A June Wedding: For Better or For Wor$e

Posted in: General Bankruptcy

There are a number of things to discuss before a wedding.  There are the small questions:  What kind of cake will we serve?  What song will we play during our first dance?  If we invite your cousin’s wife, will she get drunk and make a scene?

Then there are the bigger questions: Where will we live?  What schools will our kids go to?  What will we do about your $50,000 student loan debt?
Considering that about 2/3 of college graduates this year will have some student loan debt, this last one is a question that needs to be dealt with sooner than later.  The average student loan debt for the Class of 2013 is $35,200.  Consider also that student loan debt is extremely difficult to discharge in bankruptcy.  While only the person who actually took out the loan (and any co-signers) will be obligated, and not a future spouse, there is no question that beginning a marriage with one person bringing significant debt can trigger stress for years to come.

Monthly student loan payments can affect a young couple’s ability to save for a down payment, afford the car they want to drive, and pay for romantic date nights.  And it’s not just student loans.  Medical bills and credit card debt can also haunt a new couple until properly dealt with.  This may be a matter of creating a budget and making better spending decisions.  More drastic measures, such as bankruptcy, may be in order.  Regardless of their perception of their financial situation, young couples should make time to discuss these issues.  After all, debt has more lasting consequences than the color of the ribbons tied around your centerpieces.

Your Student Loan Burden: Good News About Interest Rates?

Posted in: Student Loans

Are you overwhelmed by student loan payments?  As I’ve blogged about previously, the general rule is that a person who has filed for bankruptcy will not receive a discharge of student loans.  The only way to do so is to seek a determination from the court that repayment will impose an “undue hardship.”  Proving the required factors is very difficult.

However, there may be some temporary relief on the horizon.  The rate on subsidized Stafford loans is currently set to increase to 6.8% in July.  Yesterday Senate Democrats proposed legislation that would postpone an interest rate increase on student loans for two more years.  The current 3.4% interest rate would extend into 2015.

A similar extension granted in July 2012 during the Presidential campaign cost an estimated 6 billion dollars.  This year, the President has proposed allowing the interest rates to change and respond with market conditions.  Interest rates would depend on how much it costs the government to borrow money.   This issue has created a rare alignment of red and blue.  Three Republican  Senators, including Lamar Alexander, have introduced a bill to allow the return to market-based rates.

Whatever the outcome, the debate continues about whether changes should be made with regard to student loans’ dischargeability in bankruptcy.  Take advantage of our firm’s free consultations if you have questions about your student loan debt.

 

 

Who Is Making Money Off My Bankruptcy?

Posted in: After Filing, General Bankruptcy

A hidden multi-billion dollar industry surrounds the bankruptcy process, and it’s not the debtors who benefit.  Bankruptcy claims are sold between creditors hoping to ultimately realize a profit when or if those claims are ever paid out of assets of the debtor’s bankruptcy estate.  The transfer also allows the original entity holding the claim to be paid something now, rather than wait on the results of the case.  This transaction is known as a “Transfer of Claim” and can occur several times during the course of the case.

Each time a claim is transferred, bankruptcy court clerks must expend additional time and costs to update records and meet notification requirements.  On May 1, 2013 a new fee went into effect.  The fee of $25.00 per transfer will be paid by the creditor filing evidence of the transfer and will be used to offset the burden on court clerks.  Time will tell if this new fee will have a significant cooling effect on the claims transfer industry.

If you are currently in a bankruptcy, don’t worry: the person going through the bankruptcy will not be affected by the new fee.

Can My Debt Be Discharged?

Posted in: Before Filing, Medical Bills

The list of dischargeable vs. nondischargeable debts can be lengthy and complex.  Here are a couple of examples of debts you will need to discuss with your lawyer about how to handle.

Court Costs

Sometimes your resolution of a criminal charge involves paying certain costs back to the court.  Or, you have been through a civil matter such as a divorce and you receive a bill for court costs.  Court costs are not dischargeable in bankruptcy. You will still be responsible for paying these, even if you receive a discharge on other debts that you list in your bankruptcy petition.

