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you could change the laws and make all these bankruptcies go away,” said Pottow, who would like the 2005 law changes repealed.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
Gift cards have become a common and convenient way for busy shoppers to remember friends and loved ones, while avoiding the hassle associated with fighting mall traffic and trying to guess what your recipient wants. Gift cards are convenient, but a staggering number of gift cards go unspent, with the balances reverting back to the retailers and banks who issued the cards. Last year, Best Buy cleared $38 million and Home Depot cleared $37 million – all from unused gift card dollars.
A New York Times article from December, 2009 reports that this year (2009) an estimated $5 billion of gift card value will go unused and revert back to the issuer. Some of the cards are lost, while others lose value month by month through inactivity fees. One gift card vendor promotes its services to retailers by claiming that that rotating gift card display may be the store's most profitable square foot of space in the location.
Responding to consumer complaints, Congress has stepped in with sweeping regulations that limit inactivity fees and restricting expiration. Disclosure requirements have also been enhanced. But, bowing to pressure from retailers and banks, these new rules do not go into effect until August, 2010 – meaning that they do not apply for the 2009 Christmas season.
Filed under Consumer Protection by
Time Magazine's recent story entitled Where are All the Foreclosure Lawyers? reveals to the country what many Florida residents already know – Florida's foreclosure laws are convoluted and confusing and most struggling homeowners cannot afford representation to mount a defense.
Because there is generally no financial aid for homeowners facing foreclosure, many mortgagees are unable to defend their homes from bank actions. Chapter 13 bankruptcy can stop a foreclosure, but it ought not be a homeowner's only recourse.
Mortgage modification programs, loudly touted by mortgage industry lobbyists fighting legislation in Congress that would allow bankruptcy judges to modify the terms of a mortgage in a bankruptcy, have done little to stem the tide of foreclosures. Time notes that the Boston-based National Consumer Law Center reported that many large banks and other mortgage servicers have decided it's cheaper to foreclose than to offer more affordable loan terms.
Because foreclosure in Florida requires court involvement, it is always in your best interest to seek legal counsel to discuss your options. Consumer firms like Clark & Washington offer no-cost consultations, while firms that specialize in foreclosure defense may charge a nominal fee. Either way, do not assume that you have no choices and do not wait until the last minute before acting.
Filed under Foreclosure issues, Mortgages by
