Suleman, who the media has dubbed "octomom," filed for Chapter 7 bankruptcy in Orange County last week. The woman reportedly has around $1 million in debt and owes more than $30,000 in back-rent. In federal court filings, she reported her assets to be worth $50,000.
]]> The mother has said that filing is the best option for her and her young children. Chapter 7 bankruptcy protection does indeed offer a fresh start after discharging most if not all debts. Suleman has said she tried to dig herself out of debt by cutting deals for media interviews and magazine spreads but that she simply could not earn enough money to get her expenses under control.She reportedly owes more than 20 times her net worth to the city's water department, DirecTV, her father, Sylvan Learning Center and Whittier Christian School.
While it is easy to imagine that a single mother of 14 might come upon hard financial times, more conventional families are finding themselves in need of bankruptcy relief, too. Starting a family is a major expense and the costs can be unpredictable. During the country's recent economic struggles, many family breadwinners are finding themselves out of work while a spouse and children depend on them.
It is important that those who are struggling with debt know that there is a light at the end of the tunnel. Bankruptcy protection exists in the U.S. to offer people a fresh start, a clean slate. Many families succeed after taking advantage of bankruptcy protection.
Source: CBS News, "'Octomom' files for bankruptcy, owes $30K in rent, up to $1M in debt," May 1, 2012
]]>The couple claimed their assets total more than $833,000 however their liabilities total more than $895,000. Among their liabilities are $30,000 owed on one credit card and an additional $17,000 is owed to two different department stores.
]]> According to the couple's bankruptcy attorney, the judge tapped into his retirement accounts to pay down a large amount of the couple's debt before filing for Chapter 7 bankruptcy protection. The attorney went on to say that the couple did everything they possibly could to pay their creditors, but like so many other American's, they are simply under water.A Chapter 7 bankruptcy will allow the couple to discharge unsecured debt such as credit cards and department store credit accounts so they can concentrate on reorganizing their finances and get back on track. A trustee assigned by a bankruptcy court will determine which of the couple's assets are exempt and which are not exempt from the bankruptcy proceedings.
Once assets are inventoried and determinations made, the trustee will liquidate the non-exempt assets, such as their home, in order to pay down as much of their debts as possible. The remaining debt will then be discharged. Exempt assets include household items, furniture and most retirement accounts.
According to court documents, the couple's income dropped from a little over $271,000 in 2009 to $171,000 in 2011. A real estate agent has put the Wright's Rancho Palos Verdes home up for sale for close to $1.2 million. If it sells at this price it should cover their outstanding debts of $895,000 and leave them a little extra to make a financial fresh start.
Source: The San Francisco Chronicle, "Calif federal judge files for Chapter 7 bankruptcy," April 26, 2012
]]>This puts the burden on many parents to teach their children about managing finances. One way to teach children about the value of money and how to manage it is to give them an allowance. Allowances help children to develop spending priorities and how to separate needs from wants. It also enforces ideas about budgeting and saving. Of course, many adults need help with financial literacy, too. Bankruptcy and debt relief professionals, as well as community organizations, can direct people to many resources for this.
]]> Even those who are financially savvy can of course run into problems with debt. We are well aware that people who make informed and intelligent financial decisions can still end up in financial ruin do to an unforeseen even such as a medical problem or sudden loss of employment.Nonetheless, those who feel they may benefit from credit counseling or an increased knowledge of financial information should take it upon themselves yet this month to learn about these things. Sign up for a financial literacy course, check out a book on the topic from the library or make an appointment with a respected specialist in the field.
Those whose finances are in dire straits may wish to consult with a bankruptcy attorney about more immediate debt relief solutions. Such a professional should also be able to direct you to many financial literacy resources so that you will be well prepared for a fresh financial start.
Source: inaudit, "April Is Financial Literacy Month: Children Can Earn While They Learn," Kimberly Watson, April 26, 2012
]]>Industry professionals are calling for changes to the Chapter 11 process in order to make it easier for companies to utilize bankruptcy protection to keep their businesses alive and save jobs. The bipartisan American Bankruptcy Institute, a group made up of lawyers and financial professionals, is coming up with a list of recommendations to update the Bankruptcy Code's treatment of Chapter 11.
