Sources said Suleman had failed to include around a dozen financial documents and statements required for a successful filing. She reportedly had until Monday to get the documents in to the court, but failed to do so. On Tuesday, Suleman's case was dismissed and the temporary stay on her home's foreclosure lifted. As a result, her creditors are now able to come after her again.
]]> The Chapter 7 bankruptcy Suleman had filed for could potentially have allowed her to discharge her debt after liquidated her assets. Discharge releases debtors from personal liability for most debts and stops creditors from pursuing collection actions. There are a number of exceptions to discharge, but individual debtors receive a discharge in almost all cases.The reasons for not granting a discharge are narrow. They include: failure to keep or produce adequate books or financial records; failure to sufficiently explain any loss of assets; bankruptcy-related crimes such as perjury; failure to obey an order from a bankruptcy court; fraudulent transfer; concealing or destroying property that would have become property of the bankruptcy estate; and failure to complete an approved financial management course.
Discharge is an important topic within bankruptcy, and we'll take a closer look at it in our next post.
Source: Orange County Register, "'Octomom' bankruptcy thrown out of court," Doug Irving & Lou Ponsi, May 15, 2012.
]]>This question was recently addressed in a Fox Business article. Fortunately, the answer has little to do with the nitty gritty of bankruptcy and divorce, and more to do with how banks handle joint loan accounts.
]]> One thing to be clear about from the onset is that when one spouse or ex-spouse files for bankruptcy, the other spouse's financial obligations remain. What matters for the spouse or ex-spouse who did not file for bankruptcy is that they have a contract with the lender, and they are personally obligated under it. What this means is that, if a spouse or ex-spouse files for bankruptcy, they may be able to have their obligation to pay a loan discharged. But the discharge does not affect the other spouse's obligation.Unfortunately, lenders often do not always have the technology or systems in place to adequately separate a joint account so as to distinguish which debtor it was who filed for bankruptcy. Joint accounts, it turns out, are often tagged for bankruptcy, despite the fact that only one party may have filed. This can lead to a number of consequences that leave debtors feeling at-risk.
The important thing to remember, though, is that filing for personal bankruptcy only affect the financial obligations of the filer, and does not affect a spouse or ex-spouse's obligation to continue paying on joint accounts the couple may have taken out together.
Source: Fox Business, "Ex Filed Bankruptcy. What About My Motorcycle?," Justin Harelik, May 15, 2012.
]]>Specifically, it is estimated that roughly 200,000 consumers who otherwise not have had enough money to file for bankruptcy were able to file because of tax returns, but that anywhere between 200,000 and one million consumers will still be unable to afford the costs this year.
]]> The average cost of filing for Chapter 7 bankruptcy, which is the most common form, is over $1,500. Among the fees is a charge amounting to around $300 simply for filing paperwork in federal court. Other fees include mandatory pre-bankruptcy credit counseling and pre-discharge education, as well as attorney fees.Bankruptcy costs have risen in the years following the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. That act sought to reduce the number of bankruptcy filings by increasing filing requirements. But one effect has been that lower income consumers have a more difficult time affording a bankruptcy.
Those who file for Chapter 7 bankruptcy can request a waiver of their $300 court fee. Judges will typically grant the waiver for those whose income is less than 150 percent of the poverty line and who prove they are unable to pay the fee either in full or in installments.
While filing for bankruptcy with an experienced attorney can be somewhat costly, it is critical to seeing the process through successfully.
Source: CNN Money, "Too broke to go bankruptcy," Blake Ellis, May 7, 2012.
]]>The three-bedroom home was scheduled to be sold at a foreclosure auction on Monday, in fact, but the auction has now been postponed for two weeks after the trustees involved in the sale agreed to the delay.
]]> As a point of interest, Suleman's father assisted her in the purchase of the home, which was set up on an all inclusive trust deed, also known as a "wraparound mortgage." The arrangement made her the deed-holder and responsible for monthly payments on the home, but her landlord-the previous owner-was responsible for making the mortgage payments. Over $475,000 is still owed on the home, and no payments have been made for a year.
