more than once. This oft-used phrase refers to the regulatory idea that many of the largest and most interconnected businesses are, in fact, so large that a government cannot allow them to fail because their failure would have a disastrous effect not only on the business itself, or even the larger industry, but also to the greater economy.

Early in the economic meltdown and late in 2008, General Motors Co. was considered just such a company. And given their huge presence in the U.S. economy, bankruptcy appeared unthinkable. Yet the unthinkable became inevitable in June 2009 as GM finally filed for Chapter 11 after years of losses and market share declines capped by a dramatic plunge in sales.

In Michael McKee’s Bloomberg article, “GM’s Long Decline May Make Bankruptcy ‘Irrelevant’ to Economy” of the car company’s “failure” he wrote:

“General Motors Corp. once mattered so much to the U.S. economy that a two-month strike in 1970 helped trigger a 4.2 percent drop in gross domestic product for the fourth quarter, as national auto production fell 82 percent.

Then, GM accounted for about half the cars and light trucks sold in the country. Now, GM controls just 20 percent of the market, and analysts say its bankruptcy filing will barely register in the broader economy.

GM’s drawn-out restructuring, an increase in U.S. manufacturing by foreign carmakers and the recession-induced decline in auto sales all have meant more to the economy than today’s legal filing.

“Bankruptcy now is irrelevant in terms of the economic consequence of what’s happening to GM,” said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania. “Either way, it’s going to be a shadow of what it was, in terms of jobs and income.”

GM has been reducing payrolls for three decades. Its U.S. employment peaked in 1979 at 618,365, when it was the nation’s largest private employer and auto manufacturing accounted for 4.1 percent of GDP. At the end of this year’s first quarter, autos were 1.5 percent of the economy, and GM had 88,000 U.S. workers.”

But as unthinkable as it was last year to let GM go bust, and how “irrelevant” bankruptcy seemed at the time as a viable solution, GM has taken a surprising post-bankruptcy turn.

In short, it was too big. It failed. Nothing bad happened. And now it’s back again.

That’s right, after an aggressive bankruptcy-inspired restructuring and reorganizing, GM, even amid weak car sales, is talking about making a profit this year. According to this week’s Wall Street Journal, General Motors Co. will make money in 2010, its chairman said, “a bold and surprising forecast for a business that exited bankruptcy proceedings just last summer and hasn’t turned an annual profit since 2004.” “My prediction is we will be” profitable in 2010, Edward E. Whitacre Jr. told reporters at GM’s Detroit headquarters, a sign of rising confidence that also sets a tough benchmark for the still-struggling car maker’s employees. “Do we have obstacles in the way? Yes. But we have a good management team and a good plan in place.”

The moral of the story?  Bankruptcy works.

Now in addition to convincing Tim Geithner, Larry Summers, and Ben Bernanke that it’s okay to let financial firms sink into insolvency—for a restructured and reorganized future—the way small banks and businesses do every week under Chapter 11,  it’s also essential to understand that bankruptcy can work for you…and isn’t a failure… but the possible key to a stronger and more productive financial future.

For more information on getting back on your feet like GM through bankruptcy visit the experienced bankruptcy lawyers of The Law Offices of John T. Orcutt.

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Published Tuesday, January 19, 2010 @ 11:23 am

In the Preventing Foreclosure series, you’ve received an introductory look at how to stay in your home, either through bankruptcy proceedings or via negotiations with your mortgage lender, with later discussions specifically devoted to how Chapter 13 or Chapter 7 bankruptcy proceedings can force creditors to end their collection activities and delay a foreclosure sale.

In Part II of this six-part series, we elaborated on the ins and out of working with your mortgage lender, including timelines, terms, and trends, including forbearance, mortgage modification, loan reinstatement, and the short sale. Here, we’ll expand on the process behind the real estate concept of a  “short sale,” including the ins and outs of this option for homeowners seeking to avoid foreclosure and settle with their lender.

Part V – The Short Sale

If you’re one of many mortgage holders in arrears due to a recent job loss, extended unemployment, medical costs, divorce, or just an adjustable rate mortgage that’s on the rise, you may be facing foreclosure. But, foreclosure can ruin your credit and make it impossible to acquire a new home, leaving you without your biggest and best asset in an uncertain economic climate.

You may have heard of one alternative to foreclosure: the short sale. A short sale occurs when the outstanding loan against your home is greater than what the property can be sold for. For some homeowners, this may be a viable solution. However, for many, it’s just a false glimmer of hope that may leave the homeowner worse off than before the short sale. Here’s a brief overview of the necessary steps of a short sale:

Verify Your Property Value
If you’re using a real estate agent, they’ll provide you with an estimate of market value. If you are selling the property yourself, do your own homework, assessing the market in your area for a proper property price.

Calculate the Costs
Add up all the costs of selling your property, including the closing costs. If you are selling the property on your own, a real estate attorney can help.

Assess the Amount Owed
Determine the amount owed against the property, including all loans, minus the total amount owing against the property from the estimated proceeds of the sale—ultimately a negative number.

Locate Your Lender
Contact your mortgage lender or lenders for their particular short sale procedures. Some lenders are willing to work with you by reducing the amount owed or making other arrangements.

Sell the property
If your lender agrees to a short sale, the next step is hiring a real estate agent—one willing to work for a smaller commission. At the same time, you’ll also need to scale back your own spending as another sign of good faith to your lender. Once a buyer is secured, you can then sell the house for a loss, and, with the lender’s permission, they agree to call it even, with no damage to your credit or ability to procure a new home in the future.

Review the Risks
In addition to the potential that your lender will deny you a short sale, the short sale process does have consequences. Your lender may not be willing to eat the loss, leaving you on the hook for the difference. Make sure they are willing to give you complete forgiveness of the debt, and that they will not hold you personally liable for the difference between what the property sells for and what you owe. Get this in writing. Even if your lender does absorb the loss, the IRS may treat this difference as taxable income, leaving you with a significant chunk to cover come tax time.

As a result, the best alternative is, of course, keeping your home—either by restructuring or reinstating the loan.  Your best bet is contacting a bankruptcy attorney as soon as you start feeling pinched to make the mortgage payment. Chances are you have other unsecured debt that can be eliminated, freeing up more money to pay your mortgage. If you have two mortgages and your home is now worth less than what you owe on the first, a bankruptcy can get rid of the 2nd. That’s right, you may be able to eliminate your 2nd mortgage.

In Part VI, we’ll conclude the Preventing Foreclosure series with a broader look at your bankruptcy options.  And, as always, to learn more about your options, contact the experts at The Law Offices of John T. Orcutt.

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Published Tuesday, January 19, 2010 @ 2:48 am

The holidays are now officially over. The New Year has begun in earnest. And ‘tis the season for tax time. If you believe you’re bankruptcy bound in 2010, that definitely means it’s also time to get your 2009 returns in order.

Thinking About Chapter 13 Bankruptcy?

Chapter 13 bankruptcy helps restructure your debt into a more manageable payment plan—allowing you to pay back what you owe over time, often at a percentage of the cost. If you’re considering this type of bankruptcy, it’s important to remember that tax returns should be provided in Chapter 13 cases.  You must file all tax returns for all tax years – including returns for 2009.  Bankruptcy Code Section 1308 provides:

(a) Not later than the day before the date on which the meeting of the creditors is first scheduled to be held under section 341(a), if the debtor was required to file a tax return under applicable non-bankruptcy law, the debtor shall file with appropriate tax authorities all tax returns for all taxable periods ending during the 4-year period ending on the date of the filing of the petition.

(b) (1) Subject to paragraph (2), if the tax returns required by subsection (a) have not been filed by the date on which the meeting of creditors is first scheduled to be held under section 341(a), the trustee may hold open that meeting for a reasonable period of time to allow the debtor an additional period of time to file any unfiled returns, but such additional period of time shall not extend beyond–

(A) for any return that is past due as of the date of the filing of the petition, the date that is 120 days after the date of that meeting; or

(B) for any return that is not past due as of the date of the filing of the petition, the later of–

(i) the date that is 120 days after the date of that meeting; or

(ii) the date on which the return is due under the last automatic extension of time for filing that return to which the debtor is entitled, and for which request is timely made, in accordance with applicable nonbankruptcy law.

In plain English, this verbose section of the Bankruptcy Code means that if you’re a Chapter 13 filer, you must file your tax returns before the creditor’s meeting to assess your ability to repay your debts.  If you have yet to file, your bankruptcy trustee (appointed to evaluate the case and serve as an agent for collecting your payments and making distributions to your creditors), may continue the meeting until it is filed, up to 120 days.  After this 120-day window, your case can be dismissed.  As such, it’s best to be proactive, avoiding any reliance on an extension.

What About Chapter 7?

If you’re considering filing a Chapter 7 bankruptcy in order to dispense all of your unsecured debts, the tax implications are a bit different.  In this case (as in a Chapter 13 case), it is vital to alert your bankruptcy attorney if you expect that you will owe taxes pending the filing of your 2009 return.

On the other hand, if you expect a refund, like the majority of Americans, based on where you live and other considerations, this financial return (or a portion of it) may be considered an asset of the bankruptcy estate, and, as such, will only be protected to the extent you can protect it with state exemptions (up to $10,000.00 for a married couple in North Carolina).

If you’re considering bankruptcy in 2010 and are concerned about the tax implications, including when to file, whether you can keep your tax refund, and any other factors in your personal circumstances that might require consideration, it’s important to speak with an experienced bankruptcy attorney who can competently guide you on the right path to the best result.

The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Monday, January 18, 2010 @ 6:48 pm

In 2005, Congressional changes to the Bankruptcy Code made bankruptcy filing more cumbersome by requiring quite a bit more red tape, leading to a significant drop in filings the following year (2006). But, as a result of the economic downturn, during the past three years, bankruptcy filings have risen back to the levels seen before Congress’ 2005 bankruptcy overhaul.

In fact, despite notions that the economy improved last year, 2009 appears to have been a devastating year for the finances of American people—and businesses—beleaguered by an unending stream of bad economic news.

According to an Associated Press report on January 4, 2010, U.S. consumers and businesses are filing for bankruptcy at a pace that made 2009 a year with the seventh most filings on record, garnering more than 1.4 million bankruptcy petitions. This record number represented a staggering increase of 32 percent from 2008.

These statistics, gathered by the National Bankruptcy Research Center (NBRC), measure consumer and business filings from December through November. December 2009 filings are not included in the total. Of the 1.43 million bankruptcies in 2009, 116,000 were recorded in December 2009, up 22 percent from the same month the year prior—a sign that bankruptcies aren’t exactly slowing down.

Another sign of a continuing wave of insolvency is that recent, recession-driven bankruptcies have occurred in mini waves of their own, beginning nearly two years ago with a run of adjustable-rate mortgage (ARM)-related filings; followed closely with an upsurge of filings from the newly unemployed; and finally, and more recently, with findings that wealthy individuals and business owners are now succumbing to the economic effect of lower incomes and shrinking home values.

The increase includes a significant upturn in 2009 Chapter 7 (liquidation) filings, which increased by more than 42 percent compared to this time last year. Conversely, Chapter 13 filings have increased at only 12 percent. The steady decline in Chapter 13 filings, stands in direct contrast with the strong push by Congress in its 2005 bankruptcy legislation to encourage bankrupt consumers to choose Chapter 13—with its focus on creditor repayment—rather than Chapter 7. The figures seem to yield not only a failure in the policies and goals of the Congressional overhaul, but consumers desire to wipe their financial slate clean, and quickly, in lieu of holding on to, for example, their home, or other non-exempt possessions.

In fact, states with high foreclosure rates are leading the way in bankruptcies as well; again, signaling the housing crisis, adjustable mortgages, and a loss of home equity, as primary factors in many Americans’ decision to file. According to the NBRC, nationwide, filings to date amount to almost 11,500 filings per million households with the highest filing rates in Nevada (two-and-half times the national average), followed by Tennessee, Georgia, Alabama, and Indiana (with one and a half times the national average).

Is the housing market, job market, or a combination of factors hitting you and your household hard? If so, the numbers above show you’re not alone. In fact, there’s strength in these numbers—knowing a qualified bankruptcy attorney has helped many weed through the bankruptcy laws and the bankruptcy system, yielding the possibility of a new start— at a low cost— for a financially viable and secure future.

The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Monday, January 18, 2010 @ 6:43 pm

Is there any way to lower your car payments in bankruptcy? The answer, which may surprise you, is maybe. While Congress recently rejected attempts to pass a law that would allow bankruptcy judges to ‘cramdown’ mortgages, there do exist some limited possibilities for revising auto loans.

Basically, debtors who owe more than their car is worth – and who doesn’t, especially if you bought it new? – may be eligible to eliminate the portion of the debt that exceeds the value. In a Chapter 13 bankruptcy, the debt would be divided into ’secured’ debt (the value of the car) and ‘unsecured’ debt (the excess money on the loan), and the car loan would be revised to repay only the secured portion.

However, this option is generally only available for people whose car loans originated more than 910 days before they declared bankruptcy. Some courts have allowed, in limited form, for the portion of a car loan that was ‘rolled over’ from a previous car loan, to be treated as unsecured debt even in a more recently originated loan. However, note that a recent decision by the US Court of Appeals for the Fourth Circuit – whose jurisdiction includes North Carolina – has determined that this portion of a car loan is included as secured.

On the other hand, some attorneys report that some lenders are willing to renegotiate the loan, even if it originated in the last 910 days. While the law doesn’t require them to renegotiate, it doesn’t prevent them from doing so either. It’s at least worth asking, before you take up your other options.

If your loan originated less than 910 days ago, and your lender refuses to renegotiate, what are your other options as you go through bankruptcy? You can simply surrender the car. Lenders don’t like this option, but if you’re filing bankruptcy, they have no choice. They will take back the car and then sell it at auction. The difference between what you owe and what they sell it for will be entered against you as a deficiency balance. However, even in a Chapter 13, there is little chance the creditor will receive any return on its deficiency balance.

You can also reaffirm the loan. In this case, you agree to continue making the payments on the car even after you file for bankruptcy. Note carefully, though, if you choose this option and then default on the loan, you will be responsible for the deficiency balance, and the lender can sue you for it. Reaffirming your car loan has some advantages though: you get to keep your car, which means you don’t have to look for a new car loan with a recent bankruptcy on your record. Making these payments on time is also a good way to rebuild your credit – just make sure the lender is reporting them to the credit agencies.

As always, remember that the best way to negotiate this maze is with the help of a good bankruptcy attorney.

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Published Friday, January 15, 2010 @ 12:55 pm

If there ever was a sure sign that print advertising is drastically down from where it was only a couple of years ago, other than the slew of newspapers around the country that have either been sold, merged, closed or gone Web only, it’s the bankruptcy filing of R.H. Donnelley, a North Carolina-based publisher of phone directories. You know, the yellow pages. At one time, the single most ubiquitous business marketing channel.

The company originally filed for protection back in May of 2009. At the time, it was big news because of the company’s notoriety as one of the region’s most successful publicly traded companies. We covered the filing in a previous post. You can read it about here.

Fast forward to 2010 and you’ll find a new, leaner, meaner version of R.H. Donnelley. At least that’s the plan. Earlier this week, the company’s reorganization plan was accepted by a U.S. Bankruptcy court, which means it can soon get back to business.

According to its Web site, the company is “… one of the nation’s leading consumer and business-to-business local commercial search companies.” Essentially, they publish print and online directories of business listings that consumers and other businesses use to learn about, track and contact companies. They also publish white pages so we can find one another in case you can’t find a WiFi connection or Facebook is acting funny.

The company is confident it’s next iteration will be a good one. In a recent statement, found in The News & Observer, CEO David Swanson verbalized that thought, stating that the company will move forward on a “stronger financial foundation.”

R.H. Donnelley’s new approach, about which they aren’t saying much outside of court, should make for a compelling business case, given that the Internet and online searching continues to grow exponentially by the day. With every keyword entered into Google, Bing and Yahoo, the print industry’s oxygen supply dwindles.

Search engine optimization, the act of programming a Web site to ensure its presence in the results of a search for its content or product line, is a multi-million dollar industry that is only in its infancy. Just think for a moment about Google. It dominates any conversation about the power of the Internet. It is one of most prominent companies, on or offline, in the world. Why? Because it made searching for something easier. They created the better mousetrap in what R.H. Donnelley calls “the commercial search” industry.

That being said, R.H. Donnelley may exit bankruptcy swinging, with all guns blazing and ready to kick butt and search for names. Yet, skepticism is to be expected. The News & Observer article (written by David Ranii) stated, “Although the company has improved its debt situation significantly, the revenue picture remains difficult. The company’s revenue fell 18 percent to $534 million in the third quarter while ad sales, an indicator of future revenue, dropped 21 percent.”

Out of bankruptcy, it appears the company will be clinging to its New York Stock Exchange listing, only to hope for the best. The approved plan included 100 percent ownership by the creditors. They were owed close to $6 billion.

The bottom line is that the Internet advertising and online search industries have only become stronger while the company was in bankruptcy. Again, their reorganization plan may call for a complete Web-based business strategy. They certainly have the data and established Web presence with www.business.com and www.dexknows.com to create a number of very comprehensive Web search tools. It can be done. Probably just not in print.

If you live in North Carolina and are facing foreclosure, real help is only a phone call away. Call the Law Offices of John T. Orcutt today to set up your free initial debt consultation. 1-800-899-1414. Call today before it’s too late.

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Published Friday, January 15, 2010 @ 8:44 am

Will California become the first US state ever to default on its bonds in 2010? Last year, Governor Arnold Schwarzenegger spent most of the year haggling with the state legislature to try to come up with a balanced budget. In May, they warned they might go bankrupt if federal government help was not forthcoming – the Obama administration declined to help them out and they went back to the drawing board. Last summer, they issued IOUs to some vendors in lieu of checks. As of December 1, the state had almost 84 billion dollars in long term budget debt.

Just last Friday, Schwarzenegger revealed a new state budget that includes an additional 6.9 billion dollars of federal assistance – assistance the federal government has not yet agreed to give. Schwarzenegger claims that if it’s not received, the state will respond with already decided-upon spending cuts. Those cuts will come on top of deep slashes California has made in its state budget over the last year: hundreds of thousands of workers have been laid off or forced onto unpaid leave, health care for poor children and the elderly has been gutted. These cuts affect millions of people as the poverty rate across California increases: poverty in Los Angeles is now estimated at 20% of the population.

What’s caused this frightening state of affairs? The recession, for one thing. California rode the wave up during the housing boom, with some of the highest housing prices in the nation – it’s now suffering the depths as prices fall. In the town of Merced, for example, housing prices have fallen 70%. 25% of homeowners whose houses are ‘underwater’ – worth less than they owe on the mortgage – live in California. Increased unemployment and decreased revenue lead to lower amounts of taxes – and at 12%, California has one of the highest unemployment rates in the nation.

But California has some problems of its own making too. Ballot initiatives allow the population to vote spending mandates, then leave the legislature to find the money to pay for them. At the same time, one of these mandates requires that 2/3 of the legislature approve any tax increase. Since just over a third of the legislature is filled with Republicans who campaigned on ‘no new taxes’ promises, this is virtually impossible.

Like many people facing finances spiraling out of control, California’s reaction has been: deny, deny, deny. Last spring, voters rejected 5 out of 6 measures to control spending. Republicans blame high waged unions and claim illegal immigrants soak up resources. Democrats point out that there are people paying $600 of taxes per year on property worth millions of dollars, and that corporations, not individuals, have been the biggest beneficiaries of the Proposition 13, the 1978 ballot initiative to keep property taxes low.

So should California declare bankruptcy? Well, no. States aren’t afforded the protections individuals receive in bankruptcy, and there are no exemptions. Equally importantly, it’s a lot harder for a state to rebuild its credit rating than an individual. If California’s bonds get downgraded to junk, its interest rates will soar – leaving even less money to provide services to its population. The people of California are the ones who will suffer.

But what California can learn from bankruptcy is this: states, like people, deserve a fresh start – and sometimes they need it, too. What California should do is convene its first constitutional convention in over a hundred years and draw up new rules. Abolish ballot initiatives that mandate spending. Make it easier to raise taxes. Negotiate with the unions. Then, like anyone coming out of bankruptcy knows, they’ll have a fair chance at a healthy financial future.

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Published Thursday, January 14, 2010 @ 4:37 pm

After the rapid, pre-arranged bankruptcies of several of our country’s largest companies, it seems the federal government is once again on the path toward bankruptcy reform.

This time it doesn’t involve border-line unconstitutional changes to consumer bankruptcy processes. No, this time the effort may include change that some believe will carry even more impact: a specialized bankruptcy court for banks and financial firms that carry the now ubiquitous label, “too big to fail.”