]]> A commission appointed by the American Bankruptcy Institute has not announced many of its proposals yet. It has said that it would like to include a process that would oust ineffective chief executives and company leaders during the filing process.The commission has argued that as it stands, the Bankruptcy Code is becoming less useful for many businesses. This is because the Chapter 11 process is simply too expensive for many small businesses. And large companies can sometimes file for creditor protection with Wall Street-brokered debt that is then traded in order for outside parties to obtain leverage in Chapter 11.
The commission is seeking ways to come up with solutions that will allow Chapter 11 to suit companies of all sizes from a variety of options.
As the Bankruptcy Code currently stands, small businesses in San Jose and San Francisco are often well-served by a Chapter 13 filing. Chapter 13 bankruptcy can provide cash flow to pull your business out of a rut, and it allows debt to be reduced or even eliminated. Business owners who are struggling with financial difficulties are wise to speak with a bankruptcy attorney about their debt relief and bankruptcy options.
Source: The Wall Street Journal, "Bankruptcy Leaders Call for Chapter 11 Overhaul," Katy Stech, April 19, 2012
]]>It was announced this week that the executive producer of the blockbuster hit "The Blair Witch Project" filed for Chapter 7 bankruptcy in a California court this month. Many are quite surprised by this, given what one imagines he made off of that one film alone. "The Blair Witch Project" made $248 million and it reportedly cost very little to make. The producer has also produced more than 10 projects since Blair Witch.
]]> The man reportedly has only $900 to his name, and $132,000 in debt. He owes the money to a variety of creditors, but the largest piece is made up of unpaid taxes due to the IRS, totaling $60,124.According to his court filing, he has $100 cash, $500 worth of furniture, $100 worth of clothing and $200 in sporting equipment. The Chapter 7 filing will likely allow him to keep most of this, as it is personal property.
Chapter 7 bankruptcy provides an automatic stay for foreclosure actions, repossession and wage garnishment and almost completely eliminates credit card debts, personal loans and medical bills, providing for a fresh financial start.
Source: TMZ, "'Blair Witch' Producer Files for Bankruptcy-I Have $900 To My Name," April 13, 2012
]]>Many financial professionals believe an increasing number of people are simply unable to pay their student loans. Educators, politicians, bankruptcy professionals and students are among those who are very concerned with this issue. Students in Santa Monica, California, were in for a rude awakening earlier this week when they gathered to protest tuition hikes their college.
]]> Dozens of students showed up uninvited to a trustee meeting Wednesday at Santa Monica College to object to a tuition increase, and they were greeted with pepper-spray from the police.Santa Monica College is a two-year community college, and such schools have a long history as a viable option for students who cannot afford a university education. Students at this school are upset about a plan that would allow students entry into required courses that are full--if they pay four times the normal tuition rate. The school would add additional sections of these classes in order to accommodate students who shell out $600 per course.
The college has said the pilot program is a way to fund state-required classes. Due to budget cuts, the school cannot currently offer enough sections of high-demand courses that students need to graduate. Critics, many of them students, say the program favors wealthy students and is in direct conflict with the traditional role of community colleges as an entry-point to the middle class.
This is clearly a difficult situation from either side, and emotions are running high for students who are worried about racking up debt. Although in most cases student loans are not dischargeable in bankruptcy, those who are struggling with student loans may learn about debt relief options that are available by consulting with a bankruptcy professional.
Source: Associated Press, "Students angry over pricey courses pepper-sprayed," Shaya Tayefe Mohajer," April 4, 2012
]]>However, there are cases where creditors violate the automatic stay by continuing to contact the debtor. This is illegal, and it is sometimes stopped with a cease and desist letter, but sometimes it is necessary to take the debtor to court. Recently, a judge ordered Bank of America to pay attorney's fees and damages for emotional distress after a bankruptcy filer experienced continued harassment from this company after filing.