Fore homeowners facing the possibility of foreclosure, a bankruptcy mechanism known as "automatic stay" can be an effective means of temporarily stopping foreclosure. The reality of the automatic stay is that banks will eventually be able to continue foreclosure proceedings once the stay is lifted. For this reason, people wishing to ultimately keep their home typically file for Chapter 13 bankruptcy.
Interestingly, automatic stay is also able to stall an eviction if one's landlord is attempting to do so. It will not stall an eviction, though, where the landlord has already obtained a court ordered wrongful possession judgment. And even where the automatic stay does provide a bit of a delay for eviction, courts tend to side with landlords who ask permission for an eviction, particularly when the renter is misusing, endangering or conducting illegal activity on the property.
Source: Wasington Post, "Auction of bankrupt Octomom's California home postponed for 2 weeks," May 7, 2012.
]]>Some people struggle to obtain credit following a bankruptcy. But there are options, even for those with a poor credit score, to obtain credit. One option for those who are unable to obtain unsecured credit cards, though, is to start out with a secured credit card. These are obtained by a deposit in an account with the issuing bank.
]]> Not all secured credit card issuers will report to credit bureaus, though, and it is important to make sure the issuer does so. This will allow the card to work in one's favor toward improving and building one's credit score. To do so successfully, use of the card should be frequent and payments should be regular.A passbook savings loan is another possible option for rebuilding one's credit. These are also secured by a deposit in an account at the issuing bank. The loan is repaid with monthly payments over a term. As with secured credit cards, one should be sure that the lending bank reports the loan to one of the three major credit bureaus.
Obtaining and using credit after a bankruptcy may be the last thing some would think to be a good idea, but doing so can actually accelerate the rehabilitation of one's credit score, as long as it is done so responsibly.
Source: Fox Business, "Create Your Post-Bankruptcy Credit Rebuilding Plan," Tanisha Warner, May 2, 2012.
]]>Sources said that the landlord of the home where Suleman lives with her children has allowed her to fall $30,000 behind on her rent payments. He has apparently stated that he is now unable to make mortgage payments, that his credit is damaged because of Suleman and that the home has gone into foreclosure.
]]> Suleman's financial difficulties have been going on for years, and she currently relies on welfare, food stamps and Social Security disability payments to support her 14 children.In Chapter 7 bankruptcy, Suleman will have her assets liquidated in order to pay off her creditors. In many cases, creditors favor Chapter 7 bankruptcy over Chapter 13, which allows the debtor to restructure their payments but doesn't require them to liquidate personal property to cover their debts. Most of the time, creditors will be receiving much smaller payments in Chapter 13 repayment plans. Unfortunately for Suleman's creditors, her assets only total $50,000.
Suleman has also reportedly said that, because of her financial distress and the desire to care for her children, she is reconsidering a previous decision not to sign any deals to do pornography. Whether that is the best decision for her and her family is questionable, but filing for bankruptcy will certainly give her the ability to move forward financially.
Source: Forbes, "Octomom Is Bankruptcy, Considering Porn. So What Happens To The Kids," Meghan Casserly, May 1, 2012.
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Our Nashville readers may be interested to know that bankruptcy filings for the Western District of Tennessee rose 2.8 percent between January and March, going from 3,063 to 2,978. Those figures include filings for all bankruptcy chapters.
The slight increase is reportedly on track with typical trends, as many people use credit cards a lot during the Christmas season. Layoffs are behind the slight increase, as well as medical bills, which are an ever-common stressor behind bankruptcy. Another factor in the increase is the increase in foreclosures. As sources note, people sometimes file for bankruptcy as a way to temporarily stop foreclosure.
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Filing for bankruptcy, as our regular readers know, puts an automatic stay on any lawsuit filed against the borrower, as well as most actions against the borrower's property by a creditor, collection agency, or government entity. That includes foreclosure.
