Blogs
If you are looking into filing bankruptcy in Dallas, you must already be having stressful financial problems. You may probably think that it will save you attorney’s fees if you do it on your own. However, you may be unaware that it is a costly mistake in the long run. Working with an experienced Dallas bankruptcy attorney will not only save you money but also time and the tension brought about by bankruptcy proceedings.
You need to know that should you decide to file bankruptcy in Dallas on your own, you will still be required to pay the same filing costs and fees. You must also be aware of how complex a bankruptcy case is because even for the simplest of cases, you need to accomplish several tasks, from filling out extensive forms, compliance to local court protocols, up to in-depth research on exemption laws. Any oversight may cause major setbacks such as the risk of losing nonexempt properties, your debt not being approved for discharge, or worse, you can be charged for fraud.
All these complications may be avoided if you work with experienced Dallas bankruptcy attorneys. You may find the bankruptcy lawyers who can help you at Allmand Law because they will work hard to bring you the best possible outcome.
What exactly do bankruptcy attorneys do for their clients?
1. Bankruptcy attorneys will make sure that all options and the different types of bankruptcy are made known to you so that you may file the bankruptcy case that best fit your financial circumstances.
Among the many types of bankruptcy, only two of them are most applicable to individual debtors: Chapter 7 and Chapter 13. Both of them provide protection from your creditors but your decision which one to file will be based on your situation.
- A Chapter 7 bankruptcy works through the liquidation of assets to pay off creditors. Bankruptcy Chapter 7 is usually fast, with discharges received within three to four months, allowing debtors the chance for a fresh start. A bankruptcy court appoints a trustee who collects all of a debtor’s non-exempt property and sells them to pay back the creditors. A debtor is allowed to keep what is known as exempt property. Chapter 7 bankruptcy is suitable for low-income debtors with little or no assets with which to pay off their debts. However, it costs more to file for Chapter 7 bankruptcy than Chapter 13 and there is a greater risk of losing your property due to foreclosure. In most cases, you will be able to qualify for Chapter 7 bankruptcy because income alone is not the sole determining factor. If you are eligible, you will need to file an official petition and submit other forms to the Dallas bankruptcy court. These documents contain detailed accounts of all your debts and describe your current financial status.
- Chapter 13 bankruptcy is called “wage earner plan” because it allows Chapter 13 filers with a regular income to pay off all or part of their outstanding debts through an approved repayment plan, within three to five years. It is often called “reorganization” The purpose of the reorganization plan is to show how you will fully pay all priority claims, such as child support, unpaid wages, and taxes, within three to five years. Unsecured debts like credit card debts and medical bills may be partially paid overtime. Even if it takes longer to discharge debts in Chapter 13 bankruptcy and there are higher income requirements in order to qualify, there is an assurance that you can keep your property and catch up on missed mortgage, car, and nondischargeable priority debt payments
2. Your bankruptcy attorney will make sure that you comply with bankruptcy requirements
The bankruptcy laws require correct and complete documentation upon filing bankruptcy. This includes numerous pages of forms to fill out and gathering and organization of supporting documents prior to filing. The reason for doing so is to prevent your bankruptcy case from being dismissed without discharging your debts because of non-compliance with bankruptcy requirements for filing, incomplete documentation, or other administrative issues.
Below is a list of the requirements you need to accomplish:
✔ Completion of the mandatory pre-filing credit counseling class within the 180 days before your bankruptcy filing.
✔ Filing of the required bankruptcy forms detailing all of your current debts, assets, income, and expenses, as well as your plans regarding loans that are secured by collateral (such as car loans).
✔ Settlement of court fees such as the filing fee, administrative fee, and in Chapter 7 cases, the trustee surcharge.
✔ Attendance to the 341 meetings where the bankruptcy court trustee, as well as your creditors, will ask you questions about the information you provided in your forms.
✔ Timely payments on your Chapter 13 repayment plan.
✔ Observance of court orders.
3. Your bankruptcy lawyer may help protect your property.
Although some property is protected by exemptions, our experienced Allmand Law bankruptcy attorneys will work hard so that you will be able to take all you are entitled to, with little or no loss of non-exempt property, while avoiding unexpected losses.
4. Your bankruptcy attorney will make sure that tax refunds and other receivables are accounted for.
It is critical to jot down all money due to you as property in your bankruptcy forms and consider the right timing when filing your bankruptcy. Failure to do will result in losses on proceeds of lawsuits, upcoming tax refunds, inheritance or life insurance proceeds, bonuses, and sales commissions.
5. Your bankruptcy lawyer will provide sound advice on dealing with credit cards and loans.
Trust that our Allmand Law bankruptcy attorneys will guide you on how to deal with your credit card debts and payday loans. Experienced bankruptcy attorneys will thoroughly explain how to deal with these personal debts and, at the same time, explain to you how your bankruptcy filing may affect your credit rating. Despite the possibility of the effects on your credit rating, you may rest assured that our Allmand Law bankruptcy attorneys will do our very best to have your credit restored in the soonest possible time.
6. Your bankruptcy attorney will take care of foreclosures and repossessions.
We, at Allmand Law fully understand the value of your house, vehicles, and personal property to you. It is therefore a given that we are committed to ensuring prevention of any foreclosure and repossession of your most treasured properties.
7. Bankruptcy lawyers will also take care of situations that may affect your loved ones.
Our empathic Dallas bankruptcy attorneys will find the most efficient way to take care of your debts, most especially if you are undergoing a challenging time such as divorce proceedings. They will work hard so that the bankruptcy process will go as smoothly as possible, with minimal effect on your family, children, and your inheritance.
