No Money To File Bankruptcy!

Bankruptcy is rising but filings are falling! Why? Simple answer: People do not have money to file for protection under the Bankruptcy Code. That may sound/read like an "Of course they cannot afford bankruptcy, they don't have any money!" Unfortunately, this is a new phenomenon.

Until recently, people would call regularly to ask for a free consultation to discuss financial problems which could result in a Bankruptcy case. Generally, we are able to work out payment arrangements with almost anyone. ALMOST is the operative word. If the person has no money and no job, and no way to pay us, even on a $25 per week basis, there is little that we can do as an office.

Understand that every lawyer does a certain amount of INTENTIONAL pro-bono work, and I do not know of an attorney who would turn away a truly troubled indigent person who just lost the house, car, wife/husband etc. That stated, none of us in Private Practice can do everything for nothing - work for free all of the time!
Because of the downturn and especially the lack of employment people aren't even calling because they feel that they cannot afford the cost of getting "peace of mind". My view of the problem is slightly different. We have accepted payments every week for a year from clients, all the while giving them as much protection as we could from creditors. Most lawyers will do that for people really in need.

Some ground rules apply:

1. Don't come in with your partner and state that you cannot afford our fees because you can't cut back on smoking 2 packs a day each. At $9/pk, that's $36/day or more than $1,000 per month.

2. While I encourage people to come in, I do not expect them to ask me to help them with a bankruptcy THEY are going to file.

3. Some folks will have to file Bankruptcy but do not want to give up they "toys" - the snowmobile, PWC, 4-wheeler, or cut back on the $200 per month cable or satellite bill because of all of the special sports channels and events, or drop the $200/mo cell service and on and on...

Filing for Bankruptcy is to give someone(s) in debt a "FRESH START". It is written that way in the Code and is discussed in cases and in Court. No one expects someone looking for that second chance to sell their soul, but to cut back on smoking, or drop a few cable channels, or give up the "bike" would seem a fair trade. The reality is that in a bankruptcy, where no unsecured creditor is getting paid back anything, you are not allowed to keep the snowmobile and the bike and the...

If you have a house, we can help you find the funds to pay your mortgage by eliminating unsecured debt. You can keep almost all of your personal property, except for things like the PWC for which you are paying $300/month for the next 36 months etc. But clothing, regular furniture, tools, in most cases automobiles (not 4 or 5), RETIREMENT plans including IRAs, and if you are renting or have no equity in your house a reasonable amount of cash/money in the bank. Depending on the situation, maybe even $10,000.

If you have the $10,000 but your debt is $70,000 you cannot pay everyone back if you have $35,000 in income and a child. But, you can either pay a small portion back, and you can pay the legal fees to file the Bankruptcy. It could be a Chapter 7 (no payback) or a Chapter 13 (payback of what you have left as disposable income each month). Or, if you wish, you can give the Trustee the $10,000, less attorneys fees, and have the Trustee distribute what is left to creditors on a pro-rata basis. It is not required, but if you feel that you should pay back what you can afford, the Trustee will certainly oblige. Just be aware that it isn't necessary in most cases.

ADVICE: If you are in debt to a point where you know you cannot make any meaningful payments, call a Bankruptcy attorney. Payment plans can be worked-out, and the initial consultation to find out about YOUR RIGHTS is always "NO COST" here.

Author's Copyright by Richard I. Isacoff, Esq., October, 2011

rii@isacofflaw.com
http://www.isacofflaw.com

Bankruptcy; Not a Four-Letter Word

Bankruptcy has had a bad reputation over the decades for some good and some bad reasons. The good reasons for a bad reputation all boil down to the issue of fraud: people who have assets and are hiding them from creditors, or people who went into business and ran up debt they could not afford, or consumers who bought "stuff" with credit (cards) with no ability to repay. In the later case, it's rather hard to repossess a vacation cruise, and in the former, if the money from profits is spent, it's gone for good. Unless intent to commit fraud can be shown, normally a Bankruptcy will wipe out debt.

Let's take a step back and discuss what a Bankruptcy does. Quite simply when a bankruptcy is filed, it protects the debtors from creditors. The are two main types of PERSONAL BANKRUPTCY - Chapter 7, where you eliminate debt without any repayment but surrender personal property and real estate that is not protected by law for the benefit of the creditors. A Chapter 13, requires that you have money left over every month AFTER paying REGULAR LIVING EXPENSES, and from the money remaining each month pay creditors on a pro rata basis.

The primary reasons for filing a bankruptcy are not voluntary at all: 1. Medical bills and illnesses 2. Loss of a job or substantial reduction in hours 3. A birth or death in the family 4. A two income household becoming a one income family 5. Bad money management. A DISTANT 6 is fraud - maybe 5%, although some experts will claim 10%.

For whatever reason, people have a negative opinion of bankruptcy - yet people would be surprised to find out about friends and neighbors have filed for protection.

