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Bankruptcy Not as Expensive as Some Suggest

2012-05-11T14:02:56Z

As the economy continues to struggle to rebound, many people are having financial problems. Making ends meet can be difficult when you unexpectedly lose a job or have wages reduced. Filing for bankruptcy is just one of the options that may be available to you if you are unable to pay your bills.

Most people do not realize that there are costs associated with filing for bankruptcy protection. Some law firms may charge a significant amount of money to handle a bankruptcy for a client, placing further financial strain on the individuals needing to file. This may scare some clients away from the process, and be reluctant to discuss bankruptcy as an option for their situation.

]]> Clients need to know that each bankruptcy attorney will have a different fee system in place. Finding help at an affordable cost is not impossible, as there are options available to you. What is most important is for you to find someone who understands your situation, who can help you determine what is best for you and your family's financial future.

One thing people need to be aware of is that there are non-attorneys offering to file bankruptcies for individuals. However, working with non-attorneys to prepare your bankruptcy petition could result in problems down the road.

Non-attorneys may not be as familiar with all of the aspects of bankruptcy law, and may miss certain items that would be beneficial to clients. Once the petition has been entered, it can be extremely difficult to make modifications. If property is liquidated to help pay for debts, it will not be possible to undo those types of transactions.

If you are having financial trouble, you need to know that bankruptcy is an affordable option. It is important to work with someone who can walk you through the process and answer all of your questions.

You Cannot Earn a Discharge For Your Student Loans

2012-04-13T12:56:15Z

The combination of the down economy and rising tuition costs has left many recent college graduates with substantial amounts of student debts. And, according to a news article by the Southern California Public Radio, the amount of student loan debt that Americans have acquired now exceeds debts for credit cards and car loans, combined.

The Federal Reserve Bank in New York estimated that by the fourth quarter of 2011, $867 billion in student loan debt was outstanding, and a recent report by the Consumer Financial Protection Bureau estimated that the total amount owed on student loans was over one-trillion dollars.

]]> In an economy where students are unable to find high-paying jobs, making monthly student-loan payments becomes very difficult if not impossible. While filing for Chapter 7 or Chapter 13 bankruptcy may be able to help these graduates alleviate many types of debt - such as credit card debt or medical bills - so that cash can be freed up to make student loan payments, it is very unlikely that their student loans will be discharged.

In certain circumstances, though, student loans may be discharged through bankruptcy. If it is proved that the student loans are an "undue hardship" on debtor, his or her dependants, or his or her family, then a judge may order the student loans to be discharged.

Proving undue hardship is very difficult, though. In general, it must be shown that the debtor:

Is unable to maintain a minimum standard of living;
Is unlikely to change or improve his or her current situation any time soon; and
Has made "good-faith efforts" to repay his or her student loans.

Even though student loans may not be discharged through bankruptcy, filing for bankruptcy still may help you get back on track. Knowing the options available to you can help you make the decisions that are best for your financial future.

Source: http://www.scpr.org/programs/airtalk/2012/04/09/25945/should-bankruptcy-be-allowed-for-student-loan-debt

Your Mortgage Debt Was Forgiven, But Do You Owe Tax On That?

2012-04-02T12:58:07Z

Some homeowners have been able to negotiate their way out of underwater mortgages and have emerged free and clear, due to short sales, foreclosures and other options that they may have had available for their situation.

Or have they?

If you managed to get out of a bad mortgage, you do need to confirm you don't run afoul of the IRS by failing to pay any applicable tax on that loan forgiveness.

]]> Cancellation of Debt

When a bank or other lender forgives a debt, some accounting must be considered. A loan does not qualify as income, because you have to repay the lender with interest, so that money "costs" you.

If the loan is forgiven, the amount "cancelled" can be counted as income, as you received money and did not pay it back. This seems particularly unfair in the context of underwater mortgages; given the property is no longer worth the original loan value, but the "gain" is based on the loan value.

The Mortgage Forgiveness Debt Relief Act

Congress recognized that for many people, if you are in a financial circumstance that necessitates a cancellation of debt, receiving a tax bill for the mortgage forgiveness, might not feel appropriate.