8. Bankruptcy attorneys will assist you on how you can pay your creditors.
A Dallas attorney, knowledgeable in bankruptcy, will go over your financial records and to gather information on the type of debts you have. Doing so will enable your bankruptcy attorney to figure out which debts are qualified for bankruptcy discharge and look for ways to handle any remaining debt. Your bankruptcy attorneys at Allmand Law will gladly help you in settling and negotiating debts and provide you guidance on how to prevent drowning in debt again in the future. This may include educating you on the budget setting, prioritizing expenses, and cutting down on unnecessary spending.
9. Bankruptcy lawyers will make sure that you pay off your debts fair and square.
Our Dallas bankruptcy attorneys will see to it that you pay your creditors fairly before filing for bankruptcy. It is against bankruptcy laws to pay off larger amounts to specific creditors such as family or friends. This is regarded as preferential transfer and will get you in trouble. This could result in lawsuits by your bankruptcy trustee and recovery of the money that should have been distributed evenly among all creditors.
10. Bankruptcy attorneys will provide advice for free.
Our friendly Dallas bankruptcy attorneys at Allmand Law are here to address any clarifications or questions that may be hounding you. Give us the opportunity to help you by letting us examine your financial situation.
Call us at Allmand Law for a free consultation and let us help you get started on the road to financial freedom.
The post Do I Need a Bankruptcy Attorney? appeared first on Allmand Law Firm, PLLC.
You will find two documents here. First, the Motion for Summary Judgment filed in the Office of Administrative Hearings. Second, the Complaint filed in Pima County Justice Court.The format was knocked out of wack a little when transferring to documents here. Sorry about that. Shannon Lee Trezza Irrev. Trust 5633 N. Camino del […]
The post Two lawsuits against Haciendas Del Conde Homeowners Association appeared first on Tucson Bankruptcy Attorney.
Free Legal Advice, is Now Called the ‘Democratization of Knowledge’
Who knew that I was a leader in providing knowledge to others (now called “Democratizing Knowledge)!!
An article on Wired, Natalie Chyi, focuses a light on how COVID-19 has changed the prospective of on sharing information. Titled The Coronavirus is Democratizing Knowledge. The sub-title is: “Despite toxic misinformation, the pandemic has empowered us to become co-creators, co-producers, and co-distributors of what we know.”
I have supported the “Democratization of Knowledge” since 1991 (I just called it “free” instead of some fancy title). The foundation of my law firm is to provide free legal advice about handling financial challenges and how bankruptcy might be one tool, among others, to help people find peace in their financial lives. As a law professor and community activist, I always believed that information about the law should not be a secret. We all have the right to understand our options and that basic information should be free. I hate what COVID is doing to the world, but am pleased that one result of COVID is to force others into an environment that encourages an open exchange of information. Everyone needs to participate in this discussion.
What can you do to help others? As a parent, teacher, doctor, mechanic, plumber, landscaper, or any other profession – what knowledge so you have to share? Companies are joining in (see article) and opening up their resources (of course that may be just long enough to get us hooked on their resources so we are willing to pay after COVID is knocked down). But, I digress. Join me and many others who believe knowledge should be free. Of course, the implementation of that knowledge needs to be customized to a specific situation and done by a trained professional (you don’t want just anyone performing surgery, installing complicated electrical systems or filing legal documents that have serious consequences).
I challenge you to think about what you know and how you can share it to help others.
MUSINGS FROM DIANE:
Most of us have more than what we need (I mean ‘really’ need) to sustain a happy and productive life. What can we share with others – our time, our knowledge, our laughter, our lawnmower? Your grandmother (or some wise person in your life) told you to be kind and help others. Many remembered that lesson and lived by it, but others forgot it as they grew older. Think about the last time you helped someone “just because you could”. Didn’t that make you feel wonderful? If you cannot remember that time, then give it a try because you will be better for it.
Now, I am not suggesting that you give so much that you hurt yourself and your family. Instead, look at what you have to share and take a chance. Don’t be upset if it does not work out the first time because not everyone is willing to accept help or advice (that is their choice). Love life and share your joy.
How Can I Help You?
The post I am a Leader in Democratization of Knowledge about Bankruptcy appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy & Foreclosure Attorney.
Presidential candidate Joe Biden recently came out in support of Senator Elizabeth Warren’s bankruptcy reform plan, which is somewhat embarrassing because she is basically proposing to nullify the Bankruptcy Reform Act of 2005 championed by Biden.
Our nation is at the beginning of a COVID-19 Recession that, once again, is dragging the bottom 60% of Americans back into the mud of economic turmoil. If Biden should win the election it is highly likely that bankruptcy reform legislation lead by Senator Warren is coming our way in the near future.
What exactly is Elizabeth Warren proposing? Details of her plan are lacking, but here is basic list of her plan.
#1 Abolish the Means Test
The 2005 Bankruptcy Reform Act attempted to deny Chapter 7 for higher income debtors by requiring them to submit a statement of their average monthly income earned during the six months prior to filing bankruptcy. That average monthly income figure was then multiplied by 12 to come up with an annualized income figure. This calculation is what we call the Means Test.
Debtors with annualized income exceeding the Median Family Income in their state find it much more difficult to file Chapter 7. Instead, such debtors are forced to repay a portion of their debt in expensive Chapter 13 cases.