However, there are two approaches to the problem. One option currently being discussed by the Senate Banking Committee, is a law that would create a new legal process designed to accommodate the structured handling of a mega-institution’s collapse. The new law would be part of a larger financial reform bill that is being bandied about in Washington in response to the role our largest financial players had in the onset of the recession.

The ultimate hope is that the new laws will allow these influential organizations to file bankruptcy without creating a worldwide economic tsunami when they come down. Think of it as taking apart an old building brick by brick instead of putting TNT in its foundation. (And then saving the most intact bricks for use in making even bigger, more cumbersome buildings.)

The reform measures, being led by Senate Banking Committee Chairman and Connecticut Democrat Chris Dodd, will enable the Federal Deposit Insurance Corporation (FDIC) to oversee the breakdown of a bank and minimize the impact on other banks.

The FDIC would orchestrate the use of public money (taxpayer’s money) to provide creditors and other involved entities with the debt and assets they are owed. Partial payments and settlements would be expected, of course. Special consideration would also be given to vendors and supplies and third party groups to hedge against their subsequent failures.

Wait, sounds like the establishment of a regular, every day bailout system, right? Sort of. The money used to settle the debts and stabilize the collapse will be put back into taxpayer pockets by fees charged to financial institutions with more than $10 billion in assets.

A specialized bankruptcy court, the other proposal, is being introduced by Sens. Mark Warner of Virginia, a Democrat, and Bob Corker of Tennessee, a Republican. Also on the Senate Banking Committee, their bi-partisan approach would create a court to decide if the FDIC dismantling, or a “resolution process,” or traditional bankruptcy, should be used to handle the shut down. Thus, it’s more of an add-on to existing law.

It still would involve legal wrangling and bureaucratic processes on the part of government bank regulators to determine if the organization’s demise would create enough disaster to warrant that a resolution process is needed. If so, it would be filed with the special bankruptcy court for a final decision.

Should Corker and Warner create an agreeable scenario, the Senate Judiciary Committee would then need to come into the picture, as they handle items related to bankruptcy code reform.

Proponents of a new bankruptcy court believe it would provide the failing organization the most say in its own future, providing a forum for insight on how to best distribute assets and formulate an exit strategy, if possible.

Also weighing in on the matter is the respected Pew Institute, which published a report calling for a Federal Financial Institutions Bankruptcy Court to handle the failure of the largest banks in only the most extreme circumstances. Otherwise, typical bankruptcy laws should remain as the default process.

Brought to you by the Law Offices of John T. Orcutt. With offices in Raleigh, Wilson, Fayetteville and Durham, our experts can handle all of your bankruptcy needs. Call today for a free initial consultation. 1-800-899-1414.

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Published Thursday, January 14, 2010 @ 11:34 am

It’s 2010, the year we take charge, so to speak, of our credit cards. In only a couple of months, credit card companies will have to fully abide by the provisions of the Credit Card Accountability, Responsibility and Disclosure Act (CARD). Some components of the act have already been in action.

Nevertheless, consumer advocates are expecting a slew of new credit card company tactics to increase, damage and elevate our debt, credit reports and heart rates. This is especially frustrating for those trying to re-establish a sound credit rating after bankruptcy. If more fees and restrictions come into play, it will take that much longer to use a credit card as a reputable credit source. (Remember though, this may not be a bad thing. Charge cards are a good way to use plastic and remain on top of your balance.)

We’ve discussed several times on the blog how credit issuers have started to counteract the measures by pushing interest rates just enough to not warrant any additional legislation yet get as much as possible from those Americans who already carry a significant monthly balance. For those with solid credit who manage a small balance over multiple cards, lenders have seized credit limits, decreasing what’s available and consequently creating marks on credit reports.

(It should be noted that action is underway to prevent those specific initiatives from harming a credit rating.)

Here are a few new methods by which credit card companies will be able to gouge their customers.

• Expect many cards to start charging annual fees. Currently, 80 percent of the available credit cards in the marketplace do not charge an annual fee. For those carrying solid credit ratings, annual charges are rare. Reports are coming in nationwide about some banks delivering notices about annual fees, which can in some cases climb to around $100. Other banks will only charge if you fall below a specific balance, which encourages card holders to not pay off a balance in order to avoid additional costs.
• Your one-time fixed rate card may suddenly shift to a variable rate, leaving you open to rapid jumps in balance. This is actually a byproduct of the law that prevents surprise interest rate hikes. Lenders bypassed it by simply creating credit cards with interest rates that will vary on their own. In other words, your card company isn’t deliberately increasing your rate, the market is doing it. Granted, that means your rate can sometimes go down, too. However, take a look at the markets. The Prime Rate is already as low as its been in a long, long time. It’s only going up from here.
• While the CARD act will prevent sudden rate hikes on existing cards, it does not address rate limits on new cards. Clearly, you don’t have to apply to a high rate card but the practice will make it much more difficult for people to obtain cards and also limit consumer choice.
• Scaring consumer advocates the most is the expected new fee strategy. It is believed that the credit card industry will start assigning fees for an array of membership services and card ownership privileges. You may also see vague charges on your statement, not unlike what’s found on most phone bills. For example, keep an eye out for inactivity or minimum balance fees.

Thankfully, consumers’ use of credit cards is at its lowest point in more than two decades. And it looks as if it may stay that way.

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Published Thursday, January 14, 2010 @ 9:30 am

More than 1.4 million Americans filed for bankruptcy in 2009; surprisingly, a large number of filers were over the age of 65. Senior citizens were traditionally less likely to file bankruptcy for a number of reasons. Until recently, for example, senior citizens held less credit card debt than younger people. They have less time to repair their credit rating after a bankruptcy as well, and may feel that the perceived harmful effects of bankruptcy will haunt them forever. Considering that many myths about bankruptcy are deep-rooted, older Americans may be more likely to hold strong feelings associating bankruptcy with shame and failure.

Nonetheless, bankruptcies among the plus 65 set continue to grow. Between 1991 and 2007, bankruptcy filings among Americans 65 and older went up 125 percent; for those between ages 75 and 84 they increased an astonishing 433 percent. The recession that began at the end of 2007 has hit seniors particularly hard. The crash of the stock market meant that many seniors wound up having far less money to see them through retirement than they had hoped. While younger workers have a couple of decades to rebuild their portfolios and 401k accounts, older Americans, who need to use that money now, do not. Furthermore, many older Americans live on a fixed income – social security payments or pension payments – and they have few options to increase that income. With a national unemployment rate hovering around 10%, jobs are difficult to find for anyone. Given that many companies have a bias – legal or not – against hiring older workers, senior citizens often find it difficult to get work.

While seniors once had a reputation for eschewing credit cards and paying with cash, in recent years, credit card companies have been aggressively marketing to senior citizens. Most doctors and pharmacies now take credit cards for prescriptions and co-pays; many strapped seniors have no choice but to put those purchases on credit. The average senior now has slightly more credit cards debt than his or her younger counterparts.

The good news is that bankruptcy offers seniors the same protections it offers all Americans: a chance to keep your home. Freedom from the incessant calls of creditors. If you’re on a fixed income, chances are good that you will qualify for a Chapter 7 bankruptcy, which will simply discharge your unsecured debt.

Why waste your golden years worrying about credit card debt? See a bankruptcy attorney today, and determine the best course for you, to bring you to financial freedom.

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Published Sunday, January 10, 2010 @ 9:08 am

Before filing for bankruptcy protection, it is well worth your time to seek out alternatives. Here are a few you for you to consider:

You know what budgeting is, but maybe you haven’t given it serious thought.  If you are finding yourself squeezed every month as you try to make payments to your creditors, it is possible that some creativity and sacrifice can give you enough breathing room to build and execute an escape plan. Check with your employer to see if the company offers an Employee Assistance Program with financial counseling services, as they can provide guidance about possible options. If some budgeting and perhaps very judicious borrowing could help you pay back your debts within 3 years while allowing you to live relatively comfortable, budgeting could be a good alternative for you.

What does judicious borrowing mean, exactly? Well, for one thing, it means no more loans from predatory outfits like payday loan stores, and it may also  mean no more borrowing from credit cards and banks–these ostensibly legitimate outfits can be as exploitative as anyone.  If you can borrow the money from a family member, or perhaps receive a low interest loan from a credit union or other borrower friendly institution, a loan can give budgeting the necessary punch to make it effective.

There are downsides, however; borrowing money to get your way out of debt is a little like a sale that promises you will save money by spending–  a contradiction in terms. The point of borrowing to get out of debt is to replace your existing debt with lower overall payments and/or monthly payments. If you aren’t saving money, borrowing more is just asking for trouble!

You may not be in a position to do the kind of borrowing that can be labeled judicious; if you are considering bankruptcy, chances are good that your credit is hurting, and low credit makes for bad loans–or no loans at all.  Borrowing from family has downsides, too: what if you become unable to repay the debt, for whatever reason? Financial problems can drive families apart, so it is important to tread carefully.

Another alternative is selling assets. If you have valuable assets, it is possible that filing for bankruptcy could cause you to lose those assets  anyway ( but this does not, of course, include your personal home or car, which bankruptcy can help you save.)  In that case, selling assets might be a good idea. On the other hand, this is just like the judicious borrowing example given above; how likely is it that you have valuable assets sitting around if you are in enough financial trouble to seek bankruptcy protection? Watch out for third party security interests in your assets; some assets may not be sale-able while someone else  (say, a lender) has an interest in the asset, so be sure to check any agreements concerning that asset before you proceed.

Budgeting can also receive a boost from restructuring of your debt; if you are able to refinance your house, transfer credit card balances or seek out other methods, you  may be able free up enough cash in your lowered payments to pay back the principals on your debts. This solution also comes with downsides and caveats, however: you may not be eligible to restructure any of your debts (especially now that banks are being so tightfisted over lending), and sometimes restructuring debt sounds a lot better  than it turns out to be: transferring balances to take advantage of lower interest rates can end up backfiring if you are unable to pay before the grace period ends and if the regular interest rate is higher than the one you gave up. Refinancing can sometimes result in lower payments and less money paid overall, but those savings sometimes end up being passed to third parties in the form of fees or commissions.

As you can see, alternatives are out there, but the drawbacks, caveats and requirements mean that no one solution will act like a miracle cure. Give equal consideration to all your options–including filing for bankruptcy protection.

So…why settle for an alternative? Stuck with what seems like a mountain of bills you cannot pay or get a handle on? Maybe the best ‘alternative’ is to just look into filing bankruptcy. The truth is: It does so much more for so much less that everything else. The fact is that, had the bankruptcy laws not already been on the books, the creditor lobby would surely block their creation. Bankruptcy is just that good. You should check it out and you have nothing to lose. Many bankruptcy attorneys offer a totally FREE initial consultation, just for this purpose. In North Carolina, so does the Law Offices of John T. Orcutt. Just call toll free to 1-800-899-1414 or visit their website at www.billsbills.com . They have offices in Raleigh, Durham, Fayetteville and Wilson.

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Published Saturday, January 9, 2010 @ 8:45 am

By now most consumers know that one of the first things to take a hit when debt problems come knocking is the good ol’ credit score. Sometimes people end up with a bad debt hanging like an albatross around their necks–and dragging down their credit scores–for years. But there is light at the end of the tunnel: negative information can only legally remain on your credit report for so long before it gets wiped away. After 7 years, you can expect a bad debt to be scrubbed from your report; but can you rely on the credit reporting system to ensure you’re not getting a raw deal?

You should check your credit report periodically and ensure that the information being reported about you is accurate. You definitely want to make sure that negative information is being reported fairly; as many debtors have found, negative information not belonging to you can end up on your credit report as a result of mistake or fraud. Even if you are responsible for a bad debt listed in your report, mistake or fraud may have caused some details of that debt to be misreported. Debt “re-aging” refers to a bad debt whose date of expiration, so to speak, has been artificially extended; if you find this kind of mistake on your report, there are steps you can take to fix your report.

Keep in mind that there are three credit bureaus which report credit history. If you believe a debt has been re-aged, you will have to contact all three bureaus to request the removal of the debt from your file. Thus, you want to obtain a report that contains information for all three bureaus. Look at the date of last activity reported on your credit report for the bad debt.  The clock starts at 180 days after the date the debt first became delinquent. If the original debtor has sold the debt to a debt collector, the debt collector may fraudulently move the date forward in an effort to coerce the debtor into paying, either by prolonging the bad effects of the bad debt on the debtors credit history or even just to bring the debtors attention to the debt once more.  However, keep in mind that mistakes happen; sometimes a creditor may simply have received incorrect information about the debt from the original creditor.

When the original creditor no longer appears on the debt, the debt is past the 7 year deadline for reporting. Any debt that you know to be older than 7 years should be contested. If you find a re-aged debt, contact each credit bureau and request the removal of the incorrect information. You may be able to contest the debt online, on each credit bureau’s website, but you may have to  complete a dispute form and mail it in. Include documentation about the debt, for example, information that proves that the reported creditor is not the original creditor, and documentation of the date of delinquency, such as credit card statements. You may also want to include older credit reports that accurately reported the age of the debt. Keep a copy of each letter you send to the credit bureaus.

The credit bureaus have 30 days to remove incorrect information from your file. If the information is not removed, you may want to file a complaint with the office of your State Attorney General. You may also write to the Federal Trade Commission to complain about the creditor, or even attempt a lawsuit against the debt collector. It can be difficult to prove that re-aging was purposeful, but the right kind of pressure can cause a debt collector to respond to your request. Remember that your goal is to get the unfair negative information removed from your credit report, so you can also try to appeal to the bureaus to remove the debt from your report on other grounds.

On the other hand, if waiting for debt to fall off your credit report is not an option, and if what you really need is to get out of debt now, and to get a “fresh start”, consider filing bankruptcy. And if you do, keep the Law Offices of John T. Orcutt in mind, a North Carolina bankruptcy law firm offering a totally FREE initial consultation out of 4 different offices: Raleigh, Durham, Fayetteville and Wilson. Just call toll free to 1-800-899-1414 or visit their website at www.billsbills.com .

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Published Friday, January 8, 2010 @ 8:34 am

Bankruptcy should not be an embarrassing process. It’s bad enough the credit industry has surrounded it with negative stereotypes to make people believe it’s a life-altering decision.

However, for a number of people in Milwaukee, Wisconsin, filing Chapter 13 has become a series of perpetual embarrassments and ceaseless frustration as a result of a healthcare provider making public the medical conditions of patients who have filed for protection when their bills became too much to manage.

A 53-year-old college admissions employee filed Chapter 13 in an effort to clean up a difficult financial period of her life. Susan Dandridge understood that a good deal of private financial information will become public record. However, she did not count on an extensive list of her personal medical conditions being included in the claims filed by Aurora Health Care, a regional medical center to which she became indebted.

When she found out her privacy had been violated, she pursued legal action. In turn, a class action lawsuit was filed as it was revealed that Aurora had done the same thing with other patients’ billing records when submitting bankruptcy information.

This very compelling case not only brings to light once more the role medical bills play in the nation’s personal bankruptcy rate but also introduces the question about what medical information, considered private under HIPPAA laws, can be revealed during the bankruptcy process.

HIPPAA, or the Health Insurance Portability and Accountability Act of 1996, requires strict public protection of an individual’s health history by the entities that handle it, such as insurance companies and hospitals. Essentially, it is in place to protect citizens when medical information is transferred between health care providers or when people switch insurance companies. It is a private entity’s responsibility to protect your medical past.

Unfortunately, in Ms. Dandridge’s case, medical information became very public. Although those specific records have since been sealed, her suit contends they were available for months prior to her realizing they had been exposed. The suit also claims Aurora intentionally disclosed the records because of her inability to pay. Thus, her medical privacy was egregiously violated and, according to the lawsuit, the organization’s actions left her open to medical identity theft.

The lawsuit contends that Aurora could have filed summary information as a way to protect the consumers’ medical background while still adhering to state and federal medical privacy laws. However, the Wisconsin Hospital Association has jumped into the mix, stating that Dandridge’s attorney misinterpreted the law and that such information can be revealed in matters of billing and collections.

The realization that the information was made public came after a separate trustee in a Chapter 7 case noticed the amount of detail in Aurora’s claims and initiated legal action that eventually ended in a settlement. From there, the issue spiraled throughout the community and to those who had financial issues with the organization.

It does not matter whether or not anyone found or used for ill will the medical information revealed in the claims. The mere exposure of them is enough to constitute harm, according to Dandrige’s attorney. He also argues that now that the information is “out there” it is subject to additional exposure by third party companies who scan and archive court records.

It is the hope of Ms. Dandridge and the other class members that the practice of including conditions and reason for treatment in the collections and bankruptcy process be halted on a national level.

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Published Friday, January 8, 2010 @ 8:27 am

It is a good idea to seek out alternatives to bankruptcy when such alternatives are in fact available. As you may have discovered, though, that can be a big “if” to overcome. So what kinds of alternatives are worth the trouble…and what alternatives are not all they are cracked up to be?

Budgeting your money, restructuring your debt, seeking better loans to replace your existing debt and selling valuable assets are all alternatives to consider if they are available to you…but that can be a big “if.” Budgeting your money may be impossible if even basic survival expenses are beyond your means; budgeting is an essential financial skill to master, but in some cases it may be too little, too slow or too late. Restructuring debt by refinancing or other options can also allow you to reap benefits, but you may not have the credit rating or the kind of debt that will allow you to refinance to your benefit. In addition, refinancing savings can sometimes be lost to third party fees and commissions, so that all you are doing in the end is renaming your loan, replacing the lender and not the principal. Finally, selling assets can help you get out of trouble, but you may not have such assets if you are seeking bankruptcy protection. In addition, if you sell an asset and end up having to file for bankruptcy protection anyway, certain sales and transfers could land you in hot water with the bankruptcy court or cause other complications in your filing. (So before you do it, check with a bankruptcy attorney!)

But what about other alternatives? Are any of them worth the trouble? Unfortunately, many debtors have learned the hard way that some of the non-bankruptcy solutions out there are not all they’re cracked up to be. A lot of them may not work at all; some may get you in bigger financial trouble, or cause you to be ripped off. And to add insult to injury, while you waste time with ineffective solutions, you may be delaying filing for bankruptcy protection to the detriment of your case.

You definitely want to think twice before opting to forgo bankruptcy in favor of “credit counseling” or debt consolidation. Government consumer watchdogs and other debtor advocates have been warning the public for a long time that outfits claiming to be able to get rid of your debt by consolidation are often not worth tangling with.  Unfortunately, even organizations claiming to be nonprofits may not have your best interest for their priorities; keep in mind that many have cast their lots with the creditors. Already, from the beginning, they are not on your side!

As you tackle financial problems, it’s better not to mess with your retirement. Reverse mortgages schemes target older folks who are cash-strapped and may make for nasty surprises for the heirs of the estate, as well as taking advantage of retirees to rack up fees and other forfeitures. Younger people may put their retirements at risk if they opt to address debt problems by dipping into their retirement funds, which are normally protected from bankruptcy proceedings. Dipping into retirement funds can also result in increased tax liability.

And speaking of increased taxes, keep in mind that any debts that are forgiven by creditors of all stripes are considered income by the IRS. According to the Tax Code, only debts that are discharged in official bankruptcy proceedings will not be considered income, so even if you catch a break negotiating with creditors, you may pay the price in increased tax liability. Remember also that often taxes are not dischargeable in bankruptcy, so if you end up having to file anyway, a debt forgiven by an unsecured creditor could saddle you with a more permanent type of debt.

Alternatives to bankruptcy are available, and you shouldn’t be totally discouraged just because  each of these solutions carries some drawbacks and warnings; the point is merely that ALL viable solutions to serious debt issues carry drawbacks. Much like you shouldn’t be discouraged to attempt the alternatives because they have drawbacks, don’t be discouraged from looking into bankruptcy protection if that could be the solution for you.

In North Carolina, you may want to check with the Law Offices if John T. Orcutt, a bankruptcy law firm offering a FREE initial consultation and offices in Raleigh, Durham, Fayetteville and Wilson. Just call toll free to 1-800-899-1414 or visit their website at www.billsbills.com .

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Published Thursday, January 7, 2010 @ 9:25 pm

The bankruptcy numbers for 2009 are out, and as expected, they’re high. According to a report in the Associated Press, 1.4 million people declared bankruptcy last year. That’s the seventh highest number ever, and the largest number since the change in the 2005 bankruptcy laws. 110,000 people declared bankruptcy in November, marking the 9th straight month of more than 100,000 bankruptcy filings.

The news isn’t surprising, as the economic downturn takes its toll on more and more American families. Even while some economists suggest that the recession is over, unemployment remains high, and many people are suffering from months of reduced income, which results in credit cards, mortgages and other bills piling up.

