Recent Blog Posts in June 2010 |
| June 26, 2010 |
| Afraid to File Bankruptcy? You Might Already Be There. |
| Posted By Joseph Tosti |
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Bankruptcy is a tough pill to swallow for anyone. The word means “failure” to people more often than it means “fresh start.” That’s good marketing by the credit industry, but it isn’t the truth.
First, it is critical to understand when you really got into trouble. It was much further in the past than you might think. It was not when your credit cards raised the interest rates. It wasn’t when the layoff happened and you could not make the minimum payments anymore. It was not when the mortgage company issued the foreclosure notice.
It was probably the day you started carrying debt for short-term expenses without being able to easily pay it off from income or savings quickly. It was the day you couldn’t pay off the credit cards in full quickly — without borrowing from somewhere else. That was the day you began down the road to bankruptcy because that was the day you tipped from paying-as-you-go to owing-as-you-go. And that was the day you gave your creditors power over you they didn’t have before.
Obviously borrowing money you can’t payoff quickly is reasonable in some situations. Buying a home or a long-term asset like a car often require long-term debt you can’t pay off next week or next month. But when you are buying your basic needs, like groceries, or clothing, on credit and not paying it in full each month, then it ought to be obvious you are not breaking even.
Even if what you buy on credit is related to long-term things, it can be an indication you are having a problem. A home repair or new tires on a car are long-term investments in those things. But good budgeting would demand that you have set aside money each month to cover those expenses. You always knew you should have some savings to cover it, right? If you didn’t, you were living off the depreciation — the wear and tear — on the home and car without any way to recover that loss except borrowed money.
Also borrowing money on credit cards to fund a business can also be a good idea. But it’s remarkably dangerous since most new businesses can’t start turning a profit as fast as the credit cards accrue interest.
It was easy for the last 10-15 years to ignore these simple realities. Credit card lenders made the minimum payment ridiculously low in comparison to your total debt. And the real estate bubble made it way too easy to just refinance and cash-out the payoffs for your other credit. And as long as you planned to work until you were 95 to pay off that new mortgage, it makes sense.
In reality, a lot of people who are not filing bankruptcy are in fact bankrupt right now. If they don’t get a raise, a large inheritance or a lottery win, they’ll spend a good part of the rest of their life with debt they can’t pay off and they’ll be at the mercy of their lenders every day. In reality, they work for their creditors but don’t get the health plan.
So when you feel badly about considering relief from your debt through the Bankruptcy Code remember — it’s about relief. It’s about getting control of your life back. It’s about having a future. Don’t let your pride keep you from getting help.
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| June 26, 2010 |
| Is Church Tithing Allowed in Bankruptcy? |
| Posted By Joseph Tosti |
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The Bankruptcy Code does allow the debtors to claim an expense for charitable contributions, including tithing to a religious organization. This has the possible effect of allowing a debtor to qualify more easily for Chapter 7 under the means test, and will allow the debtor to pay less money in his or her Chapter 13.
Section 707(b)(2) of the bankruptcy code states that no one can object to the debtor having made or continuing to make tithing contributions to a church.
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| June 23, 2010 |
| Bankruptcy Fraud — What Happens When You Are Caught? |
| Posted By Joseph Tosti |
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The Topeka-Capitol Journal Online reported today one Debtor’s bankruptcy fraud criminal conviction yesterday in the U.S. District Court in Topeka, Kansas. His wife’s trial is reported as scheduled for August 2d. According to the article, James Moser:
- Concealed information about their option to purchase 16.5 acres of prime real estate at the location where they operated a fully equipped Arabian horse training facility.
- Concealed the fact they had $125,000 worth of gold and silver coins and collectible stamps. (Mr. Moser claimed the property had been transferred when it had only been pledged as collateral for a debt.)
- Concealed their right to a commission of up to $450,000 for marketing and sale of the property at the location where they operated the horse training facility.
BLN contributors have written before and recently on bankruptcy fraud – just last week Russell A. DeMott, Charleston Bankruptcy Lawyer, wrote his excellent post, Bankruptcy Fraud: “Your Cheatin’ Heart”, following up on Craig Andresen’s, Bloomington, Minnesota bankruptcy attorney and BLN member, “No, A Bankruptcy Lawyer Should Not Withdraw from the Case if the Client Won’t Tell the Truth.”
Even earlier, Jill Michaux, Topeka Bankruptcy attorney and BLN member, wrote about another Kansas conviction in 2008 in Wichita Car Dealer Convicted of Bankruptcy Fraud – Facing 5 Years in Jail.
Mr. Moser is set for sentencing Sept. 20. He faces a maximum penalty of five years in federal prison and
Click here forexamples of bankruptcy fraud investigations in fiscal year 2010 compiled at the IRS web site.