Automobile Accidents

Having an accident while driving uninsured or underinsured can result in huge bills.  Debts incurred as a result of driving drunk are not dischargeable.  Likewise, debts incurred while you were acting willfully and maliciously are not discharegeable, and some creditors may argue that certain auto accidents fall into this category.  Generally, though,  property damage and even many medical bills resulting from an auto accident can be discharged.

Just because you believe in advance that a debt will not be discharged, you must still disclose ALL of your debts to your attorney.  Don’t try to categorize or “diagnose” your debt situation on your own.  Leaving information out, even if you think it’s not important, can have serious consequences.  Your attorney will know how to handle each debt that you tell her about.

Putting a Value on Casey Anthony’s Life Story

Posted in: General Bankruptcy

In a Chapter 7 case, a trustee is appointed to examine the debtor’s debts and assets.  The trustee’s role is to determine if the debtor has any non-exempt assets that could be used to pay creditors all or in part.  The trustee will also ask the debtor questions at the 341 meeting of creditors.

Stephen Meininger has been appointed the trustee of Casey Anthony’s pending bankruptcy case in Florida.  Creditors in her case are owed nearly $800,000.  With Anthony in hiding and claiming to be destitute, what are the trustee’s options?

The trustee argued last week in court that the rights to Anthony’s life story should be put up for auction.  According to the trustee, one bidder has already offered $10,000.  The offer came from another attorney who issued a statement that he wanted to make sure the sale happened in the clear light of day and that the money would be used for the purpose of paying creditors.  Public opinion would seem to support the idea that Anthony herself would not profit in the future from telling the story of the disappearance of her two-year-old daughter and her subsequent trial on murder charges.

Anthony’s attorneys argued that the trustee does not have the authority to sell something that has not yet been created.  They further argued that Anthony’s life story is contained within her thoughts and memories, and requiring her to give up the rights to those would be a judicial invasion of her privacy.  They also argued that a strict interpretation of the trustee’s proposal would essentially limit Anthony even from sending emails to family members discussing her personal life.

The bankruptcy judge is expected to make a decision by next month.

Medical Bills and Bankruptcy

Posted in: Medical Bills

Many people are aware of the financial strain of medical bills.  Some may even cite their medical bills as their primary reason for seeking a bankruptcy attorney.  But were you aware that doctors are also facing bankruptcy in increasing numbers?

An article published by CNN Money today highlights an alarming trend of doctor’s offices and medical practices seeking bankruptcy protection.   Some of the reasons cited are the decrease in elective medical procedures, patients cutting back on office visits, the rising cost of malpractice insurance, and the decrease in insurance reimbursements.  Even “top-notch” doctors with thriving practices can be affected.  After all, a medical office must balance books like any other business.

The article also points out that when a medical office struggles or even closes, it can become hard for patients to get the care they need.  Patients must travel to different geographic areas and seek to replace a doctor-patient relationship that may have existed for years.

After Bankruptcy, Know Your Rights and Responsibilities

Posted in: General Bankruptcy

You’ve received your discharge order.  Congratulations, you and your attorney have successfully navigated a Chapter 7 bankruptcy.  Now what?  Here are three things to think about:

1.  Creditors who have received proper notice of your bankruptcy cannot continue to contact you.  They can never collect a discharged debt.  Notify your attorney right away if a creditor contacts  you on the telephone or if you receive mail.  Many times the contact is innocent, and many times it is not.  Attempts to collect the debt are a violation of your rights and they are a violation of your bankruptcy court’s order.

2.  It is your duty to list every creditor in your Chapter 7 bankruptcy.  However, you may discover you have left someone out.  Now they are contacting you, but you’ve already received your discharge.  Notify your attorney if this happens.  If your case was a no-asset case (meaning that your creditors did not receive any payments), then your attorney can argue that the left-out creditor suffered no prejudice or harm.  Even had they been included, they would not have received anything anyway.

3.  Be very careful and cautious with new debts after your discharge.  Yes, a Chapter 7 bankruptcy will remain on your credit report for ten years and clients think they will be disfavored for a long time.  However, I warn them that now that they have wiped out old debts, they may actually look like GOOD candidates to extend credit to!  Don’t allow creditors to prey on your during this vulnerable time.  If you worry about being able to manage a credit card after bankruptcy, then don’t get one!