However, buried in the AP story was one very interesting fact. While all bankruptcies have increased over the last year, Chapter 7 bankruptcies are up 42% and Chapter 13 bankruptcies are only up 12%. That means that the share of people filing Chapter 13 is down to 28%. This is surprising, considering that the 2005 bankruptcy law is specifically designed to encourage – sometimes even force – people to file Chapter 13 instead of Chapter 7.

Why are fewer people filing for Chapter 13? There are no definitive answers, but it’s possible to speculate. For one thing, a Chapter 13 filing requires a debtor to have some form of income. The purpose of the Chapter 13 filing is to pay some or all of your debts, both secured and unsecured, over a period of 3-5 years. In order to do that, you need to have money coming in. Given the millions of people who’ve lost their jobs over the past two years, it’s not surprising that fewer debtors have enough income to file Chapter 13. While unemployment benefits do count as income, the length of this recession means that – despite the efforts of the federal government to increase these benefits through the stimulus – more and more people have lost their benefits before they’re able to find a job. And it’s likely that many of these people may have run up large credit card bills over the course of their unemployment, bills they have no way to pay.

A second possibility has to do with the foreclosure crisis. Many people who choose to file Chapter 13 do so as part of an effort to keep their home. Many people who bought homes during the housing bubble are now stuck with enormous mortgages. Since underwriting was so lax during that time, these mortgage payments may be far more than the one third of household income that’s recommended by banking standards, making it impossible to make the payments if your income has decreased for any reason. In other words, these debtors may have some income, but not enough to make the mortgage. In addition, housing prices have decreased across the country, in some markets by as much as 66%. Some homeowners may feel it’s not worth it to try to keep their homes, if they have negative equity. Filing Chapter 7 bankruptcy gives them a fresh start, and if they work quickly and steadily to rebuild their credit, they could apply for another mortgage in less than 5 years.

Finally, it’s possible that as bankruptcy lawyers become more familiar with the bankruptcy law, they become better positioned to advise their clients. Debtors who might seem required to file Chapter 13 on the face of it, may actually have other options that their lawyers can point them to. Just one more reason why it’s wise to seek out an experienced attorney before filing bankruptcy.

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Published Thursday, January 7, 2010 @ 12:27 pm

Are you putting off declaring bankruptcy because you’re afraid you’ll never be able to rent an apartment again? Have you heard horror stories from friends or relatives about how they got turned down for a rental because of their bad credit? Relax. Having a bankruptcy on your credit report won’t prevent you from finding a great place to live.

It’s true that some places – particularly apartment complexes – do check your credit, and do accept or deny your application based on the results. If you have your heart set on living in a place like this, do yourself a favor: call them up beforehand, and ask what their requirements are. Be specific. Ask if they refuse to rent to anyone with a bankruptcy on their record. Find out your credit scores in advance, and ask the apartment manager if your scores sound like they’re in the right range. If not, you’ve just saved yourself the $40-50 application fee. If the manager says, “well, they’re a little low,” offer to bring documentation showing your reliability: pay stubs from work, bank statements, savings accounts, rental history, letters of recommendation. Some apartment complexes will rent to people with lower credit for an additional deposit.

Remember, too, not every apartment owner will check credit. Many individual owners don’t do a credit check. Even those who do are likely to listen to your story about what happened, and why you declared bankruptcy. Be brief but honest; most importantly, explain how your situation has changed. Make sure they understand that the bankruptcy means you owe less (or no) money now, and are therefore better placed to make the rental payments. Again, bring documents to support your story. You can also point out that since a person can’t declare bankruptcy for another seven years, you are actually, in some ways, a better risk than someone who hasn’t declared bankruptcy – if you stop making payments, they could take you to court and you wouldn’t be able to discharge those debts. Be careful with this argument though: although it’s both true and valid, some landlords might consider the fact that you’re bringing up the possibility of not paying rent as a bad sign.

Another suggestion is to look for places to rent that are less strict. Some rentals will advertise: no credit check required. Check out apartments that are offering specials: one month free if you rent by June 1st, for example, or no deposit required. Generally, this indicates a place with low occupancy, and owners who can’t afford to be quite as picky.

Finally, once you get established in a new apartment, do everything you can to maintain the path to financial stability you started by declaring bankruptcy. Take steps to rebuild your credit. Begin to establish a nest egg so that you have some savings in case of emergencies. Most importantly, pay your rent on time every month. If you need to rent another place in the future, having a solid record of making monthly payments could be invaluable.

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Published Thursday, January 7, 2010 @ 9:24 am

Well, this isn’t really good news: the number of bankruptcy filings by businesses in the U.S. is officially rising faster than the rate at which individuals file.

The less stability in the business world, the less stability in the job market. In turn, meaning that those on the brink of serious financial trouble, may soon go beyond the brink. And, for those trying to make a successful transition out of bankruptcy, the lack of work opportunities are making it exponentially more difficult.

You may be reading about faint signs of recovery from the Great Recession. A rally on Wall Street; rising new home sales and a better than expected holiday sales season. Well, what we are not reading about is the pain being caused by the exceptional unemployment rates. And as long that hovers around double digits, we shouldn’t not expect a full recovery. That’s why more business bankruptcies are a little scary.

A service called Automated Access to Court Electronic Records compiled data that indicated more than 15,000 businesses filed for Chapter 11 bankruptcy in 2009, an increase of 50 percent. Small business Chapter 7 liquidations jumped 38 percent from 2008. Each number, respectively, was more than double the increase between 2007 and 2008.

The rate for individual bankruptcies climbed by only 32 percent. Unfortunately, a large percentage of those came at the hands of unemployment. And in light of the recent news concerning the rate of business filings, it only looks as if the two statistics are going to continue intertwining, wrapping our nation in a perpetual dance of financial misery.

Thankfully, the number of filings for 2009 still remain just below the record set in 2005 before the Bankruptcy Abuse Prevention and Consumer Protection Act was enforced.

In the last two weeks before the reforms became official, 630,000 people filed bankruptcy to avoid the more difficult path to Chapter 7 via the Means Test, a component of the new law that “qualifies” people for Chapter 7.

But now, with Chapter 7 numbers back at their pre-2005 rate, many who had thought they would fail to qualify for bankruptcy are finding out that the Means Test is no big hurdle.

However, the greatest fear to emerge from the increases in both commercial and individual bankruptcies is the notion that the credit industry make begin to seek tougher amendments to its 2005 action or worse yet, lobby for new anti-bankruptcy laws. Scary thought.

Ronald Mann, a Columbia law professor, believes the 2005 law was not warranted and that ” … it was largely ineffective. I don’t think anybody who’s knowledgeable about the bankruptcy system thought the statute was well crafted.”

Recent filings are showing a shifting demographic in the bankruptcy system. When at one time those who made between $40,000 and $80,000 were prevalent, salary ranges of those who file is beginning to grow into the $100,000 to $300,000 range.

There is no denying the connection between business bankruptcies and the rate at which individuals file. It’s all in the jobs report. And as both types continue to impact the country, we need to keep our other eye on the lobbying efforts of the lending and credit industries. There is no telling what they may think of next.

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Published Wednesday, January 6, 2010 @ 8:20 pm

Throughout the Chapter 12 Bankruptcy series we’ve explored how bankruptcy bound family farmers and fishermen can reap the many rewards and special rights provided by a Chapter 12 filing. This series included an introduction to the concept of Chapter 12, along with additional benefits drifting from this protection; a detailed look at how this process works for farming and fishing families; and what you can expect at a Chapter 12 hearing—from the earliest bankruptcy petition to the negotiated repayment plan. In the conclusion of this four-part series, we share the specifics behind, and results of, this type of bankruptcy discharge, along with an understanding of Chapter 12 debt relief exemptions, and the ins and outs behind what is known as the Chapter 12 “hardship discharge.”

Under Chapter 12 bankruptcy laws, if you were initially defined under the Bankruptcy Code as a family farmer or fisherman at filing, you can receive a debt discharge after completing all necessary payments under your court-sanctioned Chapter 12 repayment plan. In some cases, in order to ensure this discharge, you must also certify that all domestic support obligations due prior to making this certification have been paid.

The effect of the Chapter 12 bankruptcy discharge involves releasing you from all debts provided for by the repayment plan, with a few exceptions. This means that your farm or fishery’s financial slate is clean, and any creditors  (whether priority, secured, or unsecured), who were provided for in full or in part under your repayment plan may no longer start or continue any legal action against you to collect any discharged debt obligations.

There are a few exceptions to the Chapter 12 bankruptcy discharge. According to the Bankruptcy Code, certain categories of debts not discharged in Chapter 12 proceedings include: “debts stemming from domestic support such as alimony and child support; money obtained through filing false financial statements; debts for willful and malicious injury to person or property; debts from fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny, and any debts for death or personal injury caused by the debtor’s operation of a motor vehicle while the debtor was intoxicated.”

Your Chapter 12 plan usually lasts three to five years and normally provides for full repayment of all priority claims. Any debts that are not discharged will need to be paid in full under your individual repayment plan. Because an added benefit of Chapter 12 bankruptcy is that payments to secured creditors can sometimes continue longer than the three-to-five-year period plan, these debts are therefore not discharged until fully paid.

Another benefit of Chapter 12 bankruptcy is the “hardship discharge.” The court may grant you a “hardship discharge” even if you’ve failed to complete all of the payments under your repayment plan. This type of discharge is available when your failure to complete payments under your individual repayment plan is due to circumstances beyond the debtor’s control and through no fault of the debtor, such as injury or illness that prevents you from keeping an income. In some cases, the Chapter 12 hardship discharge falls under many of the rules and limitations applied in Chapter 7 bankruptcy cases.

During the complex Chapter 12 process, primarily used to bail out working families who are, in this savage economy, beleaguered and bankruptcy bound, it’s always helpful to seek the assistance of a qualified bankruptcy lawyer. While the Law Offices of John T. Orcutt do not file for Chapter 12 relief, we will evaluate your unique financial situation and refer you to a Chapter 12 bankruptcy expert if needed. Call today to set up your free initial consultation. 1-800-899-1414.

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Published Wednesday, January 6, 2010 @ 8:13 pm

The biggest bankruptcy since Orange County went through it back in 1994 may be coming to an end soon as the City of Vallejo looks to take steps necessary to move out of bankruptcy soon.

City officials for Vallejo filed for chapter 9 bankruptcy in May of 2008. The city had tried to avoid doing so by convincing the local labor unions to accept some salary concessions as the recession really began to take hold. However, since they refused to do so the city was forced to file for bankruptcy as the recession reduced local government tax revenue.

Another town, Desert Hot Springs, was forced to file for bankruptcy when it was hit with a legal verdict it could not cover. Orange County ended up filing in 2001 after some of its investments failed to pay off. Chapter 9 allows municipalities like Vallejo, Desert Hot Springs, and Orange County to reorganize instead of having to liquidate.

Currently the city is due in court with creditors this February, but it is doing what it can to come to an agreement with as many as possible. In late December the city council voted unanimously to approve a series of moves that include raising taxes, freeze bond payments, and slash spending. As it stands the budget for the city is expected to hit $83.5 million in 2014. That would be nearly $30 million more than the city is expected to get in revenue.

Financial conditions for Vallejo are not expected to get any better in the near future either. Estimates currently have the city collected almost one fifth less in property taxes due to home values falling. Administrative workers as well as police have negotiated new contracts with the city in a move intended to help it become more financially stable. Negotiations are ongoing with the labor unions in hopes of finally reaching an equitable arrangement. Next month the city hopes to come to new agreements with electrical workers and local firefighters.

Along with aiding their bottom line by receiving concessions from its employees the city will soon look to the citizens for help in order to cover the $51.6 million in debt that the city has accrued. The city will look to raise $4.5 million through increases in sales and property taxes. Hopes are that an additional $3 million a year can be saved by suspending interest and principal payments from its general fund. The city has already done this once in order to save money (last May- July) before beginning interest payments at a reduced rate of 2%.

Vallejo may not be alone in their troubles. According to a survey taken by the National League of Cities last September, most financial officers expect to see their city’s finances get much worse before any improvement.

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Published Wednesday, January 6, 2010 @ 7:22 am

It’s been a very rough year for media companies, particularly newspaper publishers. An ongoing decline in advertising revenue, huge debt and a continuing inability to obtain additional credit have threatened the industry at large. It should come as no surprise, then, that a number of newspaper publishers have sought protection from creditors through Chapter 11 bankruptcy filings and have been sorting out their financial affairs under the oversight of U.S. bankruptcy courts.

Tribune Co., home to the Chicago Tribune, has been in Chapter 11 bankruptcy since December 2008. A variety of creditors are fighting for control of Tribune Co., chief among them senior creditors led by JPMorgan Chase, which is challenging a bankruptcy court decision to extend the deadline for Tribune Co. to file a new plan of reorganization until February 2010. In turn, JPMorgan Chase and the other senior creditors’ efforts to gain control of Tribune Co. are being challenged by junior creditors.

Philadelphia Newspapers, which owns the The Philadelphia Inquirer and Philadelphia Daily News, also filed for Chapter 11 bankruptcy protection in February 2009. Senior creditors are also fighting through bankruptcy court proceedings to gain control of Philadelphia Newspapers. A three-judge panel of the United States Court of Appeals for the Third Circuit recently heard oral argument on the issue of whether Philadelphia Newspapers’s senior creditors would be allowed to use the amounts they are owed as bids in an auction proceeding, a measure known as “credit bidding.” Philadelphia Newspapers had earlier succeeded in persuading the United States District Court for the Eastern District of Pennsylvania to bar credit bidding in a potential auction proceeding.

Freedom Communications, publisher of the Orange County Register, hoped to exit bankruptcy protection quickly by filing a “pre-packaged” reorganization plan, in which a debtor’s reorganization plan is developed in advance with the aid of its creditors. Unfortunately for those which wished to see the company exit bankruptcy quickly, unsecured creditors successfully challenged the pre-packaged plan and were granted the right to file an alternative plan.

The latest publisher to seek bankruptcy protection in 2009 is Heartland Publications LLC, which filed for Chapter 11 bankruptcy protection on December 22nd. Heartland, which publishes twenty-three daily newspapers, is preparing to transfer ninety percent of its ownership to its senior creditor, GE Capital, and the remaining balance of its ownership to its largest unsecured creditor, the hedge fund Silver Point Finance LLC.

Broadcasters NextMedia Group Inc., Citadel Broadcasting and ION Media Networks Inc. and magazine publisher Reader’s Digest Association Inc. are among other media companies which filed for bankruptcy protection in 2009. The Sun-Times Media Group, which publishes the Chicago Sun-Times, and the Journal Register Co both entered and successfully exited bankruptcy in 2009.

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Published Tuesday, January 5, 2010 @ 6:45 pm

Okay, so this post isn’t exactly keeping with the recent holiday spirit, but it’s a pretty compelling topic given the nature of our blog. And sometimes, it takes extreme colors to paint the right picture.

A Tampa, Florida woman is suing a debt collection company for wrongful death relative to her husband’s 2005 heart failure. Dianne McLeod is charging that the ceaseless and what can rather easily be deemed as remarkably unprofessional phone calls contributed directly to the stress that initiated her husband’s cardiac arrest.

In 2002, not long after her husband had to be airlifted to a hospital because of heart trouble, the following message from an alleged Green Tree Servicing representative was left on the McLeod’s answering machine:

“Stanley McLeod, you need to call Green Tree and get your act together and make your payments on your mortgage and quit playing these games … Why don’t you have that helicopter pick you up and bring that payment to the office?”

Making such a message even more hard to believe is the fact that it was because Stanley could no longer work that contributed to the family’s debt problem. Disability payments were not enough to pay the bills. So the mortgage company hired Green Tree.

The collections company did not create Mr. McLeod’s heart disease. However, Green Tree is accused of calling on some days up to ten times. They were also contacting the McLeod’s neighbors. When they could reach Stanley, he would become so upset with the caller’s tone that he would begin to sweat just listening to them. He would also complain of chest pain after hanging up. His widow is certain the company’s demeanor and highly aggressive approach led to a rapid increase in stress and anxiety on an already strained heart.

Regulated by the U.S. Federal Trade Commission, debt collection efforts are often subject to scrutiny by those in debt. While the laws in place are meant to protect consumers, they are by no means tangible enough to be properly enforced within every debt collection office cubicle in the country. Many collection agents are short-term, hourly employees given a few days of training, a headset and computer-controlled call list. More over, the bonus structure for dollars collected creates a competitive work enviornment, which can easily lead to collection efforts that skirt the federal guidelines. No other industry receives more complaints than debt collection.

A representative for the company flatly denied the company’s attempts to seek restitution from the McLeods contributed to Stanley’s death.

“The collection activity did not lead to his death. The claim is meritless,” said Brian Corey of Green Tree Servicing. “We deny that the content, the number or the timing of the calls had anything to do with him dying in 2005.”

Scare tactics have long been an effective method by which to collect money owed. Heck, it’s the very strategy upon which the mafia is built. Now, that’s a reference used only to demonstrate that when typical collection efforts may not be effective, an inexperienced and frustrated collections agent may be tempted to resort to tactics not considered “above board.” And, it’s a comparison supported by industry analysts.

Billy Howard, the attorney representing Ms. McLeod, said his firm is also representing close to 500 individuals against companies that use, what he deems “Tony Soprano tactics.” Tony Soprano is a fictional mobster who glorified mob life in HBO’s series “The Sopranos.”

Howard states that most consumers, afraid of debt repercussions and stressed to the hilt, do not know which end is up financially, let alone the esoteric laws regarding debt collection. “Scare tactics work. They’ve worked for years. People are scared,” he said.

The McLeod trial will start in January. Happy New Year.

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Published Tuesday, January 5, 2010 @ 1:52 pm

Foreclosure is a common precursor to bankruptcy. More often than necessary, it happens before a family really knows where to turn for help.

Worse yet, those who lose their home in foreclosure continue to spiral into debt and end up filing bankruptcy long after it could have been used to help save their home in addition to relieving them from the agony of overwhelming monthly credit card bills and other debts. Fortunately for many citizens of North Carolina, a foreclosure prevention program has become a model for the nation and to date has assisted more than 2,500 of us from having to give back the property we worked so hard to obtain.

Called the State Home Foreclosure Prevention Project, this unique effort provides those worried about making their mortgage payment a hot line that provides advice, counseling and insight on how to work with your home’s mortgage lender to avoid having to surrender your deed back to the bank. While it certainly cannot help everyone who calls, two out of every three families needing help are getting it. And, more than 5,000 additional mortgages are still being re-negotiated.

It was originally created to assist those victimized by the sub-prime loan mortgage crisis but has since been expanded to help homeowners who have traditional loans but may be struggling with their house payment as a result of other debt forms or unemployment.

It should be noted that this program is not a debt or credit counseling service. It is designed specifically for those affected by the swath of spiking mortgage rates that resulted in the systemic plague of foreclosures nationwide, decimating the national real estate market and bolstering our economic demise.

Similar federal programs, such as the Making Home Affordable plan rolled-out last year, have not met expectations. North Carolina has managed, proportionally, to create an impact. The state banking commission has estimated that the total number of mortgages saved to date has stopped $218 million in property value and mortgage holder losses. Should those families currently working with the program be saved, the totals could more than double that number.

Yet, there remain a number of pain points in the state’s efforts to stave off foreclosures. Chris Kukla, a high level government affairs adviser at the Center for Responsible Lending, stated that a number of mortgage counseling companies and other private organizations are doing a “horrible job” in loan reorganization. Whether it be not hiring enough people to answer call-in questions or simply not understanding the paperwork process and related legalities, many of the efforts that have erupted on to the market at the height of the recession are too profit driven to provide real service.

The importance of this program to those considering bankruptcy is that it can help you alleviate one of your largest monthly financial headaches. Understand of course, that it does not eliminate your mortgage, but simply re-aligns it in a more reasonable payment plan. With this added stability, a troubled homeowner could arrive at a less pressure-driven decision to file bankruptcy and feel more confident in the outcome.

Remaining in one’s home is one of the most important factors for someone who files for bankruptcy protection, despite the fact that the majority of those who file do just that — stay in their homes. It seems that over the years, perhaps since the 2005 changes to the bankruptcy law, or maybe as a result of today’s hyper-sensitivity to the housing crisis, the fear of foreclosure has permeated the mindset of everyone facing financial trouble. Between programs like the State Home Foreclosure Prevention Project and the expertise of the bankruptcy attorneys at the Law Offices of John T. Orcutt, you have more than enough ways by which to remain safe and sound at home.

