Finance & Law for Not-So-Dummies: bankruptcy

Showing posts with label bankruptcy. Show all posts

Tuesday, November 29, 2011

Bankruptcy: After Christmas?

It's the time of the year where many people start buying gifts for others for the holidays. That, of course, is in addition to buying food, heat, electricity, telephone(s), gasoline, auto insurance, cigarettes (bad for health - bad for pocketbook), cable, clothes (don't forget shoes, socks, and underwear), and paying rent or mortgage and the car payment. Oh, and remember to buy the medications the Doctor prescribed.

Quite a list! How To Pay For It? Many people use CREDIT CARDS. Then comes February 1st and the bills flood the mailbox overwhelming the Letter Carrier's ability to carry all of the Visa, Mastercard, Discover, JC Penny, Sears, BestBuy, Fingerhut, QVC, Amex, Capital One, Orchard Bank, Bank of America et al BILLS.

When asked how they expect to pay, many will say "Well, I HAD to get those presents. I mean, it was Christmas (or Chanukah or whatever other holiday "requires" gift giving)". Says the lawyer at the first consultation about debt relief, "Okay, but how did you expect to pay the bills?" - the classic answer "I didn't think about that. I figured I be able to pay a little on each card, I guess." This response is typical from clients with sufficient income to pay the bill with minimum payments over the next 20 years, and from those who HAVE TO GO WITHOUT FOOD AND HEAT TO MAKE ONE PAYMENT!!

There are several problems here, actually many more than several. The biggest, in a sense, is that with debt that has accumulated over the past 3, 5, or 10 years there is no way ANY PAYMENTS are affordable. Then comes "Can I file bankruptcy?" The real question is "Can I file bankruptcy and still get rid of my bills (a discharge) even though I was foolish...?" There is no easy answer.

In order to eliminate/discharge debt, the Bankruptcy has to be filed in good faith. You cannot intentionally incur debt that you know you cannot pay. At a minimum, that debt cannot be discharged (made to go away). But wait...There's more! When the gifts were being bought and the plastic nearly melting from over-use, did the purchaser intend to repay the credit card company? The easy answer is "Yes, I always pay my bills!" But, is that the honest answer.

Many people just do not think about or know how to think about budgeting. People of all ages get caught up in the "I have to buy a gift for..." mode. So, what can be done for the honest but horrid money manager/giver?

Rule 1. Know how much you take home every month and how much must be spent on essentials, like the list above

Rule 2. If there is any extra, before deducting current credit card payments, be certain that it is truly disposable income immediately. Do not count the money you will save when you stop smoking.

Rule 3. Add up all of your credit card and other unsecured debt (debt not attached to collateral, like a car loan)

Rule 4. Multiply the amount of debt by 3% or 0.03

Rule 5. If the result after following Rule 4 is more than your "extra" (your disposable income) you should not incur more debt.

Rule 6. To figure how much unsecured debt you can support reasonably, DIVIDE your extra/disposable income by .03. So, if you have $200/month truly extra, the Most unsecured debt you can have is $6,000. And, remember that "extra" is what's left after paying all of the expenses listed in the beginning of this posting and any other NECESSARY expenses you have.

Even at the level shown, paying will be a bit of a struggle - things happen that cost money and are unexpected. Missing one month of the payment on any unsecured debt will make everything fall apart and you might never catch up.

If you have done those calculations, and after being careful you find that 6 months (I just picked a number) into the new year that you cannot pay because "Life comes at you fast!", then yes, you can file a bankruptcy with a clear conscience and peace of mind.

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

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

Monday, November 14, 2011

Pay Bills or Eat?

There is a perception among those of us who are of retirement age, or past it, that we have to pay every bill we have even if it means going without prescribed medications or proper food. To say that this is a wrong or bad idea is not appropriate. Those of us who try our best to honor our commitments should be commended, not condemned.

HOWEVER, the LAW , that’s the Federal law, specifically Title 11 of the United States Code, provides for DEBT RELIEF. So, why don’t more people take advantage of this legal RIGHT? There are many reasons but most are rooted in a belief system that not paying obligations is immoral, unethical, something only shysters or "those kind of people" would do. Many of these same people, those of us who feel there is no way but to pay, have had no qualms, no hesitations, about utilizing many different sections of Title 26 of the US Code which provides TAX RELIEF.

