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MISSOURI CONGRESSMAN CLAY INTRODUCES STUDENT LOAN DEBT REFORM PACKAGECongressman Wm. Lacy Clay (D) Missouri has introduced two new bills to tackle America’s student loan debt crisis. From: blackstarnews.comhttp://www.blackstarnews.com/education/education/missouri-congressman-clay-introduces-student-loan-debt-reform
Many Borrowers are Trapped by Vehicle Loans
Vehicle defaults is the next financial crisis (after the mortgage crisis)
According to the Wall Street Journal 33% of vehicle loans are upside down (meaning the vehicle is worth less than the debt). Borrowers trade-in vehicles with existing loans, finance a new vehicle and carry over the debt from the old vehicle. This results in a vehicle worth significantly less than the secured debt – sometimes as much as 100% less. This trend is continuing to rise, from 19% 10 years ago, to 33% today.
If this continues at the current rate, within just a few years 50% or more of all vehicles on the road will be worth less than the debt.
Dealerships encourage irrational financing
The dealerships encourage this insane financing scheme because they make more money. Vehicles are being designed to die within a few years, many less than the length of the loan. The borrowers are trapped. The only way out is to pay the entire loan and not finance another vehicle until it is paid in full. That is extremely difficult because many loans are for 7 years or longer (long past the life of many vehicles).
Most lenders offering underwater loans have extremely high interest rates
Once a borrower falls in default and tries to refinance they may find the only lenders willing to finance a new loan is a ‘sub-prime’ lender. These lenders are aware the borrower has financial difficulties and they don’t care (in fact, they make more money because of the default). Borrowers ask the lender for help, but they are turned away every time. Some lenders will offer to refinance (again), but this time at even higher interest rates.
Many lenders want the borrowers to default because they can raise the interest rates, charge penalties, or offer another loan at higher terms. Or they repossess the vehicle and sell it to another naive’ borrower who cannot afford the loan.
Defaults can lead directly to unemployment, eviction and homelessness
Sub-prime loans are outrageously expensive, which leads to more and more defaults. This takes a borrower, who could barely afford to pay their bills, into a guaranteed downward spiral. Default on a vehicle loan results in the repossession the vehicle and a guaranteed lawsuit. A lawsuit results in garnished wages. Garnished wages result in more defaults. More defaults result in eviction. Evictions result in homelessness. Homelessness results in unemployment.
Repossessed vehicles and deficiencies
When a lender is not paid they will repossess the vehicle, sell it at an auction (for far under the true value of the vehicle – many times to their own dealership) and then sue the borrower for the difference (referred to as a deficiency). The lender then garnishes the borrower’s wages and bank accounts, which pushes the borrower even deeper into financial crisis.
Bankruptcy may be the only way out of this insanity
I would be out of a job if lenders used common sense in making loans and working with their borrowers facing financial problems. There are times that bankruptcy is the only option for someone to start their life over. Yes, you can finance a vehicle after filing for bankruptcy (sometimes for better rates than before bankruptcy). Talk to an experienced bankruptcy attorney in order to determine your rights and obligations.
MUSINGS FROM DIANE:
Who is at fault? Everyone – the manufacturer, the dealership, the lender and the borrower.
Many vehicles are designed with short life spans, many less than the length of standard financing. A manufacturer’s goal is to sell as many vehicles as possible, so quality rarely a consideration. The average worker does not have the ability to pay cash for a vehicle and is left with options of financing at high interest rates or riding the bus. In many areas a vehicle is an absolute necessity in order to keep a job.
I am not advocating giving a free vehicle to anyone (unless you want to). But, how about using some restraint when either buying or selling a vehicle? If you are buying a vehicle that has a life span of 3-5 years then you are an idiot to finance it for 7 years. If you are a lender then why is it necessary (other than pure greed) to charge outrageous interest or terms? When the vehicle is repossessed and sold at auction, why isn’t it the obligation of the lender to get the best price possible?