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Published Tuesday, January 5, 2010 @ 11:46 am

America is a nation of givers. Despite the recession and high unemployment, approximately 80% of Americans continued to give to religious and/or secular charities. Many people who’ve lost their jobs or accumulated large amounts of debt nonetheless continue to struggle to donate to churches and causes they believe in. Perhaps you’re worried that declaring bankruptcy would put an end to your ability to donate. Or perhaps, even worse, you’re afraid that the bankruptcy trustee would be able to recover any gifts you’ve made to your church in the past year.

In fact, bankruptcy laws protect both debtors’ rights to donate and religious charities’ rights to keep donated money. Debtors taking the ‘means test’ to determine whether or not they can file chapter 7, can allocate as much of their income to charity as desired- so long as the charitable giving is in line with past practices, and not merely a strategy to pass the means test. Similarly, Chapter 13 filers can use charitable contributions to reduce their disposable monthly income, and more importantly, reduce their monthly plan payment.

It’s true that a series of bankruptcy cases had surprising and sometimes contradictory findings after the passage of the 2005 bankruptcy act. One prominent case in New York, in 2006, for example, found that Chapter 13 filers could not tithe or make any other donations until they had paid off their credit card debt. However, Congress quickly passed the Religious Liberty and Charitable Donation Clarification Act of 2006, which clarified that Americans filing Chapter 13 do have the right to make charitable donations. It built on another act of Congress, the Religious Liberty and Charitable Donation Act of 1998.

Prior to the 1998 act, bankruptcy trustees frequently sued for the return of charitable gifts. Some trustees argued that charitable deductions to churches were donated without any ‘reasonably equivalent value’ being given in return. Therefore, they should fall into the category of fraudulent transfers – payments made to one person or creditor that are more than what they owe, or what they’re valued for, thus shortchanging everybody else. Bankruptcy attorneys argued no, that in fact the donor does receive something of value in exchange for the donation: preaching, teaching, spiritual instruction, etc. The trustees countered that the donor would receive those things whether or not they gave money. Many bankruptcy courts allowed the trustees to recover the money – which caused great hardship for some charities, who had already spent that money. However, the 1998 act clarified that gifts up to 15% of the donor’s income in the year before bankruptcy are not recoverable. In addition, gifts of more than 15% may be exempt if the debtor can show that these are consistent with their past practices. If you have given 20% of your income to your church every year for the past five years, for instance, the church would be able to keep the entire 20%.

Do note, however that bankruptcy courts can still consider these donations fraud if they look like a deliberate attempt to not pay your creditors. The courts will look at timing, the amount of the payments, and the circumstances surrounding your gifts. So if you’re an avowed atheist who hasn’t been to church in ten years, and you suddenly decide to donate 15% of your income to the Church of the Fallen Brethren the day before you declare bankruptcy – watch out. The court will most likely consider that fraud.

However, if you’ve been consistently donating to your church over the years, declaring bankruptcy shouldn’t hinder your ability to give them your financial support. In fact, bankruptcy could protect this support, and make it easier for you to give to an organization that really matters to you.

Think you may need to consider filing bankruptcy…or know someone who may need to. Keep the Law Offices of John T. Orcutt in mind, a North Carolina bankruptcy law firm offering a totally FREE and confidential initial consultation, with offices in Raleigh, Durham, Fayetteville and Wilson. Just call toll free to 1-800-899-1414 or visit their website at www.billsbills.com for tons of information about every aspect of bankruptcy and bankruptcy law.

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Published Tuesday, January 5, 2010 @ 8:41 am

Wage garnishment is a relatively harsh debt collection practice employed by creditors when other methods of debt collection have failed. Wage garnishment allows a creditor to receive payment on a debt by intercepting wages before a debtor has even received them. A creditor may be able to arrange to receive payments equal to a significant percentage of a debtor’s wages, generally anywhere from 10% to 25%.

Scary thought, isn’t it? If you are seriously behind on a debt, don’t panic yet! Because garnishment is such an intrusive solution, wage garnishment must be court ordered. In order to receive payments in the form of wage garnishment, a creditor must first receive a judgment from the court. As a result, wage garnishment is typically a last resort; many creditors may not even bother with taking a case to court, especially where a relatively small debt is concerned.

If a creditor wins a judgment against a debtor and the court grants him the right to garnish wages, the sheriff will deliver the wage garnishment documents to the debtor’s employer. The debt will then be handled through the employer’s payroll department, which will institute automatic withdrawals (the way income tax and social security are automatically deducted from each paycheck.) An employer will generally be required to provide the employee with documentation regarding the wage garnishment. Because this process involves a debtor’s employer, a  debtor will not often feel he is not only losing money; he is also losing face.

Wage garnishments are more likely to be seen in response to certain kinds of debt delinquency; generally, back taxes, defaulted student loans and missed support payments such as child support and alimony are more likely to trouble debtors with wage garnishment. Still, other kinds of creditors may also be able to win a judgment against a debtor and obtain a court order for wage garnishment.

If your wages are being garnished, there are some steps you can take to make the situation easier to deal with. If your wages are garnished, you may be able to convince the court to lessen the payments by explaining your financial situation, living expenses and efforts you have taken in the past to address the debt. If you are thinking of going this route, you should file a claim of exemption immediately upon receiving the paperwork about the wage garnishment from your employer. Sometimes you will have only a limited time after the court order is entered to file a claim for exemption, and while you wait to be granted a hearing your wages will continue to be garnished; the wait for a hearing could last as much as one or two months.

Wage garnishment for payments such as child support could exceed 25% of a debtor’s income. If your income after the payments are deducted is not enough to survive on, you may be able to petition a court to lower the payments. If this won’t help you, you can also try negotiating with the debt collector to stop the wage garnishment. Once they’ve gone to the trouble of suing for a wage garnishment order, a creditor is not likely to agree to stop garnishing wages unless the debtor agrees to pay more than the amount being deducted from each payment. If you offer a lump sum payment to settle the debt completely, however, the creditor may agree to a much smaller overall amount paid, so it is worth attempting a negotiation if you think you can settle the debt.

Wage garnishment is a major headache; it is best to avoid it altogether. If you find yourself in serious financial trouble, it’s best to take the situation in hand NOW rather than allowing it to spiral out of control. Remember that filing for bankruptcy protection can help you take care of debt by allowing you to discharge it outright. Bankruptcy can also help by freeing up income from dischargeable debts to put towards your other payments. With your situatio in hand, you can prevent wage garnishing from ever troubling you in the first place.

Fortunately, at least if you live in North Carolina, wage garnishment is generally not allowed. There are important exceptions: Wage garnishment is allowed to collect back taxes, alimony, child support and some types of student loans.

Lucky enough to live in North Carolina, but still suffering under a mountain of debt you simply can not get a handle on? Or, need to stop an overly burdensome tax or student loan garnishment that is simply “taking too much”?

You may want to consider filing bankruptcy and when you do, think the Law Offices of John T. Orcutt, an established bankruptcy law firm offering a totally FREE initial consultation out of 4 different offices: Raleigh, Durham, Fayetteville and Wilson. Just call toll free to 1-800-899-1414 or visit their website: www.billsbills.com .

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Published Tuesday, January 5, 2010 @ 8:35 am

Last month, the Supreme Court heard arguments in an interesting case about bankruptcy attorneys and free speech. The new bankruptcy law passed in 2005 contains a provision that prohibits bankruptcy attorneys from advising their clients to take on new debt before filing bankruptcy. In United States vs Milavetz, a 73-year old attorney from Minnesota is challenging that law.

The plaintiffs argue that the case represents a clear violation of attorney’s freedom of speech. Constitutional lawyers think this argument has merit: how can it be legal to interfere with a lawyer’s ability to advise his clients? There are legitimate reasons that people thinking about filing bankruptcy might need to take on new debt. In those cases, an attorney’s in a difficult position: does he violate federal law or does he fail in his ethical responsibility to his client?

For example, a debtor who is about to file for Chapter 13 bankruptcy might benefit by refinancing his mortgage, securing a lower rate before he files – in this case, since he’ll be paying less on his mortgage, there will actually be more money to contribute to his Chapter 13 plan. Or the debtor facing bankruptcy might purchase a new, reliable car to insure that he or she can get to work on time. What about an emergency medical situation? There are many situations in which taking on debt might actually be the responsible thing to do – but attorneys are prohibited from pointing these things out.

In oral arguments in the Supreme Court case, the government didn’t deny that there may indeed be circumstances in which someone about to file for bankruptcy could or should take on new debt. The law states that it’s prohibited to advise someone “to incur more debt in contemplation of such a person filing” for bankruptcy. The government argued that, in this case, ‘in contemplation of’ actually means ‘actions taken with an intent to abuse the protections of the bankruptcy system’. The restriction is not, they argue, against lawyers giving appropriate advice; it applies only to helping clients run up huge new debts that will never be repaid.

Really? That’s what ‘in contemplation of’ means? Wouldn’t most people – even most lawyers – read ‘in contemplation of (filing bankruptcy)’ as ’someone who’s thinking about filing bankruptcy’?

Also, it’s important to remember that running up debts you have no intention of paying is illegal: it’s civil fraud for sure, and maybe even criminal theft. All lawyers are already prohibited from advising their clients to do something illegal! Many lawyers feel that the provision was inserted into the bankruptcy bill as part of a whole host of punitive measures against consumers filing bankruptcy and their lawyers.

Of course, this is a very small part of bankruptcy law and doesn’t affect most of the interactions between attorney and client. An experienced bankruptcy attorney is able to give their clients the best advice even if, when it comes to the area of additional debt, they have to be creative about it. Some lawyers, for example, will set out the law in detail for their clients, without actually saying ‘this is what you should do.’ Still, it’s not right – and shouldn’t be legal – for the government to interfere with the attorney-client relationship like this.

Will the Supreme Court overturn the provision? Many observers think so. Others suggest that the court will decide that the provision only prohibits advice that was already illegal. Obviously, we all have to wait and see until the Court announces their decision this spring.

Need to consider filing bankruptcy. In North Carolina, keep the Law Offices of John T. Orcutt in mind. They offer a totally FREE initial consultation out of 4 different offices: Raleigh, Durham, Fayetteville and Wilson. Just call toll free to 1-800-899-1414 or check out their website at www.billsbills.com .

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Published Tuesday, January 5, 2010 @ 6:29 am

The New York Times recently published an insightful article detailing the struggles of homeowners facing foreclosure in the outer boroughs of New York City. At the New York State Supreme Court building in Jamaica, Queens, they come face-to-face with the lawyers representing the banks and the loan servicers that are pursuing foreclosure on their homes. These lawyers oversee large caseloads and don’t appear to the Times reporter have the time to delve into each individual matter.

New York state lawmakers have passed laws requiring lenders to negotiate with homeowners in court. That’s why the court’s docket is full of homeowners facing foreclosure. However, the banks in question, and the loan servicers that represent them, aren’t cutting deals to modify mortgages, despite the efforts of lawmakers to force the banks to do so. As a court referee says in the article, “I have yet to see an attorney for a servicer cut a deal.”

The evidence suggests there isn’t enough incentive for lenders and servicers to try to bargain with homeowners. The federal government has provided small financial incentives to services to allow loan modifications. But, because the servicers also make money from the foreclosure process, especially through fees charged to homeowners, the servicers don’t have as much of a reason to take the federal government’s money.

Even when modification is a possibility, the modification process often breaks down over logistics. For instance, homeowners often struggle to produce all of the paperwork lenders demand to see in order to process a modification. The Times also reports on an initiative to bring the documentation process online, allowing homeowners to store their documents in a database for safekeeping and to electronically track the progress of their modification efforts. A consultant quoted by the Times, however, remains pessimistic, stating bluntly, “[m]arginal improvements are not going to have a significant impact on increasing loan modifications.”

It should be good news for homeowners that the federal and state governments have stepped in to provide incentives for lenders and servicers to modify mortgages. However, an incentive is only an incentive, and sadly, evidence suggests that lenders and servicers generally choose to foreclose rather than modify. If you are a homeowner experiencing difficulty making your mortgage payments or facing foreclosure, relying on modification as a last resort may land you in a lot of trouble.

Filing for bankruptcy, on the other hand, can in many instances protect your home from creditors and keep foreclosure out of the picture. If you have a regular income, a Chapter 13 bankruptcy filing offers the opportunity to catch up on your missed mortgage payments, and your home will be protected by the bankruptcy court’s automatic stay, which stays, or freezes, collections actions, including foreclosures. A Chapter 7 bankruptcy filing may also protect your property, depending on the circumstances and the extent of your other outstanding debt. If you are looking for bankruptcy advice you can trust, do not hesitate to contact the attorneys at The Law Firm of John C. Orcutt.

If you’re one of the many North Carolina homeowners facing foreclosure, contact the Law Offices of John T. Orcutt today to discuss how Chapter 13 bankruptcy can save your family’s home. Call today: 1-800-899-1414.

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Published Monday, January 4, 2010 @ 5:15 pm

If you’re considering bankruptcy in 2010, it’s important to know you’re not alone. In addition to the millions who filed in 2009 or are considering bankruptcy as their last ditch financial New Year’s resolution, most American states could face insolvency in the coming year. As such, it is the “bankrupt state of the states” in the still-unfolding economic crisis that could be a major barometer for all of our ever-fluctuating financial futures.

While California’s credit crunch has been well-reported, Adrienne Gonzalez notes in her Jr Deputy Accountant blog (46 States Could Face Bankruptcy in FY09/FY10) that many municipalities are on the brink of a financial meltdown. According to the Center on Budget and Policy Priorities, 46 states could find themselves bankrupt and destitute by the end of fiscal year 2010. Gonzalez adds:

“States are currently at the mid-point of fiscal year 2009 – which started July 1 in most states – and are in the process of preparing their budgets for the next year. Over half the states had already cut spending, used reserves, or raised revenues in order to adopt a balanced budget for the current fiscal year – which started July 1 in most states. Now, their budgets have fallen out of balance again. New gaps of $51 billion (over 10% of state budgets) have opened up in the budgets of at least 42 states plus the District of Columbia. These budget gaps are in addition to the $48 billion shortfalls that these and other states faced as they adopted their budgets for the current fiscal year, bringing total gaps for the year to 15 percent of budgets….The states’ fiscal problems are continuing into the next two years. At least 45 states have looked ahead and anticipate deficits for fiscal year 2010 and beyond. These gaps total almost $94 billion – 16 percent of budgets – for the 36 states that have estimated the size of these gaps and are likely to grow as gaps are re-estimated in the next few months.”

Many share Gonzalez’s sentiments that the above numbers “look slightly frightening.” Elizabeth McNichol and Nicholas Johnson from the Center on Budget and Policy Priorities, one of the nation’s premier policy organizations working on policy and public programs that affect low- and moderate-income families and individuals, further project that, “States will continue to struggle to find the revenue needed to support critical public services for a number of years.” Citing budget shortfalls in 2010 and 2011, McNichol and Johnson illustrate how the states’ economic plight affect everyday Americans already beleaguered by their own personal recessions.

“In states facing budget gaps, the consequences are severe in many cases — for residents as well as the economy. As the 2009 fiscal year ended and states planned for 2010, budget difficulties have led at least 43 states to reduce services to their residents, including some of their most vulnerable families and individuals. Over 30 states have raised taxes to at least some degree, in some cases quite significantly.”

With the potential for higher taxes and reduced social services, average Americans may continue to suffer from the financial missteps of their home states. However, let the negative numbers above be a positive lesson that, from the largest states to the bankruptcy bound individual, a fresh chance to rebuild the finances is really what bankruptcy is all about! To learn more about the benefits of bankruptcy, visit The Law Offices of John T. Orcutt online today.

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Published Monday, January 4, 2010 @ 12:08 pm

In states like North Carolina—composed largely of rural areas dotted with farmland and abutting the ripe fishing grounds of the Atlantic—Chapter 12 bankruptcy can be exceptionally helpful to working farming and fishing families who might otherwise be bankruptcy bound.

In part one of the four-part series, entitled Chapter 12 Bankruptcy, we introduced the concept of Chapter 12, provided a brief overview of the special rights related to this protection, and shared who (or in some cases, “what”) qualifies as a family farm or family fisherman under the Bankruptcy Code. In this section, we’ll discuss how a Chapter 12 bankruptcy works, from initial petition filing to debt repayment planning.

If you qualify under the Bankruptcy Code’s broad definitions of a “family fisherman” or “family farmer,” a Chapter 12 case begins by filing a petition with the bankruptcy court where you live or the location of the “principal place of business” for your corporation or partnership. A qualifying husband and wife “family farmer” or “commercial family fisherman” may file. Unless the court orders otherwise, the petition includes a statement of your assets and liabilities; current income and expenditures; current business contracts and leases; and a general statement of your financial affairs.  In order to satisfy all of these petition requirements, you’ll need to gather a list of all creditors and the amounts and nature of their claims; the source, amount, and frequency of your income; a list of all of your property; and a detailed list of your monthly farming/fishing expenses, as well as living expenses, including food, shelter, utilities, transportation, feed, fertilizer, etc. In order to completely evaluate your household’s financial position, married individuals must gather this information for each spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing.

Upon filing for Chapter 12, you must pay a filing fee and a miscellaneous administrative fee with the clerk of court. With the court’s permission, and with specific deadlines, these fees may be paid in installments. Failure to pay these fees may result in dismissal of your case.

Filing the petition under Chapter 12 provides an automatic stay that stops most collection actions against you or your property. Under the automatic stay protection (a protection that exists under all forms of bankruptcy), any creditors—public or private—are not allowed to call you or send you collection letters. During the proceeding, they cannot continue any legal action against you, foreclose on your home, or repossess your car and other assets. And–even if a garnishment order has been issued–the automatic stay stops garnishment of your wages. Additionally, a Chapter 12 filing has the added benefit of protecting co-debtors (those liable with the debtor) from eager creditors seeking collection of consumer debts incurred by a personal, family, or household purpose.

When you file for Chapter 12 bankruptcy, an impartial trustee is appointed to evaluate the case and serve as an agent, for collecting your payments and making distributions to your creditors. Following your filing, the Chapter 12 trustee will hold a “meeting of creditors” at which you will discuss your financial affairs and the proposed terms of your repayment plan. From this meeting, parties typically resolve problems and repayment schedules. Afterwards, you, your trustee, and interested creditors attend a hearing confirming your personal Chapter 12 repayment plan.

Whether your bankruptcy is simple or complex, you’ll need an expert attorney to navigate the waters. Contact the experienced attorneys at The Law Offices of John T. Orcutt. Please note that while the Law Offices of John T. Orcutt does not file under Chapter 12, our office can evaluate your personal financial situation and refer your case to an experienced Chapter 12 practitioner if needed. Call us today: 1-800-899-1414.

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Published Monday, January 4, 2010 @ 7:58 am

Did you find yourself standing around at the stroke of midnight on New Year’s night, hard pressed to think of something, anything, that, in the current economy, you could resolve to do when all you currently think about is money? Whether you were in Times Square or a tiny gathering, you probably weren’t alone. Millions of Americans facing foreclosure of their homes, looming unemployment, mounting consumer and health care debt, and other tenuous financial situations during this still unfolding financial downturn are also struggling to start anew despite facing insolvency. Well, in addition to shedding those pounds and quitting those unhealthy vices, get ready to start your latest (and greatest) resolution with four steps to get yourself on the road to financial fitness in 2010.

Act Now and Assess Your Finances
Figuring out your financial future is sometimes as easy as understanding where you stand today in your day-to-day fiscal life. Are you currently unemployed or feel as though you could lose your job soon? As such, do you have enough money for you debts and everyday expenses?  Are you a homeowner facing foreclosure? Do you have substantial healthcare bills or an ongoing medical condition? Do you have multiple credit card balances or mounting business expenses? Have you recently filed for bankruptcy? What other financial circumstances are you facing? The answers to these questions and others can supply the necessary starting points for charting your next solvent steps.

Put Together a Financial Plan
Financial planning doesn’t necessarily mean hiring someone else to assess your portfolio. It can start by simply tracking your personal spending for a month, while keeping in mind your desire to pay down any debt (consumer, mortgage, or otherwise), reduce expenses, increase your income or discharge debt in bankruptcy.  Once you establish a system you’re comfortable with, you can more closely keep track of your current financial situation, including how much money you may be wasting on unnecessary items and interest and how much savings you can accumulate under a new, leaner budget.

Save Up for the Unexpected
If you’re facing unemployment, increased interest on credit cards or mortgages, or high medical costs, personal savings can provide a much-needed security blanket for tough economic times. To avoid hefty hardships from expected bills, start with a target savings of at least three months of income.  This necessary nest egg can be a lifesaver in these uncertain economic times and provide much-needed peace of mind.