We all take deductions when we file taxes, rather than paying the maximum tax that we could pay based on income. We use the standard deduction or we itemize - and we itemize everything possible: real estate taxes, mortgage interest, medical expenses including part of the cost of medical insurance, tax return preparation fees, costs of caring for a dependent - and on & on. Somewhere there is a disconnect in the two position/attitudes.

The Debt Relief is Bankruptcy Protection - Protection from Creditors. IT IS A RIGHT, NOT A PRIVILEGE. Unless you have committed fraud, or some other unsavory act you are cannot be denied the Right to Obtain a Fresh Start. That is what the law discusses: a "FRESH START". And that refers to a FRESH START from DEBT.

There is no shame in admitting that the $10,000 of credit card debt that has been being paid for years, never denting the balance owed, is too much to repay. Keep in mind, that while it’s counter-intuitive, the credit card companies will not make deals to accept less than 100% of what’s owed. The fact that gas is now $4.00/gallon, and that fresh fruit and vegetables are more expensive than the best steaks, and that medical costs go up almost daily it seems....

The shame of the current economic environment is that some of the lifelines that many people have relied upon have been eliminated or cut-back. Programs like food stamps, fuel assistance, community health care programs, and subsidized housing are all under-funded because of the recession here and the on-going financial crisis world-wide.

I can only suggest that if you are having your own personal economic meltdown you seek advice from a competent Bankruptcy attorney. Any attorney worth her/her "salt" (or pepper) will give you enough information that you will know what options are available to you. If you cannot find someone in your area, feel free to call my office or send me an e-mail and I can get you connected to the proper referral folks.

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

rii@isacofflaw.com

http://www.isacofflaw.com/

Monday, October 3, 2011

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

Tuesday, September 13, 2011

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

Monday, September 5, 2011

It's The Economy - Your Economy

Now that the economy is no longer an issue, we have to turn to a new topic- "The Economy", but a different sense of the economy - YOUR economic condition. This may mirror the government's or, perhaps, you may actually understand the state of your finances, as you read this.

Are/If you are in a position where "deficit spending" is necessary for you to pay your bills (not unlike the issue of the Federal debt-ceiling - we had to get Congress to let us borrow more so we could pay the interest on the bill we already have incurred) which is like getting a new credit card with an extra few thousand dollars of credit available so you can pay the interest due on the other cards, and buy food, or pay the mortgage, or put gas in the car or... well you get the idea, you need to reconsider your position immediately.

Unlike the United States of America, you cannot keep getting more debt without near term (tomorrow or the day after) consequences. Consequences like bill collectors calling; Court appearances being required; car payments missed; a mortgage payment missed or paid more than a month late; a foreclosure; or just ANXIETY and WORRY about what you are going to do when the credit limit is exhausted.

Here is a short check-list to review:

1. Is the reason for the excessive debt, spending, reduced income, or both?

2. If it's reduced income, is the situation temporary with an end in sight or long-term?

3. If the debt is due to spending but not because of a loss of income, what caused the spending? Necessities, like food and shelter, or costs that could have been deferred, like extra clothes, a "new" car, a vacation? If the run-up of credit card or other debt is because of buying or spending for necessities, you cannot fix the problem alone. If the debt is for any other reason than necessary living expenses, then STOP SPENDING NOW.

4. In either case, figure how much you owe to each creditor. Then determine how much is due each month; for credit cards use the minimum payment PLUS 10% of that payment; for long term debt like a mortgage or car loan, use the actual payments due each month. When dealing with medical bills, remember that most often a call to the doctor or hospital with a discussion about a monthly payment plan will bring results that you may be able to afford - and may be with no interest.

5. Compare the monthly payments to creditors, ALL OF THEM, to your take home income. Remember that if you get paid weekly, you should multiply your take home pay times 52 weeks and then divide the result by 12. If your pay is every other week multiply your take home by 26 and then divide the result by 12. That way you have accounted for the 4 "extra" weeks each year.