How Can I Help You?
The post Borrowers Trapped – Defaults on vehicle loans increasing appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Continuing our blog posts about failed or closed restaurants,
when client’s contact us about a failed or closed restaurant, we
ask them to prepare and bring us an Income Statement and a Balance
Sheet for the restaurant.
The purpose of the Income Statement or Profit and Loss Statement is to
show the revenue and expenses for the restaurant for the current year and
to determine the profitability of the restaurant, if any.
The purpose of the Balance Sheet is to determine what money or property is
owed by the restaurant (liabilities), such as back rent to the Landlord,
sales tax, wages due to employees or money owed to suppliers.
We also want to know what property or assets the restaurant has to
satisfy the claims of creditors.
In our experience of representing failed or closed restaurants, a couple of
facts become apparent:
Restaurants have little to no inventory, the perishable goods must be used or
thrown out.
-The accounts receivable are generally credit card based and collected by the
restaurant in 5 to 20 days
-The used pots, pans and knives have little value
- Fixtures or property attached to the walls or the floor belong to the Landlord and
-The bar stools, tables and other property is generally auctioned off by the restaurant
owner in a going out of business sale or sold by an auctioneer for 10 to 15 cents on the dollar.
There is however one asset that is often overlooked by restaurant owner and that is the lease.
The lease needs to be reviewed to determine if the rent is below market, at market or above
market and how many years are left on the lease (the term).
A lease with less than three years remaining on its term, generally has little to no value.
Simerly a lease that is at market or over market generally has no value.
However an “under market” lease with 3 or more years on its term,
may have a significant value.
The approach that we suggest for the under market lease is that the assignment and
sublet provisions of the lease be reviewed, then the restaurant owner should contact
the landlord and indicate that they are considering closing their business and they
would like to assign or sublet the lease to a third party or have the landlord “by them out”
out their lease.
The restaurant owner with an under market lease, may want to contemplate hiring a
real estate broker to review the lease, to negotiate with the landlord and to market
the lease to third parties.
The general standard in New York for the approval of an assignment or sublet of a
lease by a tenant is known as “not unreasonably withheld”. In plain English what
this means is that if a tenant finds a suitable party, that wants to take over the lease,
the landlord must be “reasonable” in approving or not approving /consenting to an
assignment of the lease or the Landlord can be sued.
The Landlord will want the lease to be sublet to a third party and not assigned, so that
the landlord will have recourse against the existing restaurant owner and the new
restaurant tenant. If the restaurant lease is able to be assigned or sublet, then the
tenant’s security deposit (which generally is two to three months of rent) will be
preserved and ultimately returned to the restaurant owner.
That money (sublet money & security deposit) can often times create a significant
amount of money, that can be used to pay creditors, such as sales tax, or monies due
the landlord that are guaranteed by the restaurant owner.
A number of issues related to failed or closed restaurants have been discussed in prior blog posts.
Clients with failed or closed restaurants, that have questions regarding the closing of the restaurant,
or a bankruptcy filing by the restaurant or restaurant owner or a sublet or assignment of the lease
should contact Jim shenwick at 212-541-6224 or at [email protected].
Jim Shenwick has experience in workouts, bankruptcy filings and office leasing.
