What Happens to The Amounts you Owe when You File Bankruptcy?

I get asked this question often enough that I decided to actually sit down and write a post about it. If I file bankruptcy and don’t have to pay for all the debts that gets wiped out, Who ends up paying for it? I will tell you who does not pay for it, the bank does not pay for it. The fact of the matter is that the credit card business is the most lucrative part of the banks portfolio. Often the credit card business pays and sustains other banking businesses. And the credit card business is only growing more and more

A record 182 million Americans have credit cards this year compared with 147.5 million in 2010, according to TransUnion, and are carrying more than $1 trillion in debt. Consumers will add $80 billion to their tabs this year, according to projections from WalletHub, with the average credit card debt per household hitting $8,701 during the third quarter, up 4 percent compared with the same period in 2018.

Interest charges for credit cards have risen despite several Federal Reserve rate cuts. The average interest rate is 17.3 percent, near a record high, compared with 17.15 percent a year ago, according to CreditCards.com. The increase has been steeper for consumers with lower credit scores, to 25.37 percent compared with 24.34 percent last year.

So in reality you have already paid for it when you  paid 25% interest rates on your debt. So when you are considering filing bankruptcy, the last thing you need to be worrying about is the banks profit margin. They know what they are doing. The question is, do you want to muddle through bankruptcy laws by yourself or do you want to hire a professional? Make sure you are protected from the credit card companies and contact an experienced bankruptcy attorney Roland Kedikian to guide you through the process.

Bankruptcy is about Providing the Opportunities for Financial Recovery

There are many reasons why people become burdened by debts, such as job loss divorce or medical condition. For people that feel overwhelmed by their debt, there is  bankruptcy. In fact, for people struggling to pay their bills, bankruptcy provides and opportunity to get their finances back on track.

For people that are considering bankruptcy as an option, there are two approaches to filing for consumer bankruptcy, Chapter 7 and Chapter 13. Depending on your circumstances one or the other bankruptcy would be best for him or her.

For individuals that need a fast escape from debt, Chapter 7 is the best option. When a person claims chapter 7 bankruptcy, most of the debts that person owes discharge immediately. For people that do not own many valuable assets, using a Chapter 7 filing offers the best approach to bankruptcy.

For individuals who own valuable asset, such as a house that has substantial equity, Chapter 13 bankruptcy is probably the better option. Chapter 13 provides the debtor an opportunity to pay back the value of any excess equity there may be. The debtor’s debts are consolidated once he or she is under a repayment plan.

If you are not sure which is best for you, or you just need to learn, feel free to call us, we welcome your calls.

Bankruptcy Filings on the Rise

There was a 5% increase in total bankruptcy filings in July 2019 from the previous month. There were 64,283 bankruptcy filings, up from 62,241 for the same period last year.

There were 452,797 filings in the first seven months of 2019, up from 450,568 during the same period last year. There were roughly 1,000 more consumer bankruptcies at this point this year, compared to the same point last year, the organization added.

It’s a sign that people are taking out more loans without the requisite financial stability or they’ve been hit by an unexpected life event like illness or job loss. (People are twice as likely to file for bankruptcy if their health insurance has been interrupted.)

Americans are spending more. Consumers had $14 trillion in household debt in the first quarter of 2019, according to Federal Reserve Bank of New York data, up from approximately $13 trillion in debt consumers held back in 2008.

The rise in bankruptcies comes off a 10-year low. There were more than 770,000 bankruptcy filings in 2018, down from 1.6 million in 2010. The fall in bankruptcies over the last decade coincided with a 10-year bull market and decades-low unemployment as the economy recovered from the Great Recession, and people regain confidence in the economy and their ability to make payments on their loans.

