Boca Raton Bankruptcy Attorney Blog

Why Chapter 7 bankruptcy is suitable for continuous debt problems

2012-05-19T02:32:10Z

Debt that continues to pile up is a major concern of many residents in Florida. For many, the minimum payment can't be paid on credit cards, the full mortgage can't be met and only a portion of the car payment can actually be made so that there can still be food on the table for the family. It is an unfortunate circumstance, but many Florida residents find themselves in the middle of this difficult situation. Fortunately, there are alternatives to help confront overwhelming debt, including a petition to liquidate assets under a Chapter 7 bankruptcy.

When filing Chapter 7 bankruptcy, one's assets are marshaled and then sold, with the funds that are retrieved paid to creditors according to the direction of the court. If there is any remaining debt, it is generally "forgiven" by the court. There are certain items that are exempt from bankruptcy, which means that the filer can keep these particular assets in order to support themselves and their family during and post-bankruptcy.

]]> However, Chapter 7 bankruptcy is not for every Florida resident, as there are certain criteria that must be met in order to qualify to file Chapter 7. It is known as the "means test" and consists of evaluating the prior six months of income and necessary living expenses as that compares to the average household income in Florida. Even after Chapter 7 bankruptcy, there are some debts that may remain, including child support, alimony and student loans, in addition to any debt that was not surrendered in the bankruptcy filing.

While it may seem like a lot to grasp, Florida residents should realize that filing for Chapter 7 bankruptcy is sometimes the best option. In many cases, when homeowners are about to lose their home or couples are about to lose their car and can't even make a small payment on their credit debt, Chapter 7 bankruptcy is a suitable option to conquer outstanding debt. Bankruptcy typically helps many individuals and families wipe the slate clean so they can start over again to rebuild their financial security.

Source: FindLaw, "Chapter 7: How it Works," 2012

Credit card debt hurting Florida residents: is there a way out?

2012-05-08T17:15:43Z

Using plastic has been a convenience for many consumers for years, though recently consumers have been cutting back, as was discussed in a previous post. Unfortunately, it is a convenience that may well have caused many Boca Raton consumers to accumulate a massive amount of debt. Moreover, credit cards aren't just easy to use, but are easy to get your hands on as well. Though it may cause fiscal agony, credit card debt is something that is often better to deal with sooner rather than later.

When that first bill comes in the mail, the minimum payment may be low. However, as you continue to use that credit card and accumulate debt, the larger that minimum payment becomes. Eventually, that minimum payment is as much as your electricity bill each month. The higher that minimum payment becomes, the harder it is to make each month. This eventually leads to the massive debt that most consumers have under their belt.

]]> One thing that consumers can do to try to make it easier to pay down their credit card debt is by calling the credit card company and requesting a reduction in their interest rate. The first person you speak to generally won't be able to make the final decision, but if you are persistent and calm, you will get to someone who can do it. That's not saying they will, but it's worth the attempt.

Sometimes, however, credit card debt can become just too much to handle. The minimum payment can't be paid -- not even half of it for that matter -- and you are behind on all your bills, including perhaps your car payment and your monthly mortgage. When you get into such a sticky situation where you are so far in debt that you can't get your feet back on the ground alone, debt relief through bankruptcy protection could be an option for many Boca Raton area residents. Essentially, this can help you get a fresh start on things financially and take back the reigns to control your financial future.

Source: The Christian Science Monitor, "Credit card debt: What can you do about it?," Trent Hamm, May 2, 2012

Consumers tend to underestimate debt

2012-04-30T21:30:37Z

For most of us, tax season is finally over. Taking a long hard look at the year's financial statements can be a wake-up call where debt is concerned. For some residents of Boca Raton, and all over the United States for that matter, seeing debt in black and white will become a call to action for the remainder of 2012. At any rate, data indicates that the majority of consumers vastly underestimate the amount of money they owe to lenders. In fact, many people owe 1 1/2 to 2 times more in credit card debt and other consumer lending than they currently estimate.

In reality, consumer debt likely adds up to over 20 percent of an employee's take-home pay. Basically, "consumer debt" includes personal loans, car loans and of course credit card debt. Consumer debt does not include mortgage payments and when the mortgage is factored in, many people find themselves owing more on a monthly basis than their net worth can accommodate.

]]> There are lots of tactics for managing debt. Sometimes, taking these measures to eliminate or whittle down debt can have a big impact on an overall financial outlook. Unfortunately, some people in Boca Raton find themselves so overextended that implementing a new budget, or setting aside credit card spending altogether, is about as useful as putting lipstick on a pig. In cases like this, professional assistance can prove useful.

It's no secret that times are hard. When it comes to managing credit card debt and the overall cost-of-living within a household, job loss, cutbacks or other unforeseen strains on income can quickly derail efforts. It's important for consumers to understand that there is no shame in seeking assistance when it comes to financial management.