6. Make the same comparison of monthly payments to creditors to your GROSS INCOME -No Deductions for taxes, insurance etc taken.

7. If you divide your payments to creditors by the amount of your income (net income first, then gross income) you will see quickly whether you can afford the payments (based on general averages). For example: Gross income = $4000 per month - monthly payments to creditors (called debt service) = $ 2,000 per month (that is a Debt to Income, called "DTI", Ratio of 50%), you are probably running out of groceries or gasoline or RUNNING UP CREDIT CARD BALANCES, because there is not enough money to go around. The ratio should be no more than 40%! Even that is a stretch against GROSS INCOME

8. Once you reach that point, unless you take immediate action, like earning more money, cutting back living expenses and LOWERING THE MONTH DEBT SERVICE, you will end up losing a car, losing a house, AND LOSING YOUR PEACE OF MIND.

9. If the Debt Service cannot be lowered, if you cannot cut back on payments to creditors without a foreclosure or a repossession, and if your income is maxed-out, YOU SHOULD CONSULT AN ATTORNEY ABOUT BANKRUPTCY.

REMEMBER "BANKRUPTCY" IS NOT A FOUR-LETTER WORD BUT "DEBT" IS!!

Look for the next post which will explain about the "okayness" of filing for Protection From Creditors by a Bankruptcy Filing. (Coming to a theater near you (actually just this blog) on 9/9/11)

Author's Copyright by Richard I. Isacoff, Esq, September, 2011
rii@isacofflaw.com
http://www.isacofflaw.com

Monday, August 1, 2011

We Got A Credit Line Increase

The Country is Saved. We Won't Default. We Won't Need the EU to Bail US Out! Hooray!!!

As I noted in a Tweet, if the U.S. defaulted and ended up in Bankruptcy, who would be the Trustee, the guardian of creditors like China? Luxembourg???

The entire situation is ridiculous. But, it wasn't so far-fetched (a default). Everyone was buying gold and platinum and silver and... As posted here earlier "How Many Grams of Fat Are There In An Ounce of Gold?", the idea being that gold is only worth what someone will trade for it. Well, we will not have to worry about that anymore. The Congress, meaning the Democrats, Republicans, and Tea Partyists, in both the House of Representatives and in the Senate, and the President have come up with the master-plan to avoid not being able to borrow. The amount the United States can borrow will be increased.

Foolish as it appeared (because of all of the 2012 election campaigning and "holier than thou" Tea Party drinkers; I mean why have a Tea Party and drink coffee? But they did forget the crumpets!), there was exposed a huge problem with our financial system.

Some basics and answers to questions:

1. How could we run out of money to pay bills? Well, we already have. We have used the equivalent of an home equity loan to get money for all of our annual needs. The difference is that we "sell" Treasury Bonds. That is a nice way of stating that we will agree to pay "X"% interest if someone/country lends us money. Granted the amounts are larger than you would need for siding on your house, but the concept is identical. The "Treasury Bonds" that you hear/read about are nothing more than IOUs given to whoever buys the bond.

2. What is the Debt Ceiling and how high is it. It is $14.7 trillion; that is $14,700,000,000,000. It is the amount the Country is allowed to "borrow" from other countries and "all of us". It is a constitutional matter. The Congress has to agree on the amount and then get the President's approval for the MAXIMUM amount of our loans. Congress is acting like a Bank's Loan Committee deciding whether the Bank's Customer (the Country) can repay it's loan.

Were did all of the money go? No one knows for sure and no one, even the GAO (General Accounting Office) can trace it. But we know that we spent money on several wars (2 still on-going); we STOPPED a world-wide depression by enacting the "Stimulus" packages; our States, cities and towns had their tax revenue supplemented by some of that $14.7T for schools, bridges, roads, housing (especially for the elderly); the world wide stock and securities markets did not crash because we paid to offset losses -AIG, Lehman, Ford, Chrysler, GM et al.

IN REALITY, WE SPENT MORE THAN WE EARNED. Tax revenues were too low, the wars were/still are sooo expensive, and we have been spending like we could just print more money (oops, we can and did!)