From: ny.curbed.com
By: Valeria Ricciulli
https://ny.curbed.com/2019/11/1/20944015/uber-nyc-taxi-limousine-commission-lawsuit
From: bloomberg.com
By: Henry Goldman
https://www.bloomberg.com/news/articles/2019-10-11/nyc-cabbies-say-no-cost-bailout-would-avoid-financial-ruin
From: nytimes.com
By: Azi Paybarah
https://www.nytimes.com/2019/10/07/nyregion/nyc-taxis.html
From: nytimes.com
By: Brian M. Rosenthal
https://www.nytimes.com/2019/10/04/nyregion/taxi-medallions-chicago.html
HOW BANKRUPTCY HELPS YOUR CREDIT
COLLECTION COMPANIES AND CREDITOR LIE TO BORROWERS ABOUT THE IMPACT OF BANKRUPTCY ON THEIR CREDIT
A creditor has no right to come into your home
For more than three decades I have heard horror stories spread by collection companies and creditors about bankruptcy and a credit score. First, always consider the source – collection agents make a percentage of each dollar they collect – sometimes upwards of 25%, plus bonuses. The creditor’s employees are paid to collect the debt and many have no respect for the truth. Years ago a collector for an American Express debt told my client, a newly widowed senior citizen, that the law requires her to allow the collector to come to her home and take her property. He said he would be there that afternoon and that she must let him into her home. (I don’t believe he was actually employed by American Express because I have never heard a similar story since.) Of course, she believed this creep, but fortunately she called us before falling into his web of deceit. I explained the law – no creditor can take anything without a court order and even then the basic necessities (such as social security, furniture, small vehicle, etc.) are exempt (protected). That afternoon, my paralegal went to her home and spent time talking over tea and cookies. (She sent some home and they were really good!!) The next week we filed bankruptcy for this sweet woman and stopped all the calls and harassment. I can only hope there is a special spot in hell for this young man who terrorized this innocent woman at a horrible time in her life (she was married for than 50 years and her husband took care of the finances).
Does bankruptcy really help rebuild your credit score?
After bankruptcy, credit scores go steadily up, says a 17 year study released by the Consumer Financial Protection Bureau.
- Median credit scores increase steadily from year-to-year after consumers file a bankruptcy petition. Median scores for Chapter 7 filers recover more quickly than those for Chapter 13 filers possibly due to the much quicker and more likely discharge of Chapter 7 filings. (See charts below prepared by Consumer Financial Protection Bureau)
As more time passes after bankruptcy the higher your credit score
You can see from the charts above that your credit score will continue to rise after bankruptcy. The longer you wait, the higher your score. There are things you can do to increase your score.
Credit reports are notoriously wrong
It is very important to pull your credit reports 6 months after filing a bankruptcy and look for errors. Attorney Mike Cardoza lays out how to do that in How To Spot Credit Report Errors After Your Bankruptcy & Fix Them.
Have a plan and stick to it.
Don’t get so fixated on your credit score that you forget to use common sense. Don’t take on debt that you cannot afford to repay. Be very careful in signing up for more than two credit cards. Always pay the balance on the credit care BEFORE the date that credit card reports to the credit bureau. Never carry more than 20% of the available credit on any one credit card. Do plan ahead – it you want to buy a home or vehicle then to commit lots of time to rebuilding your credit score (that will save you thousands of dollars in the monthly payment).
Stay away from the “debt repair” companies – they are scams!! Learn to recognize scams.
Never use a credit “repair” company – they will be happy to take your money, but never follow through with their promises. Most fill increase your credit score for 30 days, after which all the debt will be back on your credit report and you will be out hundreds, if not thousands of dollars.
- FTC is cracking down on credit repair scams
- Illegal credit repair schemes
- $2 Million Fine for Misleading Consumers and Illegal Fees
MUSINGS FROM DIANE:
Always be smart when asking someone for their help. What is their motive? How do you feel about them (trust your gut)? Never work with someone who contacted you first (I guaranty it is a scam and will put you in worse shape than before you hired them). Always ask questions and insist on getting answers. Don’t borrow from yourself (take money out of your retirement) or continue to use credit to pay credit (a true symptom that financial collapse).
How Can I Help You?
The post How Bankruptcy Helps Your Credit Score appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
In our continuing series of posts on failed or closed restaurants, many clients have asked us to review the custom and practice and the law regarding guarantees and good guy guarantees for restaurant leases.