Preparing a Means Test is time consuming and expensive. It requires bankruptcy attorneys to acquire six months of paycheck stubs and bank statements from their clients, and that has caused the cost of filing Chapter 7 to double or triple since 2005.
Senator Warren says it is time to scrap this vengeful process, and she is right. The Means Test is a disaster that causes tremendous stress on debtors who are unable to gather paycheck stubs from previous jobs and bank statements from closed accounts. And what is the point of calculating an average monthly income for debtors who have become unemployed? Bravo Senator Warren! Yes, the Means Test needs to go away.
#2 Eliminate paperwork requirement
Currently, debtors must submit paycheck stubs, bank statements and tax returns to their bankruptcy attorney. The Warren Plan cancels that requirement, although I suspect Trustees will still demand to review recent paycheck stubs and the most recent tax return filed.
#3 Elimination of Chapter 7 and Chapter 13???
This part of the Warren Plan makes absolutely no sense and is contradictory. Warren wants to simplify the process and create a “single point of entry.” Debtors will “choose from a menu of options for addressing their debts.” A menu of options?
The menu of options available would include a Chapter 7-type option of surrendering all non-exempt property in exchange for having their unpaid debts “discharged,” as well as options that allow people to deal with specific financial problems without involving all of their obligations
Okay, Warren would abolish Chapter 7 and 13 and then we create a menu of options that includes a “Chapter 7-type option.” Um . . . what the hell does that mean?
My plan does away with means testing and the two chapters for consumer debtors. Instead, it offers a single system available to all consumers.
Senator Warren, are you aware that when a person files a bankruptcy petition they check a box for Chapter 7, 13, 11 or 12? Um, . . . that’s a “menu of options” right there. You see, we already have a menu of options in our current system.
And what does it mean to do away with the two chapters for consumer debtors? Would she delete the entire Bankruptcy Code governing Chapter 7 and Chapter 13? And how does Warren’s Chapter 7-type code vary from the current code? Why would any sane legislator do that? Such a change would throw the entire United States bankruptcy practice into utter chaos.
The current Bankruptcy Code was enacted in 1978 and it replaced the old Bankruptcy Acts originally enacted in 1801. The Chapter 7 and 13 consumer bankruptcy law has been in existence for 42 years and thousand upon thousands of court cases have interpreted and applied that code. Is Warren really proposing to do away of 42 years of bankruptcy jurisprudence?
#4 Eliminate credit counseling requirements
The 2005 bankruptcy amendments imposed a requirement that debtors take a credit counseling class approved by the United States Trustee. Warren’s plan eliminates this requirement, and I fully agree that these courses are entirely worthless.
#5 Debtor attorney duty to certify the accuracy of financial disclosures eliminated, but new Disciplinary Panels to be established. (What’s the difference?)
The 2005 bankruptcy amendments require attorneys to certify that they have performed a “due diligence” investigation into the accuracy of the bankruptcy schedules. Basically, the attorney must “audit” his client and review credit reports, background checks, public records, tax returns and other documents to verify that the bankruptcy schedules are truthful.
Warren says that such requirements caused bankruptcy attorney fees to increase and that this burden should be eliminated. However, she would create Disciplinary Panels to keep dishonest attorneys out of the system.
This proposal is stupid. Despite all the bad changes in the 2005 bankruptcy amendments, requiring attorneys to verify the accuracy of what they file in court is sensible.
The proposal for new Disciplinary Panels is ill advised. Every bankruptcy court already has a system to investigate unethical attorney behavior and the US Trustee’s Office is very active in disciplining attorneys who behave badly. There is no need for yet another overlapping regulatory body to do what is already being done.
#6 Lawyer advertising restrictions lifted
Bankruptcy Code Section 528 requiring attorneys to state that “We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code” would be eliminated. Agreed.
#7 Filing fees waived for lower-income debtors, phased in for higher income debtors.
Debtors currently pay $335 in court fees to file Chapter 7 and $310 to file Chapter 13. These fees are used to fund salaries and expenses of the bankruptcy court. Reducing the amount of fees requested may cause a financial crisis in bankruptcy courts unless other sources of funding are obtained.
#8 Chapter 7 Attorney fees may be paid after the case is filed
Bankruptcy attorneys are not permitted to collect legal fees after the case is filed because, like all other creditors, collection of their debt is automatically stayed by the bankruptcy filing. As a result, chapter 7 attorneys require all their fees and costs (typically $1,300 to $2,000) be paid before a case is filed.
Warren’s plan correctly allows those fees to be paid after the case is filed and that should bring down the filing fees debtors must pay to file a case. It will also have the effect of dramatically increasing the number of chapter 7 cases filed.
#9 Eviction Help to allow debtors to continue to pay rent and cure defaults (Already exists?)
Warren proposes to help debtors stop evictions, but no details are provided. Current provision in chapter 13 cases already have provisions to repay past due rent, so it is unclear how Warren’s proposal improves upon this.
#10 Chapter 13 Savings Accounts?
My plan allows people in the bankruptcy process who select a repayment plan option to set aside more money to cover the basics for themselves and their children. . . . Allowed parents to spend a reasonable amount of money on toys and books and basic recreation activities for their kids during the bankruptcy process.”
Hmm, this already exists in every Chapter 13 case. Line 13 of Bankruptcy Schedule J (Monthly Expenses) provides for “Entertainment, clubs, recreation, newspapers, magazines, and books.”
If Warren is suggesting that debtors be allowed to set aside money in a supervised savings account, say 5% of their income, that would be a welcome and wise change.
#11 Union Dues. Allow union members to continue paying their union dues during the bankruptcy process.