]]> According to a news report, Bank of America called a debtor 38 times to ask about outstanding payments after the debtor had filed for bankruptcy protection. The case, which took place in Fort Myers, Florida, ended with Bank of America ordered to pay $12,500.In the past, Bank of America has been accused of sending debtors' information to collection agencies after bankruptcy protection has been filed.
It is very important to work with a reputable and experienced bankruptcy attorney to file for bankruptcy protection. Such an attorney will know if creditors are violating the law and how to seek legal recourse if necessary. Bankruptcy is an opportunity for a fresh financial start, and to free oneself from an overwhelming pool of debt and the accompanying creditor harassment. Those who file for bankruptcy should be granted the proper automatic stay under the law.
Source: Huffington Post, "BofA Allegedly Called Debtor 38 Times After He Filed For Bankruptcy," Alexander Eichler, March 30, 2012
]]>Economists at Columbia University, the University of Chicago and Washington University in St. Louis found that bankruptcy filings increase across the country when Americans begin receiving their tax refunds. This, they say, is because Americans need the refund money to pay the administrative fees related to a bankruptcy filing.
]]> It is true that the fresh start afforded by a Chapter 7 bankruptcy filing is not free. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act made it more expensive, and also mandated that filers must pay for their own credit counseling.However, people should not be scared away from bankruptcy by thinking that they cannot afford it. Experienced and reputable bankruptcy attorneys in San Francisco and Oakland do offer initial bankruptcy consultations for free. Such a consultation will give people an idea of exactly what bankruptcy will cost and what it will afford them.
For example, a Chapter 7 bankruptcy filing will allow a person to protect their major and personal assets, such as their home, car and clothing, and wipe clean much of their debt. It can put a stay on foreclosure proceedings and a final end to creditor harassment.
Source: Huffington Post, "Bankruptcy Filings Delayed Until Tax Refund Arrives," Bonnie Kavoussi, March 23, 2012
]]>The CDC survey found that not only is one in five Americans have difficulty paying their medical bills, but half of them actually are not able to pay any of their medical debt down. This survey is the first comprehensive study that the CDC has done on the issue. In fact, it involved 52,000 people and it may have been the largest study ever performed on the subject of medical debt.
]]> According to the CDC, lower-income Americans were three times more likely than those of higher income levels to struggle to pay their bills over the past year (the survey took place from January to June of last year).Because the CDC has not conducted any earlier study of medical debt, there is no conclusive data about how long so many Americans have had this crushing problem. The Center for Studying Health System Change has done multiple studies, and that group believes one in five Americans have had trouble paying medical bills since at least 2007.
That finding is interesting because both unemployment and the number of uninsured Americans have increased between 2007 and 2010, but one researcher surmised that the data probably has not changed because Americans have had to cut back on health care during the recession.
The results of these studies are concerning, and it is difficult to accept that many Americans may be going without necessary doctor visits and prescription purchases because they simply cannot afford it. Some California residents who are sinking in a sea of medical bills may be wise to have this debt discharged and stop creditor harassment by filing for bankruptcy. It is best to speak with a bankruptcy professional about your circumstances, however, because appropriate debt relief options vary from person to person.
Source: Associated Press, "1 in 5 US families say they struggle to pay medical bills; half say they can't pay a cent," March 6, 2012
]]>Nationally, bankruptcy filings were down 5 percent from February 2011, but were still up 19 percent from January 2012, according to the report released yesterday. Business bankruptcy filings increased 3 percent from January to February 2012, and personal bankruptcy filings went up 20 percent.
]]> While California had more bankruptcy filings than any other state in the union last month, California ranked number five for per capita bankruptcies. An American Bankruptcy Institute representative said in a press release that the stagnant housing market coupled with unemployment led to the increase. And, while many consumers are doing well shedding debt, bankruptcy remains the only viable option for many Americans.Across the U.S., 3.73 of 1,000 Americans filed bankruptcy last month, according to the report. Here in California, 5.28 per 1,000 residents filed bankruptcy. The states with higher bankruptcy rates per capita than California are Tennessee, Nevada, Georgia and Alabama, respectively.