3. What is the "Deficit" - over-simplified but not by much - just as in any household, or business, the deficit is the NEGATIVE difference between what we spend and what we earn. The trade deficit is a bit different - that is the NEGATIVE difference between what we sell to foreign countries and what we buy from them. For a long time we have bought more than we have sold. WE ARE A NATION OF CONSUMERS.

Coupled with our penchant for buying is the fact that our "DOLLAR" has been strong for a long time in comparison to other countries' money. Simpler - our dollar was based on a stronger economy; more output and capability of manufacturing, inventing, building more than nearly all other countries. We were perceived as having the ability to produce 10, 15, 20, 50% MORE IF WE WANTED TO, AT ANY TIME - like right after the start of WWII. Doesn't do much good if no one is buying!

4. Why did it take so long to set a new limit? POLITICS - RE-ELECTION in 2012. That simple? YES. That doesn't mean that some of the 535 people in Congress did not really believe that our "bill" to others will cause the ruination of the Country. It could, but most likely won't. As these things are measured, we have a bill that is 62% of our Annual GROSS DOMESTIC PRODUCT(GDP). That means that we OWE 2/3 of our county's TOTAL output of goods and services for a year.

Just think about paying 62% of your net/take home income for loans. That doesn't take into account food, utilities, cable, gasoline etc - all of the things that are monthly or annual expenses. For the Country, it's like only having 1/3 of the total amount the United States collects, for the payment of Medicaid, Food Stamps, Unemployment, Military pay, other government employees' pay, expenses for things like the Gulp/BP clean-up, and all other programs big and small.

Maybe now our elected officials can get back to business of running the Country - maybe they need a lesson in accounting - Remember Debits on the Left, Credits on the Right. Debits by the Window, Credits by the Door (from Accounting 101). OR we could buy 535 calculators and copies of Quicken

Author's Copyright by Richard I Isacoff, Esq, August 2011

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

Monday, October 12, 2009

Stopping Foreclosure When the Lender Says "NO!"

(THIS IS A RE-POSTING FROM AUGUST 12, 2009)

Bankruptcy is a good option if you are facing foreclosure and cannot get the lender to accept reasonable terms for a modification; terms that will allow you to either catch up on back payments over time, or which will put the arrearage at the back of the loan.

The filing of any type of Bankruptcy, which is asking for protection from creditors, will stop ALL actions for money, foreclosures, repossessions etc, against you. BUT, for most consumers, only a Chapter 13 will give you the ability to spread out payments for the arrearage over a period of up to 60 months. So, assuming you are 6 months behind in payments of $1,500 each, and there are $3,00 in legal fees because you are in a foreclosure status, and you have $300 in late fees, and the lender has paid $1,200 in taxes for you because your escrow account (where the lender collects money to pay real estate taxes each month as part of the mortgage) is short because you haven't paid in 6 months - you owe the bank $13,500.

Most of us do not have that amount of pocket change, and if you did, you wouldn't be 6 months behind. Spreading that amount of money over 60 months adds only $225 per month to your expenses. Please understand that there is no misunderstanding about a desperate financial situation, but if the arrearage occurred because of a temporary drop in income, for whatever reason, you can get caught up. Too many people give up once they get that far behind because they know they cannot pay $13,000+/- all at once, and once the foreclosure starts, the lender is not inclined to "make a deal".

The Bankruptcy Laws were established so that people could get a "FRESH START". The whole concept is to give people who get into a financial bind a way out, without losing their home, car, retirement accounts etc. Details of the protections a Bankruptcy gives you are on my website www.isacofflaw.com . Once in a Chapter 13 Bankruptcy, the United States Bankruptcy Court controls what a creditor can do. If you make payments on time, including the $225/month in the above example, the lender can only sit by a wait until you finish the Plan of payments. If you make all of them, your loan is put back into "regular" good payment status.

Also, if you miss a payment due to a temporary problem (broken arm with no sick time available from your job or a seasonal drop in hours so the overtime you have been counting on isn't available) the lender CANNOT just foreclose. It must ask the Bankruptcy Court for permission and there will be a hearing on the request. There, your lawyer (don't try a Chapter 13 Bankruptcy on your own) can explain the situation to the Court and usually work some type of compromise with the lender. The Bankruptcy Court is there to protect Debtors, provided the Debtors do what they promise.

