Bankruptcy Law Blog

Tuesday, July 19, 2016

Consumer Debt on the Mend

How can I improve my FICO score?

In the wake of the financial crisis of 2008, many consumers saw their credit scores fall into the subprime zone with FICO credit scores in a range from 300 to 599. Now, the percentage of subprime borrowers is hovering at 20 percent, which is the lowest level in over 10 years. By comparison, in 2010 that figure peaked at 25.5 percent as mortgages, credit cards and other consumer debts went unpaid, and this prompted banks to tighten lending standards.

There are a number of factors that are contributing to the improvement of credit scores.

Read more . . .

Tuesday, June 28, 2016

What Does That Really Mean? Common Bankruptcy Terms Explained

What Does That Really Mean? Common Bankruptcy Terms Explained 

When the attorneys at our firm talk with someone who is thinking about filing bankruptcy, or someone who is already going through the bankruptcy process, we try to talk like normal humans rather than the legal mutants we are.

Read more . . .

Thursday, June 23, 2016

Beware of Payday Lenders

What is the government doing to rein in payday lenders?

The Consumer Finance Protection Bureau recently proposed new rules aimed at bringing payday lenders and other short-term credit providers under federal jurisdiction. Consumers who are strapped for money often use these lenders as a short-term fix, but invariably wind up with long-term problems and falling into debt traps. While these lenders are currently regulated by the states, borrowers are often the target of lending abuses.

"Too many borrowers seeking a short-term cash fix are saddled with loans they cannot afford and sink into long-term debt," said CFPB Director Richard Cordray.

What are Payday Loans?

Payday loans are small, short-term loans of about $350 that are supposed to be repaid when a consumer gets his or her paycheck.

Read more . . .

Tuesday, May 31, 2016

The Affect of Loans on Credit Ratings

How do loans affect your credit rating?

In understanding how your loans affect your credit rating, it is important to grasp the differences among various types of debt. Almost everyone in our society lives with some debt. Typically, even very wealthy people purposely carry some debt because they understand the value of being creditworthy and the financial advantages of paying off some things over a prolonged period of time. The rest of us usually become aware early in our lives that our credit rating will affect us when we attempt to make significant purchases, such as a car or a home, and that it is in our own best interests to maintain a good credit score.             

Types of Debt

Debt is characterized into two primary types: secured and unsecured.

Read more . . .

Monday, May 16, 2016

How to Stop a Wage Garnishment

Does filing Chapter 7 bankruptcy stop a wage garnishment?

Many individuals who find themselves unable to pay their debts face the potential of having their wages garnished. A wage garnishment is a court order directing an employer to withhold part of an employee's earnings and pay it directly to a creditor until the debt is paid off.

In Alabama, most creditors need to obtain a court judgment stating that you owe them money in order to obtain a wage garnishment. Moreover, if you lose a lawsuit and a money judgment is entered against you, the party that prevailed in the lawsuit can also garnish your wages. Your wages can be garnished without a judgment, however, for unpaid income taxes, court ordered child support, support arrearages, and defaulted student loans.

Read more . . .

Saturday, May 7, 2016

Law Student Allowed to Discharge Bar Study Loan

Can you be relieved of any education related loans in bankruptcy?

Student loan debt is a overwhelming problem in this country.  In fact, it has been calculated that the average person has approximately $28,950 in student loan debt to pay back to the government.  Those who pursue careers as professionals, such as physicians and lawyers, often have a much greater amount than that.  Some have hundreds of thousands of dollars in loans.  Unfortunately, student loan debts are generally considered nondischargeable in bankruptcy (with certain exceptions).
Read more . . .

Monday, April 25, 2016

Foreclosures Continue to Plague Calhoun County

Why do foreclosures remain stubbornly high is some parts of Alabama?

The so-called Great Recession of 2008 is slowly fading into the rearview mirror of the nation's psyche. In Alabama and across the nation, the financial crisis resulted in a number of homeowners losing their homes through foreclosure. While foreclosures in the state are not as widespread as they were during the height of the housing market collapse, some residents of Alabama still face the potential of losing their homes.

Foreclosures in Calhoun County

One particularly hard hit area continues to be Calhoun County, where home Read more . . .

Wednesday, March 30, 2016

Credit Card Debt: An Embarrassment, But Not of Riches

Who holds the highest revolving debt in the United States?