The Mortgage Debt Relief Act of 2007 to allows taxpayers to avoid liability for the "income" resulting from the discharge of debt on your principal residence.

To be eligible, the debt forgiveness must have occurred from 2007 through 2012.

The debt must be related to a "decline in the home's value or the taxpayer's financial condition." $2 million may be forgiven ($1 million if married filing separately.)

Equity loan debt qualifies, but only if the proceeds were used for improvements to the home. If you used a $20,000 home equity loan for paying off credit card debt or buying a car, it cannot be excluded from your income tax.

When doing your taxes, you will now if you have potential debt forgiveness income if your received the IRS Form 1099-C, Cancellation of Debt from your lender.

The Ticking Time Bomb of Student Loan Debt

2012-02-24T15:38:31Z

Since World War Two, going to college has been seen as the ticket to the American Dream. Statistics show college educated employees earn more than their non-college educated coworkers.

A recent report from the National Association of Consumer Bankruptcy Attorneys (NACBA) indicates there may be growing clouds on that horizon.

]]> They report potential clients with student loan debt have increased significantly in the last three to four years and "about half (48 percent) of bankruptcy attorneys reported significant increases in such potential clients."

No Discharge?

The trouble with student loans for those who cannot repay them, is that unlike many types of debt, they are generally not dischargeable in bankruptcy. There is also no statue of limitations, allowing the creditors to sue years, and even decades, after the debtor left school.

Undue Hardship

The only way, under the bankruptcy laws, to discharge student loans is known as "Undue Hardship." The most widely used test came out of a case the Brunner case.

A demanding three-part test is used to determine if one qualifies for an undue hardship discharge, where one has to have virtually no chance of ever improving one's income.

Co-Sign Any Student Loans Recently?

Another source of concern is the number of parents implicated in this debt. The NCBA report indicates that in 2010, 17 percent of parents had taken out loans for their children and this compares to 5.6 percent in 1992-1993.

If their children default on the loans, the lenders will come looking for them. In the worst cases, parents could lose a lifetime of assets repaying large student loans.

A Drag on the Economy

With all, or a large percent, of their income being directed to paying down student loans, this debt will weigh down on the entire economy, taking money away from other purchases.

Many student loans will require 20 to 30 years to repay, leaving many with no discretionary income for most of their adult lives. The NCBA notes that 2010 was the first year that student loans had surpassed $100 billion.

Non-Attorney Bankruptcy Petition Filers Causing Problems for Debtors

2012-01-17T20:26:59Z

This prolonged recession has hit many families hard. Many people have experienced financial problems for the first time, and are unsure what to do to get back on their feet. When they turn on the TV or go online, they are constantly exposed to ads from groups or organizations that are devoted to reducing debt or helping someone file for bankruptcy.

However, not all of these groups are created equal. Some unfortunately prey on debtors to make a quick dollar, and leave the individual in worse financial shape. Debtors rely on bad advice and have to find additional help to undo the damage that has been done.

]]> Recently, there has been a rise in the number of non-attorney bankruptcy petition preparers offering their services to debtors in need. These individuals "help" a debtor file for bankruptcy. They assist the debtor with all of the necessary steps to file for bankruptcy, offering complete service at a cost comparable to attorneys in the area.

While this may sound like a bargain to someone who has experiencing financial hardship, it is often not the answer to getting out of debt. One of the biggest issues for a person going through the bankruptcy process is what property will he or she be allowed to keep. Attorneys experienced with assisting bankruptcy clients will know how to maximize a client's exemptions, potentially allowing a debtor to keep their most important property.

Exemptions are just one small part of the complicated bankruptcy process. Once the bankruptcy plan is put in place, a debtor may be unable to change its terms. Property that is liquidated to pay off debts is gone and this cannot be changed.

Knowing the complexities of the bankruptcy code is just one advantage that experienced attorneys can provide to their bankruptcy clients. By understanding all of the options that are available, debtors can make the decisions that are in their family's best interests.

