Sun 6 Sep 2009

Chapter 7 is a Way Out of the Credit Card Trap

Posted by jschreiber under Chapter 7
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Chapter 7 bankruptcy is a way out of the credit card trap. It can mean the difference between getting a fresh start or being burdened by credit card payments for 20 years.

Too many consumers do not understand the consequences of unpaid or otherwise delinquent credit card debt.

It is in the creditor’s best interest to keep a consumer in debt. The reason is that’s how the creditor earns money–by collecting interest on the debt. Many people don’t realize the cost of credit and the dangerous cycle of monthly interest payments.

For example, a family, who already carries a significant balance on their credit cards, wants to buy the latest flat panel TV and entertainment system for $3,000. Of course, they charge it. When it comes to paying the credit card bill, they only make the minimum payment. Assuming that the interest rate is about 20%, it will take them about 39 years to pay off the bill.

For individuals that qualify, filing a Chapter 7 bankruptcy will discharge all dischargeable credit card debt thereby affording debtors a fresh financial start.

Consequently, exercising your rights under Chapter 7 of the Bankruptcy Code is an option that should be considered.

 

Sun 6 Sep 2009

Bankruptcy and Divorce: Chapter 7 Can Save Your Marriage

Posted by jschreiber under Chapter 7
[3] Comments

Disagreement about finances can lead to divorce as debt is a marriage killer.

I see it frequently–couples fighting over financial problems;–sometimes in front of me in my office. One of the leading causes of divorce is the strain between couples caused by money issues.

In these troubled times, more and more families are facing overwhelming debt. Whether caused by loss of a job, poor money management, reduced income, or increased expenses, financial pressures seem to be at an all time high.

The stress of fighting over bills and money can take its toll on the marriage, straining couples to the brink of disaster. Most marital aruments are over financial issues. Many divorces are the result of stress and constant fighting over lack of money.

Although there are many elements to a healthy marriage, statistics show that divorce occurs more often due to financial troubles than any other issue, including a spouse’s infidelity, health problems, and couples “growing apart.”

Financial stress can quickly build to a marriage’s breaking point. But if you could save your marriage, wouldn’t you?

Bankruptcy can rescue a marriage. For those who qualify for a Chapter 7 bankruptcy filing, the bankruptcy will eliminate credit card debt, medical debt, and loans, extinguishing major sources of marital strife.

Many of my clients have confided in me after the bankruptcy proceeding was concluded that I rescued their marriage.

Couples with excessive debt must understand that filing for bankruptcy relief is an option that may work to save the marriage.

Financial stress is overwhelming but divorce is infinitely worst. Seeking relief under the bankruptcy laws is a way to regain control over both your marriage and your finances.

 

Sat 5 Sep 2009

Mortgage Foreclosures: The Government Will Do Almost Anything to Reduce Them

Posted by jschreiber under mortgage foreclosures
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President Obama is worried about rising home foreclosures. He is exploring options to increase aid to troubled homeowners.

The president, however, has already rejected a proposal by the Mortgage Bankers Association. The bankers’ proposal is to reorganize and otherwise restructure Fannie Mae and Freddie Mac by creating several smaller, privately held companies, that would issue mortgage securities backed by a government guaranty–not a bad idea.

The U.S. Treasury placed both Fannie Mae and Freeddie Mac into conservatorships with new management nearly a year ago. This was done as banks nationwide were (and still are) sustaining huge losses caused by borrower defaults in subprime and other mortgage loans. The government guaranteed this debt and other morgage-backed securities and has committed up to $400 billion in taxpayer capital (aka bailout money) to fund operating losses caused by the deterioration of subprime products.

The administration has not yet committed to extending its program affording an $8,000 tax credit to first time homebuyers. This tax credit, which has helped to increase the first time homebuyer market, will expire in November of this year.

The government may extend unemployment benefits that are due to expire by year end thereby helping the jobless avoid home foreclosure. Also, it may increase programs to accelerate small business lending. Some of these programs (as extended) could be funded from the already existing $700 billion bank rescue fund which has not yet been depleted.