Although an automatic stay will immediate halt a foreclosure action by a lender, it cannot do so indefinitely. Even where bankruptcy can discharge mortgage debt, it does not discharge the lien on the property.
Those who are filing for bankruptcy and ultimately hope to keep their home may be better off filing for Chapter 13 bankruptcy, since Chapter 13 bankruptcy does not require a filer to liquidate their assets, but to come up with a plan to reorganize and pay back one's debts. A repayment plan may last up to five years after filing.
Filing for bankruptcy, whether for Chapter 7 or Chapter 13, may be a way to force a lender to negotiate a loan repayment modification. These types of deals cannot be counted on, though, as some lenders will be unwilling to negotiate regardless of a bankruptcy filing.
It is important for anybody thinking of filing for bankruptcy to speak to a knowledgeable attorney and get their questions answer. Bankruptcy, of course, is not something to take lightly. It can offer great relief, but it does take time to make a recovery.
Source: The Daily News, "Struggling Economy Keeps Bankruptcy Filings on Rise," Aisling Maki, April 20, 2012
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A recent article in the Boston Globe raised an issue that is affecting more and more people: student loan debt. As the article points out, student loan debt from private lenders is one of the few types of debt that cannot be discharged in bankruptcy, whereas medical bills, mortgage loans, credit cards and car loans can. Other types of debt that are nearly impossible to discharge in bankruptcy include child support and criminal fines.
Around 37 million Americans have student loan debt, and only 39 percent are actually paying down their balances. It is estimated that 5.4 million borrowers have at least one student loan account past due. The burden of these loans is, in other words, fairly widespread. Many recent graduates unable to find work or who remain underemployed face the possibility of wage garnishment. Obviously, this is a great burden.
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The Obama administration has been taking steps to alleviate student loan debts for current students and recent grads, including a request this week that Congress halt a scheduled doubling in federal Stafford loan rates. Unfortunately, some of those measures do nothing to help older borrowers who are struggling right now. Older borrowers are able, however, to take advantage of income-based repayment and public-service loan forgiveness. The administration has yet to make any concerted effort toward pushing for discharge-ability of student loans, however.
Advocates of changing the law say there's little evidence that borrowers abused the practice prior to 1976, when private student loans were dischargeable. They also say there is little evidence that changing the law would affect the availability of private student loans.
Regardless of what changes are in store for this law, it is clear that many people who are struggling finically with student loans and other debt could benefit from filing for bankruptcy. The decision to do so is not an easy one, and building one's credit back up is not a quick process, but for some it is the best option.
Source: Boston.com, "Even after bankruptcy, trapped by student debt," Justin Pope, April 25, 2012.
]]>Many families choose to delay bankruptcy filings because of the costs, especially since 2005, when U.S. bankruptcy laws changed. According to the U.S. Government Accountability Office, the average cost of legal and administrative fees went from $921 in 2005, to $1477 two years after the law was passed.
]]> The 2005 law was passed in order to prevent bankruptcy abuse. Because of the changes, filing for bankruptcy takes longer and requires attorneys to verify much more information than they previously did, increasing attorney fees.The law has indeed resulted in fewer people filing for bankruptcy. It isn't clear, though, whether abuse has been reduced.
While it does cost some money to for bankruptcy, and this may be a further financial stressor on those who are already struggling, it is often the only way out for these folks. Bankruptcy allows people to reorganize their finances or make a fresh start. And even though it is work building oneself back up financially, it can take a great load off one's shoulders.
Source: The Tennessean, "Tax refunds provide cash to file bankruptcy," Christine Dugas, April 15, 2012
]]>One of the first questions people have about the liquidation process is which of their assets they will be required to sell. In Tennessee, there are a number of exemptions.