Consider a Clean Slate Through Bankruptcy
Once your plan is in place, you may come to the conclusion that that you don’t have enough money to cover your many monthly expenses, pay mounting debts or save for your financial future. At that point, you may want to consider bankruptcy. A bankruptcy filing can discharge debt and allow you to save for your next steps, including a new home, your child’s college fund, and a pleasant retirement.  In fact, every year bankruptcy attorneys meet with hundreds of people in financial distress.  Each time those who have encountered misfortune, bad judgment, or business failure walk into law offices feeling hopeless and at the end of their rope, perceiving no alternatives to their continuing fiscal problems.  Almost every time, however, it seems more and more when these same clients leave these offices, they feel hope, relief and even, resolved, often for the first time in months or years—resolved that the bankruptcy laws and system offers them the possibility of a new start— at a tolerable cost—and with it a financially viable and secure future. In short, on a personal level, bankruptcy relief ends worry and stress of living on the financial brink…a resolution we can all appreciate.

If you’re bankruptcy bound, learn more by visiting The Law Offices of John T. Orcutt’s “Things to See and Hear” information.

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Published Sunday, January 3, 2010 @ 6:56 pm

Like many airlines in the United States, Japan Airlines Corporation has been struggling, possibly since the company was privatized more than twenty years ago. Stock for the nearly 60 year old company and the flag carrier for Japan hit a record low on Wednesday as fear that the company would soon be undergoing restructuring as part of a bankruptcy filing. At one point during trading the stock had sunk as much as 32% from the starting price for the day.

To avoid a bankruptcy the airline is trying to do what it can to cut operating costs as it attempts to recover from the global recession. JAL claims that it lost $1.5 billion just from April through September of 2009. Executives plan on cutting routes and jobs in the near future. Retirees may soon see their pensions reduced as the company tries to cut costs wherever it can.. The company is also seeking its fourth government bailout this decade.

Reports from Japanese news sources say that a group backed by the government aimed to aid in corporate turnaround had recommended that creditors allow the airline to begin the process of entering bankruptcy proceedings. However, it has also been reported that the creditors have rejected the proposal. They are afraid that losses would only continue to increase and that operations may not continue to operate smoothly. A final plan to help the airline is supposed to come from the corporate turnaround committee by the end of January.

Some well known airlines are trying to extend their Asian service by gaining an interest in the troubled company. Currently, JAL is part of the one world alliance with American Airlines. Delta has been trying along with its partners to lure Japan Airlines away from American by offering it $1 billion.

Government officials say that they cannot allow the airline to fold, but have not ruled out allowing it to seek relief through filing for bankruptcy.

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Published Friday, January 1, 2010 @ 5:20 pm

When many people think about bankruptcy, what normally comes to mind is what is represented in Chapters 7 and 13 of the Bankruptcy Code. In Chapter 7, you can discharge all of your debts and, in return, may lose non-exempt assets. Under Chapter 13, you may hold on to your assets, such as their home, but devote income in the near future to repaying your outstanding debts. Under both forms of bankruptcy, there are limitations to what you can do to modify your debts.

However, in states like North Carolina—composed largely of rural areas dotted with thousands of acres of farmland and abutting the ripe fishing grounds of the Atlantic—the lesser known Chapter 12 bankruptcy can be exceptionally helpful to working families who might otherwise be bankruptcy bound. Under the Bankruptcy Code, these protected groups have special rights, not found in the more common areas of Bankruptcy law.

In the special four-part series, entitled “Chapter 12 Bankruptcy,” we’ll introduce the concept of Chapter 12 along with the special rights related to this protection, as well as examine specifically how this process works for farming and fishing families, what you can expect at a Chapter 12 hearing, and the results of this type of bankruptcy discharge.

As mentioned, family farmers and family fishermen have special rights within the safe harbors of the Bankruptcy Code. For instance, a Chapter 12 bankruptcy can be attractive to qualifying parties, because, under this type of protection, creditors cannot file an involuntary bankruptcy petition against a family farmer or fisherman to recover even some of their money.  Additionally, under a Chapter 12 case the debtor is allowed to modify the mortgage lien on a farmer’s home or fisherman’s residence, important to not only stop foreclosure but also modify the terms of the loan.

But, first and foremost, it’s important to understand who (or what) constitutes a family farmer or fisherman.

According to the Bankruptcy Code, a family farmer is:

• a person or married couple (or, in some cases a corporation owned or controlled by a single family) engaged in a farming operation with debts not more than $3,237,000;
• no less than half of these debts (except for the residence) come from the farming operation for either the current year or each of the past two years; and
• the family farmer must be involved in “farm operations” which is a rather broad term. To be eligible for chapter 12, the family farmer must have a regular income, sufficiently stable to be able to make regular monthly payments during the term of the Chapter 12 plan.

Similarly, a family fisherman is:

• a person or married couple (or in some cases) a corporation owned or controlled by a single family) engaged in a commercial fishing operation with debts not more than $1,642,500;
• at least 8% of these debts (except for the residence) stem from the fishing operation for either the current year or each of the past two years; and
• the commercial fisherman must be involved in “commercial fishing operations,” also a broad term. To be eligible for chapter 12, the family fisherman must have a regular income sufficiently stable to be able to make regular monthly payments during the term of the bankruptcy plan.

While North Carolina has many urban areas, plenty of family farms and fisheries still exist throughout the state.  If you are struggling with mounting debts, and believe that bankruptcy may be your lifeline, visit the experienced attorneys of The Law Offices of John T. Orcutt online.

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Published Friday, January 1, 2010 @ 3:07 pm

To supposedly keep bankruptcy filings from getting out of hand the federal government passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, more commonly known as the Bankruptcy Abuse Reform Act (or BARF). BARF was supposed to help keep people that truly do not need to, from filing?

Unfortunately, BARF was passed upon the assumption that a lot of people were abusing the bankruptcy system. It was only more unfortunate that this assumption was thereafter proved to be totally incorrect.

Fortunately, BARF, as written, although adding lots of ‘red tape’ to the system, did not, for the most part, make unobtainable the kind of help that only filing bankruptcy can provide…given proper planning “pre-filing”.

BARF did erect substantial obstacles to filing, and these must be dealt with.

The biggest obstacle arose from the implementation of what is known as the “Means Test”. The idea was to filter out those people who would want to file bankruptcy, but who could really afford to keep paying.

As it turns out, most of the people who need to file really can’t afford to keep paying. Still, however, the Means Test does remain a substantial obstacle to filing. And to make things worse, this test is extremely complicated to understand and absolutely full of landmines for the unaware.

For example, a high income in the last 6 months could make it too expensive to file, especially if you don’t even have that income anymore. In this case, waiting to file for a number of months could be critical.

And, that’s where a good bankruptcy attorney comes in.

There are many ways to work around this ill-conceived test, but only a seasoned bankruptcy will know what they are and how to successfully apply them.

If you are thinking of trying to circumvent the Means Test on your own, beware. Even mediocre bankruptcy attorneys screw this up, and tactics gone too far will either make it impossible to file or leave you with a bankruptcy plan payment you cannot afford, or worse, result in your case getting dismissed out of court.

If you believe you need to file bankruptcy, you most definitely want to be in the hands of a good bankruptcy attorney. A good bankruptcy attorney will know what to do, but also how far is too far.

If you want a bomb defused, you want an expert at defusing bombs. It’s exactly the same in terms of defusing the “Means Test”. You want an expert. Your financial life is riding on it.

The Law Offices of John T. Orcutt give you access to 7 good bankruptcy attorneys, with an 8th in training.

Need to make sure you get the help you need. Attorney John Orcutt offers a totally FREE initial consultation, and has offices located in Raleigh, Durham, Fayetteville and Wilson, North Carolina.

Just call toll free to 1-800-899-1414 during normal business hours, or visit their website at www.billsbills.com

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Published Friday, January 1, 2010 @ 2:05 pm

According to the U.S. Department of Labor’s Bureau of Labor Statistics, there are upwards of 31 million people currently unemployed—including men and women involuntarily working part-time and people who want a job, but have given up their long search to find one. Yet, while we hear a lot of numbers like this these days regaling the staggering unemployment rates affecting our country, nothing speaks louder than a nationwide, multimedia look at the two-year decline of the United States job front.

“The Decline: The Geography of a Recession,” as created by labor writer LaToya Egwuekwe, serves as an interactive look of just how much Americans are hurting (click the link above to view). Eqwuekwe encourages you to “watch the deteriorating transformation of the U.S. economy from January 2007—approximately one year before the start of the recession—to the most recent unemployment data available today.” Like a foul weather system racing across the country, the darkening shades speak volumes.

As we begin a new year with the job market on a continual decline despite economic gains, looming unemployment remains at the forefront of the American psyche. Elected officials, facing reelection battles, are feeling the heat from their parties and constituents. And news sources of all types are debating when, and in what fields, employers will begin rehiring workers.

As business forecaster Kiplinger suggested, only time will cure the problem.

“Time for a gradual revival of credit markets and for a climate shift. In today’s risk-averse environment, few firms are willing to expand, betting on a better tomorrow. And for those that are willing, financing is tight — either by government fiat (tougher lending standards) or because lenders have become supercautious. That’s especially true for small businesses, where most job creation takes place.

The fact is, unemployment will get worse before it gets better, rising to about 10.5% next spring, then hovering around 10% through the end of the year. Just to hold that rate steady, total employment needs to grow by about 125,000 jobs a month, absorbing young folks seeking their first job plus new immigrants. That’s a long way from the 190,000 jobs lost in October.

Indeed, it will be next spring before the long slide of job losses comes to an end, with businesses hiring more people than they fire. Total employment for 2010 will probably increase by only about 1 million.

One reason: There’s still plenty of room for businesses to increase production and handle new orders without putting new workers on the payroll. They can switch part-timers to full-time and lengthen the workweek, now at a 45-year low. According to economist Daniel Meckstroth of the Manufacturers Alliance/MAPI, manufacturers have enough slack to boost production 5% in 2010 without having to hire.”

As Kiplinger asserts, if you’re looking for work in 2010, some of the greatest areas of job growth appear to be in health care. Because our nation’s Baby Boomers continue to age, and our citizens of all ages continually get sick (and maybe sicker in these depressing times), despite the recession this fulfilling field added more than 234,000 jobs in 2009. The imminent passage of a major health care bill by Congress will only add to the need for doctors, nurses, pharmacists, home health professionals and a variety of medical technicians. As Congress weighs whether to treat nuclear as green energy and debates the viability of other energy sources, the energy industry itself will also likely see an increased need for engineers.  Additionally, human resources workers will stay in demand as companies hire, and rehire, workers in 2010; alongside a stronger market for lawyers, accountants, consultants, manufacturing jobs in food processing, pharmaceuticals and medical equipment, and new jobs in finance stemming from continued efforts to modify delinquent mortgages.

Long story short, the map says it all. And just as it took years to get us into this mess, it will take years to return to get us back to pre-recession employment totals, rehiring the millions who have been laid off, the millions of part-time workers seeking full-time jobs, and the millions of new workers who enter the labor market every new year.

Is it all hitting you and your family hard? If so, and a lot less debt would put you and your family on a better course to survive no matter how bad it gets or how long the recovery, don’t forget the pressure-relief valve that is always there to bail you out – BANKRUPTCY.

The Law Offices of John T. Orcutt offer a totally FREE debt consultation. Is it time to take them up on their offer? Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com . Just click on the yellow “FREE Consultation Now” button.

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Published Wednesday, December 30, 2009 @ 10:49 am

You don’t have to be Chrysler or GM to consider bankruptcy. Maybe you are a small business owner with just a few employees and are struggling to keep everyone on the payroll while you fight off creditors, waiting for the next big contract to come through. You’re not alone. Here are the things you might consider as you look down the road.

This article assumes you’ve exhausted your credit and financial resources and are considering bankruptcy. Your best option when considering bankruptcy is to consult with a qualified bankruptcy attorney who can counsel you on your specific situation. You may find that bankruptcy is not the best move for you, but a qualified attorney will help you make that decision.

There are several different kinds of bankruptcy which may come in to play for you, as a small business owner. Here is a brief overview.

Chapter 7 Bankruptcy:
This is sometimes called “straight bankruptcy,” as it is what most people associate with the term “bankruptcy” comes up. Depending on which set of exemptions are available to you under state or federal law, there is often a lengthy list of items of property which you can exempt from liquidation when you file for Chapter 7 bankruptcy.  However, if there are any assets outside of your available exemptions, the Chapter 7 trustee will likely seize and sell that property and distribute the resulting proceeds amongst your unsecured creditors.

Chapter 11 Bankruptcy:
You may have heard of a company that goes into “reorganizational bankruptcy.”  Most often, this refers to Chapter 11 bankruptcy. Although this type of bankruptcy is often used by large corporations, small business may also file for protection under Chapter 11. As with the other forms of bankruptcy, certain rules and qualifications apply which may not make Chapter 11 a proper fit for your business’s needs.

Chapter 12 Bankruptcy:
If your business is a family farm, or a family fishing business, Chapter 12 bankruptcy may be your best option. Chapter 12 is tailored to the special conditions that come from individuals, families or small businesses which make their living from the land, streams or sea.

Chapter 13 Bankruptcy:
You may consider Chapter 13 bankruptcy if your business is just yourself, or if your business is unincorporated and operates as a sole proprietorship.  As with personal Chapter 13 bankruptcy, this process gives you a chance to reorganize and repay many of your debts under court protection, rather than wiping debts clear from your books.  Under some circumstances, you may not have to pay any of your unsecured debt.  Only an experienced bankruptcy attorney can properly advise you on your particular set of circumstances. Chapter 13 stops the clock on debt collection while you make progress to get back on your financial feet by paying a monthly amount as part of your Chapter 13 personal reorganization.

As with any major decision in your personal or professional life, you should consult with an attorney who is an expert in bankruptcy before moving ahead. A qualified bankruptcy attorney will give you sound advice on whether or not bankruptcy is the right choice for you, and under which of the various chapters of bankruptcy you should file for protection from your creditors.

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Published Tuesday, December 29, 2009 @ 6:52 pm

Have the credit card companies ‘jacked-up’ your rates, doubling your payments?

And really stuck it to you and your family?

Now, you’re screwed for sure…right?

Where is the money gonna come from to make double payments?

You can’t just ask your boss for a raise because you need more money…can you?. So, you have to try to pay with what you have.

The problem is that every dollar you pay is a dollar you steal from your family.

And…to make things worse…

Have they lowered your credit limits, putting you “over limit” for no fault of your own, so now they can soak you for outrageous “over the limit” fees?

And, these are on top of the already outrageous “late payment” fees.

All tactics designed to gouge out of you as much money as possible.

What’s fair or right about that?

And…adding insult to injury…have they changed your credit card from a “fixed rate” to an “adjustable rate”?

That’s not right.

What they did might be legal under the law, but just because something’s legal, don’t make it right or fair.

Just because you can…doesn’t mean you should.

But they did it anyway. It’s like the banks are telling you “Screw you. We want more money. So just pay it and shut up.”

Angry? You should be. Real angry?

The only good news is that you are not alone. They have done it to millions, if not tens of millions, of good, hard working Americans.

The only question is “What are you gonna do about it?”

Want to know why they did this to you?

The answer is simple.

Greed….to make as much money off the back of you and your family as they can…while they can.

Congress passed a new Credit Card Reform Bill of 2009. This bill was intended…so they say…to ‘rein in’ the credit card companies, that is, the big banks who issue credit cards to tens of millions of Americans.

For decades, the big banks had been suckering us Americans with the lure of easy credit, full well knowing that we would get in debt and stay there…good news for banks who live off of interest and fees, and all the more so as they more and more jacked up the interest rates, shortened the grace periods, and made a fortune charging higher and higher extortion-level “over limit” and “late payment” fees.

And, everything was working just fine…like the banks planned…until they completely screwed up the financial market and forced Congress to spend our money on huge “bailouts”.

All of a sudden, the banks were in trouble and some Congressmen saw this as a one-time opportunity to try to clamp down on the nasty credit card tactics, a chance to put a stop to some of the now well-known and abusive credit card company shenanigans. As a result, a credit card reform bill was passed and signed into law.

On its face, the credit card reform bill looked great. For example, there are provisions to make it illegal to change your interest rate on existing balances.

Sounds good…right? Wrong!

Long before the bill ever went to the President for signature, it was stuffed full of holes…err ‘loopholes’.

The biggest loophole lies in the fact that the bill does not even go into effect until 2/22/10. This delay provided the big banks more than enough time to do all sorts of things to sidestep the new bill, to protect themselves and to make even more money. In effect, the big banks have turned the credit card reform bill into nothing but a big joke.

One of the things they did was…across the board…to jack up everybody’s interest rates.

How did this happen?

What went wrong? What happened to the credit card reform bill? How did it get full of holes in favor of the big banks it was meant to rein in?

Easy. The banks were able to exert enough influence to get a number of key provisions taken out of the bill and others changed, including the date when the bill would go into effect…2/22/10.

Are you surprised? Don’t be.

The truth is that the big banks have been in control of this country since the Constitutional Convention, when America first became America. They were in control, they are still in control, and they will always be in control. And, being in control, they are, in effect, also in control of Congress.

Unfortunately, the vast majority of Congressmen need bank contributions (read “money”) to pay for election campaigns. But there’s a price to pay for this money. And, that’s where the golden rule comes in: The banks are the guys with the gold and the guys with the gold get to make the rules. The banks have the money the Congressmen need.

And, just to make sure they are heard, big banks spend a ton of money on lobbyists to try to bully some Congressmen, and brainwash others. And that’s just the tip of the iceberg in terms of the influence that banks have over Congress.

The price to pay is that the banks get to help write the rules (read “new laws”)…or in this case…the credit card reform bill.

At the same time, this time around, the big banks knew they had screwed up the entire financial market, and so much so that it forced Congress to spend OUR money to bail them out. But, they also knew that the bailouts were not popular at all with the voting public. And they knew that most Congressmen would be feeling the heat from the bailouts and that, as a result, these Congressmen would be feeling the need to at least put up a showing that the banks were being punished. Not doing so, the big banks knew, these Congressmen would suffer the wrath of the public in the next election.

So…the big banks knew…something had to give, that there would be a price to pay for the bailouts, and part of the price came in terms of the new credit card reform bill.

Or so it would appear to the public. Unfortunately, appearances don’t necessarily reflect reality, and that is exactly what happened to the credit card reform bill.

Even with all the problems the banks had caused to our economy, the big banks still, in effect, had massive amounts of influence over Congress. And, controlling Congress meant that the big banks could get things changed in the proposed credit card reform bill. And, so it came to pass, and the banks got most, if not all, of what they wanted, a bill so watered down with loopholes that it was, in effect, turned into nothing but a joke on the public.

Basically, as it turns out, the new credit card reform bill is just another SCAM by the big banks.

In effect, a lot of the current credit card reform bill was written by the same big banks it was meant to rein in.

Congressmen and the banks both got what they wanted. Congress got to look like it did something to punish the banks, and the banks got a bill that they would work around.

Depressing? Disappointing? Frustrating? I agree.

With the major provisions of the bill delayed until 2/22/10, the big banks got busy changing things necessary to completely sidestep the bill.

And, that’s were the rate hikes, lower credit limits and adjustable rate credit cards come in.

The banks knew that, under the new law, they wouldn’t be allowed to so easily change things in the future regarding credit cards. But, nothing in the bill kept them from doing it now, before 2/22/10, and being the big banks they are, that is exactly what they did…to you and to me.

First, they jacked up your credit card interest rates. Then, they lowered your credit limits, and then, they did other things like changing your credit card contract from “fixed rate” to “adjustable rate”.

The net effect: Passage of the credit card reform bill, instead of helping you, actually hurt you…and hurt you bad.

The upshot was that millions of good, hard working Americans, just like you, quickly received notices jacking up their rates, lowering their credit limits and changing their credit card contracts from “fixed” to “adjustable rates”.

The real bottom line is that if you were just staying afloat before…and just making ends meet…now you were screwed.

Who can have their payments doubled and survive?

What always gets me though….is why so many Americans just sit there and take it?

I am always asking myself: “Why are people not more pissed off? Why isn’t everybody angry at the banks?”

Is it because people feel helpless against the giant bank? I can understand that. Most of us aren’t bankers and we don’t know what to do or if there is anything we can do.

Is it because what the banks are doing is allowed under the contract you signed with them? I don’t know if you have ever looked closely at a credit card agreement, but it you have, you know that it is long and complicated and full of good stuff to let the banks do just about anything it wants to pull the rug right out from under us.

Is it because the things the banks are doing to us aren’t illegal? I would hope not because where I come from, just because you can get away with it, don’t mean it’s right. And, there ain’t nothing ‘right’ about jacking up interest rates, doubling payments, and screwing families.

