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Bankruptcy Law Blog

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. 


Thursday, January 28, 2016

Relief on the Horizon for Student Loan Borrowers

Can student loans be included in a bankruptcy petition?

Discharging student loans in a bankruptcy petition have been restricted by law. However, recent cases suggest that appellate courts could may craft a broader definition of how much distress a borrower needs to be in before discharging student loans.

As has widely been reported, the amount of outstanding student debt has risen dramatically in the last decade. In 2005, the US Court of Appeals established a standard for discharging student loan debt in a bankruptcy. Since then, lower courts have ruled on the issue opening the door to the possibility of the Supreme Court weighing in on this issue.

Currently, the law requires a borrower prove paying student loans would cause an “undue hardship” to have it discharged. But different courts have adopted different definitions of this standard. For example, the eighth circuit (which covers states in the middle of the country), applies a different, less stringent test - the totality of circumstances. This test takes “a broad-based view” about whether the debtor’s circumstances rise to the level of undue hardship,

On the other hand, most appeals court throughout the country apply “the Brunner test” to determine whether a debtor is eligible to have student loans discharged. Among other things, the test requires a debtor prove a minimal standard of living cannot be maintained if the student loan must be paid and that a good faith effort has been made to repay the loans.

A current case working its way through the first circuit, however, could see the “totality” test applied which would divide the appellate courts’ rulings. So, the Supreme Court might be compelled to intervene in order to set a national standard.

For some borrowers, discharging student loan debt in a bankruptcy could provide much needed debt relief. In fact, one-in-four student loan borrowers is in default. But the legal impediments remain as borrowers continue to resist getting student loan debt discharged in a bankruptcy petition. To obtain help in choosing the best method for handling your student loan debt, you should consult with an experienced bankruptcy attorney for advice and guidance.  


Friday, January 22, 2016

Trump Pushed to the Brink of Personal Bankruptcy in Past

Is personal bankruptcy only for the middle class?

When you think about personal bankruptcy you probably conjure up images of middle class people struggling to make ends meet.  While personal bankruptcy is available to help people in that situation, others, who are much wealthier and well known, also take advantage of this process.  Looking for a fresh financial start, celebrities and business people alike have filed for, or come close to filing for, personal bankruptcy.  Some of these individuals include entertainer Michael Jackson, Boxer Mike Tyson and businessman and presidential candidate Donald Trump.

Before considering presidential office, Donald Trump spent years amassing a fortune through real estate and other business deals.  He is estimated to be worth approximately $4 Billion.  But, in the 1990’s, Trump almost saw it all flash before his eyes.  He was even faced with a possibility of personal bankruptcy.  At this time he owned various property holdings, companies and other assets.  He and his companies owed approximately $3.4 Billion that they could not repay.  Creditors could have seized many of his assets and the worst part being that the Donald had personally guaranteed about $830 Million of the debt.  These debts forced him to the brink of personal bankruptcy.  Although Trump has filed for business bankruptcy on a number of occasions, he narrowly escaped personal bankruptcy when he struck a deal that allowed him to pay back these debts over a number of years.  He also used money from his holdings in Atlantic City, New Jersey to keep him afloat during this time.  In fact, three of his casinos filed for business bankruptcy.

Bankruptcy can be personal or business, simple or complex.  If you are facing personal bankruptcy you need experienced counsel by your side. 

 


Thursday, December 24, 2015

Dealing with Too Much Credit Card Debt

When credit cards first came into use, for many they seemed like a lifeline, enabling the purchase of necessary items before the money was in the bank. All too quickly, due to a combination of consumer overuse and the increasingly exorbitant interest rates charged by credit card companies, that lifeline put many in a stranglehold.

If you find yourself overwhelmed by credit card debt to the point that your financial (and perhaps even emotional) life has become unmanageable, now is the time to take some serious steps toward economic stability. It may help you to know that you are far from alone. According to debt statistics released this year, the average U.S. household now carries just over $16,000 work of credit card debt, a number that, unfortunately, continues to climb.


Measures to Help You Regain Control

The first step is usually the hardest one:


Stop Adding to Your Accumulated Debt


While it may be difficult to resist temptation, it is imperative to stop adding to your mountain of debt as you try to get out from under it. Cut expenses wherever you can. Stop using credit cards entirely. If you have been going through a rough patch during which you have needed to pay for essentials, like utility bills, with credit cards, try negotiating a payment plan with the company in question. Another possible solution is downsizing your home, car, or other expenses, or refinancing your home.


Negotiate a Lower Credit Card Interest Rate


Credit card companies don't want you to default, so they are often willing to negotiate a lower interest rate so that you can comply with their demands. Not all credit card companies will negotiate such a reduction in interest, but it may be possible to shift your current balance to a card with a lower (even a 0%) interest rate.
Work Out a Payment Plan

If you are unable to pay the minimum amount of your credit card balance even at a lower interest rate, see if you can't get a deferment on your payments for some period of time, or negotiate a new payment plan. Most companies would prefer having you pay some regular amount, even a small one, rather than defaulting altogether.

Going on a Spending Diet


As with changing any bad habit, one dramatic alteration can sometimes kick-start the process. Some people find going on a "spending diet" for a month or two can be rewarding. Deciding not to purchase anything over a certain amount can also be helpful. Make a firm decision to use the saved money to pay down the existing debt.

Earning More While You Spend Less


It stands to reason that if you find a way to earn more money, you will be able to pay off your debt more quickly. Even a relatively small addition to your income, when applied to your existing debt, can make a significant different over a period of time.

Other methods of relieving overwhelming debt include filing for personal bankruptcy. To obtain help in choosing the best method for handling your credit card debt, you should consult with an experienced bankruptcy attorney for advice and guidance.


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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.”