Do you have questions about a Chapter 7 bankruptcy?  Call the McKellar Law Firm today to schedule a free consultation.

Next Step for Detroit

Posted in: General Bankruptcy

On January 17, I first wrote about the financial woes of Detroit, whose long-term debt was upwards of $12 billion dollars according to a recent state audit.

On Thursday, Governor Rick Snyder finally took the next step.  Although still opposed by the city council,  Snyder appointed Kevyn Orr as the emergency financial manager of the city.  Orr was joined by Snyder and Detroit Mayor Dave Bing at a press conference on March 14.  Orr referred to his future work with Detroit as “the Olympics of restructuring” and also stated he felt “compelled” to take the job.

Orr is an experienced bankruptcy attorney, who resigned from his position at the Jones Day firm to accept this task.  Orr’s prior experience includes work on the 2009 Chrysler bankruptcy and a position at the Federal Deposit Insurance Corporation.  Orr is a law graduate of the University of Michigan.

The powers of a financial manager under Michigan law include the ability to modify labor contracts and sell off assets.  Orr also has the final decision on whether or not Detroit will enter into Chapter 9 bankruptcy, the debt restructuring chapter available exclusively to municipalities.

Orr had strong words for those he is about the enter into negotiations with: “Don’t make me go to the bankruptcy court.  You won’t enjoy it.  I’m very comfortable in the bankruptcy court.”

Bankruptcy for “Girls Gone Wild”

Posted in: General Bankruptcy

Morally, and now officially.  GGW Brand, the company behind the Girls Gone Wild series of videos, filed for Chapter 11 bankruptcy February 27 in Los Angeles.  The company rose to fame for producing videos of drunk young women being encouraged to expose themselves and kiss each other. The company lists over $16 million in debt and less than $50,000 in assets.  The main reason behind the filing seems to be the slew of lawsuits against the company and founder Joe Francis.   A young woman who claims someone exposed her breasts in a video titled “Girls Gone Wild Sorority Orgy” won a $5.8 million judgment against the company in 2008.  She claims her efforts to collect the judgment have been thwarted by the company transferring assets and evading creditors.  Also included is the $7.5 million damages award for defamation to Steve Wynn of Las Vegas fame.  There’s also the Nevada Supreme  Court ruling that Francis owes a 2$ million gambling debt to Wynn.

What lies ahead for the company?  With Spring Break just around the corner, it seems the company intends to push the franchise forward despite the filing.  The company said in a statement that “(t)his Chapter 11 filing will not affect any of Girls Gone Wild’s domestic or international operations.  Just like American Airlines and General Motors, it will be business as usual for Girls Gone Wild.”

Reader’s Digest Files for Bankruptcy Protection

Posted in: General Bankruptcy

For the second time in less than four years, Reader’s Digest has filed for Chapter 11 bankruptcy.  The company listed more than $1 billion in assets and $1 billion in debts in court papers filed Sunday.

The company has been in existence for 91 years and publishes more than 75 magazines.  In the 1940s, only the Bible exceeded the Reader’s Digest in sales.  The recent changes in the way people access and read material has had a profound effect on the company.  Despite selling off AllRecipes.com and Every Day with Rachael Ray last year, Reader’s Digest still struggled to manage its debts.  The CEO of Reader’s Digest stated that economic downturns and the “accelerated shift from traditional print media and marketing to digital media and marketing” hurt the company following its first bankruptcy in 2009.  While the print magazine is said to be read by more than 25 million people, more digital editions sold in December 2012 than print editions.  In fact, Reader’s Digest offers a free six-month trial of the iPad edition to current print subscribers.

To simplify the process, Reader’s Digest reached agreements with more than 70% of secured lenders prior to filing.  As part of the restructuring, the company will borrow more than $45 million in new financing.  The company anticipates an 80% reduction in debt upon exiting bankruptcy.  Future plans include licensing to third parties and other publishers, capitalizing on the brand recognition while streamlining the company’s overseas business.  The company plans to continue to publish through the duration of the bankruptcy.