Source: U.S.News & World Report, "5 Bankruptcy Myths Debunked," Susan Johnston, May 14, 2012
]]>The determination of which of the two most popular forms of bankruptcy Ohio consumers can file for is dependent on the outcome of a means test. Generally, individuals who have little in the way of assets and not much money coming in, end up filing for bankruptcy under Chapter 7. People who have a steady form of income and assets they would like to hold on to more commonly file for Chapter 13 bankruptcy.
]]> The chapter a consumer files under is important because it has a bearing on how the bankruptcy is handled. Chapter 7 bankruptcies are commonly referred to as a liquidation. In this situation, a consumer's assets will be sold and the proceeds of the sale distributed to creditors. Most remaining types of debt are then erased. The entire process is usually fairly short.Chapter 13 bankruptcies are a bit different though the end result of debt relief is the same. A filing under this chapter entails the creation of a repayment plan that lasts between three and five years. Though it takes longer, in many cases the consumer is able to keep many of their assets.
Bankruptcy is not always the answer for everyone. In some cases there are other approaches that can be taken to deal with accumulated debt. Accordingly, it is important for a consumer to make sure an educated decision regarding the matter is being made. This may mean it is necessary to consult with multiple financial advisors as well as attorneys. Whatever decision is made, it is likely that the consumer will feel relieved that they are doing something to get themselves out of the difficult position.
Source: Investopedia, "How To Survive Bankruptcy," Angie Mohr, May 9, 2012
]]>According to her bankruptcy filing she owes nearly $1 million to creditors, with only about $50,000 in assets.
]]> By filing for bankruptcy Suleman should get a fresh start from her overwhelming debt. Under Chapter 7, her assets will be liquidated and all of her unsecured debt will be discharged. This form of bankruptcy appears to be appropriate considering that she otherwise would be unable to pay back her creditors.It is important for Ohio residents who are considering filing for bankruptcy to remember that potential future earnings are not taken into account for bankruptcy purposes. Relying on her somewhat infamous status, Suleman is expected to be able to continue to earn income.
Because her income is unpredictable, and her livelihood is not dependent upon her credit history, her bankruptcy filing should not affect her financial future much, if at all. As a result, she will be able to exit from bankruptcy free and clear and then earn money without having to pay back creditors for previous debt.
Also, since she will not be allowed to file for Chapter 7 again for the next 10 years, credit card companies will be more than happy to offer her credit based upon her future income potential.
Suleman's ability to cash in on her quasi-celebrity status may questionable, but for now Octomom's decision to file for Chapter 7 certainly seems to make the most sense for the financial future of her family.
Source: TIME, "Was it Smart for 'Octomom' to Declare Bankruptcy?" Martha C. White, May 4, 2012
]]>A $26 billion settlement was recently reached in the matter and, as was predicted by many, foreclosures are now on the rise. This is according to RealtyTrac, a marketer of foreclosed properties, which analyzed information from 212 metro areas. It is likely only a matter of time before this trend spreads throughout the rest of the nation.
]]> Throughout the state of Ohio there are undoubtedly many homeowners who are facing the loss of their homes via a foreclosure action. Most homeowners who are in this situation are experiencing financial difficulties for a variety of reasons. They may feel as they though they do not have any options. The reality however is that they likely do.Homeowners facing foreclosure may be able to hold onto their homes by filing for Chapter 13 bankruptcy. Filing for a bankruptcy such as this one results in the issuance of an automatic stay which halts any foreclosure action already in progress and prevents any such action from being commenced, at least temporarily. The first step to saving one's home is to determine whether a homeowner qualifies for Chapter 13 or if there are other options that could accomplish the same goal. A bankruptcy attorney can assist in that matter.
Source: Collections & Credit Risk, "Foreclosure Filings On An Upswing," April 27, 2012
]]>However, if your overwhelming financial debt includes private student loans, you will not get relief. Since the major bankruptcy reform in 2005, student loan balances are now in the "almost impossible to wipe out" debt group, which also includes child support payments, tax liens and criminal fines. If it appears curious that bankruptcy can wipe out mortgages, credit card balances, auto loans and medical bills, but not student loans, your questions and displeasure are well founded.
