With unemployment still high, personal bankruptcies continuing to rise, and the housing market remaining in a downward spiral, more individuals are changing the way they pay their bills. According to TransUnion, people are likely to pay their car payments before paying their credit card or mortgage payments, meaning that credit card and mortgage delinquencies are more common these days than car payment delinquencies.
Specifically, the national average on 60 day delinquencies for car loans is .81%, while the 90 day delinquency average for credit cards is 1.10%. Although these are relatively small percentages in this current economic situation, the most staggering number is the delinquency on mortgages at 6.25%, almost six times higher than the other loans.
Not surprisingly, the states that have been hardest hit with foreclosures, bankruptcies, and unemployment also have the most delinquencies. Nevada, which boasts the highest number of personal bankruptcy filings in the country, also has the largest number of mortgage delinquencies at 14.53%. The credit card and auto delinquencies are also higher than the national average, at 1.98% and 1.16% respectively. Florida is not far behind, with its mortgage delinquency rate at 13.34%. Florida, however, has better statistics for its auto and credit card delinquencies, at .99% and 1.47%, respectively.
Why is this trend in the way people make payments occurring? According to the Director of Consulting and Strategy for TransUnion, “Consumers recognize that their credit cards are 
their primary purchasing vehicles in this economy.” Using this logic, it appears that people, who are unemployed, want to maintain a good relationship with their credit card companies as they find themselves using these same cards for everyday necessities, such as food, paying utilities, clothing, and gas. Additionally, people find that they need their cars to go to jobs or to interviews for a job, and as such, do not want to have their vehicle repossessed. Individuals, in these situations, cannot afford to have these cards or cars taken away, as they provide for their basic needs. Their homes, however, do not hold the same weight.
Aside from individuals needing to use their credit cards and vehicles, they are also reluctant to pay their mortgages on time because of the lack of equity in their homes. People can see the value in their credit cards, paying for food, and their cars, getting to them work, but they cannot see value in a home, in which they owe 20% more than what the home is currently worth. Instead, individuals would rather have a home foreclosed on and continue to keep food on the table. Additionally, more and more individuals care less about a foreclosure remaining on their credit report for seven years. They simply rationalize that they will not own a house for a couple of years and rent instead. Until the housing markets rebounds for a number of consecutive months and unemployment reverses, it is likely that this trend will continue and even increase. It is not hard to understand, however, as people without jobs simply want to take care of their family, food, clothing, etc., and credit cards supply them with that opportunity.
Filed under Bankruptcy Statistics, Blog, Foreclosure issues, Mortgages by 
Morris Publishing Group, publisher of The Florida Times-Union and over a dozen other dailies, formally filed for bankruptcy last Tuesday morning.
Morris Publishing filed a petition for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Georgia in Augusta. Under the prepackaged plan, Morris Publishing will reduce its overall indebtedness from approximately $415 million to $126.5 million. The prepackaged restructuring plan, agreed to by approximately 93% of its bondholders, will exchange $278.5 million of its existing debt that would be due in 2013 for $100 million in new debt that matures in 2014.
Morris said the $100 million in new notes will bear interest of at least 10%, but some could be as high as 15%. Some of the interest could be paid with additional securities rather than in cash.
"This filing is the final step in the financial restructuring we announced last fall," said Morris Publishing Group Chairman William S. "We are pleased that so many of our noteholders agreed to support this move to get Morris Publishing on more solid financial ground."
Morris and its debtors own and operate 13 daily newspapers and over a dozen nondaily newspapers and other publications nationwide. Morris said operations at their papers, which had a total circulation of 450,000, will continue despite the filing.
According to a filing in bankruptcy court, when the petition was filed Morris’s newspapers had about 1,847 full-time employees and 335 part-time employees. Morris also said that all obligations to employees and vendors will be met in full.
Filed under Blog by
With the number of bankruptcy filings by U.S. consumers and businesses surging, 2009 has been marked as the seventh worst year on record. 1.43 million petitions have been submitted nationally, over 20,000 of which were in Central Florida!
According to data collected from the nation’s 90 bankruptcy districts, filings increased 32% nationwide from 2008 to 2009. In Central Florida, filings increased 58% from 2008, and 188% from 2007.
Compared to the rest of the country, Florida has the 12th largest increase of 44%. Arizona experienced the fastest increase of 77%, followed by Wyoming with 60%, Nevada with 59%, and California with 58%.
Florida workers are waiting to see what’s going to happen once the space shuttle stops flying next year, which will leave 7,000 space industry employees jobless. "It's very, very sad to see people in this situation," said Merritt Island bankruptcy attorney Carole Bess.