Senator, please note that Line 5(g) of Bankruptcy Schedule I already allows for payment of union dues.
#12 Student Loan Discharge
My bankruptcy reform plan ends the absurd special treatment of student loans in bankruptcy and makes them dischargeable just like other consumer debts.
Is Warren proposing the immediate discharge of all student loan debts? Would graduating students be immediately eligible to discharge their entire student loan debt burden? No waiting period?
Doesn’t it seem a bit unfair for recent college graduates to discharge taxpayer subsidized student loans when their income is likely to rise in the near future? Other consumer debts are not subsidized by taxpayers. Isn’t that the key difference?
Something tells me that voters do not view limited discharge options on taxpayer guaranteed loans as an absurd special treatment. A waiting period to discharging student loans is fair and appropriate, and allowing their discharge after 20 years is probably acceptable to most legislators and voters.
#13: Uniform Federal Homestead Exemption
My plan creates a uniform federal homestead exemption. The exemption would be set at half of the Federal Housing Finance Agency’s conforming loan limit for the bankruptcy filer’s county of residence . . . . For most communities, it would be $255,200 in 2020″
Wow! Nebraska’s current homestead exemption only protects $60,000 of home equity. One of the most common reasons a client will not file chapter 7 is that they have more than $60,000 of equity, so they file chapter 13 instead to protect their home.
The 2005 bankruptcy amendments attempted to curtail homestead exemption planning by preventing debtors who move to states with more generous homestead exemptions from claiming those exemptions. (Rather, debtors had to claim the exemption in the state they moved from less than two years ago.)
Warren’s plan blasts opens the doors to homestead exemption planning. Her plan encourages debtors to sink money into their homesteads on the eve of filing bankruptcy.
There is a lot to be said for creating standard bankruptcy exemptions that apply to all cases nationwide. We actually have that system now, but current law allows states to opt out of the federal exemption system. By standardizing exemption laws the the bankruptcy process becomes more uniform and that in turn encourages lawyers and software developers to create cost cutting mega firms that cross state lines. Essentially, Warren appears to advocate the “Turbo-Taxing” of the bankruptcy process by making the process streamlined and uniform.
#14 Mortgage Loan Modifications
My plans also permits people to modify their mortgages in bankruptcy -something that is generally prohibited by law . . . As part of the menu of options available to a bankruptcy filer, it offers a special streamlined pre-packaged mortgage bankruptcy procedure that will allow struggling homeowners to get a statutorily defined mortgage modification
What does this pre-packaged procedure involve? Will it allow for a cramdown of the loan balance to the present value of a home? Will it allow debtors to re-write mortgage loans to cure defaults outside of chapter 13 plan? Will a debtor be allowed to cramdown the interest rate to current levels?
Will homeowners receive a windfall by modifying loans to cramdown mortgage balances and interest rates during periods of declining home values, and then keep all the new equity acquired when property values rise again in good times?
Banks will vigorously oppose this reform, and that will cause a potential log-jamming of reform legislation thus risking no reform is passed at all.
Modification Limits? How many times may a homeowner force the bank to modify the loan?
#15 Zombie Mortgages
Warren proposes to force banks to complete a foreclosure if the debtor surrenders the home. How is this constitutionally valid? By what right may Congress force a bank to take an affirmative act to acquire property they do not want?
Perhaps it would be better to allow debtors to exercise existing bankruptcy powers to conduct an auction of unwanted property via a motion to sell free and clear of liens.
#16 Auto Loans: Repeal 910 Day Rule
The plan repeals the 2005 amendment that prohibits the cramdown of auto loans acquired within 910 days of filing bankruptcy to the value of the vehicle. Will this change be limited to chapter 13 cases? May a debtor cramdown a loan to the asset value in chapter 7?
#17 Local Government Fines
Warren proposes to allow the discharge of local government fines, except for fines related to death, personal injury or other egregious behavior.
What about landlord code violations? Speeding tickets?
#18 Civil Rights Debts
No discharge for violations of civil rights such as, for example, police brutality. However, these debts are already not dischargeable under Bankruptcy Code 523 for intentional bad acts.
#19 Improved Data Collection
Warren would invites bankruptcy filers to provide statistical information on racial identification, gender, and age. Why not make this mandatory? What if they “identify” as a Martian? Perhaps we should just go with whatever their state driver’s license says?
#20 Lump-sum Personal Property Exemption
Warren’s plan provides for a standard federal personal property exemption that is adjusted by the number of dependents in the household. A single federal personal property exemption would greatly simplify the process and give rise to more national bankruptcy law firms since state exemption law complexity would be eliminated.
Does this preempt all state exemption laws? What about exemptions for personal injuries and other rights to compensation that are difficult to measure? Will all of these numerous state exemption laws be replaced by a single dollar federal exemption?
#21 Millionaire’s Loophole Closed
Warren would eliminate protect for self-settled trusts. She also seems to say that Spendthrift trusts would become property of bankruptcy estate. Um, . . how? State law governs what is property of the estate, and state laws say property in spendthrift trusts are not property of the debtor.
#22 Exemptions forfeited if debtors lie on bankruptcy schedules.
#23 Fraudulent transfer law strengthened.
Property transfers by deadbeat parents to trusts to avoid paid support would be reversed. The statute of limitations to reverse fraudulent transfers would be extended. And, Warren would make it a federal crime to engage in or aid and abet or receive an actual fraudulent transfer.
Transferring property while insolvent becomes a crime? To receive a transfer becomes a crime? This is very dark.