]]> This protection has helped educational lenders, but has hurt all who are in financial distress and have high balance student loans. To date, little public attention has been paid to mounting student debt. Wildly escalating college costs since the 1990s have put more younger people in financially disastrous situations. However, escalating student loan debt, often a root cause of financial problems, cannot and will not disappear in bankruptcy.At least one respected member of Congress has proposed overturning the 2005 provision regarding student loans. Even the U.S. Treasury Secretary admits that the proposal has "some merit." Still, experts believe that this bill has little chance with a deeply divided Congress in an election year.
Proponents of relaxing student loan dischargeability argue that students do not seek "extra" protection. They only want the same treatment applied to every other type of consumer debt. How do you feel about the inability of students and former students to receive bankruptcy protection for educational loans?
Source: Business Week, "Even after bankruptcy, trapped by student debt," Justin Pope, April 25, 2012
Recognizing this, Ohio's Attorney General recently filed a lawsuit against a man involved in multiple failed mortgage modification agreements in the state of Ohio. The man did business as several companies based on the west coast. In addition to being accused of violating Ohio's Consumer Sales Practices Act by failing to deliver what was promised, the lawsuit alleges the man violated the Debt Adjusters Act by charging fees that are considered to be excessive.
]]> The man, who apparently has done business under at least five different names, reportedly took around $3,000 from each client. After receiving the money he allegedly failed to provide the promised services.It is unfortunate that any Ohio homeowners lost money to someone they believed was there to provide assistance. Even if they are behind in their mortgage payments, those homeowners may still be able to save their home. Depending on their circumstances, filing for a Chapter 13 bankruptcy could do the trick.
As soon as a homeowner files for Chapter 13 bankruptcy, an automatic stay is issued. This prevents a foreclosure from being entered or continued, meaning the homeowner is able to stay in their home, at least while the bankruptcy is being processed.
Anyone who is behind in their mortgage or other bills could potentially benefit from consulting with a bankruptcy attorney. He or she can likely help determine what options are available to the homeowner.
Source: Collections & Credit Risk, "Ohio AG Sues Foreclosure Rescue Operation," April 19, 2012
]]>Ohio's graduating class of 2012 will be some of the first seniors in the country who have met the new requirements. Their classes in financial literacy taught them consequences of the choices they make regarding their budgets, savings, credit, interest rates, investments and philanthropy. The students used a computer program to simulate real-life situations like back accounts, salaries, rent costs, utility payments, car loans, insurance and credit card debt.
]]> They would receive fake bills in the mail and have to return them with fake checks. The students were rewarded for making sound financial decisions and keeping accurate checking account balances. Conversely, they were penalized for missing payments and would incur late fees. Students even had a savings option that would award them for pining away dollars in a fake 401K plan from their fake biweekly paycheck. The program simulation would even throw curveballs at the students like a car wreck, medical bills, a drop in the stock market and returned check fees.Congratulations to the class of 2012! We hope that by learning how the real world works now, you will be better suited to survive economic trends and fluctuations in the future.
Source: Cincinnati.com, "Budget Challenge teaches kids finance," Laura Baverman, April 20, 2012
]]>The 2005 bankruptcy laws were designed to help prevent abuse within the bankruptcy system, in part through additional paperwork and requirements. A side effect of the extra requirements has been an increase in how much the process costs, particularly in the case of attorney fees.
]]> The more time a bankruptcy lawyer spends on the case, the more expensive the case becomes. According to the U.S. Government Accountability Office, in 2005, just before the new laws, the administrative and legal fees tied to a bankruptcy case were $921. In 2007, the amount had increased to $1,477.Despite the additional hoops that must now be jumped through to file a bankruptcy case, it is still a good option for many people when they can find the necessary funds to pay for the case. Income tax returns provide those necessary funds for some. Because of this, it is not uncommon to see a spike in the number of Chapter 7 or Chapter 13 bankruptcies filed in the first part of the year.
According to the National Bureau of Economic Research, this year, more than 200,000 will use their tax return to file for bankruptcy. It is likely that some of those individuals live in Ohio. Though it may seem overwhelming, for many it provides the financial fresh start needed.