Most restaurants in New York are owned by a limited liability company (“LLC”) or a Subchapter S corporation. That entity will set up and run the restaurant and the LLC or S corporation stock will be owned by an individual.
In negotiating the restaurant lease, all Landlords will require that the owner of the LLC or the S corporation guarantee the lease.
There are two types of lease guarantees in New York. A full or complete Guarantee for the payment of rent or additional rent by the restaurant under the lease. Under this type of Guarantee, if a restaurant fails to makelease payments for 6 months or any period of time and owes $50,000 for rent and additional rent under the lease and these monies are not paid by the restaurant, the Landlord can demand that the guarantor pay those monies and if payment is not made, the Landlord can sue the individual that owns the restaurant/guarantor for that sum of money. This is an example of an unconditional or unlimited guarantee by the restaurant owner to the Landlord.
The second type of guarantee is what is known as a “Good Guy Guarantee (“GGG”)”, which is a specialized type of guarantee which limits the payment of the guarantor under the restaurant lease, if certain conditions enumerated in the GGG are met. If the restaurant performs those conditions, the guarantor is released from its obligations under the Lease.
An example is provided below.
Example, many GGG require that the following conditions be performed by the restaurant in order for the GGG clause to come into effect and to limit the restaurant owners exposure to the Landlord for future rent. 1. the restaurant must be current on its payment of rent and additional rent, when the GGG sends a letter to the landlord indicating that the restaurant is closing, 2 . written notice must be given to the Landlord (as specified in the lease) regarding the date of the closing of the restaurant a certain number of days in advance of the closing date (usually 45 to 60 days), 3.the restaurant must be left in “broom clean” condition and 4. keys for the restaurant must be delivered to the Landlord.
Under this scenario, if all 4 conditions are satisfied, the guarantor is released from its guarantee under the Lease.
However, the restaurant remains liable for the remaining rent and additional rent due under the Lease, unless the Landlord releases the restaurant from future rent (by the parties entering into a Lease Surrender Agreement) or the restaurant’s lease is subleased or assigned to a 3rd party in accordance with the terms of the Lease and with the consent of the Landlord.
As can be seen from the above examples, a GGG is a more limited form of guarantee.
Under New York custom and practice, the guarantee whether it is a regular guarantee or a GGG can be incorporated into the terms of the lease, but it must be signed and dated by the guarantor and the guarantor is usually required to give his or her social security number and home address to the Landlord.
The guarantee or good guy guarantee can also be its own separate document and it is usually two to five pages long.
Before a restaurant closes, the lease and the guarantee, should be reviewed by an experienced attorney to determine what conditions must be met. Any clients having questions regarding a closed or failed restaurant and lease guarantees or good guy guarantees should contact Jim Shenwick at 212-541-6224 or email him at [email protected]. Jim Shenwick negotiates leases, practices bankruptcy law and represents failed or closed restaurants.
By Steven P. Taylor, J.D.
Founder of the Law Offices of Steven P. Taylor P.C.
If you become entitled to receive an inheritance after you file for bankruptcy in Indiana, it may be part of your bankruptcy estate. In a Chapter 7 bankruptcy case, it can become part of the assets that the Chapter 7 bankruptcy trustee can take unless it’s protected by an exemption. In a Chapter 13 case, receiving an inheritance does become part of the bankruptcy estate and may increase the amount you have to distribute to your unsecured creditors.
Becoming Entitled To Inheritance Within 180 Days of Filing Bankruptcy
With respect to a Chapter 7 bankruptcy, whether or not an inheritance becomes part of your bankruptcy estate depends on the timing of the inheritance. If you become entitled to the inheritance (not receive) within 180 days after you filed, the inheritance becomes the property of the Chapter 7 bankruptcy estate. 11 U.S.C. §541(a)(5)(A). You should immediately advise your attorney and are required to notify the Chapter 7 Trustee and Court. As you may recall, when you file for Chapter 7 bankruptcy, a trustee is appointed to ascertain whether you have assets which the trustee can liquidate and use those funds to pay your creditors. Some of the debts get paid and the remainder will get discharge, leaving you free to move on from crushing debt.
