In a prior post, we discussed the chapter 7 bankruptcy request that was made by one individual in serious need of help. That individual is a single mom of 14 children who was granted the name 'Octomom' by popular media after she gave birth to octuplets in January 2009. Octomom's bankruptcy case was thrown out of court this week after she failed to file the necessary paperwork requested by the court.
]]> The single mom was given a Monday deadline to file certain financial documents that were not included with her filing. When she failed to file the documents and the deadline passed, the bankruptcy judge not only dismissed her chapter 7 case on Tuesday morning but also lifted the temporary stay on her foreclosure proceedings.A total of 21 individuals and businesses were listed as creditors in her bankruptcy filing. Now that the case has been dismissed, each and every one of those creditors can once again seek the full amount of the debt she owes them. While it is clear that there is a very limited amount of funds, it does not meant that creditors have no viable options. For example, in the single mom's case, her mortgage lender can proceed with the foreclosure action.
Source: The Orange County Register, "'Octomom' bankruptcy thrown out of court," Doug Irving and Lou Ponsi, May 15, 2012
]]>According to a recent study, medical bills increased 50 percent from 2001 to 2007, and most of the people who filed were middle class homeowners. In fact, 78 percent of those people who filed for bankruptcy already had health insurance. Although many factors may contribute to financial difficulties, one such factor might be unexpected gaps in health insurance coverage. Others may be facing hardship because they lost their jobs after being too sick to work.
]]> In Florida, where a significant portion of the population requires significant or long-term care, bankruptcy provides a multitude of options. Depending on your situation, you may actually find bankruptcy to be the best course of action or offer the most protections. For example, a Chapter 7 filing allows an individual to keep certain exempt property, although the value amount which can be claimed as exempt varies from state to state. In addition, certain types of debt may be eligible to be legally discharged by the Chapter 7 proceeding.One thing is certain: bankruptcy laws are extensive. If you or a loved one is in financial difficulty, you should consult with a professional to learn about all of the different options available to you. The best solution for your needs may just surprise you.
Source: go banking rates, "Don't let your medical rates bankrupt you," Laura Edgar, May 8, 2012
]]>The amount of debt shouldered by students has prompted many in Florida and other states to seek bankruptcy relief at an early age. We have also said in past posts that student loan debt is generally not dischargeable in bankruptcy; it would be helpful to discuss that statement a little bit further.
]]> First, we use the word "generally," because there are some rare instances in which student loan debt could be discharged in bankruptcy. However, there are very specific requirements and proof requisites that make doing so somewhat complicated.Second, there are two types of student loan debt. There are commercial or private student loans and federal student loans. Commercial loans are ones that are taken out with a private lender and based on your credit. The Free Application for Federal Student Aid or FAFSA is the first step for obtaining a loan through the federal student loan process. Repayment of each different type of loan has different rules, restrictions and repayment terms or options.
Third, student loan debt is not just a personal issue for many graduates, it is a national issue. In fact, legislators have already introduced two bills that would address the ability to discharge commercial student loans during the bankruptcy process.
Last, these intricate details and differences are precisely the reason that a person facing financial problems should seek the assistance and advice of an experienced bankruptcy attorney. Having an experienced professional on your side is the best way to navigate what is often a complex and confusing situation.
Source: cbs, "Student debt tops $1 trillion," May 1, 2012
]]>Now, after incurring approximately $30,000 in unpaid rent and another $1 million in debt, the single mom has filed for Chapter 7 bankruptcy. The mother hopes to obtain a fresh start through the liquidation process -- something she believes is will be in the best interest of her children.
]]> Aside from the rent owed, the mother's debt includes money she borrowed from her father, unpaid balances on her DirecTV account, money owed to the city for water usage and tuition due to a private educational center several of her children attended.Prior to having the octuplets, the mother had paid the family's bills with public assistance. After their birth, the mother tried to make ends meet by moving into her mother's three-bedroom home and making deals with media outlets, tabloid sources and other investment opportunities. Not only did the mother's debt rapidly increase after the second set of births, but she faced losing the roof over her head when her mother's home went into foreclosure.
Having 14 children does not leave a lot of room for an average nine to five job, but it did not mean that she was going to agree to every opportunity that came her way. The mother turned down a million-dollar deal to appear in an adult film in 2009, something the mother felt was crossing the line. According to the documents filed in the federal court, the mother claims approximately only $50,000 in assets.
Octomom's situation may fall on the extreme end of circumstances, but it certainly is a situation that Chapter 7 bankruptcy was designed to address.