#24 Disallow Bankruptcy Claims of Creditors that Violate Consumer Laws
Creditors would be barred from filing claims for expired debts. The FDCPA law would be amended to ban collection on expired debts.
Miriam Goott, a bankruptcy attorney at Walker & Patterson at her home in Houston, Friday, May 8, 2020.Photo: Karen Warren, Houston Chronicle / Staff photographer
Houston attorney Miriam Goott, who represents small businesses in their bankruptcies, likes telling potential clients: “I hope to never see you again.” That’s because she’s worked out a deal with their creditors or helped them solve a problem that avoided bankruptcy altogether.
“Half the time, I play the role of a therapist,’’ she said. “What they perceive to be this huge problem generally isn’t. It’s typically one or maybe two creditors that are really the issue.”
Some attorneys predict a wave of bankruptcies in the months ahead, as the economic toll of the oil bust and the pandemic create long-term struggles for the area’s economy, according to a University of Houston Bauer College of Business forecast. Plus, the CARES Act made it even easier for small businesses to file for bankruptcy.
GROWTH OPPORTUNITY: Law firms with bankruptcy practices positioned to do well in downturn
Bankruptcy may provide much-needed relief for small businesses but it’s more of a last resort than a first resort. The good news is, for many borrowers struggling to make payments, a bankruptcy may not even be necessary.
Goott focuses her practice at Walker & Patterson on consumer and small business bankruptcy.
“I don’t feel comfortable filing a bankruptcy until we know we’ve exhausted all our options,’’ she said. Why? Bankruptcy can help beleaguered business owners sleep at night, but it also comes with risks.
Personal bankruptcy will have a significant impact on credit and borrowing costs in the future. Businesses have to open their books to public scrutiny and there are reputational risks as well.
“It’s different to hear your CPA filed bankruptcy than maybe your hairdresser,’’ Goott said. Plus, bankruptcy is expensive. Goott charges as little as $10,000 to $15,000 for a business Chapter 7, or liquidation, and fees can run as high as $300,000 for a complicated Chapter 11, or reorganization. Some law firms charge millions for complex, big-business reorganizations.
Taking stock
For a small business, the first step to avoid bankruptcy is to get a handle on its financial situation. That’s easier said than done, given the current uncertainty in the economy. But secured creditors are going to be running projections anyway, said Patrick Hughes, a bankruptcy attorney and partner at Haynes Boone in Houston.
Estimate operating costs and revenues for the next 12-week to 1-year periods, taking a look at the business’ capital structure and tax obligations, he said. “What does it take to survive in the near term?’’ Hughes said. “It’s a sobering exercise. It’s disheartening. Sometimes, you realize cuts have to be made.”
A big mistake small businesses make is failing to pay taxes. What starts as a business obligation quickly becomes a personal liability, as owners will be on the hook and even criminally responsible, bankruptcy lawyers said. Make sure some cash is set aside in case the business does need to file for bankruptcy.
A handle on debt
The details of loan terms matter. Go to creditors, focusing on secured creditors first.
“Your primary concern is the lifeblood assets of your business,” Hughes said. “If you’re a trucking company, you don’t want a lender to declare a default and exercise remedies against your trucks.”
Creditors may be hardheads and won’t want to work with you. But they are more likely to take aggressive steps if you’re not upfront and transparent about the state of your business, he said.
“If your lender doesn’t have confidence because the debtor has gone turtle and won’t give information, they’re going to be more aggressive in how they handle that,’’ Hughes said.
TOMLINSON’S TAKE: Reopen Texas economy cautiously, second COVID-19 wave would devastate
Your creditors may not be willing to negotiate. But lenders usually don’t want to foreclose on assets in a bad economy. If your business is viable and has a track record of making payments on time, generating revenue and attracting customers, that will work in your favor, Hughes said.
Goott frequently gets on the phone with creditors and negotiates a solution. Sometimes, she tells creditors that if they don’t negotiate, the debtor is going to file for bankruptcy. Sometimes, she just needs to tell creditors the reality of someone’s business and the chances of collecting on the debt.
One of Goott’s clients, for example, was personally liable for the debts of the business, and an ex-business partner was successful in obtaining a judgment in court. Goott was able to negotiate a payment plan over a 12-month period that lowered the interest rate on the debt.
Her one piece of advice: get the agreement in writing. When you’re relying on a verbal agreement, creditors can change their minds. Bank employees move on and you’re stuck with someone who doesn’t acknowledge the agreement. Or the employee might not have had the authority to offer a modification in the first place.
Litigation risk
Unsecured creditors are a different matter. They can sue you; they can get a judgment. In Texas, certain assets are exempt from most judgments, including the owner’s residence, car and retirement accounts. Creditors can garnish bank accounts, however. If that hasn’t happened yet, you may want to wait and see what happens, Goott said. An unsecured creditor may sell your debt to a collection agency. Or they may go out of business. You may never get sued.
Of course, efforts to avoid bankruptcy may be unsuccessful. If creditors simply won’t negotiate and start lawsuits and the process of acquiring assets of the company, or even personal assets, it’s possible to hand over the keys, or negotiate a transfer outside of bankruptcy. You might be able to get an injunction in court, although that’s rare, Hughes said.
A bankruptcy filing can be useful because it triggers a stay — basically, the courts block landlords and creditors from evictions or seizing assets while the case winds its way through the court system.