Most of us are well aware that revolving debt, including credit card debt, home equity loans and personal lines of credit, has risen sharply in this country. For many of us, this is a very personal issue since our own revolving debt is frighteningly high. According to a study by ValuePenguin, a New York-based financial company, by December of 2015, revolving debt had risen to $936 billion, up from $930 billion the month before. Credit card debt has reached its highest peak since the 2009 recession.

Ferreting Out the True Statistics

The study showed that average households in the U.S. now carry $5,700 in debt. While this may sound like a manageable amount, unfortunately, the reality is that the lowest income families and individuals are carrying the highest debt load.

Census Bureau and Federal Reserve Board reports differentiate credit card debtors into two categories: transactors, who pay off their credit card charges monthly and revolvers who carry credit card debt balances from month to month. It is the former who average the $5,700 amount in debt. For the revolvers, or balance-carrying households, the average amount of debt is $15,779. These debtors are also most likely to miss payments and are carrying their debt at interest rates as high as 18 percent.

These disturbing statistics point out the tail-chasing quality of credit card debt. Those who are least able to pay off their debts are paying the highest interest rates to begin with. As they make only minimum payments and sometimes miss payments, they accrue further fees and their debt becomes more and more insurmountable.

The Stigma of Debt Leads to Deception

No one wants to be in debt. In fact, there is such great stigma attached to being in debt that a great many people lie about how much money they actually owe. According to government data, there is an enormous discrepancy between how much lenders report lending ($683 billion) and how much borrowers report borrowing ($268 billion).

The figures show that people are more prone to lie about their credit card debt than about their mortgages or student loans. Apparently, there is far less stigma attached to borrowing to purchase a home or an education than to simply buy "things." According to NerdWallet, a personal finance information service, 70 percent of Americans believe that credit card debt is more shameful than any other type.

While, of course it is best to pay down your debt, paying off your highest interest credit cards first, in many situations this is impossible because of medical costs, for example, or job loss. If you have become overwhelmed with personal debt and are considering filing for personal bankruptcy, you should contact a reputable and experienced bankruptcy attorney to help you consider your best options.

Monday, March 21, 2016

Bankrupt Rapper 50 Cent Being Probed for Financial Misconduct

Curtis James Jackson III, aka, 50 Cent, the infamous rapper who achieved commercial success in the music industry after running afoul of the law back in the day, may be in trouble again.

Jackson burst onto the music scene back in 2003 with a hit rap song "In Da Club," went on to sell more than 22 millions CDs and acted in a few films. As he acquired wealth, he even bought a 21-bedroom mansion with a home movie theatre and 8-car garage in Connecticut, formerly owned by one-time boxing legend Mike Tyson.

Somewhere on the road to riches, it seems 50 Cent took a wrong turn, as he filed for bankruptcy last July. The circumstances surrounding the bankruptcy are also curios as Mr. Jackson filed for Chapter 13 protection after he lost a lawsuit regarding a sex-tape dispute in which the plaintiff was awarded $7 million. He is also involved in a multi-million dollar dispute with former business partners involving headphones.

Since his filing, it has been reported that 50 Cent posted pictures on social media sites showing him leading a lavish lifestyle by flashing piles of cash. Now, a Justice Department watchdog recently filed documents in U.S. Bankruptcy Court in Hartford, CT., saying the social media posts are "potential evidence of serious misconduct."

What is Chapter 13 Bankruptcy?

Chapter 13 is a type of bankruptcy that allows individuals who are struggling with debt to seek relief through the court. In this bankruptcy filing, an individual uses his or her income to pay some or all of what creditors are owed over time -- from three to five years, depending on the amount of individual's debt and income. In return, property can be retained by the person seeking relief. The court must approve the repayment plan and also determine that there is enough income to meet the payment obligations under the plan.

Financial Accountability

In the curious case of 50 Cent, the federal watchdog contends the perception of Jackson's lavish lifestyle requires financial accountability. This comes on the heels of the bankruptcy court judge ordering him to explain the social media posts in person. Since filing for bankruptcy in July, Mr. Jackson has posted photos that show piles of cash his couch and refrigerator. A Justice Department official reportedly said, the pictures are “openly contemptuous of the bankruptcy code and process.”

