If you ask 10 bankruptcy lawyers why their clients file for bankruptcy, you are likely to get ten different answers. I ran across this post from the Silicon Valley Blogger on the Digerati Life blog that offers the following reasons:
- Bad luck – unexpected illnesses, accidents, crime, unexpected job loss
- Lack of preparation – lack of emergency funds, insufficient insurance, poor estate planning
- Bad Financial Decisions – divorce, bad investments, gambling, falling for something that sounds too good to be true
Here at Clark and Washington, we probably see more bankruptcies resulting from medical problems and related bills than from any other cause. Our #2 reason would be bad decisions – such as buying too much house or a too-expensive car.
Of course some bad decisions are worse than others. Take, for example the case of Tony Alleyne in England. Tony is an interior designer and he came up with the idea of creating a house who came up with the idea of decorating the interior of his house as an exact replica of the Starship Enterprise from Star Trek – The Next Generation. Tony believed that fellow Trekkies would rush to hire his firm to redecorate their houses in a Star Trek motif.
After going through several hundred thousand dollars (and 1 wife), Tony discovered that this Trekkie market did not exist and that he had spent almost 10 years pursuing a business plan that had no chance for success.
If you have any thoughts about what causes bankruptcy, we'd love to hear from you. If you want to replace your refrigerator with a "warp coil" let us know as well – we can set you up!
Filed under Causes of bankruptcy by 
Can you save your home from foreclosure without filing for bankruptcy? There has been a lot of news lately about possible voluntary actions by mortgage companies to re-write loans, to hold off on foreclosure and to "work with" cash strapped homeowners. All these possibilities are out there, but if you are facing an actual foreclosure, Chapter 13 bankruptcy remains your most reliable tool to stop a foreclosure.
This does not mean that scamsters have not found a way to use Chapter 13 as a tool for their fraudulent activity. We recently came across an article in a Kasas City newspaper that described the activities of a foreclosure scammer. The scammer would contact homeowners facing foreclosure and offer to stop the process for several hundred dollars. He would then file a "two page" emergency Chapter 13 petition, then disappear.
The two page Chapter 13 will stop a foreclosure, but the homeowner is left with an incomplete petition and, quite possibly, a bankruptcy that they did not want. Further, if someone signs your name to a bankruptcy petition that you did not authorize, this is a form of identity theft.
The U.S. Trustee estimates that this scammer stopped foreclosures on over $50 million of property in four States. Although this particular scammer does not appear to have operated in the Tampa area, we regularly speak with clients who have been approached or vicitimized by foreclosure scammers here as well.
If you are facing a foreclosure, don't take a chance with a non-attorney who makes unrealistic promises. A legitimate consumer bankruptcy law firm will tell you about the good and the bad having to do with Chapter 13. Remember – if something sounds too good to be true, it probably is.
Filed under Foreclosure issues by
Would you be surprised to learn that there are collection agencies whose main purpose is to collect debt that has been discharged in bankruptcy. Would you be even more surprised to learn that these collection agencies are not fly-by-night operations – that five of them are traded on NASDAQ, and two of the largest of these debt buyers are owned by the respected investment firm Bear Stearns.
In its November 1, 2007 issue, Business Week published a disturbing investigative report about the very robust market in discharged debt. Discharged debt can be bought for pennies on the dollar. Collection agencies rely on techniques like harassment, ignorance of the law and timing (if your closing is being held up by a $500 debt that was discharged, you might be inclined to pay the debt to avoid a delay).
Here's how big – and lucrative this market is: Norfolk (Va.)-based Portfolio Recovery Associates (PRAA on the NASDAQ) earned $44 million in 2006 on $188 million in revenue, a margin of 23%. Portfolio Recovery said in its 2006 annual report that it had paid $55 million to buy debts with a face value of $6.3 billion that had gone into bankruptcies since 2004.
Often these debt buyers claim that they did not know about the bankruptcy as grounds to justify their collection harassment. Others contend that the Fair Credit Reporting Act does not obligate them to update credit reports.