Further, if you have equity in your house of $30,000, and your payments are $1,000 per month, the Court normally will not allow a foreclosure even if you are 2 or 3 months behind. While that is not specified in the Bankruptcy Code, the concept, called "adequate protection", is clearly spelled out. In essence it states that if the lender is not at risk of losing anything by waiting and using some of your equity to guaranty the arrearage will be paid, then the Court WILL NOT allow the lender to foreclose. The lender has no risk in waiting so you get a chance to get caught up again.

The Bankruptcy laws are complex, but the concept is not. If you are behind in your mortgage payments, and the lender wants to foreclose, and the lender will not "make a deal" with you, and you do not have a lump sum to pay all of what you owe from payments not made, a Chapter 13 Bankruptcy filing can be used to save your home. You can find a qualified Bankruptcy attorney by going to the website of the National Association of Consumer Bankruptcy Attorneys www.nacba.org , www.abi.org, or by calling my office for a "no charge" referral.

www.isacofflaw.com

rii@isacofflaw.com

Wednesday, July 29, 2009

Get Protection from Creditors - But Wait, There's More!

"Protection from creditors" - just a euphemism for Bankruptcy? No, it is what filing Bankruptcy is and does. There are no more Debtors' prisons and no one has to walk around with a big scarlet "B" on his/her chest. Fine!, but what really happens, and who can file for protection? Before going any further, filing Bankruptcy WILL NOT force you to lose your house or car. In fact, it may help you to keep them.

My post of Monday July 27th discussed the need for completing a full personal budget for you and your family (if there is one to consider). Again, make a list of ALL regular living expenses, including cigarettes, gasoline, socks...EVERYTHING EXCEPT UNSECURED DEBT like credit cards and personal loans (Beneficial, CitiFinancial, HFC/HSBC etc. Then figure out your regular monthly income, including OT you ALWAYS get, bonuses you ALWAYS get, child support/alimony, pension, steady part-time jobs etc. then deduct all payroll taxes and insurance costs to get a net income. Next, if you are paid every 2 weeks, multiply the NET INCOME by 26 and divide that result by 12 to get a net monthly income.

THE MOMENT OF TRUTH - deduct your regular monthly expenses from your regular monthly income.If you have money remaining, is it enough to pay all of the minimum payments PLUS 1% of the principal for each card/debt? If the answer is yes, start by making a real month by month budget and start paying down each debt every month. Be sure to be on time, and that means the payments have to be in the mail at least 7 days before they are due, or 10 days before the start of the next billing cycle.

If you cannot make the payments and meet your expenses, then consider a bankruptcy consultation with an experienced Bankruptcy Attorney. You can find one on the web by going to www.nacba.org , which is the site for the National Association of Consumer Bankruptcy Attorneys, or by e-mailing me and we will get you a referral.

Bankruptcy is a RIGHT, not a privilege. The laws and rules are "spelled out" in Title 11 of the U.S. Code. It states clearly in Congressional intent and is sen again and again in cases, that the purpose of the Bankruptcy laws is to give Debtors, who cannot repay their debts, a "FRESH START". It is not punitive - it is a RIGHT.

For consumers, there are 2 sections of the Code that apply: Chapter 13, which is a way for people who have some money left over at the end of the month to repay a percentage of what they owe, be it 5%, 10% or 100%. The repayment period is up to 5 years, and the 30% interest rates stop immediately; and Chapter 7, where the consumer/debtor cannot make ANY payments for a 36 month period, or the amount of the payments would be so insignificant that the consumer really should keep the funds for emergencies.

Most good Bankruptcy lawyers will not charge for the initial consultation which is where she/he will help you determine if a Bankruptcy is the correct financial decision for you. The rules for filing are not that difficult to understand and the next Post will go into the details.