]]> The following are some of the assets which are exempt from liquidation in a Chapter 7 bankruptcy proceeding:•· As much as $25,000 on a principal residence
•· Family cemeteries and burial lots
•· Up to $10,000 of personal property
•· Certain retirement plans and state pension monies
•· College education savings plans
•· 75 percent of weekly disposable earnings
Insurance benefits
•· Cash surrender value of life insurance
•· Benefit payments, alimony, and child support
•· Workers compensation
Of the various exemptions under Tennessee law, people are typically very concerned about their home. Unfortunately, the exemption amount is set quite low. For an individual who jointly owns a principal residence, the total exemption cannot exceed $7,500, which is equally divided among the individuals. If only one joint owner has filed for bankruptcy, they may claim a $5,000 exemption.
An unmarried person 62 and older may claim an exemption of $12,500, and a married couple, only one of whom is 62 or older, may claim up to $20,000. If both married persons are 62 and older, they may claim up to a $25,000 exemption. A married person with one or more minor children may also claim a $25,000 exemption.
There is some question as to whether married couples with minor children who jointly file bankruptcy are able to stack their $25,000 exemptions for a total of a $50,000 exemption on a principal residence. Bankruptcy courts in Tennessee have differed on the question. The U.S. Bankruptcy Court for the Middle District of Tennessee answered in the affirmative back in 2008.
Those who are interested in exactly what they will able to keep in a Chapter 7 filing should speak with a qualified attorney.
Source: Online: http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter7.aspx; website for US. Bankruptcy Court for Middle District of Tennessee; gives overview of Chapter 7 bankruptcy.
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Bankruptcy is a big step to take in one's financial life, and should not be entered into lightly. Most people know that instinctively, but it is worth emphasizing since bankruptcy can affect one's credit for a number of years. That said, it is not impossible to pick oneself back up off the ground and rebuild one's credit after a bankruptcy.
Fortunately, as a recent Fox Business article points out, lenders know that a
bankruptcyfiling, in most cases, does not reflect financial irresponsibility. According to a recent study at Texas A&M University, four out of five bankruptcies result from circumstances outside the control of those who file, such as persistent unemployment, medical debt due to an illness, and financial losses due to other tragic or catastrophic events. Medical debt, in fact, is considered the single most cited reason for filing for bankruptcy, with over half of bankruptcies in the United States involving medical debt over $5,000.
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The fact is that bankruptcy is not something most people plan on leading themselves into. Most people who file for bankruptcy do so out of necessity and would rather not file. Because of this, and because of limitations in how often an individual can seek bankruptcy protection, there are lenders out there who are willing to work with those who've been through bankruptcy.
Rebuilding one's credit history after a bankruptcy is actually critical to improving financial situation. Waiting for one's credit score to go up on its own will take much longer, and it is better to take a proactive approach. The bottom line is that one must use credit responsibly, but not be afraid to do so.
Source: Fox Business, "Best Credit Cards After Bankruptcy," Curtis Arnold, April 9, 2012.
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Sapps, who earns a monthly income of $115,881, lists nearly $6.45 million in assets and apparently owns almost $6,500 worth of Jordan brand shoes, as well as a $1,200 lion skin rug.
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Sapps has had a rather productive post-NFL career, appearing on several Television programs, including "Dancing with the Stars," but this activity has apparently not been enough to cover his costs. In his bankruptcy filing, Sapps lists over $6.7 million in liabilities, including back child support and alimony.
More financial troubles could be in store for Sapps, who nearly lost his reporting job with the NFL Network over Twitter comments he made concerning the recent New Orleans Saints bounty scandal. Sapp apparently tweeted that he "Just heard who the snitch was," referring to tight end Jeremy Shockey.
To the average person, it seems surprising that a wealthy athlete could find themselves in a situation like Sapps, but it is becoming more and more common. According to a recent Sports Illustrated report, 78 percent of NFL players and 60 percent of NBA players file for bankruptcy within two years of their retirement. It isn't clear what the reasons are for this, only that bankruptcy becomes a fallback for a good number of pro athletes.
Source: Washington Post, "Warren Sapp: The latest multimillionaire athlete to file for bankruptcy," Matt Brooks, April 9, 2012.