Source: Indianapolis Star, "Adding up what you owe is the 1st step to managing debts ," Walter Koon Jr., April 29, 2012

Retirement accounts in bankruptcy

2012-04-24T23:42:27Z

Many Florida households have no doubt experienced economic distress in recent years. At the same time, some may well have substantial retirement accounts, and it may be tempting to use that money to pay off debts. However, before making the decision to make debt payments with money currently resting in an IRA or company pension, there are some important things to consider when it comes to bankruptcy.

In fact, it may make more financial sense to declare bankruptcy and take the hit to one's credit report rather than start dipping into a retirement account. This is chiefly due to two reasons. The first is simply that the money you have saved up for your later years might end up having to be spent over a period of decades. Using it now for short-term monetary relief could lead to big financial headaches in the long-term.

]]> Moreover, it might come as a surprise that money in a retirement account is often protected in bankruptcy. That is, creditors cannot touch a debtor's company pension or 401(k) at all, although this may vary state to state. With regards to an IRA, the money in it is protected under federal law up to $1.17 million, which increases annually to take account of inflation. Using this money to pay off debts, though, could put the funds in jeopardy.

Due to the bankruptcy protections afforded to retirement accounts, any Florida resident may also want to think twice before rolling over one account into another. For example, since a 401(k) may enjoy unlimited protection while a debtor's IRA enjoys protection up to only $1.17 million, it may not necessarily make sense to rollover the 401(k) into the IRA if the total amount brings you over the protection threshold. That may be particularly true when bankruptcy is a distinct possibility.

Source: Seeking Alpha, "IRA Bankruptcy Protections ," Ryan Glover, April 17, 2012

Many use tax refund to file for bankruptcy

2012-04-19T21:53:57Z

With the tax filing deadline at the beginning of this week, many Florida residents should begin receiving their tax refunds in the mail. Since many continue to struggle with their financial obligations in the wake of the economic recession, the tax refund may offer an opportunity to get ahead of one's debt. Indeed, some may well use their refund to pay for filing for bankruptcy.

Perhaps somewhat counter intuitively, it costs money to file for bankruptcy. In fact, due to a change in U.S. bankruptcy laws in 2005, it is now more expensive to file than it used to be. According to the U.S. Government Accountability Office, it cost an average of $921 in legal and administrative fees to file for bankruptcy before the laws were changed. By 2007, the costs had jumped more than 50 percent to an average of $1,477.

]]> That has led to many people using their tax refunds to cover the costs, and the National Bureau of Economic Research expects that more than 200,000 households will do so this year. Since the average refund is $2,913, the amount may more than cover the costs of filing for many households. It may be no surprise then that bankruptcy filings tend to spike around this time of year.

By filing for bankruptcy, many of these households in Florida and elsewhere may be able to restructure or even eliminate their debt obligations. Far from being a stigma, bankruptcy is actually an opportunity. It's a way for people to gain a fresh start on life without having a cloud of debt hanging over their heads.

Source: CNBC, "Tax Refunds Being Used to Pay for Bankruptcy Filings ," Christine Dugas, April 13, 2012

Former NFL defensive tackle files for Chapter 7 in Florida

2012-04-13T16:54:50Z

NFL fans may be interested to know that Warren Sapp has filed for Chapter 7 bankruptcy in south Florida. As a former defensive tackle for both the Tampa Bay Buccaneers and the Oakland Raiders, Sapp was in the NFL for 13 years and went to the Superbowl in 2002 when the Buccaneers won. Nonetheless, he is now filing for Chapter 7.

Sapp's average monthly income at the moment is $115,881, which includes contracts with Showtime, CCA Sports and an advance for a book deal. However, while his monthly income is certainly substantial, he owes a total of more than $6.7 million to his creditors along with back child support and alimony. The bankruptcy filing happened in Fort Lauderdale on March 30.

]]> In this case, Sapp still has substantial assets of about $6.45 million. However, by filing for Chapter 7, he may have to liquidate many of these assets, including 240 pairs of Jordan athletic shoes. During a Chapter 7 bankruptcy, many of the assets owned by the debtor are sold off to satisfy the claims of creditors, although some exemptions do apply.

While Sapp's personal bankruptcy filing may involve substantial debts and assets that most are not likely to hold, it is still true that many Florida residents have struggled with their financial obligations as of late. Indeed, unemployment, medical expenses or some other unexpected calamity can set any household back. Chapter 7, though, provides a way for debtors to get ahead of their obligations and eventually emerge from the process with little or no debt.

Source: The Washington Post, "Former NFL star Warren Sapp files for bankruptcy in South Florida, owes more than $6.7 million," April 7, 0212

Know your rights after filing for bankruptcy

2012-04-04T03:52:22Z

For many Florida residents, bankruptcy may well offer an opportunity to gain control over one's finances. By declaring bankruptcy, a person may be able to discharge many of their debts or restructure them. Moreover, though, bankruptcy may also be able to stop creditor harassment.