Graying of U.S. Bankruptcy

In 1991, elders made up 2% of the bankruptcy relief claims; now the share is 12%. The leap in elder filers means about 98,000 families or about 133,000 elders out of 51 million people over 65 file for bankruptcy to get relief from all debt, excluding nondischargeable student debt (which is often incurred by co-signing the student loans of children or grandchildren). In most cases, those filing for bankruptcy come from the lower end of the income ladder. Of elder households that filed for bankruptcy in 2016, 78% made less than median total income.

Explaining Elder Bankruptcy

Several overlapping factors have contributed to the rise in elder financial distress. In the last 40 years, trade unions have weakened, real wages have stagnated, and good pensions have eroded—trends that catch up with people as they age. Companies have offloaded longevity and pension risk onto employees by eliminating pension plans or switching from defined-benefit plans to less-certain 401(k)-type options.

Another big impersonal force is the rise in medical costs, which has coincided with political decisions to have Medicare pay for a smaller share of elder health care. The longer people live, the higher the medical costs.

Perpetrators and predators are another source causing bankruptcy risk among the elderly. Banks hype low-interest credit cards, even to elders who have just filed for bankruptcy. According to the Federal Reserve’s Survey of Consumer Finances, 60% of senior households had debt in 2016 and 29% of senior households owed money on mortgages or other housing debt. These rates represent a roughly 50% increase in the share of senior households holding debt over the last 25 years.

It is clear that America’s evolving labor markets and crumbling retirement system play a central role in the graying of bankruptcy.

Zero Down Chapter 7 Bankruptcy Scheme. Watch Out!!

The U.S. Trustee Program has filed a complaint against a California lawyer and her firm for its so-called “no money down” billing practices in Chapter 7 cases. Peter C. Anderson, the U.S. trustee for the Central District of California, sued Patricia Ashcraft and the Law Offices of Gregory Ashcraft, APC, related to attorney fees collected for a Chapter 7 bankruptcy the firm filed for Mary Anne Gilmore on May 2.

The Dec. 12 complaint from the Justice Department’s trustee unit overseeing bankruptcies seeks disgorgement, or repayment, of attorneys’ fees, sanctions, and an order preventing such billing in future cases. According to the complaint, the firm bifurcates its representation into two components—representation pre-petition and representation post-petition. It has separate retainer agreements for the services, the complaint stated. It provides its pre-petition services for free, and bills for its work for post-petition services on a monthly basis.

According to the firm’s website, Ashcraft partners with a company called BK Billing, LLC, the complaint said. BK Billing funds the firm by a payment, in this case $2,100, and bills the client the entire fee, $3,000, at a rate of $250 per month for 12 months, according to the complaint.

Ashcraft doesn’t disclose that the client is paying financing fees or interest amounting to more than 40 percent, the complaint said. Additionally the cost of filing the bankruptcy is almost doubled compared to her prior fees prior to the zero down program.

The facts of the case can be read below.


No Bankruptcy Aid For Marijuana Businesses

In an article published by the American Bankruptcy Institute last Friday, director of the Justice Department’s Executive Office for U.S. Trustees, Clifford J. White III, and the trial attorney for the agency, John Sheahan, explained that cannabis businesses cannot claim bankruptcy because of their lingering Schedule I status.

“Marijuana continues to be regulated by Congress as a dangerous drug, and as the Supreme Court has recognized, the federal prohibition of marijuana takes precedence over state laws to the contrary,” the article stated.

The Justice Department noted that the United States Trustee Program’s stance remains firm and that no assets associated with the cannabis industry can be liquidated or restructured following bankruptcy.

“The USTP’s response to marijuana-related bankruptcy filings is guided by two straightforward and uncontroversial principles,” the two Justice Department officials pointed out. “First, the bankruptcy system may not be used as an instrument in the ongoing commission of a crime and reorganization plans that permit or require continued illegal activity may not be confirmed. Second, bankruptcy trustees and other estate fiduciaries should not be required to administer assets if doing so would cause them to violate federal criminal law.”

“Not only would a trustee who offers marijuana for sale violate the law but so, too, would a trustee who liquidated the fertilizer or equipment used to grow marijuana, who collected rent from a marijuana business tenant, or who sought to collect the profits of a marijuana investment,” White and Sheahan said.