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But mortgage delinquencies have not decreased across the board. For some borrowers, particularly those in wealthy neighborhoods, delinquencies are often stretched out. In the Nashville area, mortgage loans at and above $1 million were delinquent an average of 278 days longer than loans below $250,000 at the end of January.
]]> The increased delay in foreclosure is due, in large part, to the fact that expensive homes are difficult to sell and maintain, and banks are hesitant to sustain losses in times when profits are already low.For borrowers of these homes, foreclosure proceedings are sometimes put off for months, allowing them to continue living in a home without paying the mortgage.
While all types of borrowers have experienced an increase in foreclosure delay in recent years, borrowers of less-expensive homes are less likely to be able to remain in their home, as banks tend to be less willing to draw the process out for them.
For some borrowers who are delinquent on their loans, bankruptcy may be a way for them to keep their home, or least to delay foreclosure. In Chapter 13, bankruptcy gives one the chance to pay off late payments over the term of the repayment plan, which is up to five years.
While Chapter 7 can cancel one's personal liability of a promissory note, it cannot get rid of the lien, which means it cannot cancel a foreclosure. Chapter 7 can, though, buy one some time and allow one to save up money and perhaps even work out a modification with one's lender.
Source : The Tennessean, "Foreclosures slow on high-priced homes ," Bobby Allyn, April 1, 2012.
]]>The prediction is hopeful, and follows a year of already substantial improvements. In 2011, the number of bankruptcy filings decreased 12 percent after improvements were seen in real estate and labor markets. The credit rating agency has predicted an additional decline of four to five percent for 2012 as the economy sees some additional improvements.
]]> Decreased spending and increased saving by consumers and stricter lending standards by banks certainly factors into the improved numbers. One factor that may limit the decrease in bankruptcy filings in 2012, though, is relaxed underwriting standards on the part of banks, which are expected to give consumers greater access to bigger credit lines.Interestingly, credit card delinquencies and charge-offs dramatically decreased last year. The latter, as our readers probably know, refers to late payments. But contrary to popular misconception, credit card charge-offs does not refer to debt cancellation. Credit card companies typically charge-off debt which is over 6 months delinquent. At that point, the debtor receives a ding on their credit report and the debt is sold to a collection agency that may eventually sue for payment.
Credit card charge-off stay on one's credit report for 7 years, and can get in the way of purchasing a home, a new car, and perhaps in obtaining a job.
Credit card debt is one of the easiest types of debt to eliminate through bankruptcy. Those who carry the heavy burden of such debt often consider bankruptcy as a means of helping them get back on track.
Source : Marketwatch, "U.S. personal bankruptcies to fall further: Fitch ," Mia Lamar, April 3, 2012
]]>A recent bankruptcy filing for a former Tennessee Valley Authority Police employee may be thrown out due to irregularities that were spotted by a bankruptcy trustee. The female former TVA employee is accused of several crimes including bankruptcy fraud and falsifying invoices.
]]> The story begins in 2008 when the woman allegedly began charging non-work related purchases to her TVA credit card. Then in 2009 she supposedly began having an affair with a fellow TVA employee. According to a news report, the woman gave more than $100,000 in gifts to her married colleague. To pay for the gifts, she is accused of using her TVA credit card and faking invoices related to her purchases.In addition, the woman supposedly borrowed money from old friends and relatives to make payments on other loans. The authorities believe that it is when she could no longer keep up the ruse, that she declared bankruptcy in 2010.
In a Chapter 13 bankruptcy, there is a trustee who is charged with paying creditors, and the individual pays the trustee an amount that is agreed upon in bankruptcy court. The trustee in this case noticed that the woman's financial statement was not consistent. The trustee eventually discovered the personal loans, that apparently had not been declared, and the false purchases using TVA resources.
Obviously, filing for bankruptcy is intended for people who are in debt for legitimate reasons. The woman accused of bankruptcy fraud is scheduled for sentencing on May 30.
Source: knoxnews.com, "TVA employees' tryst ends in federal charges," Jamie Satterfield, March 15, 2012
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