Author's Copyright by Richard I. Isacoff, Esq., July 2009
www.isacofflaw.com
rii@isacofflaw.com

Monday, July 27, 2009

Credit Card Rules - Explained (sort of). What to Do Until Then

On June 11, 2009, I wrote extensively about the new credit card laws - the ones that do us no good at the moment but might as the varied effective dates arrive.

Attached/Linked title of this posting, and again at the end of this entry, is a video that goes through the major points of the new rules.

None of the rules will erase any debt that has already been incurred, regardless of how unfair the borrower believes the debt to be. Interest rates jumping to 30% , late fees of $39 on a balance of $100 with a report of late payments (over 30 days) to the credit agencies, with, of course the accompanying rate increase, and perhaps the most difficult for regular card users, the arbitrary elimination of the available credit/decrease in credit line, without warning or apparent reason.

The 2 real banks, and the 1 "investment bank" (see last post for that definition) that had record profits, Bank of America, CitiBank/CitiGroup, and Goldman Sachs respectively, are the worst offenders. Yesterday, in the Sunday edition of the New York Times, there was a story by David Streitfeld dealing with Bank of America specifically, but the industry in general. In it he describes a woman who could not keep up with the higher and higher interest rates being charged. After pleading with Bank of America to lower the interest rate on her account without success, she just stopped paying her monthly bill. A wise decision? - probably not! - except in this case it was born out of desperation. The result: Bank of America called her with "deals" so she could afford her payments.

Look at the video - read the article in the Times and think about your position. Are you able to go without Credit Cards? Can you pay the minimum payments PLUS 1% of the balance owed to lower the principal and actually pay down the debt? If you can, then you may be able to get out of debt.

Factor in all of your debt - especially the credit cards. IMPORTANT!! - Put together an accurate list of your regular monthly living expenses. Include such things as cigarettes (if you smoke), a reasonable amount for food, eating out if it's unavoidable, enough for gasoline and a monthly budget for car repairs (during the entire year), all of your insurances, clothing (include shoes and underwear), income taxes expected to be paid over and above payroll deductions, student loans, cell phone, cable, Internet, utilities, rent/mortgage, and everything else that you really need to spend or save for each and every month. After all of that, can you pay the minimum PLUS at least 1% of the outstanding balance on all debts, whether each is a credit card, a personal loan from CitiFinancial/HFC,HSBC,Beneficial, or from anywhere else.

If after doing that budget exercise you can make the payments GREAT!! Do not be late on one payment or your plan might become dust in the wind. BUT try. If you cannot, seek financial counseling - not from a TV advertiser promising to reduce your debt to "pennies on the dollar" for a mere $XXXX.XX per month and a non-refundable processing fee of $XXX.XX

Author's Copyright by Richard I. Isacoff, Esq, July 2009
http://www.isacofflaw.com/
rii@isacofflaw.com

http://video.nytimes.com/video/2009/05/19/your-money/1194840368370/guide-to-new-credit-card-rules.html

Tuesday, June 23, 2009

Where Do We Go From Here - Bankruptcy?

Regulatory reform is upon us. Congress and the White House have signed into law legislation that should revamp the entire structure of banking and financial institution oversight. The "watchers", auditors and guardians of the economy now have a veritable arsenal to be sure we do not have another meltdown. In the meantime, what do we do to improve the situation as it effects each of us?

There are really three primary groups of people who have to deal with the economic "Katrina" we have just gone through - at least as far as the eye of the storm: 1. Those who had nothing to lose and now have nothing to fall back on and may not even be able to get satisfactory employment; 2. The wealthy who managed not to lose everything and can rebuild without a significant change in lifestyle, except for the new Benz and 4 weeks in New Zealand this year; and 3. Everyone else - struggling to make ends meet and to plan for retirement (now put off until 70 to 75 by many).

This post will try to assist the last group - those working, maybe 2 jobs, or in a family where both spouses are employed (at least for the time being). Next time, we will deal with the 1st group

The new credit card laws (see June 11, 2009 Posting) will help keep credit costs down IN THE FUTURE, but will have little effect on current debt service (monthly payments). The result of legislation, reaction by card issuers, may also severely restrict the issuance of new cards and has already cut credit limits by as much as 75% and in some cases totally. It was never a good idea to play musical cards and hope that there never was a last card, but many of us did just that. Guess what? There is a last card and we already have it!