Congress passed the Small Business Reorganization Act last year, making it easier and less costly for small businesses to file. For example, business owners normally have to pay creditors in full under a Chapter 11 reorganization to retain ownership. But a small business Chapter 11 allows small businesses to pay less than 100 percent in exchange for shelling out three to five years of the business’ disposable income instead.
No creditors’ committees are allowed, which helps lower the cost of the bankruptcy.
The CARES Act, which passed in March, also raised the cap on total debt for a small business Chapter 11 from $2.7 million to $7.5 million, allowing many more businesses to qualify. “This creates a huge opportunity for small business to restructure their debt,’’ Hughes said.
Often, bankruptcy can be avoided altogether. Goott doesn’t make any money that way. But she builds trust with potential clients. “The best thing I do for (businesses) is to give them the ability to narrow in and focus on the problem,” she said.
Gallery Sues Landlord, Claiming Covid-19 Shutdown Voids Lease
The lawsuit contends that since the Venus Over Manhattan gallery is closed by government orders during the pandemic, the lease should be terminated.
In early March, the Venus Over Manhattan gallery on the Upper East Side mounted an exhibition of paintings, drawings and wall reliefs by the artist Roy De Forest, the biggest presentation of his work in New York City since 1975.
But the show’s prospects may have been limited when Gov. Andrew M. Cuomo of New York banned most gatherings and ordered nonessential businesses to close by March 22 as part of an effort to limit the spread of the coronavirus.
Now the gallery is suing its landlord, arguing that the governor’s actions provide a basis to end its lease, which it says started in 2011 at $54,000 per month, and recover its deposit of $365,000.
“As a result of the Covid-19 pandemic, Governor Cuomo issued a number of executive orders, which by March 29, 2020, completely frustrated the very purpose of the lease,” a lawyer for the gallery wrote in a complaint filed last week in Federal District Court in Manhattan, adding that the gallery therefore “considers the lease terminated.”
The dispute is between companies run by two prominent art collectors, both with significant business experience and neither averse to attention.
The gallery’s owner, Adam Lindemann, who once ran an investment firm, briefly set an auction record for Jean-Michel Basquiat in 2016 when he sold a painting by the artist at Christie’s for $57.3 million.
The gallery’s Madison Avenue building is listed as a property of the real estate company run, with a partner, by Aby Rosen. He has displayed several Picassos in his Manhattan home and, in 2014, riled some neighbors by erecting on his Long Island estate a 33-foot, painted bronze sculpture of a naked pregnant woman with an exposed fetus.
Mr. Margolin said by email that the lawsuit involved “a dispute between a commercial tenant and a landlord” about whether a lease default had taken place. A representative for Mr. Rosen’s company, RFR Holding LLC, declined to speak about the suit.
The complaint filed by the gallery says that it considers the lease to have been terminated as of April 1. On March 25, it added, the gallery informed the landlord that it was vacating the premises on or about July 1 and demanded the return of the $365,000 deposit.
On April 8, the complaint states, the landlord declared a default under the lease and on April 23 seized the deposit.
The gallery claims it is entitled to end the lease based on two arcane legal doctrines: “frustration of purpose,” described in the complaint as when an unforeseen event destroys the reason for a contract; and “impossibility of performance,” which the complaint says allows performance of a contract to be excused if governmental activities render that performance impossible.
Joshua Stein, a commercial real estate lawyer not involved in the lawsuit, said that frustration of purpose is one of several doctrines businesses have considered asserting during the pandemic as a basis to withhold rent or walk away from a lease.
An email from a new client:
Hi Sam! Thank you for your time yesterday. A few quick questions for you.
-
- After my case is filed, and everything goes through, how long does it take for my credit to repair/refresh?
- What are most of your clients seeing?
- Can I expect to have an industry average credit score within 3 years?
Credit comes back in phases. Right now his credit is in the gutter and the score has nowhere to go but up. In fact, most debtors have a higher credit score one year after filing bankruptcy than on the day they filed.
That’s right, filing bankruptcy may cause your credit score to go up. Hold on, I thought bankruptcy ruined credit? Why would filing bankruptcy be good for your credit?
FICO Score
When we refer to credit scores, we are generally referring to your FICO Score created by the Fair Isaac Corporation. A score below 580 is considered poor and a score above 670 is considered good.
Initial credit score hit followed by positive reporting
In truth, filing bankruptcy usually causes a credit score to drop initially. And the higher the score is on the day a case is filed, the harder the hit.
But, most people file bankruptcy after they have already maxed out and defaulted on credit card accounts. They file bankruptcy after receiving a court judgment. The credit score is already down so the hit they take is not significant.
Once the initial credit score hit takes place the negative reporting stops. It’s like putting a bandage on an open wound. The blood stops flowing and the credit wound begins to heal. Now the foundation for positive credit reporting is in place.
Ironically, filing bankruptcy may make it easier to get a loan
Many find it easier to get loans after bankruptcy than before. In fact, some bankers send me clients to clean up the bad credit issues so they can actually extend a new loan.
That may seem strange, but think about this for a minute. If you were a banker, would you prefer to extend credit to a person on the verge of filing bankruptcy or to a person who just walked out of Chapter 7, who is debt free and who cannot file another Chapter 7 for eight years? Who is the better risk?
A credit score is supposed to tell a banker the likelihood that a person will repay a debt, and a person with no debt is a better risk than a person who is deeply in debt.
Debt-to-Income ratio
Thirty percent of a credit score is based on the Debt-to-Income Ratio. If you owe $5,000 of debt on a $100,000 annual salary, your debt-to-income ratio is 5%, which is very low. But if you owe $10,000 on an annual income of $20,000, then the ratio is 50%, which is very high.