Cut Down on Medical Costs to Keep Bills Under Control

2011-12-14T15:04:48Z

According to HealthNewsDigest.com, 2.8 million Americans are turning 65 years old in 2011 and becoming eligible for Medicare. While the government program is less expensive than many private health-insurance programs, the out-of-pocket expenses can still add up and cause financial strain, especially for people living on fixed incomes.

]]> To avoid significant health-care debt - which is one of the more common reasons why people file for bankruptcy - HealthNewsDigest.com provides the following tips to help keep medical costs as low as possible:

Understand your paperwork: Know the parts of your bill and what an Explanation of Benefits (EOB) is.
Don't pay the bill immediately if you are not certain it is correct: It is harder to get money back once you have paid the bill.
Make sure the bill has accurate basic information: Check that the bill has your name, address, date of service and insurance information listed correctly.
Verify the bill against the EOB provided by your insurer: The EOB should show the amount charged by the provider, the amount paid by the insurer and the amount to be paid by you. That amount on your EOB should be the same as the amount on your bill.
Avoid receiving treatment or services from out-of-network providers: Your insurance company has negotiated lower prices with in-network providers, so using out-of-network providers generally will be more expensive.
Ask the provider for a prompt-payment discount: Many providers offer discounts to people who pay for their treatments in full on the day of service.
Ask for an interest-free payment plan: If you can't pay right away, some providers will allow you to set up an interest-free payment plan.
Don't ignore bills and let them pile up or go to debt collectors: Don't wait so long that your bill gets sent to a debt collector or begins to collect interest. If you are in the process of verifying or correcting a bill, let the health-care provider know and ask that the bill not be sent to a collector.

Holiday Shopping Could Cost You More Than You Think

2011-11-18T14:51:04Z

When asked to imagine a winter holiday scene, it might be fair to say that most people would picture a winter scene with stockings hanging from the mantel of a fire place and presents scattered beneath a decorated tree. A scene like this does not come free of charge, however; it costs money to put presents under the tree. And if families are not cautious, the choices they make during the holiday season could lead to having to file for bankruptcy.

]]> Whether a family of lesser means, of wealth or anywhere in between, the holiday season presents a tempting opportunity to stretch budgets beyond reasonable means, risking putting the family in a difficult financial position as the new year begins.

Consumers have options of how they choose to finance purchasing gifts; all offer benefits, but all also present financial risks if consumers are not careful. A CBS News article highlights three common ways to finance purchases: credit cards, debit cards and cash, and layaway.

Credit cards allow consumers to purchase items under the promise of paying the credit card company at a later date. As CBS News notes, many credit card companies offer special promotions during the holidays, allowing consumers to more quickly accumulate rewards points. If people are able to pay the balance of their credit card bill during the next billing cycle, credit cards may offer a great way to purchase gifts. However, if a person buys more than they can easily afford, the interest that accumulates on a carried credit card balance can quickly create a very difficult financial situation.

Debit cards and cash present a way to purchase gifts without fear of accumulating interest. But, paying for presents in this manner is only available to people who have the cash available to spend. If people are not careful, using a debit card can quickly deplete their checking account.

Layaway plans allows people to put presents on hold at stores after paying a small down-payment. People then save money until they are able to pay the remaining balance. As the CBS News article states, stores do not offer layaway in an effort to be helpful to consumers, but rather as a way to make money and help make sure the store does not lose sales to customers with no credit or with limited financial resources.

If used responsibly, credit cards, debit cards and cash, and layaway plans can help people put gifts under the tree this holiday season. However, if people overextend themselves financially, they may find them in situations that require solutions for regaining control of their financial situations, such as filing for bankruptcy. Bankruptcy may offer people a way out from under a mountain of debt, including credit card debt, to gain a fresh start.

Source: http://www.cbsnews.com/8301-500173_162-57324115/layaway-best-way-to-pay-for-holiday-purchases/

Foreclosure Rates on the Rise

2011-10-31T19:34:37Z

Indianapolis foreclosure rates have taken a turn for the worse and rose recently to 3.58 percent of all mortgages. This increase is up from last year's figure of 3.19 percent according to mortgage tracking service Corelogic, which tracks national foreclosure data. Indianapolis has remained higher than the national foreclosure rate, which was 3.44 percent in July.