Source: cbs news, "'Octomom' files for bankruptcy, owes $30K in rent, up to $1M in debt," May 1, 2012
]]>One couple from Buffalo County, Nebraska, now are currently facing bankruptcy fraud charges after federal prosecutors said that they attempted to structure income so that it would not be received until their bankruptcy was closed.
]]> According to the federal prosecutors, the wife worked for the city, earning commissions on grants during 2004 but did not submit the bill until several years later. By delaying submission, prosecutors say that the $159,000 would not be paid until the bankruptcy filed in 2003 was closed.A state auditor allegedly caught the irregularity during an audit of the county's records. The payment caught his attention because he said that the commission payment should have been structured differently because the grant was allocated to several counties, not just the one that the wife worked for. The auditor then dug further and found that the couple had filed for Chapter 12 bankruptcy -- a less common type of protection for family farms.
It is not our job to judge the intent of this individual couple, whether the delayed submission was simply a mistake or a planned action. What we learn from this situation is that bankruptcy is complicated and the consequences of our actions -- even small mistakes -- can have an impact on the process. Having an experienced bankruptcy attorney on your side will prevent these mistakes, and you can help by completely disclosing every possible source of income or debt to them.
Source: Omaha World-Herald, "Buffalo County board chairman, wife indicted," April 18, 2012
]]>This situation has caused many students many sleepless nights as they worry about how they are ever going to pay off their college debt, forcing a number of them into bankruptcy -- even though student loan debt is generally not dischargeable. Most students can only afford the 25-year repayment plan or an income-based repayment. Imagine paying off your own college debt and at the same time taking out loans so your children can go?
]]> Some students have banded together in a class action claiming that not only are they paying off huge principal debt, but that the lenders are making a pretty penny at their expense. According to a recent lawsuit, Citibank, Discover Bank and The Student Loan Corporation falsely make students believe that their monthly payments are being lowered when in fact, the principal is being reduced but the lender is earning more interest income than they should be by extending the loan period.The lead plaintiff claims that not only are the parties "engaged in a scheme to collect additional interest at the expense of borrowers of student loans," but that the corporations make it nearly impossible to inquire about the status of a loan. We all probably become frustrated with automated phone systems, but the plaintiff in this case said the automated systems make it nearly impossible to reach a live person. Then, once you do, the operators give the student inconsistent answers to the questions.
Many students simply send in their monthly payment without asking why this amount? What am I paying, principal or interest? To most, student loan repayment schedules, terms and interest rates can be confusing. If you are facing financial trouble, an experienced attorney can help you understand your debt -- catching irregularities like the ones that led to this class action -- and find solutions that will work for your individual situation.
Source: Courthouse News Service, "Sneaky Banks, Student Loan Corp. Keep Students in Debt, Class Claims," Adam Klasfeld, April 30, 2012
]]>The Chapter 7 bankruptcy process was recently chosen as an option for relief by a music industry business manager. The business manager was a former business manager for the music group Black Eyed Peas. The business manager recently admitted to the fact that he did not file income tax for many of his business clients, including the Black Eyed Peas music group.
]]> The business manager's bankruptcy filings stated his approximate debt is between $500,000 and $1 million, and he reported owing more than $1 million in overdue taxes. As the business manager for the Black Eyed Peas, he was entitled to 5 percent of the music group's income, which was based on earnings from touring revenue, merchandise, sales and endorsements.It is reported the business manger's 5 percent of the music group's income should have provided him with multi-million dollar earnings. Although this is the estimated amount he should have earned, his bankruptcy filings show he is broke. The business manager's employment with the Black Eyed Peas has ended and no further status has been provided regarding the pending Chapter 7 bankruptcy.
Source: The LA Times, "Former Black Eyed Peas business manager files for bankruptcy," Harriet Ryan, April 16, 2012
]]>The terms of student loan debt have changed due to amendments in the federal bankruptcy code. The bankruptcy code is governed by federal laws, so Florida students have similar regulations in regard to bankruptcy as students in every state.
]]> Student loans are a common reality for many Florida graduating students. Student loan debt can become difficult to navigate through life's many challenges. Student loan debt does not take into account potential unemployment, low pay or medical bills. When these life events arise and couple with the student loan debt, many people seek personal bankruptcy as a form of relief.Many of these people seeking relief through bankruptcy are surprised that their student loan debt survives the bankruptcy process. In fact, those who are behind in their student loan payments often see their tax refunds seized and wages or other forms of income garnished.
Many people who file personal bankruptcy are unaware of the restrictions involving student loans, potentially in part to changes in the bankruptcy code. Before 1998, under the bankruptcy code student loan debt could be discharged if the debt was more than seven years old.