Some debt buyers intentionally change the account number of the discharged debt in order to make it more difficult to link the original creditor's account with the new collection account.
Filed under Recovering from bankruptcy by
At Clark and Washington, we get a lot of questions about the credit counseling and financial management course requirements set out in the bankruptcy laws. When are these courses required? How much do they cost? Why are there two courses? How long do the courses take?
Here is a brief overview of the credit and financial management courses that you are required to take as part of your Tampa/St. Pete bankruptcy filing:
Pre-Bankruptcy Credit Counseling
Before you file, you must complete a "credit counseling" course. This counseling requirement applies whether you are filing Chapter 7 or Chapter 13. The certification certificate that you receive upon completion of this course is part of our standard filing paperwork. Pre-filing credit counselors must be Trustee approved. Here is what will be covered:
- the counselor will evaluate your financial situation
- the counselor will provide information about consumer debts (i.e., credit cards and consumer loans) and will discuss alternatives to bankruptcy
- the counselor will discuss budgeting and help you evaluate whether you have enough in your budget to pursue a debt workout rather than bankruptcy
- if requested, the counselor will refer you to a debt management agency for the creation of a personal debt management plan
- the counselor will attempt to offer a long term view of your financial activities and habits
Generally the credit counseling courses last anywhere from 60 to 90 minutes and can be done in person, on the web or via telephone. Most of the credit counseling agencies we have seen offer this counseling for between $35 and $50 per person. If you cannot afford to pay the counselor's fee, you may request a fee waiver from the counselor's office. All fees and payment should be discussed and agreed to prior to the session.
Pre-Discharge Financial management Course
If you successfully complete your bankruptcy, your judge will issue an official court document called an "order of discharge." This discharge order formally terminates your obligation to pay the debts that were included in your case. Before you can get this discharge order, however, you must complete a course called the Financial Management Education course. As is the case with pre-bankruptcy credit counseling, the financial managment counselor must be approved by the Trustee in your filing jurisdiction. The purpose of the financial management course is to educate you about:
- developing a budget and living within your means
- developing better spending habits
- learning about money management, including saving, budgeting and checkbook control
- wise use of credit – what to avoid when accessing available credit
Generally financial management courses last about two hours and can be done in person, on the web or via telephone. As is the case with credit counseling, the fee will be in the $35 to $50 range.
The financial managment counseling company will fax or email a certificate to you and/or your lawyer. This certificate must be filed with the clerk of court. If you do not file this certificate prior to the time your case is closed, you will not receive a discharge.
Both course completion certifications together prove that the debtor has been educated by professionals to understand proper budgeting, money management and how to use credit without ending up in trouble. Of course these aren't the only bankruptcy filing requirements, but these are two of the mandatory steps. If you have any specific quesitons about pre-bankruptcy credit counseling or about pre-discharge financial managment education, please contact our office at 813-345-5954 or visit out Tampa bankruptcy web site.
Filed under Preparing for bankruptcy by
Last week the Tampa Tribune published a timely article about a growing problem in the Tampa/St. Pete area – lawsuits against consumers for repossession deficiencies.
In difficult economic times, cash strapped families sometimes come to the realization that they simply cannot afford a car or truck payment. As difficult as it may be to get to work or to shuttle the kids around town with one car, getting rid of that second car or truck payment may seem like a good idea, especially if that second vehicle is a gas guzzling SUV or truck.
Unfortunately, in most cases, you may need to think twice about surrendering your car or truck back to the bank or finance company. As the Tribune points out. surrendered vehicles are disposed of at an auto auction, where they often bring no more than half of "retail" value. If your loan was a four or five year note, or if the interest rate was high, or if you paid little or nothing down, there is a good chance that you will be "upside down" with your loan.More on Repossession Deficiency an Unpleasant Surprise if You Walk Away from Your Vehicle Loan
Filed under Causes of bankruptcy by