Bankers focus heavily on debt-to-income ratio when reviewing loan applications.
The number one thing you can do to increase your credit score is to pay down debt. That is why bankruptcy actually improves the credit score–because the debt-to-income ratio immediately improves.
Payment History
Some rebuild credit quickly after bankruptcy as they continue to pay existing car or home loans, and those payments get scored positively. Others stop using all credit after bankruptcy and just use cash, which is fine, but the result is that nobody is scoring their use of credit, so the score stays low.
If you want to build credit after bankruptcy you must use credit. Some clients obtain secured credit cards to rebuild their credit score. Paying off auto loans after bankruptcy helps. Paying down student loans helps. Paying down any debt after bankruptcy helps.
Paying credit card bills early in the billing cycle helps the score. Not only do they score if you pay a debt on time, but when you pay the debt.
Bankers prefer customers who pay loans the day the bill arrives in the mailbox over customers who pay 2 seconds before the bill is late. Those who pay after a due date incur late fees and that is a sign of a risky loan to a banker.
Studies show that early payers tend to default less and late payers tend to default more. So, pay bills early in the bill cycle and watch the credit score go up.
Focus on the Cash Score, not the Credit Score
Credit scores really only matter if you need to borrow money, like buying a home. Otherwise, instead of focusing on the credit score, focus on the cash score. How much did you save this month? Do you have 3 months of expenses saved in cash? Have you made saving cash systematic?
Unfortunately, our credit scoring models do not account for cash savings, but those who store cash reserves are prepared for unexpected events and default less.
Buying a home after bankruptcy
As a general rule, you must wait two years after filing Chapter 7 to qualify for a FHA home loan.
Those debtors in the middle of a Chapter 13 case must wait at least one year and be able to prove that they have made all bankruptcy payments on time. In addition, a debtor must obtain court approval to incur a mortgage debt during a Chapter 13 case.
Car loans after filing bankruptcy
It used to be that a debtor had to wait for the Chapter 7 discharge to obtain a car loan. That has all changed in recent years. Now, some are getting car loans a day after the case is filed. It appears that the auto lending industry has finally figured out that those entering Chapter 7 are better credit risk since they emerge debt free and cannot file another Chapter 7 for eight years.
Conclusion
Filing bankruptcy does not block access to credit. In many cases it actually increases the ability to borrow. Some waiting periods apply to obtain certain types of credit, but generally a person files for bankruptcy to start building good credit, not to destroy it.
Filing bankruptcy can accelerate the process of building better credit.
Image courtesy of Flickr and eflon
Lead Express, Harvest Moon Financial, Gentle Breeze Online and Green Stream Lending, used Deceptive Marketing Practices
Lead Express, Harvest Moon Financial and others repeated drew interest-only charges, leaving consumers to pay more than promised
May 22, 2020 – The Federal Trade Commission (FTC) has charged Lead Express, Harvest Moon Financial, Gentle Breeze Online, and Green Stream Lending with deceiving its customers by overcharging millions of dollars and repeatedly withdrawing money from customers bank accounts, without their permission.
Post from the FTC: According to the FTC, the 11 defendants, through Internet websites and telemarketing, and operating under the names Harvest Moon Financial, Gentle Breeze Online, and Green Stream Lending, used deceptive marketing tactics to convince consumers that their loans would be repaid in a fixed number of payments. In fact, in many instances, the FTC alleges, consumers found that long after the promised number of payments had been made, the defendants had applied their funds to finance charges only and were continuing to make regular finance-charge only withdrawals from their checking accounts.
In addition, the FTC charges that the defendants failed to make required loan disclosures, made recurring withdrawals from consumers’ bank accounts without proper authorization, and illegally used remotely created checks.
“Harvest Moon bled consumers dry, by promising a single payment payday loan, but then automatically debiting consumers’ bank accounts for finance charges every two weeks, in perpetuity,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection.
The FTC charges the defendants with violating the FTC Act, the Telemarketing Sales Rule, the Truth in Lending Act and Regulation Z, and the Electronic Funds Transfer Act and Regulation E. The defendants named in the case are: Lead Express, Inc.; Camel Coins, Inc.; Sea Mirror, Inc,; Naito Corp.; Kotobuki Marketing, Inc.; Ebisu Marketing, Inc.; Hotei Marketing, Inc.; Daikoku Marketing, Inc.; La Posta Tribal Lending Enterprise; Takehisa Naito; and Keishi Ikeda.
The Commission vote authorizing the staff to file the complaint was 5-0. The U.S. District Court for the District of Nevada entered the temporary restraining order on May 19, 2020.
The FTC has information for consumers about payday loans, including alternative options and information for military consumers.
MUSINGS FROM DIANE:
Those having financial challenges are easy targets for creeps, like payday lenders. These lenders will open businesses, create loans and take innocent peoples hard-earned money. When they get in trouble (like Harvest Moon) then they close that door, only to open another door the next day. Avoiding using payday loan companies, it is the beginning of the end. Look for other options – does your bank offer a short-term loan, can you take another temporary job, can you adjust why you are spending more than you are earning? I know the solution is not simple, but please ask for help from someone who is interested in your best interests. Never borrow money from your retirement accounts, unless you talk to someone (like me) who can explain the consequences.
How Can I Help You?
The post Lead Express, Harvest Mood Financial Sued by FTC appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy & Foreclosure Attorney.
A Wave of Small Business Closures Is on the Way. Can Washington Stop It?