Going to a different reason to have a more moderate opinion of bankruptcy filings is that THE OLD AND NEW TESTAMENTS, AND THE QUR'AN all encourage a forgiveness of debt to those truly troubled by debt. That is for the CREDITOR to FORGIVE the DEBTOR.

It makes no sense for a retired person on a fixed income to have to make a decision between food or medicine; or for a family to have to deny a child the presence of a parent so that parent can work 3 jobs to just pay basic bills. Please do not misunderstand: it is not suggested that filing a bankruptcy is the first course of action to think about, but it should not be the last, after losing everything.

Simple tips, some repeated some not:

1. Don't solicit credit cards or get as many as you can. Determine how much credit you need and only borrower that much.

2. If you find yourself using credit for living expenses, seek a credit counseling service such as Consumer Credit Counseling or Money Management International - just be certain that it is a true not for profit agency, not a scam. If you have to pay a big up front fee - stay away.

3. If you have a bank where you are known and are comfortable at a branch, ask if the bank has someone to help you budget your money.

4. As soon as you find yourself ready to get a second card/loan to make payments on the first, consult an attorney who handles bankruptcy as she/he will also deal with basic debt counseling.

5. Don' let pride get in the way of keeping your peace of mind or all you have left is a piece of mind.

For more in-depth information visit my website http://www.isacofflaw.com or other resources like the National Association of Consumer Bankruptcy Attorneys, or the American Bankruptcy Institute.

Author's Copyright by Richard I. Isacoff, Esq, September,2011

rii@isacofflaw.com
http://www.isacofflaw.com

The Debt Ceiling: What Is It (and why do we care)?

As Congress argues over what to argue about, they are avoiding dealing with THE major financial issue that needs to be resolved now - not in 15 or 20 years. The Federal Debt ceiling, the total amount of money the Country is allowed to borrow as authorized by Congress. Currently it is $14.3 TRILLION and analysts predict that we have until July, at the latest, before we are MAXED OUT.

I use the term "Maxed Out" because it is a concept with which most consumers have dealt. Well, perhaps not with that much money, but the financial reality is the same: No More Available Credit. In consumer circles it happens when your no longer have any available credit on any credit card to make payments on the other credit cards. In Nations' budgets, at least where there is a body that manages finances, countries sell bonds - here, most commonly Treasury Bonds.

Buyers of these bonds are promised, by the Government, a certain rate of interest and payments at certain dates. Well, where the issuing country has more debt that cash coming in (taxes, tariffs, fees, leases, sales of rights to drill/mine/grab oil etc), that country has to sell more bonds to pay the interest owed on the earlier ones which were issued. Striking similarity to the credit card example above; borrowing to pay interest on borrowing.

Here is the difficult part - Congress has to approve additional borrowing - borrowing beyond that which they approved in the last round of borrowing authorizations. If we do not borrow more and cannot pay the interest when it becomes due and we default/fail to pay, the world economy will go into a tailspin. We have been the single country that the world turns to for stability - yes, even after the 2008 meltdown. If we default, the 2008 to present recession will seem like the "good old days" (why were any old days good?).

The issue before Congress, which the Federal Reserve and Treasury have to explain to them, is that we need to borrow more - a lot more; and, the lack of a decision on this matter is already starting to enter the "markets". There is no question that $14.3 Trillion is an overwhelming figure but when measured against the potential growth in our economy and growth of the country, it becomes manageable over time if we avoid spending too much more than we earn. Just like any household budget.

Unfortunately, one party wants to show the other that it stands for "deficit reduction" and will slash spending to fix the problem fast. The other party wants to fix it slower and not slash as much for fear of stopping the "recovery" and growth of the economy. Too many budget cuts and reductions in spending will leave the country with a more dismal future with regards to medical insurance, education, roads, etc. AND MIGHT STOP ECONOMIC GROWTH. Not beginning to balance the budget and to lessen the borrowing will put the country in a hole from which Alice (the Wonderland/Looking Glass Alice) couldn't get out.

We might wish to believe that Congress will compromise in time and everything will be fine, just as before. Maybe but maybe not. Members of both Houses are so locked into the mindset that compromise means the "other guy" won and that we must stand true to our core beliefs (pullease), that they might wait too long. Not to the point where we default, but to the brink where other countries and industry thinks we might actually default THIS TIME.

Jobs -gone. Savings - gone. Inflation or deflation - huge. Depression - there won't be enough business left to employ anyone. Gold (why I do not grasp) - to Jupiter We won't be able to borrow - sell bonds. There will be no lending going on in this country (or most others). Companies will just close their doors. No one will be able to buy anything not made here because our dollar won't be worth anything anywhere.

Why do we play the game? To get re-elected? Or to fix a problem, that took 40 years to create, in 12 months? To be sure that whoever is running a failed country is of the correct ideology? Well - you get the idea!!

Author's Copyright by Richard I. Isacoff, Esq., April, 2011

rii@isacofflaw.com
http://www.isacofflaw.com
Twitter: @riisacoff