With the DOJ cracking down, the lines are blurred on whether these businesses are considered legal, or illegal.

Bankruptcy impact on 2017 Holiday Shopping

There will be trouble in the upcoming 2017 holiday season for consumers wanting to walk in their favorite toy store and fill up the stockings for the little ones. No its not just what you could afford, but also where you can go to get the toys for the little ones.

Mattel, the maker of Barbie dolls and Hot Wheels cars, reported disappointing third-quarter results late Thursday and said it was hurt by Toys R Us’ Chapter 11 bankruptcy filing last month. Earlier this week, Hasbro, the maker of My Little Pony and Monopoly, also blamed weak results on the Toys R Us bankruptcy filing.

Both companies said they temporarily slowed shipments to Toys R Us ahead of its bankruptcy, and both said they are working with the retailer to get their toys on its shelves during the holiday season. While Toys R Us had said when it filed for bankruptcy protection that it planned to work with suppliers and would keep its 1,600 Toys R Us and Babies R Us stores open. A resolution is if far from certain.

We only hope you plan ahead in getting the gifts for the little ones.

Who is the King of Bankruptcy?

Before being appointed as Commerce Secretary by President-elect Donald Trump, investor Wilbur Ross Jr. was a banker well known for restructuring failed companies through leveraged buyouts. He earned himself the name “King of Bankruptcy” for his experience buying bankrupt companies in the manufacturing and steel industries and selling them for a large profit.

His portfolio included $1.3 billion in municipal bonds, $1.3 billion of interests, $550 million in equities, $225 million in art, $180 million cash, and $120 million real estates for a total of $3.7 billion.

Who knew there was so much to me made using bankruptcy law?

History of Bankruptcy Law.

The U.S. Constitution had in 1787 explicitly called on Congress to establish “uniform Laws on the subject of Bankruptcies throughout the United States.” This would be good for the “regulation of commerce,” James Madison explained in Federalist Paper No. 42, “and will prevent so many frauds where the parties or their property may lie or be removed into different States.”

In April 1800, President John Adams signed the Bankruptcy Act into law. the 1800 law was nonetheless more forgiving than standard English practice. U.S. courts and creditors did not necessarily view insolvency as a moral failure. Sometimes businesspeople took risks that didn’t work out, and it was helpful to have a process to manage the unfortunate results, share the responsibility among creditors and debtors, and allow for fresh starts. But in 1803 Congress repealed the law.

Congress once again enacted bankruptcy laws in times of financial distress in 1841 and 1867, only to repeal them soon afterward. Bankruptcy remained an often-confused matter of state law and judicial interpretation until the passage of the Bankruptcy Act of 1898.

That’s not to say there haven’t been some big changes to U.S. bankruptcy law since 1898. During the financially distressed 1930s, Congress first added a provision allowing municipalities to declare bankruptcy, then rewrote the entire bankruptcy code. The latter reform made corporate bankruptcies less attractive by, among other things, requiring that an outside trustee be appointed to run the bankrupt company. Another major rewrite in 1978 took away that requirement, allowing the pre-bankruptcy management team to stay in charge.

Personal bankruptcy filings also rose after the 1978 reforms, and kept rising for decades. In response, Congress passed a law in 2005 that made it harder for individuals to get their consumer debts discharged. The result was a sharp decline in nonbusiness bankruptcy filings.

There’s always going to be a tension in bankruptcy between discouraging profligacy and enabling the insolvent to make a new start. It is a process of navigating deeply felt competing obligations. What is definitely a problem is the absence of any bankruptcy process at all.

In the U.S., one of the most controversial holes in the bankruptcy net is student debt, which, thanks to a series of ever-tighter restrictions adopted by Congress starting in 1976, is now so hard to get discharged that few try. The next change in bankruptcy law should deal with student debt obligations.