Or is it because, as Americans, we have gotten so far removed from having to fight for our rights, so tame and domesticated that we don’t even have any fight in us? Instead, like the tame and domesticated farm animals we have become, we depend on a Congress and our President to fix things and protect us. How is that working out for you and your family? As Americans, we hafe been like cows being lead to slaughter.

This has got to stop!

Whatever the reason is, what the banks have done is NOT RIGHT, and the bottom line is this:

What are you going to do about it?

If you answer is “nothing”, you can stop reading right here, right now.

But, if you are as pissed off as I am, and have had enough, and need to make sure your family survives no matter how bad things get (and things will get worse before they get better), and want to fight back,….read on.

The truth is that with hiked rates and doubled payments, many of us will either have to do something or see our families suffer and submerge.

Let’s face it. We only have so many dollars and every dollar we send to the credit card companies is a dollar we can’t spend on our families, and which comes right out of the mouth of our kids.

I don’t know about you, but that is not what I intend for my family…and it just pisses me off.

How about you?

As it is, our grandchildren’s, grandchildren will still be paying for the bank “bailouts” forced on us by Congress, and now… to make things worse… the banks are throwing salt in our wounds by jacking up rates and screwing with us.

I don’t now about you, but I sure as hell don’t intend to just sick back and take it in the face when the credit card companies treat me this way, whether what they are doing is legal or not.

And, to make it worse, the banks aren’t even honest with us. Instead of telling us the truth, they trump up this and that to justify screwing us. And even when we didn’t do anything wrong, they make up stuff, for example, referring to defaults or late payments that never happened.

It makes me sick and it makes me angry. Is it just me, or are you angry too?

Why don’t they just tell it like it is? If they did, it would likely sound a lot like this:

“We are in the business of making money. That’s why we exist. That’s what it’s all about. That’s all there is to it. Nothing personal, but we’re in it for the money and we always have been.

We don’t care about you. We never did. If, on occasion we come across like we do care, we’re only pretending, either because we know that being nice to you will keep you paying or because being nice to you is in our best interest, not yours.

In fact, you are so brainwashed by your moral upbringing that you go on expecting us to act differently. You just never get it. Being fair or just or helpful or honest or putting your best interest first is just not our nature as a bank.

On top of that, you signed a contract with us that lets us do whatever we want to you. In effect, the contract is only binding on you. The truth is that it’s a joke that it’s even called a contract. A true contract would assume that both sides had a hand in coming up with the terms. Instead, it should just be called “Our Rules”. Yeah, the golden rule: We have the gold, so we make the rules.

And, under that contract, we have the right to do anything we want, including raising your rates and screwing you in ways you can’t even imagine.

And, we do it because it makes us more money. Did we mention that it’s all about money, money and more money? It doesn’t matter. We can say it’s all about money and you still don’t get it. You still think our relationship is about honesty and fair dealing. It not. It’s about money, taking your money and giving it to us.

Furthermore, experience has shown us that we can treat you as badly as we want and get away with it every time. To us, you are not human beings or families. You are just numbers and profit. And, since you are just numbers and profit, we can screw you and still sleep at night, just fine. In fact, those of us who make the big decisions don’t even live in your communities, and even if we did, you don’t know who we are. And you think that just because we have people working in your community, that makes a difference. It doesn’t. They do what we tell them. Sure, part of what we tell them is to be nice to your face, but we don’t mean it. We just say it because we make money off of you, lots of it.

Oh, sure, a few of you will stomp and complain and maybe close your accounts with us when we treat you badly, but we have everybody so brainwashed that ‘credit is king’ that most of you will put up with just about anything we do to you if it means that your credit score will be ok..

What’s really wild is that most of you won’t even get mad at us and the few of you who do won’t be able to convince the others to get mad. In fact, you’re so brainwashed that most of you will blame yourselves for getting into debt in the first place. How cool is that? We have spend our careers figuring out how to legally trick you and cajole you deeper and deeper into debt, so much so that you are trapped forever, and still you don’t blame us. Instead, you blame yourselves, and feel so bad about not paying your bills that you will take food out of your own kids mouth and keep making your own families sacrifice on and on and on to keep paying us.

The truth is that we can screw you and we have screwed you, and you won’t do a thing about it.

So, nothing personal, but if we can skirt around the negative effects of the credit card reform bill, even if it screws you and your kids, that is what we are going to do. We’re bankers. It who we are. You’re just too stupid to see it.”

Angry yet?

I hope so because if you get angry enough, there are things you can do to fight back,

….things that speak to the big banks in the only language they understand,

….things that speak to the big banks in the only way that ever really gets their attention: MONEY.

You don’t have to just sit there and take it, and your family does not need to continue sacrificing and suffering.

Are you ready to take control? Are you ready to do something positive? Are you ready to do whatever it takes to make sure your family survives no matter how bad things get?

If so…good!

The first thing you need to do is to stop looking to Congress for help. That ship sailed long before you and I were ever born. You know it and I know it. Instead, we need to do what we can to help ourselves.

Second, stop thinking that big banks care, or will ever treat you fair. It ain’t gonna happen. To them, you are not a human being, much less a human being with kids and brothers and sisters and a mom and dad. You’re just a number to them, a statistic on a computer screen, and that will never change. So, stop wasting time calling them and asking them to be fair.

Next, find a small community bank that’s too small ‘not-to-care’ and move your bank accounts and all your banking business there. It may be that you still need the big bank for your credit card, but not for the rest of your banking business.

Next, if you are one of the lucky ones who can afford to do it, pay off your credit cards in full and stop using credit cards, except where you already have the cash or income to pay the thing off fully each and every month.

If you are not so lucky, and you can’t afford to pay off your credit cards in full, unfortunately, you only have 3 choices:

Choice 1: Go on paying, no matter what.

If you can even afford it, one option is to just go on paying your on your credit cards no matter how much they jack up your rates and no matter how high your payments get to be.

This is what the banks are counting on you to do, and if you do it, they win. The problem with this option is that every dollar you pay them is a dollar no longer available to take care of your family. In these tough economic times, continuing to pay on jacked up credit cards is risky business at best, and more likely, financial suicide for your family.

Choice 2: Stop paying.

In the short run, this will leave a lot of money in your pocket, and that good in terms of taking care of your family, but any credit you do have will be killed of completely, and ultimately, you will still owe all the money, plus interest. And…sooner or later…the credit card companies will sue you, and having gotten a judgement against you, will take from you whatever money or property they can legally get their hands on.

Choice 3: File bankruptcy.

What a surprise. A bankruptcy attorney hawking bankruptcy as a solution.

But the fact is that, if you can’t pay all your bills or, even if you can, but only by making your family suffer, bankruptcy does 2 things that nothing else in the world does:

First, it gets rid of debt and gets rid of it permanently. Results will vary depending upon your situation, but nothing gets rid of credit card debt, for instance, like filing bankruptcy.

And second, if you have no choice and need to file bankruptcy, it gives you a chance to give the banks a dose of their own medicine?

Let me explain. At its core, what bankruptcy does best is that it gets rid of debt. It just erases it, like, “today you owe it”, and “tomorrow you don’t”, like it never existed.

Well, you know who gets hurt when you don’t have to pay. The big banks…at least in terms of credit cards. The very same banks that the government forced you to help “bail out”. The very same banks that just jacked up your rates, doubling your payments. The very same banks that stuck it to you and screwed your family. The same banks that would let your family sink if it means making another buck.

Sick of having your back against the wall?

Need to get your family out of debt and back on track?

Need to put your family first again…instead of last?

And need to do it now before things get even worse?

Want to give the banks a dose of their own medicine for making you suffer and forcing your hand? Is it time to make them suffer the way they have made your family suffer?

If so…Think bankruptcy.

You have the power.

The power of bankruptcy.

Call today for a FREE Debt Consultation and at least find out how all this bankruptcy stuff works. You won’t be disappointed…I guarantee it.

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Published Tuesday, December 29, 2009 @ 6:00 pm

It hardly seems fair.

Those needing help with a bad mortgage that can be blamed on banking industry profit strategies are now faced with the problem of having their credit ratings ransacked as a result of enrollment in a federally-backed mortgage modification program.

The subprime mortgage crisis forced hundreds of thousands of Americans into bankruptcy or foreclosure. As the government realized, despite its public reticence, that it played a tremendous role in the state of its citizens’ bleak checking accounts, it announced the creation of the Making Home Affordable program, a concerted effort to offer banks financial incentives to adjust their customers’ mortgages at more favorable terms to the customer.

In the program’s wake arose countless private organizations and state-run mortgage assistance efforts. However, deep under the surface of the seemingly endless field of good will grows a bitter small seed of realization that your credit rating will experience increased erosion by entering into a mortgage modification plan… As if the impact of missed home payments and additional debt wasn’t already hard enough to swallow.

Jason Axelrod, a Chicago city employee, was one of many Americans who recently realized that seeking mortgage help would lead to negative consequences. He enrolled in a trial modification a number of months ago, at which point he sustained a reputable credit score of 750. With overtime cut and a quick jump in property taxes, it became increasingly difficult for him keep his monthly payments on track. The mortgage modification adjusted his payments by $565.

Trial modifications are generally intended to last a few months while banks and program representatives collect paperwork and gauge the homeowner’s ability to handle the new payments.

Eight months later, Jason remains in a morass of confusing paperwork and has yet been able to provide his lender with the appropriate paperwork to finalize the trial plan into a permanent one. Oh, and his credit score, despite no additional big ticket items or debt troubles, has dropped by more than 100 points. He was recently offered a car loan at 12 percent interest. He had previously enjoyed a low rate of 4.7 percent.

It is during the trial period that industry guidelines require lenders to report information on those enrolled. Specifically, the credit bureaus want to know a borrower’s status before entering the program. And it is in this reporting effort where the less-than-above-board practices of the credit bureau come into play. Essentially, to the folks at Equifax, Experian and TransUnion, the mortgage modification enrollment process is simply another credit checkpoint, supplied by the government, that they use to collect information on consumers. It’s like shooting debtors in a barrel.

A jointly devised coding program was installed to signify a borrower’s status as a “partial payee.” The presence of this code alone is enough to negatively impact credit standing. The full scope of its impact is based on a number of mortgage payment factors, such as number of missed payments before enrolling in the assistance program.

However, according to the Treasury Department, even those who were current on their mortgage could see their credit score cut by 100 points, simply because they chose to enroll in a program offered by the government.

At the start of September 2009, 24,000 people current with their mortgage entered into trial modifications. Just after Thanksgiving, the total number of trial modifications was just under 700,000. That’s a lot of credit reports. And most likely, a lot of frustration.

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Published Tuesday, December 29, 2009 @ 2:59 pm

The theme of making resolutions for the New Year is hard to ignore when it comes to dishing bankruptcy advice and related financial insight. It seems that every year, our resolutions become more important. Most likely, that’s because we feel more mature in age, but not in our financial outlook. Given the way 2009 went for most folks or for those who filed bankruptcy, that’s an easy-to-understand feeling.

So what are you going to do differently this year? Here are some ideas from a recent article in The Wall Street Journal, written by Dave Kansas, as reprinted in the Raleigh News & Observer.

Establish a concrete savings plan
It doesn’t matter how little, but resolve to put some money away with every paycheck. The recession has taught a lot of Americans how important savings can be, especially in the face of unemployment. The feel-good stories about “getting back to basics” and keeping money under the mattress are – for most of us — just that: stories. But it’s much easier than you think to make such a strategy a reality. Whatever the amount—$10, $25 or even $50—the point is to make it a habit, especially if a recent Chapter 7 bankruptcy has given you a fresh start. You may not realize it, but time is an investor’s best strategy. In a few years, you’ll soon realize that interest can actually work for you, not just against you. Put it away and keep it away.

Build an emergency fund
This concept is closely related to your savings plan, but the intent is different. This money, once established, should be considered more liquid. That is, it may not be in place for the long term. Determine how much money you would need, when conserving, for three to five months of bills, groceries and rent or mortgage. Consider this fund a form of insurance against the same type of life emergencies that may have led to your bankruptcy. You can use your savings plan to help build it and once at a comfortable level, leave it alone and use the excess for your savings plan.

Change credit cards, preferably to one that requires full payment each month
Although you may have already done so, consider this a reminder to shred any credit card account that does not offer the absolute best terms available. Be stingy. If you have to resort solely to a debit card, do it. After all, they are accepted anywhere traditional credit cards are taken but they limit the amount you can spend. Also, look into cards that require that the balance be paid in full every month. The comfort in knowing you do not carry any debt is very beneficial and you’ll feel a terrific sense of accomplishment.

Reward yourself
Wait? What happened to staycations and storing money under the mattress?

Look, being conservative with your money is always a great idea—but remember why we have money. To do stuff and to enjoy life! It’s okay to reward yourself within reason and in fact, personal entertainment should be a line item in your monthly budget. You need to live. Plus, keeping yourself bottled up under the confines of an over-zealous savings strategy will only lead to more frustration and an inability to ever spend without regret. Your savings plan should include things like the occasional weekend trip, nights out or tickets to the big game. Don’t beat yourself up about every purchase, especially if you have worked hard for it.  Spend some of your hard-earned money as a reward for saving alot of it.

Take every advantage your fresh start in bankruptcy has given you. 2010 is a new year, the year you’ll begin to bounce back from bankruptcy.  Make 2010 a ten out of ten.

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Published Monday, December 28, 2009 @ 4:40 pm

Student loans are the source of many an American’s debt woes, especially in today’s down economy. If you have ever looked into discharging your student loan debt through a bankruptcy filing, you have discovered that, while not impossible, discharging student loans in bankruptcy is extraordinarily difficult.

Student loans are not dischargeable in bankruptcy unless continued payment of those loans poses an “undue hardship” under Bankruptcy Code Section 523(a)(8). While the term “undue hardship” is not defined in the statute, in practical terms, the “undue hardship” standard has been applied extremely strictly. Speaking in broad terms, student loans cannot generally be discharged unless the debtor in question is physically unable to work and is unlikely to be able to obtain gainful employment anytime in the future. In fact, one federal judge has referred to the “undue hardship” standard as the “let’s make it as tough as humanly possible to discharge a student loan” standard.

The federal government actually made it harder for debtors to discharge student loans in bankruptcy in 2005, when the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) was passed into law. Prior to BAPCPA’s passage, privately funded student loans, as opposed to federally funded and federally guaranteed student loans, could potentially be discharged in a Chapter 7 bankruptcy proceeding. Under BAPCPA, the “undue hardship” standard applies to all student loans, whether federal loans or private loans.  

In one recent case, Educational Credit Mgmt. Corp. v. Bronsdon, a court ruling on the bankruptcy proceeding of a particularly luckless recent law school graduate chose not to make things any easier for her. Denise Bronsdon was sixty-one years old when she entered the Southern New England School of Law in 2002. Although she graduated in the top half of her class, she was unable to pass the Wisconsin bar exam upon her graduation in 2005, After failing the exam three times and finding herself unable to pay to take the exam again, she worked some temporary jobs, but was unable to find full-time employment and filed for bankruptcy. 

Ms. Bronsdon succeeded in convincing a Massachusetts bankruptcy court that her loans constituted an undue hardship. Her lender, however, appealed to the United States District Court for the District of Massachusetts. The District Court then ruled that the bankruptcy court erred when it failed to include the fact that Ms. Bronsdon chose not to participate in the D. Ford Direct Loan Program’s Income Contingent Repayment plan in its undue hardship analysis. The bankruptcy court concluded that the loan repayment assistance program should not be part of the analysis because her participation in the program could have resulted in serious tax liability, but the District Court held that the bankruptcy court’s conclusion as to Ms. Bronsdon’s future tax liability was overly speculative. 

The District Court remanded the case to bankruptcy court and instructed the court to consider the loan repayment assistance program in its undue hardship analysis. In related news, the Supreme Court of the United States recently heard argument in United Student Aid Funds, Inc. v. Espinosa, a case in which a lender sued to challenge the confirmation of a debtor’s Chapter 13 bankruptcy plan years after its approval by a bankruptcy court because the bankruptcy court did not apply an undue hardship analysis in ordering the discharge of interest owed on the debtor’s student loan debt. The Court will decide whether an undue hardship analysis was necessary for the bankruptcy court’s approval of the debtor’s bankruptcy plan and its subsequent discharge of his student loan debt to be valid and final. 

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Published Monday, December 28, 2009 @ 12:36 pm

Across the nation, there has been a dramatic increase in bankruptcy filings as more and more people are out of work or underemployed and unable to meet their financial obligations. Nowhere is this economic decline more evident than the state of Michigan, where both unemployment and bankruptcy figures have risen dramatically.

The state of Michigan has had the dubious distinction of having the highest unemployment rate in the nation, 15.3 in September. A glimpse of hope has been seen over the past couple months which have seen the rate drop to 15.1 in October. That number fell further, to 14.7 in November, as 16000 people became employed and the unemployed ranks closed by 20000. The unemployment rate for the nation dropped down to 10% in November.

Citizens of Kalamazoo, Michigan, like much of the nation, have been beset by economic woes over the last few years. Much of the state has been severely hit by the economic crunch with the woes that have hit the auto industry, a major employer throughout the state.

The U.S. Bankruptcy Court in Grand Rapids handles bankruptcy filings for Kalamazoo County. Through the first eleven months of the year over a thousand cases (1084 to be exact) were heard. This number was an increase of 13% over the previous year. The major source of bankruptcy filings came from the consumer sector as they increased by 16% over the last year from 960 through the end of November (from 830).

Kalamazoo County also falls under the purview of the Western Michigan District of the federal bankruptcy court. For the first eleven months of 2009 there were nearly 15000 bankruptcy cases filed in the district. As could be expected the vast majority were of the personal nature, Chapter 7, which totaled 13,278 up to this point in the year. Over 1600 filed for Chapter 13 protection with an additional 55 cases being filed for Chapter 11.

Many local attorneys say they have not seen this much work since the rush of filings back before the new law was passed back in 2005. Although there have been improvements in the recent unemloyement numbers across the state there is little evidence that relief will come to the beleagured state or Kalamazoo county any time soon.

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Published Monday, December 28, 2009 @ 7:10 am

The New Year is a few days away. And without doubt, millions of Americans will welcome 2010 with grand hope, desperate to put 2009 far behind them, the year the Great Recession took hold of our collars and shook us into submission. Unfortunately, many Americans will greet the end of the 2000’s first decade still in debt and financially directionless.

But that doesn’t have to be the case.

Bankruptcy, despite all you may think you know about it, can make 2010 the year you really start over, the year things become as you make them, the year you regain control.

The federal government is reporting that with 2009’s end, so goes the worst national economic era to strike the 50 states in decades. Much of this optimism, unfortunately, has failed to provide security. The talus is simply too loose, the slope too steep and the edge too precipitous for Americans to feel confident in the footholds being provided. Unemployment continues to shroud our workforce in a cloak of despair and frustration. All the positives can be too easily brushed off as temporary, government-designed band-aids that do nothing for long-term care and instead will soon peel off, exposing our credit card cuts and sub-prime avulsions to additional economic bacteria.

However, treatments are plentiful. And bankruptcy is one of them.

The bankruptcy process, when handled by a competent, established attorney, is a very respectable way to handle the stress and prevent the longstanding financial damage that un-attended-to debt can do to a family.

Most people who give thought to bankruptcy quickly brush it off as an escapist’s tool; something the irresponsible do to cover their mistakes. Well, if you were to start asking around, it would take little time for you to uncover that most of those who have filed for protection are professional, educated and careful with their money. You will also find that things like sudden unemployment, medical bills and emergency life expenses do not discriminate. They affect everyone and if we were universally prepared for those types of setbacks, we wouldn’t need the bankruptcy code.

Back in 1934, the U.S. Supreme Court established the need for a federal measure that could assist the honest debtor in repairing their economic wherewithal. That same year, an opinion was written on the matter that said:”(Bankruptcy) gives the honest but unfortunate debtor … a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”

A few years ago, the lending industry powered a major revision to the bankruptcy code called The Bankruptcy Abuse Prevention and Consumer Protection Act. Despite its title, it was designed to make filing bankruptcy more difficult. It was meant to perpetuate the stigmas and make people less tolerant of those who have to file.

The law changes included the “Means Test,” which was designed to qualify a person for Chapter 7. If you made too much money, suddenly you are not eligible to file under the same guidelines as others. The questionable constitutionality aside, the law served to make the bankruptcy code that much more tedious and frustrating for people. Without question, it prompted many people to avoid filing altogether and made the protection of our established laws that much more difficult to obtain. But don’t buy into the myths or the hype. For 99.9% of you, bankruptcy is still a valid option. And the Law Offices of John T. Orcutt know how to make the new bankruptcy laws work for you!