Bess thinks the problem is getting worse faster and we will be experiencing a new wave of businesses closing. A downward spiral occurs as businesses increasingly close because the number of unemployed rises, which potentially leads to even more bankruptcies.
Experts believe some of the increase is because of a natural recovery as consumers and attorneys become used to the recent overhaul of bankruptcy laws.
According to John Pottow, a bankruptcy professor at the University of Michigan, the return of the high number of filings show the failure of the 2005 overhaul bill, which made filings more costly and time-consuming as consumers had to go through exhaustive paperwork to determine eligibility for Chapter 7 bankruptcy and added liability for attorneys who provided assistance.
"It never made sense in the first place that you could change the laws and make all these bankruptcies go away,” said Pottow, who would like the 2005 law changes repealed. “If people are encountering financial distress, you can only scare them away for so long before they come back again.”
Filed under Bankruptcy Statistics, Causes of bankruptcy by
Recently, the Orlando Division of the U.S. Bankruptcy Court's Middle District of
Florida for the first time began displaying pamphlets for free or reduced cost mental-health counseling and other services. It’s important that people dealing with the stresses of bankruptcy are aware of the emotional and mental-health resources available for them in their communities.
There is no doubt that difficult financial times lead to emotional troubles. Two months ago in Orlando a young father was fatally shot and five others wounded in a downtown office building. The shooter in the incident was struggling with unemployment and was recently ruled incompetent to stand trial. In another incident just weeks earlier, a man charged with fatally shooting his wife in their Isleworth home was also facing foreclosure and the bankruptcy of his company. These extreme cases illustrate the emotional distress that is tied to personal financial turmoil brought by the recession.
People facing bankruptcy may have lost their health insurance and likely think they cannot afford mental-health counseling and other services. The pamphlets encourage using the United Way’s 211 line, which offers 24-hour crises and suicide counseling. Free or reduced cost services which help with issues ranging from mental-health to housing concerns are also referenced.
The effort to display the pamphlets was led by U.S. Bankruptcy Judge Arthur Briskman, who is on the bench in Orlando: "the awareness and availability of professional counseling is beneficial with the significant increase of economic pressures on our fellow citizens.” Briskman plans to make the information available on the court’s web site as well.
According to Briskman, Orlando, which has the highest rate of increases in bankruptcy filings in the state's Middle District, is indicative of the region’s large portion of middle-to-lower income people who are employed hourly and whose incomes have been reduced by the housing bust. In 2009 bankruptcy filings increased 59 percent in Orlando, 42 percent in Tampa, and 32 percent in Jacksonville.
The pamphlets demonstrate a significant first step to helping the people affected, and I hope that bankruptcy filers will utilize the resources available to them.
Filed under Blog by
When you meet with one of our attorneys, we will compile a list of all of your debts – credit cards, medical bills, installment notes, mortgage debts, lawsuits and even information about debts that you think you may owe, but do not yet have a formal demand for payment. We will also ask you for information about taxes, including any federal income tax you may owe, along with income tax due to Florida or to any other state where you may have lived.
Recently one of our clients expressed surprise that our attorney was asking about income tax debt, stating "I did not think that I could even include this tax debt in my bankruptcy."
In fact, you are required by the Bankruptcy Code to include income tax debt in your Chapter 7 or Chapter 13 case, and in some cases, this tax debt can be reduced or eliminated in bankruptcy.
The question of whether your income tax can be discharged in bankruptcy depends on how old the debt is and when you filed your return. In order to be dischargeable, your tax debt must meet the following conditions:
- The due date for filing your tax return is at least three years ago.
- Your tax return was filed at least two years ago.
- The tax assessment is at least 240 days old.
- Your tax return was not fraudulent.
- You are not guilty of tax evasion.
Here is an example: you filed your 2005 tax return showing $7,500 in outstanding debt on April 7, 2006. On April 16, 2009, that $7,500 became dischargeable, meaning that it could be eliminated in a Chapter 7 filing and treated as unsecured debt in Chapter 13.
If, however, you did not file your 2005 return on time, waiting until November, 2009 to do so, your tax debt would not be dischargeable as of today (January 16, 2010) because less than two years have passed since you filed your return.
Substitute returns filed on your behalf by the IRS do not count as filings for purposes of dischargeability. Similarly, tax debt that is secured by a tax lien may be dischargeable but the lien may still be valid. And finally, only income taxes can be discharged in bankruptcy – trust fund (941) taxes cannot be discharged.
Not surprisingly, the rules about discharging tax debt in Chapter 7 or Chapter 13 can be confusing and you are welcome to call or email our office for advice unique to your situation.
Filed under Taxes and bankruptcy by