While there have been many indications reported lately that the U.S. economy is rebounding, these numbers show that many people in California are still struggling to get a grasp on their debt. Bankruptcy can result in a better financial future for many businesses, families and individuals, and it is often a smart choice for an individual to make in order to stop creditor harassment, keep your house and start anew.
The American Bankruptcy Institute is a nonpartisan organization that analyzes bankruptcy issues.
Source: Orange County Register, "U.S. bankruptcies up 19% in a month," Jan Norman, March 7, 2012
]]>In fact, millions of Americans deal with harassing phone calls from debt collectors. And, many of these collectors are trying to get you to pay false loans or debts that have been extinguished. The Federal Trade Commission has been monitoring several debt collection operations recently, and has even shut at least one down for making threatening calls.
]]> Those who are dealing with creditor harassment are wise to talk with a bankruptcy attorney about how to make this stop. A bankruptcy attorney will know if the collection agency has the right to even collect the debt they are going after, as well as suggest debt relief options. One option, Chapter 7 bankruptcy, results in an immediate halt to creditor harassment.While it is important to talk with an attorney about your specific case, the following are several laws under the Fair Debt Collection Act that California consumers should be aware of:
• It is illegal for a debt collector to harass you or make threats.
• Collectors must send a written statement listing how much money you owe within five days of first contacting you.
• Collection agencies cannot contact you before 8 a.m. or after 9 p.m.
• Collection agencies cannot threaten to arrest or harm you.
• A debt collector cannot call you again if you send a letter by certified mail asking them not to. This does not get rid of the debt, but should stop the contact. The creditor can still sue you for the debt.
• If an attorney is representing you about the debt, for instance in bankruptcy court, the debt collector can only contact the attorney, not you.
• Your wages can be garnished by a debt collector only as the result of a court order.
Source: Huffington Post, "Debt Collectors Targeted For Heightened Unlawful Harassment," Catherine New, March 1, 2012
]]>The total outstanding student loan debt is now more than $1 trillion and many are worried that as college tuition continues to rise, not only is college becoming out of reach for so many Californians, but more and more college graduates are simply unable to pay these loans back.
]]> According to a report in the San Francisco Chronicle, economists are worried that because college graduates have their finances tied up in student loan debt, new home purchases and other activities of this demographic that typically stimulate the economy are not happening.Currently, bankruptcy law does not allow student loan debts to be erased with a bankruptcy filing--though most other debts are wiped clean when someone files for Chapter 7 bankruptcy. This is a real problem for many bankruptcy filers. About 50 percent of bankruptcy attorneys reported in a survey that they have seen increases in clients who are burdened by student loan debt.
Some bankruptcy attorneys think that student loan debt should be discharged in a bankruptcy proceeding, just like credit card and other debt can be discharged. Critics counter that this would be a bailout of the student loan industry, and others still think the only fix would be to somehow hold down college inflation rates.
As the law stands now, it still can be helpful for some of those who struggle with student debt to file for bankruptcy. A Chapter 7 filing discharges almost all debt, which allows people to have more resources to manage their student loan debt. In addition, a bankruptcy attorney can help you to defer you student loan payments for up to five years or reduce your payments.
Source: San Francisco Chronicle, "Is Student Loan Debt The Next Financial Crisis?" Tim Parker, Feb. 22, 2012
]]>The Sunset Junction Neighborhood Alliance owes about $900,000 in debt and has now filed for Chapter 7 bankruptcy protection. The organization reportedly owes the city of Los Angeles about $250,000, and most of the rest of the debt amounts to booking fees that were not paid to musicians who were scheduled to perform at the 30-year-old festival.
]]> The Sunset Junction Neighborhood Alliance is a non-profit organization that simply seemed to have difficulties meeting its financial obligations.The street festival began as a free grassroots event, in which neighborhood businesses and local musicians participated. Over its 30-year history it has become a ticketed event that attracts national attention. During these major changes and growth, the organization, like many small businesses, seemed to suffer growing pains related to its finances.