If you want 2010 to ring in on a positive note, don’t do what you did in 2009. Let facts drive your decisions, not misappropriated stigmas and half-truths. It’s your New Year, give yourself a reason to make it a happy one.

In North Carolina, contact the Law Offices of John T. Orcutt. 1-800-899-1414.

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Published Sunday, December 27, 2009 @ 5:31 pm

If the present economic environment wasn’t Scrooge enough, just in time for the holidays, it appears the Obama Administration’s Making Home Affordable foreclosure prevention plan has failed to meet its goal of helping millions of Americans avoid foreclosure.

In fact, according to a recent Treasury Department report, 27 percent of the 650,000 homeowners taking part in the mortgage modification program are now delinquent on their mortgage payments.  Reflecting the mortgage industry’s aversion to permanently modify mortgages, of that number, only 1,711 participating homeowners attempting to avoid foreclosure have been able to convert their modifications to permanent status. Homeowners facing foreclosure and needing help to secure a loan modification were encouraged to visit http://www.makinghomeaffordable.gov.

Crunching these paltry numbers translates into even more disturbing results for many seeking good news about federal mortgage relief and a way to save their homes.  According to Shahien Nasiripour’s recent report in The Huffington Post, results of the President’s $75 billion foreclosure program mean that, for example, out of every 100 homeowners who came to JPMorgan Chase for modification assistance under Making Home Affordable, just 15 have or will likely receive a permanent payment reduction. So, what happened to the other 85? Nasiripour says:

“for every 100 trial plans initiated from April through September 2009 under the Home Affordable Modification Program:

• 29 borrowers did not make all required payments under their trial plan;
• 20 borrowers did not submit all documents required for underwriting;
• 31 borrowers submitted all required documents but the documents did not meet HAMP underwriting standards, due to such things as missing signatures or nonstandard formats;
• 4 borrowers were or are likely to be rejected for undisclosed reasons;
• 1 borrower will not or is not likely to get their payment lowered.”

This Huff Post data comes from the prepared remarks bank officials planned to make before the House Financial Services Committee. The testimony was posted on the committee’s website.

To date, critics say the response of legislators and the Treasury Department to this dire news has been sorely inadequate. While several weeks ago mortgage lenders were threatened with losing access to precious incentives if they didn’t increase permanent mortgage modifications, with millions of homeowners facing foreclosure, failing banks still received billions in bailout money with no real implications for not helping the same struggling borrowers, and by extension communities, avoid the negative impact of foreclosure.  While the Treasury Department has recently extended the modification program, this system on its own appears to have provided few long-term solutions to this continuing housing crisis.

To help homeowners avoid foreclosure in the long-term, industry insiders and other commentators insist legislators will need to force banks to modify mortgages in ways that are affordable over the long-term. Since many the rising numbers of unemployed homeowners are unable to pay their mortgage even with unemployment insurance benefits, one suggested change would be to allow unemployed homeowners a mortgage deferment while they’re looking for work.

Homeowners who are having difficulty making their mortgages may be considering filing for Chapter 7 or 13 bankruptcy protection. Another option for legislators is giving the bankruptcy courts the power to modify these same underwater mortgages during Chapter 7 and Chapter 13 bankruptcy.

As American homeowners languish waiting for more immediate mortgage help, many are turning to bankruptcy to stop foreclosure and other creditor actions. For reliable bankruptcy advice that you can trust, contact The Law Firm of John T. Orcutt. And to find out more about your bankruptcy options, visit The Law Offices of John T. Orcutt’s “Things to See and Hear” information.

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Published Sunday, December 27, 2009 @ 2:21 pm

Recently one of the largest radio broadcasting companies in the nation, Citadel Broadcasting, entered into bankruptcy proceedings. Now it appears as if there may be other media giants following in Citadel’s footsteps with NextMedia Group and Heartland Publications looking to file for bankruptcy as well.

This has been a bad year for media organizations all around. Earlier this year the well known Reader’s Digest Association filed as well as television broadcaster ION Media Networks and the Sun-Times Media Group (a newspaper company). So far, only ION has announced that it will be coming out from bankruptcy; this after they managed to get rid of nearly $3 billion (2.7) of preferred stock and debt.

Not only has the current poor economy made life difficult for the media, but having to compete with the internet has made things hard as well. Many of these companies also took on a large amount of debt right before things began to get bad. Such was definitely the case with Citadel as it took on a rather large amount of debt in order to purchase the Walt Disney Company’s ABC radio station (but not ESPN or Radio Disney) back in 2006.

Like Citadel, both NextMedia and Heartland have filed prearranged bankruptcies meaning that the already had come to an agreement with their creditors before filing. This form of bankruptcy filing is preferred in business since it tends to be less expensive, much quicker, and does not disrupt continuing business operations nearly as much.

NextMedia, an operator of nearly 40 radio stations claimed between $100 million and $500 million in debt when they filed. When all is said and done the control of the company will end up being in the hands of several creditors. Much of their debt will be paid in full while a good percentage will also be turned into equity in the company. The company does not expect any major changes to occur or any disruption of business to happen either. After proceedings are done they will be down to about $128 million in debt remaining.

Like NextMedia, Heartland Publications filed for bankruptcy in Delaware (chapter 11). They put the blame on a decline in advertising revenues along with the rise in competition from internet news sources. The company runs about 50 small town newspapers. Agreements with their creditors, namely GE Capital, will end up cutting their debt nearly in half.

Citadel, owner of 224 radio stations, came to an agreement with most of its lenders that will allow them to use their new secured credit facility to get a $762.5 million loan. The agreement will also see the elimination of about $1.4 billion in debt. However, the current shareholders will essentially get nothing for their investment as 90% of the stock in the newly formed organization will go to creditors. When it filed, Citadel listed assets valued at $1.4 billion with debt of $2.5 billion meaning nearly 60% of the debt will be erased.

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Published Sunday, December 27, 2009 @ 10:10 am

A common practice for many businesses and individuals is to make charitable contributions that can then be used as a tax deduction. Whether the motivation be a tax benefit or true philanthropy, many organizations depend on these contributions.

The contributions that Joe Kimmel has made to two local universities in western North Carolina are likely to come to an end soon as the philanthropic business man has filed for personal bankruptcy protection as well as protection for his company, Kimmel and Associates. Kimmel is the sole owner of Kimmel and Associates, a company that specializes in executive searches for the construction industry. Exactly how the two bankruptcy filings will affect the donations he has pledged to two universities remains to be seen.

Kimmel has pledged a combined $9 million to the University of North Carolina at Asheville and Western Carolina University. A new basketball arena was to be constructed in Asheville and a new construction college at WCU.

He made his pledge to Western Carolina University back in December of 2005. He was supposed to be donating $6.92 million to go to the construction of the Joseph W. Kimmel School of Construction Management, Engineering and Technology. The donations were to be spread over an eight year time frame.

Information has yet to be obtained about the $2 million Kimmel donated to the University of North Carolina in Asheville. The convocation center for the Center for Health and Wellness at the University is set to be named after Kimmel.

While Kimmel and his business will likely come out of the bankruptcy court in good shape the same may not be said for the construction projects already underway by both universities. It is almost a certainty that any future contributions will be out on hold as Kimmel and his company regain their financial footing. None of the nearly hundred employees of Kimmel and Associates are expected to lose their jobs.

At least three of the payments to Western Carolina have already been made. Bankruptcy law permits a Trustee to recover amounts contributed to a charity if the contributions were made with an intent to defraud creditors. While the true motivation of Kimmel’s contributions are probably not of a fraudulent nature, it is certain that no future contributions will be made. This will leave the school scrambling to obtain additional funding to complete the projects.

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Published Thursday, December 24, 2009 @ 7:26 pm

Medical debt is one of the nation’s largest bankruptcy stimulants. Hospital stays, exotic medications and steep monthly premiums have helped fester a plague of debilitating debt obligations that is said to affect millions of Americans.

Today, on what may eventually be considered an historic day for American government, the United State Congress may have found a cure. Or at the very least, it could be argued that the political chemo drip that has been hanging over the country’s head for almost a century has started to have an effect.

On the eve of our country’s most recognized reason to come together with families and to celebrate life’s little importances, like health and happiness, the United State Senate approved a healthcare reform bill that contains some of the most sweeping changes ever introduced to the $2.5 trillion healthcare industry.

In its current dosage, the bill will broaden medical coverage to 30 million citizens currently deemed uninsured. Once in place, 94 percent of the country will be covered. The bill also introduces provisions that will require industry providers to cease denying coverage to people with existing medical problems.

Other highlights include the requirement for most Americans to have coverage, a subsidy program to assist those unable to pay for an entire plan and a system of state-run insurance exchanges in which people can compare potential insurance products.

Every year, more Americans file bankruptcy because of medical debt. Quite often, even those with good coverage find themselves unable to cope economically with the burden of sickness. The American Journal of Medicine reported earlier this year the number of families in debt because of hospital bills is growing quickly. Specifically, the organization’s report cited that 62 percent of all bankruptcies in 2007 were rooted in medical obligations. And that was before the recession’s tentacles were able to fully strangle the country.

Most of those surveyed in the report were college educated and middle class. Here are some more stats:

• Unaffordable bills were directly attributed to 92 percent of medical bankruptcies
• Loss of income due to illness caused 40 percent
• A quarter of all business that provide health insurance benefits cancel them when an employee experiences a serious illness
• An additional 25 percent cancel medical health benefits within a year of onset of an employee’s medical problems

The debate on medical insurance reform is far from over. In fact, it will never end. Today’s measure will ignite an entirely new litany of political diatribes, grandstands, agendas and campaign platforms.

The majority of Republicans are remaining firm on their stance that the bill is an intrusion into the private sector and a government power-grab, arguing also that it will increase the budget deficit and slash a patients’ right to choose how they are covered.

Additionally, with the President’s approval rating far below from where it ballooned just after his election almost a year ago, critics are using the health care bill debate as a pulpit from which to preach about broken promises, expanding government and un-accounted for policy blunders. No doubt the political haggling will slow the bill’s ongoing maturity.

In the end, the bill is about providing American’s with a reasonable shot at being able to financially afford being sick. Sure, there is not much talk about prevention, maintaining personal health or altering the lifestyle habits that contribute to the economic weight of our medical bills. But at least the problem has finally reached its spot in the limelight. And from here, it looks as if the only direction left to go, is up.

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Published Thursday, December 24, 2009 @ 1:01 am

Well, it’s the holidays, so it’s time have some fun and hopefully, forget about all those pesky financial problems. They say humor is the best medicine, so we searched around and came up with a few great jokes about, well, what else? Money! Enjoy …

At the annual Christmas gathering, all the kids were at the feet of their wealthy old great granddad, who was settled in his chair entertaining them with classic yarns about days gone by and memorable life adventures. One of the kids asked him, “Pappy, how did you make all of your money?”

“Well, son,” he said while stuffing his pipe with fragrant cinnamon tobacco. “It was the Great Depression, and I was down to my last nickel. I found an old fruit stand and bought the cheapest apple I could find with that nickel, all bruised and dirty. So I polished it up, kept it cold and fresh and the next day, sold that apple for a dime. The next day, I did the same, but this time invested in two dirty old apples. I sold them again for even more. I did that each day for a month and made almost $2.00 by the end of that month.”

“Then you saved enough to buy your own apple cart?” asked one of the enthralled children.

“Nah, my first wife’s father died and left us two million dollars.”

A customer called the customer service department of a company from which he recently ordered a product. “I’m looking for a product that should have been delivered a number of days ago. Can you tell me its status?”

The rep punched in the customer’s account information. “Sir, I’m showing an overdue amount from the last order. We can’t ship your new order until you pay for the last one.”

“Oh,” the customer pondered. “Well, cancel the new order, I can’t wait that long for it.”

Sid and Nancy walked into the electronics store looking for a new home theater set up. “How can I help you?” asked the eager sales associate.

Sid replied, “Well, we’re looking for a top of the line system, BluRay, surround, the works.” The associate was thrilled and began showing them around the highest end products. A little nervous, Nancy cautioned, “I don’t know if we can afford these, they just seem too much.”

“No problem. You just put down a small payment now and not make another payment for six months.”

Nancy blurts in surprise, “Who told you about us?!”

Cleaning her husband’s dresser drawer before relocating to retire, a wife comes across an old cigar box under a pile of socks holding $5,000 cash and a couple of golf balls. Upon his return, the wife inquires, “Can you tell me about the money and golf balls in your top drawer?”

He sighs, sits her down and explains that every time he cheated on her over their 30-year marriage, he put a golf ball in the box. The wife cried a bit, gathered herself and said, “Well, twice in 30 years isn’t terrible. We can get through this. But what about the money?”

The husband looked around. “Each time I collected a dozen balls I sold them.”

The bankruptcy judge peered out over his glasses at a gentleman filing Chapter 13. “Okay, sir, I’ve decided to give your creditors $450 per month.”

“Thank you, your honor,” the petitioner responded. “And every once in a while I’ll send them a few bucks myself.”

Remember, keep things in perspective, and go have some eggnog.

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Published Wednesday, December 23, 2009 @ 5:49 pm

Even in these tough economic times, everyone wants their family and friends to have a nice holiday—full of fun, frivolity and festive giving. And, even if you find yourself among the millions considering bankruptcy in the New Year, you may believe, now more than ever, that it’s open [holiday] season to shop for pricey presents using problem credit cards. In fact, many Americans do charge up expensive tabs in the months preceding the Christmas season when anticipating a bankruptcy—hoping to secure some great gifts prior to wiping away these same debts, along with many others, in January or February.

However, it’s never been more important to avoid a holiday spending binge when seeking this fresh financial start. While prudence alone should speak to some of the reasons to avoid abusing bankruptcy for seasonal gains, the Bankruptcy Code itself addresses the issue of this type of credit card debt as well. Section 523(a)(2) exempts from discharge, any debt that was obtained if an individual made material and false representations about his financial condition (i.e. lies on the credit application). Section 523(a)(2)(C) provides that:

1. consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services (luxury goods defined as goods or services reasonably not necessary for the support or maintenance of the debtor or a dependent of the debtor) incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and

2. cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable;

Section 523(a)(2)(a) excepts from discharge money, property or services incurred by false pretenses, a false representation, or actual fraud (i.e. incurring debt that you knew or should have known that you would not be able to repay).

In layman’s terms, this translates into a stern warning against unnecessary, binge spending in the months leading up to your bankruptcy. As a result, if you do decide to charge up hundreds or thousands of dollars in charges in November or December and then try to discharge that debt in January or February, credit card lenders have three viable arguments they can use to object to discharging your debt in a bankruptcy case. This type of “discharge litigation” not only risks hefty exemptions from your debt relief, but it is also costly to defend, adding more expensive fuel to the insolvency fire.

What can be even more expensive is how these holiday spending sprees can create potential delays in your bankruptcy filing. Often, a bankruptcy attorney will advise clients in the New Year who reveal large Christmas credit card statements, to wait four to six months at a minimum before filing for bankruptcy—during which time you must continue to make regular payments on your new, larger holiday balances.

If you are already in debt, credit card or otherwise, or facing a loss of income, it’s essential to fight the urge to use plastic to purchase that big screen television, new game console, latest toy or anything else you can’t afford. And, if you’re bankruptcy bound, but must spend during this holiday season, as an alternative to credit, try carrying cash, checks or debit cards. As a result of using the money you actually have, you may make more thoughtful purchases and spend less this season, and, in the end, spend less time digging yourself out of post-holiday season debt and its inevitable barriers to bankruptcy.

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Published Sunday, December 20, 2009 @ 2:45 pm

The full extent of the new credit card legislation will not kick in until February 22. And since its announcement, many of us have been experiencing the credit card companies’ efforts to remedy the government action.

For example, card companies are quickly pushing interest rates, doubling minimum payments, sneaking in fees and lowering credit limits, even for cardholders with solid credit histories.

Back in August, the first wave of reform took effect, requiring card issuers to provide additional notice of account changes, such as rate changes or fee hikes. In February, the second wave will impart on card companies the responsibility to limit interest rate increases on current balances. Next summer will see the final phases of the law involving reduced fees.

Truthfully, if you have thought about bankruptcy recently but are holding out hope that these new laws are going to fix your credit card debt problems, we have news for you: you need to call us. And quickly. Your bills are only going to continue to mount and could even get worse. Because the folks on the other side of your Visa, MasterCard and Discover statements still have ways to encourage you to spend and at the very least, know how to continue to make additional money off of your monthly balances.

While the new legislation will prevent credit card companies from jacking your interest rates on an existing balance, they will still be able to raise your rate after a late payment or other form of “agreement violation.” And, they can raise those rates by any amount they deem reasonable. Rest assured, their definition of “reasonable” is not the same as ours.

One of the loopholes in the new legislation (called the CARD act) is that it only addresses existing fees and rules. Card companies can create new fees at will. A representative with www.lowcards.com, a Web site devoted to helping consumers understand credit cards, recently stated, “Theoretically, they could create a fee for names that begin with ‘J.”

Annual fees, online access fees, inactivity charges—you name it, could become familiar numbers at the bottom of your monthly statement. Fifth Third Bank starting using a $19.00 inactivity fee if a card is not used for 12 months and Citibank is implementing fees for some customers who don’t spend more than $2,400 a year.

Credit card issuers will also be doubling minimum balance payments and in some cases, by even more. For a person carrying a $5,000 balance, that payment, typically at 2 percent, could be as much as $250, which amounts to 5 percent of their balance. For many, this could be the scariest component of a card company’s profit strategy, as most cardholders use the minimum payment as a benchmark for staying afloat.

Thankfully, Washington has recognized the practices underway in the credit card industry and proposed, under House Financial Services Committee Chair Barney Frank (who else?), the Consumer Financial Protection Agency. The purpose, among many others to be sure, of this regulatory entity would be to approve credit card fees.

Credit card companies might want to exercise caution as they proceed, however. This is the age of the vocal consumer. Viral ground swells of protest can flow quickly via the Internet, especially through social media pathways. A woman recently posted her disgust with Bank of America’s actions relative to a interest rate hike on YouTube. It resulted in her rate being reduced to its original amount.

Does that give you any ideas?

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Published Sunday, December 20, 2009 @ 12:31 pm

Wouldn’t it be easier sometimes to not have to shop for Christmas? It sure would be nice to just enjoy roasted chestnuts, old music and making popcorn strings.

But this is America, and we like to spend. In fact, many experts note that the holiday season is when many of us start our forays into bankruptcy-inducing debt. Or to put it another way, the credit card companies love December.

There is no question that the commercial aspect surrounding the holidays make it exceptionally difficult to not get caught up in the haze of bargain-basement BluRay players and trendy wind-up hamsters. It seems every year the gift list grows by a few more folks. New nieces and nephews, a step-son or two maybe.

If debt is already making you worry about having to pay for holiday presents, don’t be afraid to speak up. The holidays should be fun, not stressful. You may be surprised at just how many of your family members feel the same way about gift buying that you do.

So, have you wondered how much you could save by not buying gifts this year? Well, thankfully the people at Forbes.com put together a brief rundown of how you could probably better spend your debt-earned cash this year.

While spending is expected to be down this year, it will not match the 30 percent decline that happened between 2007 and 2008. According to Forbes, in 2008 we spent:

• $431 on family members
• $119.82 on ourselves
• $94.52 on friends
• $26.70 on co-workers
• $43.50 on miscellaneous items

Grand total? $750.68. Surely that’s money better spent on a Visa balance.

If you wanted to take the anti-holiday spending project to another degree, you could choose to not buy a Christmas tree this year, too. That will net you another $41.50 in savings. Understand, that is only the national average. Every corner stand in the Triangle has several $100.00 fir trees. Figure about $10 per foot.

Since Thanksgiving doesn’t teach us anything about gluttony, despite how loudly we declare to never eat another bite, the subsequent holiday parties and cookie tins continually take their toll. Especially on our checking accounts. An organization called Information Resource, Inc. conducted a poll that found 94 percent of Americans plan to limit spending on holiday food to under $500.00. For beer, wine and liquor, the results showed that 90 percent of us only plan on spending $200.00.

Hate traveling during the holidays? Who doesn’t? a 2008 Maritz poll found that people who make between $35,000-$250,000 a year will average $960.50 on holiday travel. That’s hard to even think about. Try Skype and a Web cam this year. You’re not exchanging gifts anyway, right?

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Published Sunday, December 20, 2009 @ 8:22 am

Creditors around the country probably still secretly wish that Debtor’s Prison still existed so that they could send all the people that do not pay their bills there. Thankfully, the founding fathers had the foresight to do away with such an antiquated notion back when the country was formed and even provide the foundation for the bankruptcy laws that we now have today.