Source: USA Today, "Tax refunds being used to pay for bankruptcy filings," Christine Dugas, April 13, 2012
]]>People must do more than simply give their bankruptcy attorney a list of their debts. Along with receiving advice from their lawyer, debtors should understand the source and totality of their financial morass. Fortunately, in most cases, their IRAs will remain unscathed.
]]> While IRA and Roth accounts have always enjoyed protection, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 expanded this coverage. Formerly, IRA balances up to $1 million were exempted from inclusion in bankruptcy actions. BAPCPA provides for inflation indexing, currently increasing protected balances up to $1.17 million. This protection offers a good measure of comfort for people in financial distress.However, always ask your legal advisor to verify that your IRA is protected. One unusual facet of bankruptcy regulations has surprised/confused people at times. While bankruptcy is a federal law, individual states are free to modify some provisions. This unusual situation creates some significant differences from state-to-state.
For example, while your IRA is protected up to $1 million plus the inflation index, an inherited IRA is sometimes treated differently by the courts. Also, should you take early withdrawals from your IRA to help solve your financial problems, you may subject these retirement funds to your creditor attack during bankruptcy. These are additional examples that reinforce the need for experienced legal advice.
The key is to think clearly and follow trusted legal advice. Your IRA enjoys protection from creditors, but could become vulnerable in certain situations. Proper legal counsel could help keep your IRA safe from harm.
Source: Seeking Alpha, "IRA Bankruptcy Protections," April 17, 2012
]]>As a standard part of a Chapter 7 bankruptcy, the assets of the person who filed the petition are sold and the proceeds distributed to that person's creditors. At end of the process, any remaining unsecured debt that meet certain requirements will be discharged and the filer will get a fresh financial start.
]]> The pieces of property that usually end up being liquidated by the trustee are things such as jewelry and sometimes motor vehicles and houses. In some cases however, other types of property are sold as well. As a performer who routinely creates songs, Young Buck has a lot of intellectual property that if handled correctly could potentially be quite lucrative. This property is scheduled to be auctioned-off in May, assuming the court approves the sale.Included in the potential sale are the masters of his recordings which would entitle the owner to license the music for use in things such as commercials. In addition, royalties which would bring in revenue whenever songs are played will likely be for sale. Other intellectual property that will probably be on the auction block are copyrights, trademarks and the rapper's rights of publicity.
As is the case for most people who find themselves in this situation, it will probably be difficult for him to say goodbye to this property. In the end however, the fresh financial start will likely make it worth it.
Source: The Wall Street Journal, "Young Buck Songs, Royalties on the Block," Jacqueline Palank, April 6, 2012
]]>According to a recent report issued by a federal watchdog, TARP is not accomplishing all that it had hoped. Of the $7.6 billion that has been made available to the participants in the Hardest Hit Housing Markets program, only 3 percent has been used.
]]> By the end of 2017, an anticipated 458,000 people owning homes are projected to have received assistance. Thus far however, only 7 percent or 30,640 homeowners have received any funds. Instead over three quarters of the money available in the fund has gone to assist the unemployed, the other group targeted for aid under TARP.The goal of the program was to encourage the states facing the most unemployment and problems in the housing sector to create different approaches to aid their residents by strengthening housing programs. Instead of programs focusing on things such as reducing mortgage principals however, in many of the cases the money was just used to pay mortgages and related fees to homeowners who have lost their jobs.
One of the problems identified by the watchdog group was the inability of the states to secure mortgage servicers' support in the proposed endeavors. The Assistant Secretary for Financial Stability disagreed with this conclusion. He said that Treasury has been working with loan servicers since the very beginning of the program.
Source: CNN Money, "Watchdog blasts housing program for 'hardest hit'," Jennifer Liberto, April 12, 2012
]]>According to figures recently released by the Federal Reserve, revolving debt, which includes credit card debt, dropped $2.2 billion in the month of February. The previous month, January, recorded a decrease of $3 billion.
]]> This drop marks the second month in a row in which people's use of their credit cards throughout the nation appears to have dropped. This comes on the heels of a dramatic increase over the winter holidays when credit card use rose sharply.Many people who turn to credit cards to get by, plan on the practice being a short term solution. The idea is that they will get them through until a new job is found or they find another way to get back on their feet again. Unfortunately this is not always the case and it may not take long before the user feels that they are in over their head.