In short, the Justice Department has asked the judge to appoint an examiner to determine how much money 50 Cent has made since the bankruptcy filing and whether he has accurately reported his income. The facts of this case are rather curious, and it is uncertain what will become of 50 Cent's piles of cash. For the ordinary individual who is facing problems paying his or her debt, however, a bankruptcy attorney should be consulted to explore the options that may available.

Wednesday, February 24, 2016

HGTV’s Kitchen Cousins File for Bankruptcy

Can debts incurred by fraud be discharged in bankruptcy?

We’ve all seen them. Home improvement shows in which a contractor or decorator comes in to transform a person’s house into his or her dream home. Just turn on HGTV and you will most likely find one playing right now. What seems like a dream come true, however, can become a nightmare if the renovation or redecoration is botched. In this situation, the contractor or decorator may be liable, but what if he or she doesn't have the money to pay the judgment? Well, that is where the bankruptcy court comes in, as they did in a case involving a notable pair from HGTV.

The Kitchen Cousins, John Colaneri and Anthony Carrino, are well known for transforming kitchens on HGTV. Earlier this year, however, an arbitrator found that they had botched a renovation and that they were liable to the owners for $860,000. Some of the damages were increased because the arbitrator found that certain consumer fraud laws had been broken during the renovation process. 

Four days later, the cousins filed for bankruptcy. The owners of the home then decided to file a claim with the bankruptcy court asking for the debt to be considered nondischargeable. They claim that the debt was incurred by fraud and that the cousins should be held liable for it. It seems that the cousins have begun preparing for the worst-case scenario by liquidating some of their assets.

When a debt is incurred by fraud, it may be deemed nondischargeable by the bankruptcy court. In order for a court to determine whether the debt should be paid, the creditor must file a claim with the court. It is then in the hands of the court to decide whether the debtors should be released from liability or whether they should be forced to repay the debt. It is worth noting that just because fraud has been found by another court, it does not mean that the bankruptcy court will find that fraud existed. The bankruptcy court must make its own decision in the case.

If you are contemplating bankruptcy, you shouldn’t do so alone. Contact a Mobile and Baldwin, Alabama bankruptcy attorney today. 

Thursday, February 18, 2016

Stopping Foreclosure with a Bankruptcy Filing

Can I save my home by filing for bankruptcy?

Since the Great Recession of 2008, many individuals have had problems keeping up with their mortgage payments. In some cases, mortgage lenders have cut deals with borrowers by modifying the loan or agreeing to a short sale. However, most homeowners are tied to the terms of the mortgage contract and the provisions regarding default and foreclosure.

What is a mortgage foreclosure?

A foreclosure occurs when a homeowner fails to make full principal and interest payments on a mortgage. If a borrower misses a payment and does not pay it within one month, he or she is in "default." The lender will notify the borrower that the payment must be made in full. If the mortgage remains delinquent after 3 to 6 months, the lender can initiate a foreclosure proceeding, which allows the lender to evict the homeowner, seize the property and sell it at a public auction.

Ultimately, a foreclosure will cause long-lasting damage to your credit rating. There are alternatives to foreclosure, including loan forbearance or a deed in lieu of foreclosure, where title to the property is signed over to the lender. However, if these arrangements are not available, a borrower may be able to stop the foreclosure process by filing for bankruptcy.

How Filing for Bankruptcy Can Stop a Foreclosure



The new bankruptcy laws make it difficult for an individual to file a Chapter 7 Bankruptcy. However, a Chapter 13 Bankruptcy petition may enable you to set up a plan to pay the mortgage payments that are in arrears. The homeowner and lender can agree to a time period for the repayments to be made, but the delinquent payments must be made simultaneously with the current payments. Provided that all of the required payments are made according to the repayment plan, you can avoid foreclosure. In some cases, a Chapter 13 filing may also eliminate payments of second and third mortgages as bankruptcy courts may deem these to be unsecured debt, depending on the amount of equity in your home.

Although a bankruptcy filing may stop a foreclosure, it is not a silver bullet, and it can seriously damage your credit score. If you fail to make payments that have been agreed upon, the lender can still foreclose on the property. Ultimately, deciding to go bankrupt is a serious decision that requires the advice of a qualified attorney. 

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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”

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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”