The Federal Reserve is expected to wind down its purchases of $1.25 trillion in mortgage backed securities and $300 billion in U.S. Treasury debt. These purchases are the main reason mortgage rates have been close to record lows for most of this year.

But, what happens to the economy when these programs which, arguably, have artifically inflated certain segments, have been eliminated? Will the economy revert to the malaise that existed before the first of this year?

The president is doing what he can to increase economic indicators by spending taxpayer money but it’s our fear that once these programs are eliminated, we will be left with another trillion dollars of unpaid debt and very little, or nothing, to show for it.

 

Fri 4 Sep 2009

Short Sale Sellers Beware: Taxation on Cancellation of Debt is Like Jumping from the Frying Pan Into the Fire!

Posted by jschreiber under short sale
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Income from the cancellation of debt is a problem for many taxpayers because the volume of defaulted debt continues to increase. The current economic downturn was triggered by an unprecedented number of defaulted subprime home mortgages. Home prices have fallen nationwide for the first time since the 1930’s.

The applicable Internal Revenue Code section provides that gross income includes income from whatever source it is derived, including income from forgiveness of debt. Certain cancellation of debt income, however , is excluded from taxation such as, among other things,:
1. discharge of debt under the federal bankruptcy laws;
2. discharge of debt when the taxpayer is insolvent;
3. discharge of debt that is qualified farm indebtedness.

Who benefits from a so-called short sale on real estate? The lender whose debt is being partially satisfied, the municipality whose property taxes are being paid, and the realtor whose commission is being paid.

What’s the benefit for the homeowner/debtor who receives nothing from the sale?

That’s a rhetorical question. In fact, often, the homeowner/debtor who is talked into this short sale believes he is “doing the right thing.” In reality, the homeowner may be creating nondischargeable tax liability due to the “phantom” income he is receiving by virtue of the sale; income on which he is taxed on.The difference between what he owes on the real estate mortgage loan(s) and the amount the lender(s) are actually being paid from the short sale is taxable income under applicable tax law.

We as lawyers, who concentrate our practice in debtor/creditor law, bankruptcy, insolvency and business reorganization rarely advise a client to enter into a short sale arrangement. Why should a debtor, who already can not pay his bills, assist in such a transaction only to receive a mandated 1099 statement evidencing income on which he will be taxed? There are better solutions including allowing the lender to foreclose its mortgage and the debtor exercising his rights under the federal bankruptcy laws.

Feel free to call our office to obtain more information on cancellation of debt and how, in the long run, it may hurt you, not help you.

 

Wed 2 Sep 2009

How to Find a Good Indiana Bankruptcy Lawyer

Posted by jschreiber under lawyers
[8] Comments

What is worst than declaring bankruptcy? Hiring the wrong lawyer for the job. Nobody wants an incompetent attorney, especially when it’s your financial future that hangs in the balance.

Here are some tips to help you find the best attorney to handle your bankruptcy case.

1. Do not dawdle. Contemplating hiring a bankruptcy attorney has all the allure of selecting a mortician. Waiting until the last minute will not give you the time you need to find a good lawyer. And, it will not give a good lawyer enough time to adequately prepare your case.

2. Don’t ask friends for referrals unless they too have filed for bankruptcy relief. Unless your fellow churchgoer or golf buddy has gone through a bankruptcy, he or she will not have any meaningful leads for you.

3. Rather, ask for suggestions from non-biased legal professionals. Consider who among your circle of acquaintances might know a bankruptcy lawyer. If you have a personal attorney, start there but keep in mind that bankruptcy law is a specialty. If your personal lawyer also handles divorces, criminal defense, personal injury cases, etc., and he/she offers to handle your bankruptcy case, he/she probably is not the right one.

4. Investigate experience. Attorneys who are experienced have been bankruptcy trustees themselves. See if your prospective attorney has been a bankruptcy trustee.