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| June 23, 2010 |
| Should Chapter 13 Plan Require ALL The Debtor’s Disposable Income |
| Posted By Joseph Tosti |
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At the same time the bankruptcy community is pondering theLanning decision on what “projected disposable income” is in a Chapter 13, I read Judge Eugene Wedoff’s thoughts on whetherChapter 13 plans ought to require the payment of all of that disposable income to the trustee. *
His point was that requiring payment of 100% of the calculated disposable income was a disincentive to choose Chapter 13. He likened it to a 100% tax on all income above the median income. (Of course it’s not 100% of “income”, but 100% of “disposable income” as figured on the B-22 form.) We would find an income tax that took 100% of any measure of wealth to be reprehensible. But that’s the Chapter 13 requirement.
I concur in those thoughts, but would come at the issue a bit differently. A Chapter 13 debtor with above median income commits his earnings to the “supervision of the court” for five years. What an opportunity to develop new spending habits! Or, more precisely, new savings habits. Instead, the current system requires thatevery penny not calculated as required for basic living be spent.
We squander this opportunity to have debtors practice saving, a habit that most have not regularly indulged in. We require that they expend every cent that comes through their bank account.
No financial management class or counselor would see a budget with no provision for either the unexpected nor the inevitable old age as acceptable. Why does a plan of reorganization for consumers mandate such a result?
(Unfortunately, the article is in the member’s only portion of the Chapter 13 Trustees’ marvelous site.)
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| June 23, 2010 |
| Should Chapter 13 Plan Require ALL The Debtor’s Disposable Income |
| Posted By Joseph Tosti |
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At the same time the bankruptcy community is pondering theLanning decision on what “projected disposable income” is in a Chapter 13, I read Judge Eugene Wedoff’s thoughts on whetherChapter 13 plans ought to require the payment of all of that disposable income to the trustee. *
His point was that requiring payment of 100% of the calculated disposable income was a disincentive to choose Chapter 13. He likened it to a 100% tax on all income above the median income. (Of course it’s not 100% of “income”, but 100% of “disposable income” as figured on the B-22 form.) We would find an income tax that took 100% of any measure of wealth to be reprehensible. But that’s the Chapter 13 requirement.
I concur in those thoughts, but would come at the issue a bit differently. A Chapter 13 debtor with above median income commits his earnings to the “supervision of the court” for five years. What an opportunity to develop new spending habits! Or, more precisely, new savings habits. Instead, the current system requires thatevery penny not calculated as required for basic living be spent.
We squander this opportunity to have debtors practice saving, a habit that most have not regularly indulged in. We require that they expend every cent that comes through their bank account.
No financial management class or counselor would see a budget with no provision for either the unexpected nor the inevitable old age as acceptable. Why does a plan of reorganization for consumers mandate such a result?
(Unfortunately, the article is in the member’s only portion of the Chapter 13 Trustees’ marvelous site.)
by Cathy Moran, California Bankruptcy Lawyer on June 22, 2010 · Posted in *Chapter 13 Bankruptcy
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| June 22, 2010 |
| Personal Bankruptcies Hit a High and May Keep Rising |
| Posted By Joseph Tosti |
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In the first quarter of 2010, the rate of personal bankruptcy filings in a dozen states increased by double-digit percentages over 2009's monthly averages. "What is surprising is that there are still hefty increases in states like Arizona, California and Florida," says AACER president Mike Bickford, referring to the fact that it might seem that the worst would be over in states hard-hit by the housing bubble. "Intuitively, you would think there might be some leveling off in these states, but that is not the case. In addition, there were large increases in bankruptcy filings in the Midwest, especially Michigan and Illinois."
The statistics show that Chapter 7 bankruptcy filings are rising faster than the more complex Chapter 13 filings. While the latter requires individuals to repay a substantial portion of their debt and prevents banks from foreclosing on their homes, Chapter 7 bankruptcy allows a debtor to wipe out his or her debts entirely and get a fresh start. "It is very fast and very deep debt restructuring," says Porter. Since 2005, Chapter 13 filings have dropped from about 35% of all personal bankruptcy filings to 25%, she says. "Systemically, that's a big change."
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| June 21, 2010 |
| Credit Card Charges by Laid-off Debtor Held to be Reasonable and Dischargeable |
| Posted By Joseph Tosti |
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A Michigan bankruptcy court decision allowed the Discharge of a chapter 7 debtor's credit card debt, even though the credit card was used while the debtor was laid off from his job just before the bankruptcy was filed. The creditor objected to the dischargeability of the debt based on its allegation of fraud and false pretenses.
The court observed that the debtor testified credibly that he had every expectation of returning to work as had always happened in the past. The debt was discharged. |
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| June 21, 2010 |
| Recent Court of Appeals Discharges $300,000 in Student Loans |
| Posted By Joseph Tosti |
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The 8th Circuit Court recently upheld a Minnesota bankruptcy court's discharge of $300,000 in student loans, even though the Debtor's husband was paying for a newly installed screened-in deck and had just purchased a luxury Chevrolet Suburban.
The court ruled that the debtor's inability to work, due to family considerations and having to care for her autistic children, as well as the fact that it was not actually the debtor's income that was used for the luxury purchases.
For more information on Bankrupty news check back often or contact orange county bankruptcy attorney Joseph Tosti.
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