]]> There are a number of indications that homeowners are still in a very tough financial situation. The percentage of mortgages over 90 days delinquent rose to 6.41 in July, up slightly from the June rate of 6.39. This is the first increase in the month-to-month tracking of these statistics since January according to the Corelogic report. One good sign is that the delinquency rate overall is down 6.98 percent this year from July 2010.

Robo-signing

Robo-signing is a widespread problem in Indiana and has a direct affect on many of the problems that homeowners are having across the state. "Robo-signing" is the term given to the problem of low-paid workers signing important documents that they haven't read, are not qualified to read or are not qualified to sign. Many of these documents found in recording offices were not only foreclosure documents but thousands of other homeownership documents unrelated to foreclosures.

The scandal and investigation that followed has revealed more than 8,000 suspect documents in Allen County alone, according to the Journal Gazette. The inability to verify documents due to signing concerns and fraudulent documents can delay home sales, further adding to the already strained housing market.

Vulnerable Homeowners Risk Victimization

2011-10-21T14:17:35Z

Every day it seems to be the same story: the economy is struggling. Homeowners are struggling. Many homeowners face foreclosure. To save their homes and their livelihoods, many homeowners seek help from outside firms and companies. Opportunistic companies take advantage of homeowners and other consumers who are struggling financially by offering empty promises of help - for a price.

Recently, Indiana Attorney General Greg Zoeller filed lawsuits against two credit services and foreclosure consultants who offered financial assistance to struggling homeowners and promised to help them out of debt. The firms advertised on the Internet to woo the homeowners, but what's worse is that these firms are accused of specifically targeting vulnerable homeowners by researching public records of foreclosures. With these records, the firms contacted homeowners with what appeared to be a random offer of help. Desperate, some homeowners accepted the help and lost money because of it.

]]> The two firms, Community One Law Center and National Law Partners of Florida and California, allegedly accepted deposits in return for a promise to help the homeowner out of debt. According to the Indiana Attorney General, homeowners paid the firms anywhere from $499 to $2,699 for their assistance. The homeowners did not receive the help they were promised.

Consumer Fraud Complaints on the Rise

In this difficult economy, consumers have become vulnerable to scams promising to help with debt or reducing debt. Other cases of consumer fraud that have been in the news lately include "robo-signing" affidavits and empty promises from debt settlement companies. According to the Indiana Attorney General, complaints of consumer fraud are up 19 percent.

In order to avoid these scams, homeowners and other consumers should be wary of firms which offer financial assistance or debt reduction services that require payment by the homeowner or other consumer.

You don't have to look far to find allegations of consumer fraud. One thing is clear - consumers need to be on high alert so they do not become victims.

National Decline in Foreclosures May Help Struggling Homeowners

2011-09-28T15:40:51Z

According to data from RealtyTrac, a company that markets foreclosed properties online, 84 percent of the nation's metro areas saw a decline in home foreclosures during the first half of 2011. The company also reported that the nation-wide foreclosure rate has dropped 29 percent in the past 12 months.

Industry analysts attribute much of the slowdown in foreclosures to the glut of foreclosed properties on which lenders already foreclosed and cannot sell, not to any dramatic turnaround in the country's housing market. Additionally, lenders are being more cautious in how they proceed in foreclosing on homes after the 2010 "robo-signing" scandal over how lenders were having attorneys process foreclosure documents without actually verifying the contents of the documents was accurate - and essentially committing foreclosure fraud.

]]> While this may signal poor news for the nation's economy, lenders being less anxious to foreclose property may help homeowners who are struggling to make their mortgage payments and trying to avoid foreclosure. With a backlog of properties already in lenders' possession, lenders are less likely to institute new foreclosure proceedings on mortgagees who are behind in payments, giving people extra time to try to get back on track financially before they are in serious danger of losing their homes.