5. Spend a day at creditors meetings. Observing attorneys in action can give you an idea of the lawyer you want representing you. At a creditors meeting, the only statutory required appearance by all debtors, you can get a chance to talk to the debtors and ask them whether they felt their lawyer did a good job. These meetings often are held at the bankruptcy court.

6. Check out the law firm’s offices. You are not looking for how tastefully a lawyer’s office is decorated. Rather, you need to assess how well organized an office is, as well as its general environment. Are the staff friendly, courteous, and professional? Does the lawyer make a good appearance? Does he answer your questions in layman’s terms or is he confusing because he’s speaking in “Legalese?” This office appraisal can give you vital clues as to how a lawyer will handle your case. If you don’t understand what he’s saying, chances are that a trustee or judge won’t understand him either.

We have other suggestions on how to choose the right Indiana bankruptcy attorney as well which will be the subject of future blogs.

In the meantime, we invite you to navigate our website, www.schreiblaw.com, to learn about our law firm, our lawyers, their backgrounds, and the professional services offered by the firm.

This blog is authored by Jeffrey A. Schreiber, the founding lawyer of the firm. For over 26 years, Mr. Schreiber has concentrated his law practice in bankruptcy and business reorganization. He was appointed by the U.S. Department of Justice as a private panel Chapter 7 bankruptcy trustee and served in that capacity from 1987-2004.

 

Tue 1 Sep 2009

Indiana Foreclosures and Foreclosures Nationwide Continue to Increase

Posted by jschreiber under mortgage foreclosures
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Unfortunately, it looks like the foreclosure crisis will get worse before it gets better.

Six million loans are either past due or in foreclosure in the second quarter of 2009, the highest level ever recorded. Worse, loan defaults are not the only cause of foreclosures. In some areas, unpaid property taxes are triggering foreclosures, even for homeowners who are otherwise current on their payments.

In recent years, some cities and counties that are strapped for cash have sold their delinquent tax bills to private firms. The firms, which typically charge double-digit interest rates and steep fees, get to keep what they collect. They also succeed to the right to foreclose liens encumbering property, taking priority over mortgage holderss.

Local government cannot undo their previous tax lien sales. But changes in federal policy can reduce the foreclosure risk from unpaid property taxes. This is an issue with which Congress will have to grapple.

 

Fri 21 Aug 2009

Chapter 13 Revisions are Needed as Mortgage Delinquencies Are On the Rise

Posted by jschreiber under Chapter 13
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Late payments on real estate mortgages increased to a record high in the second quarter of this year. Almost one in eight homeowners were delinquent in their note payments secured by mortgages.

The rise in the amount of mortgage foreclosures is attributed to unemployment nationwide and especially here in Indiana. The unfortunate reality is that higher unemployment rates propel more mortgage delinquenies and foreclosures over the rest of the year.

Hopefully, our representatives in Congress are taking heed of these disturbing statistics.

Now is the time for Chapter 13 revisions so that “upsidedown homeowners” that elect to file Chapter 13 can cram down the balance owed on their mortgage notes to the value of the collateral.

For more information on Chapter 13, check out our website and an article on the cramdown subject I wrote entitled, “Bankruptcy Change holds Foreclosure Fix” that was published on February 19, 2009 in the Indianapolis Star.

 

Tue 18 Aug 2009

Prospective Indiana Chapter 7 Debtors May Be Able to Avoid Bankruptcy By New Credit Card Bill Terms

Posted by jschreiber under Chapter 7
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The new credit card legislation enacted by Congress will take effect this week, forcing card issuers to provide consumers more time to pay their bills and to consider interest rate increases. This may be the first step toward stemming the tide of credit card based consumer bankruptcies.

Starting Thursday, issuers must give customers 45 days’ notice before raising their interest rates, instead of 15 days as previously required. Customers can then choose to pay what they owe at the original rate over time but they will not be able to use the card for future purchases.

The issuer reserves the right to increase the minimum payment. Card issuers will also have to mail bills 21 days–instead of 14 days–before the due date.

We believe this is a good first step toward credit card regulations but we won’t see dramatic relief until the balance of the regulations become effective in February.

Stay tuned……

 

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