Borrowing Money While In Bankruptcy

After one files bankruptcy, can I borrow money? How long will it be before I can borrow money again? How long will it take me to rebuild my credit? These are common questions among debtors, for which there is not a specific answer. This blog take a brief look at a company, in bankruptcy, needing to borrow money.

On September 20, 2011, Reuters posted an article about a company needing to borrow some money in order to exit its bankruptcy, and apparently having a hard time borrowing the money. The company I am speaking about is Nebraska Book Co., and they are needing to secure $250 million in financing. Because of the economy, they have moved the confirmation hearing from October 4 to October 27.

Just in case you are wonder what the company does, that is would need that amount of financing, it operates 280 college bookstores, and is among the largest in the United States. The article states, in part,

Nebraska Book, whose 280 locations make it among the largest U.S. college bookstore operators, filed for bankruptcy in June with a prepackaged restructuring proposal that would pay back secured lenders in full. The plan would give subordinated noteholders a 78 percent equity stake, $110 million in unsecured notes and $30.6 million in cash.

The whole article can be found at

http://www.reuters.com/article/2011/09/20/nebraskabook-idUSS1E78J21Y20110920

It appears money is tight for everyone these days, from the home owner, or small business, up to businesses looking to borrow a quarter of a billion dollars. So, when it comes to being able to borrow money, its hard to tell which will have the greatest impact, a bankruptcy or the economy.

Increase in Bankruptcy Filings by College Graduates

The typical person filing bankruptcy has historically been the low-income, under-educated people of our society. But with the downturn in the economy, there are more and more people with college degrees that have ended up filing bankruptcy. Even some upper income folks have turned elected to seek bankruptcy protection when their investments went South.

While 70% of bankruptcies are still comprised of people that did not graduate from college, graduates filing under BAPCPA have increased by 20% according to a study of more than 50,000 people covering 2006 to 2010. There has also been an increase in unemployed persons filing by 21% since 2006.

There was a 12% increase in married people filing since 2006, with married people making up more than 60% of all filings; however, only 35% of those petitions were joint petitions. A majority of the people filing experienced a decrease in income, or lost their jobs, while they had credit cards overextended. Bankruptcy filing peaked in 2010, when approximately 1.5 million people filed.

Of the people filing, when broken up into groups, there was an increase in all groups, with the exception of African-Americas, where the filing dropped to 11.3% from 15.4%.

Jacksonville Bankruptcy Attorney Grange – Your Car In A Chapter 7

Ever wondered what you can do with your vehicle in a Chapter 7 bankruptcy? Is is better to pay off your vehicle loan prior to filing bankruptcy? The following blog address general issues surrounding the treatment of vehicles, and most other secured personal property, in a Chapter 7 Bankruptcy.

First, lets look a financing. The general perception of the public is it is better to pay your debts than to owe creditors. Logically, that, of course, makes sense from a public policy and ethics standpoint. Nobody likes owing money, and generally, everyone feels obligated to pay their debts. In a perfect world, and even not so perfect, that is just human nature. However, the bankruptcy code was drafted and redrafted by congress, and many changes have been made.

Under the current bankruptcy code, if your gross income 6 months prior to filing bankruptcy is above the median income for a household of your size, within your state, then you have to go through a “means test” to see if you can file a Chapter 7 Bankruptcy.  Secured items are used to help you successfully get through the means test. That is, the more secured items you owe money on, that you wish to keep, the better. I know this doesn't make sense, but that's the way it generally works. And for cars, if you owe money on a couple of vehicles, this can actually give you additional deductions that will help you in completing the means test with the result you are looking for. If you don't pass the means test, you may be looking at having to do a Chapter 13, or even a Chapter 11 bankruptcy if you have significant debt.

So, should you pay off your car prior to filing a Chapter 7 bankruptcy? Generally the answer is no. But you should be current on the payments when you file with the court.

Upon filing a Chapter 7 Bankruptcy, you are presented with 3 official options, and one unofficial or rogue option. The options are to surrender, reaffirm, redeem, or ride through, with only the first three being addressed by the bankruptcy code. The last is just commonplace in some areas, among certain creditors.

First, lets look at surrender. It is exactly what it sounds like. If you decide, for whatever reason, you do not want the vehicle, you can simply surrender it to the creditor, either before the bankruptcy or during the bankruptcy, and you will not owe a deficiency balance on the loan. Some of the reasons I have seen that people surrender their vehicle are as follows:

• The vehicle simply is not worth what is owed;
• The payments are too high;
• Too many repairs need to be done to the vehicle, and can't afford the repairs; and
• To save money on insurance, registration fees, maintenance, and reduce liability.