Last year, the city declined to award the organization the permits that it needed to pull off the 2011 festival because the non-profit stilled owed the city money from previous years.
Often, small businesses file for Chapter 13 bankruptcy protection, because it allows them to reduce and eliminate some debts while keeping their business. This often encourages creditors to accept lower interest rates and better loan terms. Tax debts that are older than three years can sometimes be completely eliminated.
The Sunset Junction Neighborhood Alliance filed for Chapter 7, which means it will likely stop all operations. A trustee will likely be appointed to sell the company's assets in order to pay its debts.
Source: LA Times, "Sunset Junction Street Festival group files for Chapter 7 bankruptcy" Feb. 16, 2012
]]>Foreclosures were slowed in 2011 while the lenders negotiated for more than a year with the attorneys general over accusations of shoddy paperwork and other fraudulent activities that have been used to repossess homes.
]]> The settlement will funnel $17 billion in relief to current homeowners, to cushion some from foreclosure. The majority of this will be done through reductions in the principal owed on mortgages.The agreement also includes $5 billion for California and the rest of the states to fund foreclosure prevention programs. Lenders will also refinance $3 billion to lower homeowners' interest rates and pay around $1.5 billion to homeowners that were affected by botched foreclosures from 2008 to 2011.
It has been estimated that hundreds of thousands of homeowners will receive money as part of that settlement, but most checks will only be between be $1,500 and $2,000. However, the total settlement could swell to $45 million if the next nine largest mortgage companies agree to sign on. The settlement should directly benefit hundreds of thousands of Californians, according to a news report. Californians could receive up to $18 billion from the settlement.
While the settlement sounds like good news, it is important to note that, according to RealtyTrac, about 11 million U.S. homeowners currently owe more on their mortgages than their house is actually worth.
And, though the agreement is predicted to make the housing market's recovery more likely, in the meantime banks are poised to resume home seizures, according to news reports.
This is because a backlog developed while lenders were in negotiations throughout the year, so foreclosures that could have happened last year will come through this year.
Source: Bloomberg, "Foreclosure Deal to Spur U.S. Home Seizures," Prashant Gopal and John Gittelsohn, Feb. 9, 2012
Source: Los Angeles Times, "Officials say $25-billion foreclosure deal will help heal market," Jim Puzzanghera, Feb. 9, 2012
]]>Creditors and debt collectors have a limited time window in which they may sue debtors for nonpayment of bills, and the federal government is concerned that collectors are going after debt that is past the statute of limitations. In California, generally, creditors and debt collectors may only sue debtors for nonpayment of bills that are not more than four years old.
]]> If a debtor sues you to collect debt that is time-barred, you can often have the suit dismissed in court. However, many consumers are not aware that their debt is too old to be collected, nor are they aware that many states allow the clock to reset if the debt is acknowledged with a payment.Recently, one of the nation's largest consumer-debt buyers paid to settle a lawsuit from the Federal Trade Commission that alleged the collector was using deceiving tactics to collect old debts.
The FTC argued that the Michigan-based collection agency violated the Fair Debt Collection Practices Act and the Fair Credit Reporting Act when it failed to tell consumers their debts were too old to be enforced. The FTC also said that the company did not tell consumers that if they made any payment at all on an old debt, it may re-set the statute of limitations.
Furthermore, the FTC claimed that the company may not even be able prove some debts, and provided inaccurate information to credit reporting agencies. This may be because, often, when a debt collector buys a debt from a creditor the records are not transferred well. This means that the debt collector sometimes has very little documentation about what may or may not be owed.
The creditor has not admitted guilt but did agree to a settlement. The creditor has agreed to tell consumers it will not sue for time-barred debts, even if a partial payment is made.
The FTC may release a report this summer about the collections industry to address some of these issues regarding old debts. In the meantime, those who are being pursued by collectors should make certain that they understand their rights.
Source: Washington Post, "Have old debts? Read up on your rights," Michelle Singletary, Jan. 31, 2012
Source: Creditcards.com, "State statutes of limitation for credit card debt," Connie Prater, Dec. 12, 2011
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