People who have accumulated a great amount of credit card debt may be dealing with harassing phone calls from creditors. They may also be facing losing their house to foreclosure. It may feel as if there is nowhere for them to turn for assistance. Fortunately, people in that position may be able to find relief by filing for bankruptcy. If one qualifies, once the bankruptcy proceeding is complete, a fresh start may be attained.
Source: Bloomberg, "Consumer Credit in U.S. Rose Less Than Forecast in February," Alex Kowalski, April 6, 2012
]]>But it appears that the issue of robo-signing is not finished. Late in March, a senior Federal Reserve official recommended that eight companies not involved in the settlement be fined for their allegedly sloppy or fraudulent foreclosure documentation practices. The firms include large corporations like U.S. Bancorp, Goldman Sachs and MetLife. A recent news report found that these and the other five companies have dubious document review practices.
]]> Any inaccurate, false or misleading information in foreclosure documents can be grounds to invalidate the proceeding, potentially allowing homeowners to keep their property. As an article about the proposed fines indicates, the errors need not be major. One U.S. Bancorp foreclosure was recently dismissed by a judge because one company official identified herself in two different corporate positions in the same document. In another case, it was discovered that an executive with a mortgage servicer had signed a foreclosure document 15 months after her company had transferred the mortgage to another lender. That foreclosure was halted as well.For people in Cincinnati whose homes are in foreclosure or might be soon, having an attorney review the foreclosure documents for errors or fraud can potentially lead to a positive result.
Source: MSNBC, "Fed may fine firms not part of foreclosure deal," Jessica Silver-Greenberg, April 1, 2012
]]>Under the bankruptcy protection code, a debtor's discharge is a legal injunction that bars creditors from attempting to collect or recover any funds. Afforded to those struggling with debt under the bankruptcy code, it's an important component to allowing individuals to start fresh and get back on their feet financially.
]]> Unfortunately, some creditors fail to abide by these injunctions. A judge recently ruled against Bank of America for unlawfully continuing to harass a man after he filed for bankruptcy protection. The man kept a record and determined that Bank of America creditors had called him 38 times demanding repayment related to outstanding debt that had already been discharged.A judge ruled against Bank of America and ordered them to pay the man $12,500 for emotional distress and to cover attorney's fees.
This is not the first time Bank of America has been cited for unlawful debt collection practices. There have been several other lawsuits and complaints against the banking giant related to their attempts to collect debts that have either been paid or discharged.
The decision to file for bankruptcy protection is often a difficult and emotional one. When the decision is made, individuals should be allowed to move forward with their lives and not face additional harassment or scrutiny by creditors.
Source: The Huffington Post, "BofA Allegedly Called Debtor 38 Times After He Filed for Bankruptcy," Alexander Eichler, Mar. 30, 2012
]]>While every consumer signs a contract and agrees to certain terms upon entering into a credit card agreement, many debt collectors do not abide by the terms laid out in these contracts. It's important, therefore, that consumers know their rights and take steps to protect themselves from unethical and illegal credit card debt collector practices.
]]> After 21 days, failure to make a minimum credit card payment may result in a report of such being sent to credit bureaus. However, many credit card companies allow a 60 day grace period before they will report anything. After the 60 day lapse, your account is turned over to collections and you will receive constant calls and letters.After 90 days of no payment, your account will likely be turned over to a third-party debt collection agency. These agencies are relentless in their pursuit and will likely call and email constantly and also send threatening letters. Depending on the amount, they may file a lawsuit summing the party in default to appear in court. Failure to show in court results in an automatic judgment in their favor at which point they can take measures to garnish wages.
While it's advisable to always pay your credit card bills, consumers must be aware of widespread complaints related to debt collection practices. If having difficulty making minimum credit card payments, try to negotiate more workable payment terms directly with the credit card company. Also check your state's laws related to collection lawsuits as a case can be dismissed if it wasn't filed in a timely manner. Lastly, always be certain the debt is one you actually owe and that you're not falling victim to illegal collection practices.
Source: Kiplinger, "What to Know About Credit-Card Debt Collection," Cameron Huddleston, Mar. 29, 2012
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