Now, student loan debt cannot generally be discharged through the bankruptcy process. The current federal bankruptcy code will not permit the discharge of student loans unless exceptional circumstances exist. An experienced Florida bankruptcy attorney can take into consideration every circumstance that makes up the whole picture and help those with student loan debt find relief even if some of the that debt is not dischargeable.
Source: ajc.com, "Return to sensibility on student loan debt," Jonathan Ginsberg, April 10, 2012
]]>We know that the sales are beneficial to the bank, but what about the individual homeowner? A short sale can be very beneficial to a homeowner whose house in underwater -- they owe more on the mortgage than the property is worth. The process can help them avoid foreclosure entirely, and some banks have even offered cash inducements to select homeowners. Some homeowners have received inducements as high as $35,000.
]]> Although a short sale can be very beneficial to both homeowners and lenders, there are some important factors homeowners should be aware of before agreeing to a short sale. First, it is important to remember that the balance of the mortgage debt after the sale does not automatically disappear. A lender may not agree to release the homeowner from the entire promissory note, meaning that they will attempt to collect the balance -- something that lenders do not always make clear.There are also certain tax consequences after a short sale. If a lender does agree to release the homeowner from the promissory note, the forgiveness of debt becomes taxable income that has to be reported to the IRS. Some people already in financial trouble may not be able to come up with the funds necessary to pay the tax.
If you are considering a short sale, discuss your situation with a bankruptcy attorney experienced in foreclosures and short sales. Their guidance will ensure that you are doing what is best for you and not the bank.
Source: Bloomberg, "Short Sales Surpass Foreclosures as Banks Agree to Deals," John Gittelsohn, April 17, 2012
]]>One proactive solution comes by way of a short sale. A short sale essentially allows a homeowner to put the house up for sale and accept an offer that is below the amount owed on their mortgage. The bank must approve any offer made by a prospective purchaser, and in the past have been somewhat reluctant to do so. But, according to a recent Jacksonville-based company survey, their attitude may be changing.
]]> The survey showed that 23.9 percent of home purchases made in January were classified as short sales. That number is up from 16.3 percent in January 2011. Another indication of the attitude change is that foreclosure sales have gone down from 24.9 in January 2011 to 19.7 percent this past January."It's a fairly recent phenomenon that short sales have been increasing," said a vice president with the Jacksonville-based company, Lender Processing Services Inc. Lenders come out on top in many short sale scenarios, recouping more money than if the house was sold as a foreclosure. In fact, when the survey was taken, homes sold in foreclosure returned an average of 29 percent less than comparable properties, while short sales on average sold for only a 23 percent discount.
So why the reluctance to agree to sales? One reason may be that many lenders have only recently hired and trained the necessary number of staff members to keep up with demands. We know that short sales help the bank, but how do they help the individual? Check back for the discussion in our next post.
Source: Bloomberg, "Short Sales Surpass Foreclosures as Banks Agree to Deals," John Gittelsohn, April 17, 2012
]]>Collection actions can include, but are not limited to, phone calls and letters demanding payment for the debt. Although this is standard practice after a debtor has filed bankruptcy, some creditors do not abide by the injunction and illegally contact the debtor. A Florida resident, who has filed bankruptcy and received creditor protection, was involved in this exact situation.
]]> The creditor in this situation called the debtor at least 38 times in regard to the debtor's outstanding debt. The debtor's bankruptcy petition was filed in a federal bankruptcy court in Florida, and the presiding judge did not let the creditor get away with violating the debtor's rights. The presiding judge ordered the creditor to pay $12,000 for violating the injunction. The amount the creditor was ordered to pay was to compensate for a combination of attorney fees and emotional distress to the debtor.This is not the first case in which this specific creditor has disregarded the protections provided to a debtor while in bankruptcy. It is also not the first time a court has reprimanded the creditor for such actions. The purpose of the legal injunction remedy for debtors who have filed bankruptcy is in part supposed to provide the debtor time to get their finances organized without harassment and to address the debts owed to creditors during the process.
Source: The Huffington Post, "BofA Allegedly Called Debtor 38 Times After He Filed For Bankruptcy," Alexander Eichler, March 30, 2012
]]>Warren Sapp filed for Chapter 7 bankruptcy protection after owing creditors in excess of $6.7 million. The debt accumulated as a result of bills, alimony and past due child support. In a Chapter 7 bankruptcy filing in Florida, most people who file this type of bankruptcy are relieved of most or all of their debt and not required to pay anything to their creditors beyond what can be recouped during the process.