I am sure there are many other reasons, but you get the idea.

The second option is reaffirmation. With reaffirmation, you enter into a new agreement, usually with either the same or better terms than that of the old agreement you had prior to filing bankruptcy. In most cases, you simply keep paying for the vehicle as if you had not filed bankruptcy. But, be aware, that if you get behind on payments, or in some other way breach the new agreement, the creditor may try to repossess the vehicle, sell it, and you will then owe a deficiency balance which the creditor can try to get from you by trying to take property or garnish wages, just as though you had never filed bankruptcy.

The third option is redemption. Through redemption, you pay the creditor, in one lump sum payment, the value of the vehicle as determined by agreement of the parties. This is usually done by motion to the Court. If the parties can't agree, then there is usually a hearing before the bankruptcy judge so he or she can establish a value. After this is paid, you simply don't owe any more money for the vehicle. It is yours.

The forth option, ride through, which is indicated as being unofficial, or rogue, is not addressed by the bankruptcy code.  In fact, as the bankruptcy code is printed, if you don't pick one of the three options above, the creditor is suppose to simply retrieve their collateral. But sometimes a creditor simply doesn't want the car, and does want his money. So the debtor simply keeps paying the creditor as if they had never filed. This is usually arranged between the debtor and creditor prior to filing bankruptcy, and sometimes is entered into without the intention of every entering into it. This happens if the reaffirmation agreement doesn't get filed prior to the entry of a discharge, for whatever reason, and you have a creditor and debtor that can work together. The upside of this is, if the creditor gets the vehicle because of being behind on payments, they can only get for the vehicle what they are able to get from it sale. There is no deficiency balance because it was discharged in bankruptcy. The downside is, if the creditor would rather have your vehicle than their money, they can refuse payments and get the vehicle. Now you know why I refer to this as a rogue option.

If you have any questions regarding options you have concerning vehicles, or any other personal property, you should contact a local bankruptcy attorney in you area for advice.

When You Should Consider Finding A Bankruptcy Attorney

Many people are continuing to face financial hardships in our unstable economy. So, what signs should you look for to indicate whether you should look at filing bankruptcy? This blog addresses some of the signs or signals one should look for in determining whether they should seek financial advise from someone, including the advise of a bankruptcy attorney.

Although everyone knows that numerous bankruptcies were filed in Florida in 2010, what some might not know is the Middle District of Florida had one of the highest filing rates in the country, behind a district in California. In 2010, Florida had 110,304 bankruptcies filed seeking protection and/or relief under the Bankruptcy Code.

Bankruptcy should be viewed as a last case alternative to relieving debts, and as such, bankruptcy is not for everyone. There are also some debts that survive bankruptcy. Bankruptcy, under current law, remains on ones credit report for 10 years after the end of the bankruptcy. But, even though it should be considered a last case alternative, waiting too long to file and a lack of financial planning, can cause additional problems. If you are worried about too much debt, you should seek the advise of a local bankruptcy attorney to explore various options.

The first, and most obvious, sign you should look for is whether you are solvent; that is, are your debts higher than your assets. Generally, when one achieves this level of indebtedness, payments begin to arrive to creditors late, driving up late fees and, in some cases, interest rates.

Just because you have a lot of debt, in an of itself, does not necessary necessitate the filing of bankruptcy. You should also look at the class of the debts. For example, how much of the money you owe makes up secured and unsecured debts. You should look at what comprises your debts, such as credit card bills, medical bills, mortgages, car loans, tax liability, restitution, student loans, etc. Then the attorney will have to consider, among other things, which debts are likely to be discharged compared to which one are not likely to be discharged. It is also important to know when and how the debts occurred.

Other things you should consider is whether you have been able to get a handle on your debts through negotiating with the creditors, or whether a legitimate alternative debt relief company has been able to help you. Keep in mind that most “debt settlement” and “foreclosure rescue” advertisements are scams. There have been a proliferation of these companies as the economy turned South. Do not pay these companies an up front fee, and only deal with legitimate established credit counseling organizations. If you found one of these companies have not been able to help you, your next step may be looking at bankruptcy as a possible alternative.

Sometimes creditors actions will cause you to look at bankruptcy. They may be threatening to sue you, or tell you the account has been forwarded to their attorney. These are flashing signs saying you should look at bankruptcy. Waiting too long can possibly lead to a loss of your assets or wage garnishment. But keep in mind that this could also lead to an alternative of seeing if the creditor has been violating the Fair Debt Collection Practices Act, which may be able to serve as a defense to the law suit, or grounds for filing your own law suit against the creditor.