More startling however, is a study released June 4th, done by Harvard with some top notch doctors lawyers and economists, including Elizabeth Warren, Chair of the TARP oversight committee, that determined that from 2001 to 2007, there was a 50% increase in Bankruptcy filings due to medical expenses/emergencies. In 2007, it's reported that in 62.1% of the Bankruptcies filed, medical expenses/problems contributed significantly to the need to seek Court protection. In many of these cases credit cards were used to fund the expense - in others, hospitals' and other health care providers' bills have gone unpaid and built-up that 62.1% figure.

Surprisingly, or maybe not, 77.9%, more than 3/4 of those filing because of medical issues, had health insurance at the start of the bankrupting illness. Co-pays, deductibles, non-covered procedures, and uninsured hospital stays contributed to the result.
Most of those filing bankruptcy for these reasons where homeowners (2/3) and 60% had gone to college.

Did the bankruptcy make sense? Did it fix the problem? Did the people filing for Bankruptcy protection find relief, financial and "peace-of mind"? MAYBE.

The next posts will deal (short and sweet) with the Bankruptcy process - its good and the bad, but most of all what it is, how it is done, and what it is not. As a beginning, it must be understood that filing Bankruptcy, called filing for protection from creditors, is a right, not a privilege. The law is contained in Title 11 of the U.S. Code. The effect of the filing is Debt Relief. Interestingly, when people income file taxes, few pay the maximum amount on their gross income. Normally, deductions are taken for mortgage interest, medical expenses, child care etc, or the standard deduction is used. This is called Tax Relief. The IRS Code is Title 26 of the U.S. Code.

For some reason everyone is proud to use the Tax Code to minimize what they have to pay to the Government, yet people are still ashamed of filing for Debt Relief under the Bankruptcy laws. Tax Relief - Title 26; Debt Relief Title 11. They are both Federal law and they are both there to give guidance and assistance to taxpayers/consumers. Sure, with the IRS Code the government wants money and with the Bankruptcy Code, debtors are relieved of the obligation to pay money, including certain taxes. Look, a Federal Law is a Federal Law and Bankruptcy is not a four (4) letter word.
Author's Copyright by Richard I. Isacoff, Esq, June 2009

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

Monday, April 20, 2009

Money For Foreclosure Relief: An Expensive Fiction

An Associated Press story in the New York Times on April 16, 2006 headlines "SIX LENDERS TO GET HOME LOAN AID", specifying in the body of the story that the recipients of the $9.9 billion are JPMorgan Chase, Wells Fargo & Co, GMAC Mortgage (which owns the Ditech entity), CitiMortgage, Select Portfolio Servicing, and Saxon Mortgage.

A FRONT PAGE story in the Wall Street Journal the day before read "BANKS RAMP UP FORECLOSURES". Guess who this article refers to as "ramping up": JPMorgan Chase, Wells Fargo, and FannieMae and FreddieMac. Citigroup stated that it had stopped foreclosures until March 12th at the request of the Obama administration but has gone back to business as usual. If a borrower is a "good candidate" for a modification as determined by CitiGroup, which means that it must own the loan - no securitization - it will wait and see what happens. GMAC too had stopped actions at the Administration's request, is back foreclosing. It stated that 10% of the mortgages in some state of foreclosure may be eligible for a federal program.

It seems that the government is rewarding lenders to foreclose. They are giving additional $$billions to the same companies that are not using the funds to help homeowners, but rather are using the funds to beef-up their balance sheets. It is not even being done under the guise of some Federal program like "HOPE NOW", which has had little impact on solving the problem, but at least gives the aura of respectability. One can at perhaps admire the honesty of these companies which do what they want, with seeming impunity. Select Portfolio and Saxon Mortgage are two of the most difficult entities with which to deal. Wells Fargo, while professing to be helpful is a throw-back to the old joke about banks lending you money when you don't need it - the have taken that addage to heart with mortgage bailouts.