Bipartisan proposals address weaknesses of a hastily passed aid program.
One of the great threats to the post-pandemic economy is becoming clear: Vast numbers of small and midsize businesses will close permanently during the crisis, causing millions of jobs to be lost.
The federal government moved with uncharacteristic speed to help those businesses — enacting the Paycheck Protection Program, with $669 billion allocated so far.
But there is a problem. The structure of the program is not particularly well suited to the type of crisis that millions of businesses face. The program may have bought businesses some time, but in its current shape it will not enable many of them to remain solvent long enough to emerge from the other side of the pandemic in some viable form.
Rather, it is more tailored to what the crisis looked liked when shutdowns first took place in the olden times of March 2020, when it seemed that business closures would be a short-term blip and everyone might be able to get back to normal by summer.
It was intended to cover eight weeks’ worth of expenses, of which 75 percent must apply to payroll, for firms with under 500 employees. Now it is looking likely that many businesses will face revenue shortfalls for many months.
For loans made under the program to be fully forgiven, an employer must maintain pre-crisis employment levels. Now it’s clear many businesses will permanently shift to smaller staffing levels to remain viable, such as restaurants operating at partial capacity.
The program is technically available to companies that make a good-faith assertion that they need help to support operations. But it doesn’t distinguish between firms with mild and temporary disruptions and those facing threat of permanent closure.
Moreover, the structure of the program, which provides a recipient with a Small Business Administration-backed loan that is then forgiven if certain conditions are met, could make some business owners reluctant to take advantage. They might fear that if they run afoul of the government’s rules, they will have even more debt heaped on top of a failing enterprise.
“The risk is that they’ve spent more money on this program than anyone has ever spent on a small-business program in world history, but haven’t changed the trajectory of permanent small-business closures,” said John Lettieri, president of the Economic Innovation Group, a think tank that advocates business dynamism. “If the patient has a gaping chest wound and you give him a bandage, it’s better than nothing but probably isn’t going to keep the patient alive.”
When Congress enacted the Paycheck Protection Program as part of a $2 trillion aid package in March, it still seemed plausible that the disruption to the economy would be temporary. And the P.P.P. was devised to ensure that employers kept as many people on their payrolls as possible. But that has often acted at cross-purposes with the goal of having businesses ultimately emerge as viable enterprises.
“The P.P.P. makes sense in that incentivizing employers to keep people on payroll and compensating them for doing that is valuable, especially given the overwhelming of the unemployment insurance system that was happening,” said Adam Ozimek, chief economist of Upwork, a website for freelancers. “Conceptually that makes sense, but the issue is trying to do that and at the same time address the issue of massive small business insolvency that we are increasingly facing.”
Mr. Ozimek is dealing with the tension firsthand. In addition to his job as an economist studying labor markets, he is co-owner of Decades, a bowling alley, restaurant and bar in Lancaster, Pa. Before the pandemic, it employed the equivalent of 35 full-time employees, but it now needs fewer workers while takeout food is its only business. It has taken a P.P.P. loan.
Leading economists have identified the mass closure of service-oriented businesses as a particular risk for the medium-term future of the economy. One survey of 5,800 small businesses conducted in late March found that only 47 percent expected to still be in business at the end of the year if the crisis lasted four months.
“The loss of thousands of small- and medium-sized businesses across the country would destroy the life’s work and family legacy of many business and community leaders and limit the strength of the recovery when it comes,” Jerome Powell, the Federal Reserve chair, said in a speech last week. “These businesses are a principal source of job creation — something we will sorely need as people seek to return to work.”
There’s not much the government can do if a health crisis renders some types of businesses, especially those where large groups of people gather, nonviable indefinitely. But there are several ideas circulating on Capitol Hill to try to address the potential of mass small business closures.
Senator Michael Bennet, Democrat of Colorado, and Senator Todd Young, Republican of Indiana, plan to introduce a bill text Thursday on what they call the “Restart Act.” Businesses would receive loans to finance six months’ worth of fixed operating costs and payroll, offered at a low interest rate — no payments due for 12 months — and with a seven-year term.
In their bill, the government would forgive the share of the loan devoted to payroll, rent and other fixed expenses based on the company’s revenue decline. So it would act as a loan for companies that are able to weather the downturn, and act as a grant for those more severely affected.
Another group of senators, including the Republican Mitt Romney of Utah and the Democrat Joe Manchin of West Virginia, have proposed legislation that would build on the Paycheck Protection Program, in part by expanding the period for loan forgiveness from eight to 16 weeks.
In the House, Representatives Dean Phillips, Democrat of Minnesota, and Chip Roy, Republican of Texas, have offered legislation that would, among other steps, extend the duration of P.P.P. loans.
The bipartisan nature of the bills shows this issue doesn’t cleave along the usual ideological divides. A key question is whether whatever comes next will enable businesses that are in a deep hole now — but have a viable future once the public health crisis recedes — to get from Point A to Point B.
And it would particularly help if any new or revised P.P.P. program would have clearer rules of the game and greater predictability about who is truly eligible and under what terms.
“To be kind to both Republicans and Democrats who came up with this plan on the fly, the magnitude of the shock is so much larger than what anybody thought it was at the time,” said Joe Brusuelas, chief economist at RSM, an accounting firm that serves midsize companies. “It makes sense to revisit the program.
“Right now what we’re hearing from our clients is that they are frustrated and confused.”
Updated daily, this blog will keep you informed on the latest bankruptcy news! 
Learn more about how Bankruptcy works and what you need to know.