One should also look at their personal stress level. High stress can lead to many problems including health and family problems. Although it is rarely published in the media, many people file bankruptcy seeking relief of stress based on ones financial situation, sometimes combined with unscrupulous debt collectors.

Many people make the mistake of waiting too long to properly plan on the filing of bankruptcy with the assistance of a local bankruptcy attorney. Proper planning is crucial, in most situations, in order to preserve assets and discharge debts. Many people try to do what they think should be done to prepare for bankruptcy, only later to find out that they did exactly the opposite of what they should have done. This is partially because most people believe the bankruptcy code is logically drafted, which is not necessarily true. Doing things to help yourself, or creditors, can actually end up hurting you. Seeking the advise of a local bankruptcy attorney is very important.

If you are concerned about your debts, there are plenty of attorneys that offer free bankruptcy consultations. It is much better to seek advise of a bankruptcy attorney early rather than later.

Filing Bankruptcy Is Emotional

While most of this blog site is devoted to bankruptcy practice, procedure, and tips, a few post deal with the emotional and stressful side of filing bankruptcy, and this post falls into the later. Almost every bankruptcy consult I give, the person or couple on the other side of the table will say that they never in a thousand years ever thought they would be placed in this situation. In their minds, they are in disbelief, they feel embarrassed, and even a general feeling of guilt, of even have to contemplate bankruptcy. Much of this is associated with the culture and society in which we live. Generally, one thinks of bankruptcy as taking advantage of a creditor or a symbol of failure. Emotions are similar in many respects to what one experiences when getting divorced or after the death of a loved one. Disbelief, anger, resentment, hurt, and loneliness.

During the bankruptcy consultation when learning of ones income, debts, assets, and expenses, I also learn how they ended up where they are. They usually come to see me after exhausting all other remedies, which they usually find out later that it may have been a mistake to not have consulted with a bankruptcy attorney sooner. Sometimes they have sold most of their belongings, financed bills through relatives, and exhausted savings in an effort to not have to file bankruptcy. For these people, bankruptcy may be the last alternative, or in some cases, the they may be judgment proof.

Jacksonville Loan Officer Sentenced To 30 Months

This is a reprint of an article submitted by David Bauerlein on September 15, 2011 - 4:59pm to BizJax

A Jacksonville loan officer who operated a business called “Joe-Can-Do-It.net”  was sentenced to 30 months in federal prison for committing wire fraud, according to the U.S. Attorney’s Office.  Joseph Ulysses Grant IV,  31, was sentenced this week by U.S. District Judge Harvey Schlesinger.  Grant promised people he could obtain full financing if they bought homes he listed for sale, and as part of his scheme, he submitted false financial information on loan applications he prepared for the buyers, authorities said. He also gave lenders an inflated value for the sales price of the homes.

The statements submitted to lenders said the buyers were making down payments for the homes, but actually, Grant “or others” were providing money to buyers for down payments, prosecutors said. The person who advanced the down payment for the buyer then recouped the money out of proceeds from the sale of the house.
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It is people such as this that have contributed to the economic crisis we are in today.  However, if a competent foreclosure defense attorney were representing the homeowner, it appears on the surface that may be some very valid defenses and affirmative defenses.  The attorney could also look at a possible counter claim.

So, would you take a case such as this to state court, where the foreclosure would be filed, or file a Chapter 13 bankruptcy and proceed with an adversarial hearing?  This is one case where a Chapter 13 bankruptcy may be advantageous.

NACBA Memeber Only Workshop Early-Bird Discount Ending Today

The early-bird discount for registering for the NACBA Member Only workshop in Colorado Springs is today. In addition to the regularly scheduled meeting, there is the following:

Meet & Greet, Thursday Oct. 27^th, 8:30pm.  Part scavenger hunt, part 20-questions. Get your card signed by the folks who fit the descriptions on the card, earn a beverage ticket. Meet the Board, meet our speakers, meet people you’ve chatted with on the listserv, just come to mingle!

Group Event:  Train ride on the historic Pikes Peak Cog Railway. Buses depart from the Broadmoor at Noon for the 8.9 mile journey up the tallest cog rail in the country; the round trip to the summit takes just over 3 hours. Everyone should be back to the hotel no later than 5:30 p.m.

A brochure can be accessed by clickinghere.