Little do most people know but the founding fathers were not the best at managing their own finances as they were in managing a war for independence. After all, these people did dump thousands upon thousands of dollars in tea into Boston Harbor! Most people are not aware, but the third president of the United States, Thomas Jefferson, was on the verge of bankruptcy for many years.

Luckily our founding fathers had the understanding that financial turmoil could strike any American, usually honest people that made a few too many mistakes or fell on hard times that would have trouble making ends meet and fulfilling their financial obligations. The first law allowing for people to wipe their debts clean was passed in 1800, but the power of business was evident even then and the law was repealed three short years after it was enacted. States tried to follow suit by enacting their own bankruptcy laws, but the Supreme Court quickly put a stop to this exercise.

The first federal law to pass that helped debtors came about in 1833. However, it was not until 1841 that bankruptcy laws became more of a remedy for debtors than creditors. Much like the law in 1800 though, this one was abolished three short years later as well. Another effort lasted a few years longer following the end of the Civil War with the passage of the Bankruptcy Act of 1867; eleven years later business interests once again prevailed as the law was done away with.

The underlying rationale for the repeal of each bankruptcy law was that it should be up to the creditor and/or the court if someone should be able to declare bankruptcy and wipe out their financial obligations. It was not until the late 1890s that the idea that honest people should be allowed a way out from the financial hole of too much debt without the creditors/ courts giving the okay. This unconditional discharge finally became law with the passage of the Bankruptcy Act of 1898.

Creditors undoubtedly still try to get this law overturned. It worked at other times in history so why not? However, in a country founded on the concept of new beginnings the concept of being allowed to escape persecution of a financial nature appears to have become an inherent right.

So when you are pondering the decision to file for bankruptcy keep this in mind: it took nearly a hundred years for that right to be secured; it is yours- use it. Also, if it was good enough for Thomas Jefferson than it is good enough for you too!

If you are in North Carolina, talk to the experienced bankruptcy attorneys at the Law Offices of John T. Orcutt today to discuss how bankruptcy can help you save your family home from foreclosure, decrease your auto payments, and get rid of your burdensome credit card debt once and for all. Call 1-800-899-1414 today to set up your free initial consultation. Convenient offices in Raleigh, Durham, Fayetteville and Wilson.

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Published Sunday, December 20, 2009 @ 6:52 am

Thus far in the Preventing Foreclosure series, you’ve received an introductory look at how to hold on to your home; learned the best ways to work with your mortgage lender; and were provided with a more permanent plan to keep your house through Chapter 13 bankruptcy.

But Chapter 13 isn’t the only option for average Americans struggling with mortgage debt and facing foreclosure. With Part IV of this six-part series, it’s time to get a better understanding of how filing for Chapter 7 bankruptcy can also help protect yourself and prepare you for a stronger financial future.

Part IV – Chapter 7 Bankruptcy

Stop Foreclosure
As is the case with Chapter 13 bankruptcy, the Bankruptcy Code’s automatic stay is a powerful court order that kicks in as soon as you file your bankruptcy papers. In addition to pausing any foreclosure proceedings, the automatic stay will put a stop to all forms of collection by creditors, including, repossessions, garnishment, lawsuits, and harassing phone calls. If you’ve made the decision that you simply can’t afford your mortgage payment, consider a pre-foreclosure Chapter 7. Your unsecured debt will get wiped out, and the bankruptcy will stall the foreclosure, giving you some time to save up some money for your next step.

Protect All of Your Property
Chapter 7 bankruptcy is, in some ways, win-win situation for homeowners facing foreclosure. Chapter 7 dispenses all of your unsecured debts, including credit cards and health care bills. While creditors, in turn, are entitled to proceeds from a sale of some of your valuable assets, in almost every personal Chapter 7 bankruptcy case there is no property sales of any kind. Thanks to Chapter 7 bankruptcy exemptions, most or all of your property is probably fully protected from sale or repossession, including your home and possibly your cars. With the recent passage of new homestead exemption legislation in North Carolina, chances are, all of your property is protected.
Keep in mind, if you own more than one home, vacation properties or a more expensive home (with a value above your state’s maximum amount) you may want to protect these properties by filing Chapter 13 bankruptcy instead—a better option to protect a home for families with more regular or disposable income.

Dispense With Other Homeowner Debts
Chapter 7 bankruptcy may not only cancel all mortgage debt, but also dispenses with additional mortgages and home equity loans. In addition to removing mortgage debt, new tax laws mean you may no longer face tax liability for defaulting on a mortgage or home-improvement loan.

Avoid Dead-End Solutions and Foreclosure Scams
Amid an uncertain economic period full of rising unemployment, high debt loads, plunging housing values and wobbly stock prices, Chapter 7 bankruptcy provides safe and legal solutions to your foreclosure fears and avoids today’s endless array of rescue scams preying on the vulnerability of desperate homeowners.

Sometimes its Better to Just Walk Away
As 2009 comes to an end, more than 3 million foreclosures are predicted, as homeowners are increasingly incapable of paying the mortgage during this brutal recession. Filing for Chapter 7 bankruptcy pending foreclosure can provide a much-needed stopping point for those drowning in homeowner debt—as well as debts related to credit cards, medical bills, and more—and a comparable starting point for a family’s more viable financial future. The lending industry has taken advantage of consumers, driving home prices to unrealistic heights. With home prices collapsing, and many homeowners owing more than their home is worth, it makes better financial sense to walk away. Chapter 7 allows you to do so with a clean slate.

To get the big picture on how Chapter 7 works and how the laws in North Carolina can help you, speak with a professional bankruptcy lawyer at the The Law Offices of John T. Orcutt.

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Published Saturday, December 19, 2009 @ 4:18 pm

One would think that with the country going through the worst economic downturn since the Depression years that the government would be a bit more concerned with people trying to commit fraud when they file for bankruptcy. Yet in the last fiscal year (ending September 30) the government had conducted the fewest number of fraud investigations since 1986.

In the last fiscal year the number of people filing for bankruptcy has increased by approximately 30 to 35%; nearly 1.4 million people filed in fiscal 2008. This increase comes on the heels of two years (2006 and 2007) in which there was a decrease in filings. That was due to laws being passed in 2005 making it more difficult for people to file and be approved for bankruptcy (with the aim of decreasing the number of people trying to file). As economic times worsened that number was bound to come up like it did.

With such a dramatic increase it would seem logical that the government would increase the number of agents involved in investigating bankruptcy fraud cases. Instead that number has seen a reduction. Ever since the terrorist attacks on 9/11 the government has been dedicating more resources to national security. This has inevitably led to fewer agents available to investigate white collar crimes. Since there are fewer agents, they have been forced to prioritize their efforts.

White collar investigations have been geared towards larger criminals than potential fraudulent bankruptcy filers. The focus has been more towards stopping securities and mortgage fraud and the next Bernie Madoff from getting away with $65 billion of honest peoples’ money. Whenever the FBI has been able to assign more agents to white collar crimes it is typically for securities or mortgage cases. Bankruptcy fraud does not even register in the top five as far as investigation priorities go according to the section chief for financial crimes in the Washington FBI office, Sharon Ormsby.

For the fiscal year ending September 30, the government had investigated 82 cases which they looked upon as bankruptcy fraud. There could possibly be other cases involving bankruptcy fraud, but that would be where the bankruptcy fraud would be secondary to a larger crime, i.e. securities fraud. Numbers from 2003 estimated that a potential 10% of cases filed were fraudulent to some extent. It would be hard to tell right now with such limited resources whether or not that number is any better or worse.

Some judges have found it a little frustrating. Whenever they are suspicious that fraud may have been committed in a case they can recommend that the FBI investigage, but clearly there are not enough resources directed toward the problem.

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Published Saturday, December 19, 2009 @ 10:10 am

Back in 2005, credit card companies were convinced – or at least tried hard to convince everyone else – that there was a bankruptcy crisis in the United States. Bankruptcy rates had doubled since 1980, they pointed out. ‘Shopaholics’ were charging everything under the sun and then declaring bankruptcy, forcing the credit card companies to eat their debt. They then had no choice but to pass these expenses on to consumers in the form of higher fees and interest rates.

In 2005, the major banks spent tens of millions of dollars lobbying Congress to make it harder for consumers to declare bankruptcy. Despite protests from lawyers, judges and law professors working in the system, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act. Insiders pointed out that the law was essentially written by the credit card companies; a single law professor and four credit industry lobbyists actually wrote the legislation.

Nearly everyone agrees that the laws made filing for bankruptcy more burdensome for debtors. Perhaps the most pernicious element, and the one the credit card companies fought hardest for, is the means test. The means test looks at your prior six months of income to determine whether you qualify for Chapter 7 bankruptcy. If your income is too high, you may need to increase certain expenses which qualify as deductions (much like tax deductions). If your income is still too high, you may need to file for Chapter 13 bankruptcy, which offers the same relief as a Chapter 7, but requires a payment plan. The Chapter 13 payment plan can last anywhere from 15 months to 5 years, depending on your particular jurisdiction.

A boon for the credit card companies and consumers who pay their debts, right? Well, certainly the credit card companies did well for a while– their profits rose thirty percent between 2005 and 2007. However, the decline in interest rates and fees they promised would accompany this never happened – in fact, interest rates and fees increased over this period. Things got so bad that Congress finally passed another bill last May, this one regulating industry practices: they set limits on credit card fees and interest rates and will require lenders to be transparent in their communications, starting in July of 2010.

More importantly, recent studies suggest that the new bankruptcy law may have contributed to the rise in foreclosures – costing the banks billions of dollars – and to the housing crisis in general. Now that many consumers mistakenly believed that bankruptcy was not an option, in many cases they simply walked away from their homes instead of declaring bankruptcy and continuing to make their mortgage payments. Feeling that they couldn’t make both their mortgage and credit card payments, they may have opted to make neither. As foreclosure rates rose, slumping housing prices feel even further. Neighborhoods with a number of foreclosures went into deep decline. Banks lost money, the country slid into recession.

Does this mean that the bankruptcy law caused all of this? No, of course not. Many factors contributed to the recession, included the derivatives trading on Wall Street, the government trying to finance two wars without raising taxes, etc. However, it is clear that the idea that banks would pass on savings to consumers was unrealistic. It’s also clear that removing consumer options resulted in financial decisions that ultimately hurt the banks as well as consumers. (Other studies argue that stringent bankruptcy laws discourage risk and entrepreneurship; it’s no accident that many countries in the EU are loosening their bankruptcy laws during this recession.) The obvious conclusion is that Congress, and not the banks, should write laws. And that they should listen to the experts – in this case, the lawyers and judges involved in bankruptcy proceedings – instead of lobbyists with an agenda.

The good thing is that, in many jurisdictions, judges have construed the new law in favor of debtors. The means test is not bullet proof, and Chapter 7 is still a viable option for most consumers. And with the rising tide of delinquent mortgages, Chapter 13 bankruptcy remains the best way to save your family’s home. Contact a bankruptcy attorney today and get the truth about bankruptcy. And visit http://www.billsbills.com/truth_bankruptcy_book.php for more of the truth.

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Published Friday, December 18, 2009 @ 7:21 pm

Last Friday, the House of Representatives passed a wide-reaching swath of financial reforms, designed to reign in the worse excesses of the banking industry. Democratic lawmakers are hailing the bill as a huge victory for consumers. However, one important provision failed to pass: cramdown.

‘Cramdown’ would allow bankruptcy judges to reduce the principle balance of the mortgage on a primary residence in a Chapter 13 bankruptcy, resulting in lower monthly payments for the filer. It’s important to note that bankruptcy judges are already allowed to practice cramdown for a variety of debt, including boats, cars, vacation homes and family farms. In fact, prior to changes in the bankruptcy laws in 1978, they were able to cramdown residential mortgages as well.

Support for cramdown began gaining strength last spring, when the drop in housing prices caused a rise in foreclosures and a spike of people ‘under water’ in their homes. As the recession got worse, more people became vulnerable. Many Democratic lawmakers argued that cramdown was a necessary provision that would allow more people to stay in their homes. The banking industry countered that it would raise costs for everyone and divert capital from the mortgage market at a time when it desperately needed more, not less funds. Observers pointed out that banker’s fears were unrealistic; banks already eat the loss in a foreclosure, so how would this law upset the whole system?

Meanwhile, the Obama industry introduced housing reforms, notably the Making Houses Affordable, a program designed to encourage mortgage companies to voluntarily modify loans and keep people in their homes. While the program does offer some financial incentives, industry observers note that mortgage companies make far more money from the fees involved when a homeowner goes foreclosure.

In April, the House passed cramdown, but it stalled – badly – in the Senate. Twelve Democrats joined with every Republican to defeat it.

This fall, nearly everyone agrees that the MHA program has been a failure. Far fewer loans have been modified than the administration hoped; foreclosure rates continue to rise across the country. It’s hard not to see the lack of cramdown as a pertinent factor. Cramdown would offer the homeowner some leverage. If mortgage companies refused to modify loans, the homeowner could have filed bankruptcy and the decision to modify or not would have rested with an independent party, the judge. As it is, judges are unable to modify the loans, which leaves the entire decision in the hands of the mortgage company.

That’s why Democrats in the House included cramdown again, in the package of regulatory reforms they voted on last Friday. However, this time – under some pressure from small banks and credit unions – the measure failed to pass even the House.

What’s the future for cramdown? It doesn’t look good. Without some radical change somewhere, it doesn’t look like cramdown will even come up for a vote again. This is too bad; this provision would not only be very helpful to many individual homeowners, it has the potential to send ripples through the housing market as well.

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Published Tuesday, December 15, 2009 @ 1:48 pm

In these painful financial times, the toughest bind facing many Americans is financing their well- being. While it’s vital to stay healthy and seek medical help when necessary, with health care costs on the rise and health care reform largely in limbo, the results of putting wellness over wealth can be financially devastating.

As the New York Times reported, (from the November 25, 2009, article “From the Hospital Room to the Bankruptcy Court” by Kevin Sack), many Americans are merely “one accident or illness away” from a “medical bankruptcy.” And while there is no medical bankruptcy per se—rather merely a standard filing that includes the wiping away of medical bills—more and more people are filing for bankruptcy because of these bills with the ubiquitous term “medically bankrupt” having become largely a sign of the economic times. “This has really become the insurance system for the country,” said Susan R. Limor to the New York Times in the same article. Limor is a bankruptcy trustee who calculated that 13 of the 48 Chapter 7 liquidation cases on her docket included medical debts of more than $1,000. Under Chapter 7, a debtor’s assets are liquidated and the proceeds are used to pay creditors; any remaining debts are discharged, and filers are left with a 10-year mark on their credit ratings.  “You can’t believe how many people discharge medical debts,” Limor said. “It’s a kind of trailing indicator of who’s suffering in this economy.”

And those suffering are not alone. According to a recent study from Harvard University, today medical bills make up well over half of all bankruptcy filings (62% in 2007), accounting for the bankruptcies of between 1.5 to 2 million Americans each year. Moreover, of those filing for bankruptcy, three-quarters have medical insurance.  In many cases, this crippling debt is the result of insurance co-pays and deductibles, which can run into the tens of thousands of dollars. Yet, some who file for “medical bankruptcy” do so even with relatively small medical bills because, left to their own devices, many hospitals and medical practices refuse to make arrangements for debt relief or installment plans.

As such, the alternatives to a medical bills-inspired bankruptcy can be worse. Medical debt—from hospitalization to medication—is unsecured with no guarantee available for creditors, like insurance companies, hospitals and doctors, to take back. As a result, without filing medical bankruptcy, health care debts can be tied to the collateral you do own. A hospital or insurance company can also garnish your wages, and even claim a portion of the equity in your home, business or other large assets.

As the New York Times article illustrated, if you’re plagued by medical debts and other related health care costs, Chapter 7 bankruptcy may be the only viable solution for you. Filing for Chapter 7 can eliminate most of your debts, including those arising out of medical expenses—whether they’re billed from your hospital or charged on your credit card.  An experienced attorney can evaluate your precise financial problems—medical or otherwise—and work out how the implications are likely to affect you. You’ll also learn the best ways to most effectively deal with creditors, along with possible solutions to improve your credit scores and credit ratings so that any effects of the bankruptcy might be minimized. The same lawyer can help you file for bankruptcy, as well as represent you in the bankruptcy court. For more information about the benefits of filing for bankruptcy, including alleviating medical debts, visit the experienced attorneys of The Law Offices of John T. Orcutt online.

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Published Monday, December 14, 2009 @ 6:00 pm

With millions facing foreclosure, job losses or salary cuts, mounting credit card and medical bills, and other tenuous financial situations during what seems like an unending economic downturn, more and more Americans are considering payday loans as a way to keep their heads above water.  In an earlier post, entitled Pass on the Payday Loans this Holiday Season, we explored why this trend is far from financially desirable over the long term, often leading to payday borrowers becoming slaves to an endless cycle of insurmountable interest, perpetual payments, and, in some situations, leaving many Americans vulnerable to collections actions, judgments, wage garnishments and bankruptcy.

But what if you’re already drowning in payday loan debt? How can you avoid any or all of the above?

One way to escape the cycle of payday loans is a payday loan settlement.  When attempting to negotiate a settlement, your due diligence and research prior to contacting your payday lenders to settle could prove very rewarding.

Here are your best, first steps.

Lining Up Your Lenders
Payday loan settlements are largely a matter of negotiations among you, as borrower, and your lender or lenders.  As a result, whether you’re planning to pay down a couple of payday loans or a couple of dozens, it’s important to “line up your lenders”—writing down all payday loans you have, separated, if necessary, into two primary categories: Internet loans and those received from actual payday lending stores.  For each lender, also account for the amount borrowed and the total amount already paid back, including interest, fees, and any other relevant lending charges. Because online and brick-and-mortar lenders are regulated differently, separating each into these sections will allow you to more easily take the next step in the settlement process: maximizing the effect of your state’s payday lending laws.

Learning Your State Licensing Laws
The next step for a successful payday loan settlement is to verify whether your state’s laws require online payday loan companies to be licensed in your home state or whether they accept another jurisdiction’s licensing standards.  About half of states, as well as the District of Columbia, have passed industry-backed laws specifically authorizing payday lending.  These laws generally require either licensing or registration.  Some specify maximum loan terms and/or amounts.  In order to get this information, check either Internet payday loan state laws or Payday Loan Consumer Information.  This verification of registration and licensure is especially important in the event your payday loans are Internet-based.  Since the large majority of online payday lenders are not licensed anywhere in the country, a licensure requirement in your state of residence gives you a starting point to negotiate the validity and settlement of your debt.

Knowing Your Limits (and Theirs)
Feel like you’ve been paying too much for your payday loans?  Well, your state may agree.  In fact, if payday lenders violate state lending limits, you may have another vantage point from which to begin settling your loans.  Begin by verifying the laws in your state regarding whether rollovers are permitted at either type of duly-licensed payday lender, as well as the maximum allowable interest, fees and loan amount allowed for each.

Settling with CFSA Members
The Community Financial Services Association of America (CFSA) is dedicated to promoting responsible regulation of payday lenders.  Participating members are required to set up payment plans for borrowers drowning in their debt.  In order to get any type of loan settlement with a CFSA member, you must first file a request to settle before you default on your debt, allowing you a means to rearrange your payday loans in a way that can not only help you discharge them but also pave the way to a better financial future.

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Published Sunday, December 13, 2009 @ 6:54 pm

In Part I of the Preventing Foreclosure series, you received an introductory look at how to keep your home, with Part II of this six-part series emphasizing the power of being proactive, providing even more specifics on the best ways to prevent impending foreclosure proceedings by working directly with your mortgage lender before you find yourself falling behind.

If you are already behind on your mortgage payments, it’s hard to negotiate with your lender. With so many Americans behind on their mortgages, loan servicing companies simply don’t have the manpower to address every delinquent mortgage. But you have options- Chapter 13 or Chapter 7 bankruptcy proceedings can force creditors to end their collection activities and delay a foreclosure sale.

Part III – Chapter 13 Bankruptcy

When examining your options for saving your home, if you find you are in arrears, but also have regular income to catch up with those back payments, just not all at one time, you may find that Chapter 13 bankruptcy is your best first step in protecting your biggest asset. As such, filing a Chapter 13 bankruptcy stops foreclosure on your home and restructures your debt into a more manageable payment plan— allowing homeowners to pay back what they owe on their mortgage over time, often at a percentage of the cost.

Good Way to Pay With the Automatic Stay

Under the Bankruptcy Code, a debtor in Chapter 13 bankruptcy is protected by the automatic stay. This stay stops creditors in their tracks and prevents their collection actions, including foreclosures. This stay continues working throughout the duration of your bankruptcy case, as long as you adhere to the guidelines set by the court; meaning as long as you remain current on your payments to your bankruptcy trustee, you should come out of the bankruptcy current on your mortgage and with your home.