Likewise, if you become entitled to the inheritance (not receive) within 180 days after you filed, the inheritance becomes the property of the Chapter 13 bankruptcy estate. 11 U.S.C. §541(a)(5)(A). With respect to a Chapter 13 bankruptcy, the consequences of becoming entitled to receive an inheritance also depend on the proposed distribution to unsecured creditors in your plan. In a Chapter 13 Plan, you must provide a dividend to your unsecured creditors equal to the amount they would receive as if you had filed Chapter 7. If your dividend is now insufficient, you will need to modify your plan to increase the dividend. This can be done by an increase in your monthly payments or by devoting a portion of the inheritance when received to the Chapter 13 Trustee to satisfy this requirement.
Potentially losing an inheritance can be an emotionally upsetting time; however, remember that you must be completely honest and disclose all debts and assets to the court. If the court finds that you misled the court about an inheritance, the Court could impose monetary penalties, dismiss your case and still be required to give up all or some of your inheritance. Potentially, your actions could lead to an investigation by the government for fraud, which can lead to hefty fines or incarceration. Therefore, if you do become entitled to inherit within 180 days of filing for bankruptcy, you must disclose that fact to the court and trustee by amending your bankruptcy Schedule B, and maybe C.
- You must amend Schedule B and disclosure your interest in underlying assets of the inheritance and an estimated value. If you are claiming the property as exempt in some fashion, you must also amend Schedule C.
As may be gathered, the trigger is that you have become entitled to the inheritance. It doesn’t matter when you actually collect the inheritance, even if it is after your bankruptcy is supposed to be over. The date that matters is the date entitled to the inheritance become effective (i.e., the date the decedent passed away).
Becoming Entitled to Inheritance After 180 Days of Filing Bankruptcy
With respect to a Chapter
7 bankruptcy, If you become entitled to an inheritance more than 180
days after you file, the consequences are significantly different. The
inheritance is not part of your bankruptcy assets. Therefore, a Chapter 7 trustee cannot claim
the inheritance and try to liquidate it for the benefit of your creditors. It is all yours.
With respect to a Chapter 13 bankruptcy, however, the Court and Chapter 13 Bankruptcy Trustee may still require to amend your plan due to becoming entitled to an inheritance, even if more than 180 days have passed since you filed. This is because under 11 U.S.C. §1306(a)(1), your Chapter 13 bankruptcy assets include all assets acquired until your case is closed, dismissed or converted. While technically, you are not required to pay an increased dividend to your unsecured creditors by reason of becoming entitled to this inheritance; the Chapter 13 Trustee will require you increase the dividend to the unsecured creditors by some amount. (By the way, this can happen when your income and assets increase for any reason during the Chapter 13 bankruptcy repayment plan period, from three to five years.)
Steps to Take to Keep Inheritance
If you are aware that you are the beneficiary of a will of a person who may be passing within 180 days of your anticipated bankruptcy filing date, you may want to suggest that your entitlement be left to you as a beneficiary of a spendthrift trust. Some courts have held that a true spendthrift trust is not part of the bankruptcy estate. Contrary to conventional wisdom, spendthrift trusts are not solely for the well-to-do. Having this discussion with a loved ones who want you to have something with they pass can honor their wishes and allow you to avoid the hassle of dealing with bankruptcy trustee in a bankruptcy proceeding.
Find an Attorney
If you file for bankruptcy in Indiana and receive an inheritance, bankruptcy laws require that you disclose the new assets to the court and trustee. If you anticipate that you may inherit property while in bankruptcy that you really want to keep, you may wish to discuss your case with an experienced Indiana attorney to determine how to protect your inheritance from bankruptcy or how an inheritance will be treated during the bankruptcy.
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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.