]]> This type of bankruptcy usually allows the person who filed to keep their vehicle, home and certain other assets. It was reported Warren Sapp has assets that total approximately $6.45 million. Some of his assets include 240 pairs of athletic shoes worth approximately $ 6,500, a watch that has an estimated worth of $2,250 and a rug made of lion skin worth approximately $1,200. Documents indicate he lost his Super Bowl Ring from 2002 and a National Championship ring from 1991.The former NFL player's bankruptcy has been filed in South Florida in the U.S. Bankruptcy Court. The Chapter 7 bankruptcy filing is a liquidation bankruptcy, but does exclude protected assets. Once a bankruptcy filing has been initiated it can also stop creditor collection phone calls. It was not reported if Warren Sapp has filed the paperwork to receive an automatic stay to stop creditor calls, but this is an option after bankruptcy paperwork has been filed. Throughout this process, it will be determined what assets Warren Sapp will keep and what assets will be liquidated.
Source: The Sun Times, "Warren Sapp files for bankruptcy; assets include 240 pairs of Jordans," April 9, 2012
]]>Records from the U.S. Bankruptcy Court show the number of residents filing personal bankruptcy in Broward County has risen for the fourth consecutive month. The number of bankruptcy filings in Palm Beach County, Florida, has also risen in the last month.
]]> According to some economists and legal analysts, the continual increase in personal bankruptcy is linked to unemployment and credit issues. Unemployment and credit issues can also lead to foreclosure issues, which have also been reported as a primary reason for personal bankruptcy in Florida.Homeowners in this type of situation are often served with a foreclosure notice, which leads them to seek bankruptcy as a possible remedy. Although bankruptcy may settle financial obligations, filing bankruptcy with the Federal court system is not completely free. Many people seeking to file bankruptcy choose to wait for their tax returns to afford to file for bankruptcy.
Since 2008, over 72,000 homes have been repossessed in the Broward and Palm Beach Counties. The amount of repossessions is compounded by the fact than almost half of the houses in these areas have a mortgage that is twice the amount of the value of the house. This can be a discouraging scenario for home owners.
Homeowners who are facing financial strains, which include decisions about their mortgage, may be able to find resolutions through the bankruptcy process. The various types of bankruptcy and debt relief can help homeowners make prudent choices about their financial future.
Source: The Sun Sentinel, "Personal bankruptcies up in Broward County in March," Arlene Satchell, April 2, 2012
]]>Record levels of civil penalties were issued by a federal judge this week for violations of the Federal Trade Commission Act and the Telemarketing Sales Rule. The order required two individuals to pay the $30 million issued in penalties as well as forfeit approximately $1.1 million in profits gained as a result of their violations.
]]> According to court documents, the two individuals led a scheme operating under the name "Cash Grant Institute" that made over 2.7 million calls promising consumers that cash grants would be available to them in amounts up to $25,000 to help eliminate debt. The individuals were then directed to online sites that made similar promised that local, state, federal and even money donated by wealthy individuals funded the grants.Consumers were directed to submit a fee on the websites that promised "free money from the government." Once a fee was submitted on the websites, the consumers learned that the process was not as easy as promised and that many would not be eligible for official grants from the government.
State and federal programs do exist for individuals in need of financial assistance. However, an internet website promising quick answers for a fee is a dangerous way to deal with the issue. Consulting a Florida bankruptcy attorney experienced in helping individuals in debt is the way to protect your interests and ensure every step of the process is handled accurately and effectively.
Source: Collections & Credit Risk, "FTC Case Against Robocallers Leads To Record $30M In Penalties," April 2, 2012
]]>Recently, a scammer addressed this issue of fixing others bad credit. The scammer now faces jail time for taking advantage of those in need. Florida residents are not exempt from the potential of being targeted by a scam artist.
]]> The scammer targeted those with bad credit with a promise to fix their credit. The scammer is a veteran to this type of behavior and was previously involved in a scheme involving unclaimed funds in Florida.To complete this scam, the scammer used two fake companies and submitted fake client information. The scammer submitted fake client information to Experian and TransUnion, which are two credit bureaus. The fake information stated the clients received extended credit and repaid loans quickly. These falsities allowed the client's bad credit score to get upgraded. Through the two fake companies, the scammer was able to acquire access to a computer system, as a furnisher, to erase client's bad credit information. The term furnisher refers to a business that provides data to credit bureaus.
The customers who used this service were able to open $9.3 million in loans. The loans were opened because the companies relied on the credit bureaus for credit history and the credit bureaus had been given false information. The scammer had thousands of clients in this scheme and each of the clients paid anywhere from hundreds to thousands of dollars to fix their bad credit scores. The scammer made over $1 million in the fees collected from the clients. The scammer pleaded guilty and is required to pay restitution for the $9.3 million in loans.
Source: New York Daily News, "Credit fixer crook must pay $9M," Robert Gearty, March 21, 2012
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