Additionally, lenders may be more open to negotiating a loan modification with more favorable terms for the homeowner so that he or she can make the monthly payments. Finally, lenders might approve more short sales in an effort to avoid the whole foreclosure process and ensure that the lender does not have yet another property to try to sell.

While the news that foreclosure rate has dropped only because lenders have already foreclosed on so many other homes may be disappointing for those looking for signs of recovery in the nation's economy, this may end up being beneficial for some people who are suffering the brunt of the poor economy and are in danger of losing their homes.

How to Avoid Home Loan Modification Scams

2011-07-28T14:26:47Z

With more Americans finding themselves in danger of losing their homes to foreclosure, loan modification companies are becoming more popular, as are scammers on the hunt for desperate homeowners.

One out of every nine homeowners in the U.S. is behind on their mortgage payments by more than three months. Families struggling to keep their home can be easily lured by scammers immediately guaranteeing modifications without requesting the necessary information to secure such a change.

]]> Take the time to get to know who your lender is and who actually owns your particular loan. Most mortgages are owned by a single bank or are otherwise turned into a mortgage-backed security and are now owned by a number of different people.

Scammers will sometimes act suspiciously and make odd requests when you are sending them or your bank important, personal information. One red flag is being asked to pay for a percentage of the fees upfront. It is definitely uncommon and even illegal in some states to charge anything upfront for these services.

A homeowner wanting a loan modification can choose to work with their lender themselves or to seek professional help with an attorney or non-profit counseling service. Most experts don't recommend attempting to secure your own modification unless you have some experience with foreclosure and finances.

Scrutinize documents so that you are absolutely sure of what you are signing before you sign it. Be wary of any strange or forged-looking papers. Be sure to protect yourself and your investment. It is important to know exactly what you are being promised, and what could happen if you are unable to meet your new obligations.

Marriage and Money 101

2011-07-22T15:40:22Z

The current economy is affecting more than taxes and jobs in Indiana. Bankruptcies have skyrocketed, home values have decreased, credit card debts have accumulated, and as a result, marriages are in trouble. Money problems are impacting couples all over the United States. As the economy continues to struggle, more and more couples are deciding to divorce, and finances seem to be a key factor or last straw that is helping to end these marriages.

]]> It's a well known fact that financial problems add stress and strain to even the best of marriages. And while we keep hearing that we are on the road to economic recovery, couples are dealing with the left over realities of the recession and it can be ugly. Young professional couples are often inexperienced when it comes to handling money issues. Many families were living way beyond their means when the economy sank, and now they are finding themselves relying on credit cards or drying up their savings accounts in order to keep afloat. Some are even filing for bankruptcy.

Prolonged financial strain can cause division and hardship on any marriage. As food products, gas and clothing costs continue to spike, couples feel continued tension and pressure when it comes to making wise money decisions. Add in old student loans, accumulated credit card debt, pay cuts, and you have a lot to wade through as a couple. It is imperative that these stretched couples land on the same page.

That is why discussing money issues before they arise is so important. Older couples, who have been married for a long time, seem to ride through financial storms much better than those in new marriages. They have learned to plan and work through tough times. Moving forward and accepting where you are at financially may be the first and best step to surviving this economy with the person you love. Working together may not only help marriages survive this financial crisis, but also emerge in solid financial shape.

Welcome to Our Indianapolis Bankruptcy Law Blog

2011-06-13T20:27:57Z

Things change fast in the legal world. Every day, state legislatures and judges make hundreds of decisions that impact the way cases are prepared and presented for court. At Walton Legal Services, we know how important it is to stay current with legal issues. We follow the legal stories that will have an impact on the best strategies to use while protecting your rights.

Keeping you informed about the legal process will help you make better decisions about your own bankruptcy case. This Blog page is intended to serve as a forum for discussing case law and relevant court decisions. Periodically, this page will be updated with new information and topics for discussion, so please return often to see the most current post and comments.

Our firm has always placed an emphasis on personalized attention and responsiveness to client concerns. Your input means a lot, so please send us your comments. Thank you for visiting. Call or contact the office by e-mail to discuss your specific legal need today.