Why is this issue being dealt with here, where the posting have tried to educate and explain? Because this is an education also. The much publicized "homeowner relief plan" was just for PR. If you have a home in danger of foreclosure, DO NOT WAIT for the government to help you. Assume that money is being spent, but more likely than not, to pay for the deficiency balance which remains after a family is evicted from their home which just went through foreclosure, fetching 60%-70% of the outstanding balance of the mortgage. We cannot have the Banks losing any more money, can we?

Your best bet is to contact an attorney who has experience in debt counseling, foreclosure prevention, and depending on your situation, bankruptcy. A competent lawyer can answer your questions about your risk of losing your home and can suggest several courses of action which might bring you a good resolution. At least, you will have someone on your side!

Author's Copyright by Richard I. Isacoff, Esq., April 2009

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

Thursday, January 29, 2009

Foreclosures: When Will Someone Do Something?

As has happened before and will again and again, Congress and the Administration state they want to help homeowners facing foreclosure, due to job loss or predatory lending, but no one can figure out how. The problem, I believe is caused by a total disconnect with the problem facing people and the problems being caused by the major economic upheaval we are experiencing.

The financial markets, our own and those world wide, are in chaos, due in large part to the actions of Wall Street fund managers and the disintegration of loans based on the lenders' risks. Washington is viewing the problem as a challenge to the system, not as a hardship for homeowners/people. The logic cannot be faulted in a view from the top down. BUT, from the bottom up, meaning from the view of families, the fight must become top down and bottom up, at the same time.

As posted before, many mortgage servicers, the folks who collect our payments, have no authority to modify loans; at least that is their view. They would be subject to suits from those who have invested in the gigantic pools of mortgages, and find their return on their investment diminished. That can be fixed by giving Courts the right to adjust unfair mortgage terms, or by passing a law that allows or mandates that certain contracts, namely the contracts regarding these mortgage pools, can be changed without liability (within certain parameters). Heresy to a free market? Maybe, but a little bit of deviant behavior is better than the death of the system.

The vote on January 28th in the House of Representatives, to approve or not approve the President's stimulus package, was decided solely on party lines. ALL Republicans voted against it. Were any members required to vote with the President? NO! However, it is not reality to think that not one Republican agreed with the bill. Politics of the worst kind is preventing true relief from making it to homeowners. Understand that the Democrats have no bills before Congress to actually stop foreclosures by modifying loans, that is by forcing those controlling the mortgages to negotiate in good faith with borrowers, so an affordable payment can be paid each month.

There is no simple, one size fits all, answer. Giving the Bankruptcy Courts the power to modify mortgages is part of the solution; relieving servicers from liability for modifying loans is another; a third might be to have a federal agency refinance, or underwrite the financing of homeowners in trouble. DOING NOTHING IS THE ONLY REALLY WRONG DECISION, yet, that is where we are.

Author's Copyright by Richard I. Isacoff, Esq, January 2008
http://www.isacofflaw.com/

rii@isacofflaw.com

Wednesday, January 21, 2009

Stop the Foreclosure: How?

Since the last posting, very little has come of the stories about bailout money being available to stop foreclosures. Loan modifications are obtainable, but, without patience and a knowledge of the process, the task is nearly insurmountable. What is worse is not just that the pace of foreclosures is increasing, but that the moritoriums are over and all of the borrowers who thought that a solution would be reached, before the sale date, are being rudely surprised.

The argument that the President Obama will institute programs that will be the lifesaver for which everyone is waiting has merit; but what do we do about all of those homeowners who lose their homes in the meantime? If you have any concern about a soon-to-happen foreclosure, please read the post of December 22, 2008, which deals with stopping the process.

If there is any question about whether a property will be sold at a foreclosure action, contact an attorney or a legal aid organization. If there is no time left, and if there is a sale tomorrow, file a Chapter 13 Bankruptcy. The Clerks at every Bankruptcy Court can help an individual file the basic documents to get the Bankruptcy started, thereby STOPPING the sale.

The offer is open and will remain so - contact me through my website or directly by e-mail and I will try to assist through a referral to an attorney, or by "walking you through" the filing process.
Author's Copyright by Richard I. Isacoff, Esq, January, 2009
http://www.isacofflaw.com/

rii@isacofflaw.com

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