Anyone who has ever fallen behind on a debt knows the lengths to which creditors may go to in order to collect on that debt. The debtor often begins receiving phone calls and letters that lead to significant emotional distress, and the creditor's actions may well make the problem worse rather than better. In a bankruptcy, however, a person can file for what is known as a debtor's discharge.

]]> A debtor's discharge is a legal injunction designed to prohibit collection actions by the creditor. Unfortunately, banks and other creditors do not always obey the discharge, and this happened recently with one Florida debtor. Even after the person went into bankruptcy and filed the debtor's discharge, Bank of America continued to call the debtor.

In that case, the bank was eventually punished by a U.S. bankruptcy judge and was ordered to pay not only the attorney's fees of the debtor but also damages for emotional distress. However, the Florida debtor's situation was hardly an isolated phenomenon. In order to collect on their debts, creditors may regularly resort to unsavory tactics that may even be illegal under some circumstances. Knowing one's legal rights can keep a person one step ahead of the creditors.

Source: The Huffington Post, "BofA Allegedly Called Debtor 38 Times After He Filed For Bankruptcy ," Alexander Eichler, March 30, 2012

Got debt problems? Bankruptcy may help

2012-03-26T22:35:18Z

Many Florida residents continue to struggle financially during these tough economic times. Often through no fault of their own, many have found themselves dealing with unemployment or with a medical emergency. That can lead to tremendous levels of debt that may well seem overwhelming. However, it is possible to escape from debt problems.

The first method is simply through self-help measures. When one's burden of debt is below the $5,000 mark, it may be possible to regain control of one's finances just by reducing expenses. However, when the level of debt exceeds half of one's income, then more drastic measures are necessary.

]]> One measure is to negotiate with lenders for lower monthly payments or a reduction in the interest rate. Bankruptcy may also be an option if the debt one owes is greater than their annual income. Under bankruptcy, one can restructure or discharge their debts, enabling them to regain their financial footing.

However, there are two types of bankruptcy that Florida debtors should be aware of. The first is called Chapter 7. Under Chapter 7, any unsecured debts, such as a credit card debt, may be wiped out. However, Chapter 7 also forces the debtor to liquidate many of their assets, so it may not be for everyone.

On the other hand, a Chapter 13 bankruptcy helps people to escape their debt problems by allowing them to restructure their debt obligations. Under the protection of a court, they create a debt repayment plan that puts them on the path toward financial independence within three to five years. Thus, bankruptcy is an opportunity for those suffering under debt to gain control over their financial lives.

Source: CNBC, "Unmanageable Debt? How to Get Help," Scott Gamm, March 16, 2012

Student debt spiraling out of control

2012-03-19T19:24:42Z

Recently, we reported on this blog how bankruptcy filings are declining across Florida and additionally how Florida consumers are cutting back on their credit card debt. However, even though the amount of debt held by households is becoming more manageable nationally, one form of debt is bucking the trend -- student debt. Indeed, it may come as no surprise that student debt is spiraling out of control for many families.

For the past decade, tuition and fees at public colleges for in-state students have risen by an average of 5.6 percent each year after subtracting for inflation. Unfortunately, even with many households facing financial hardship in these tough economic times, it appears the rate of increase may itself be increasing. This year, the average increase in tuition is 8.3 percent, and in some states, the hike in tuition may be as much as 20 percent at some public universities.

]]> Making the problem more difficult is that student debt is not necessarily treated like other forms of debt when it comes to bankruptcy. That is, while a debtor may be able to discharge or reorganize their credit card debt or mortgage by filing for Chapter 7 or Chapter 13 bankruptcy, that is not always true with student debt. Instead, the debtor must make an additional showing that repaying the loans would cause them to suffer "undue hardship" and that is difficult to do.

Nonetheless, declaring personal bankruptcy may enable a Florida debtor to discharge or reduce their other debt burdens. That may in turn make it easier to repay the student debt. In fact, bankruptcy is an opportunity to set things right and to put oneself on a better financial footing. However, there are certain regulations that pertain to bankruptcy, and it is important to understand these rules before filing for bankruptcy.

Source: The Arizona Republic, "College debt especially costly for parents ," Anne Ryman, March 17, 2012

Florida consumers cutting back on credit card debt

2012-03-14T16:43:50Z

Florida residents may be heartened to hear that on a list of the top nine American cities that cut their credit card debt the most, cities in the sunshine state took five of the spots. The list, provided by Business Insider, is based on data provided by Equifax, which is a credit reporting agency. The data compared the amount of credit card debt held in each city in the fourth quarter of 2010 to the amount held in the fourth quarter of 2011.

The city with the largest reduction over that time period was Port St. Lucie, whose residents cut their credit card debt by almost a quarter. Other Florida cities on the list included Ocala, the Northport-Bradenton-Sarasota area, the Tampa-St. Petersburg-Clearwater area, and the Lakeland-Winter Haven area. Furthermore, it appears that the decline in credit card debt is a statewide trend.

]]> It is not just credit card debt that consumers are managing to pay down either. In October 2008, all forms of debt from mortgages to student loans hit a high of $12.4 trillion. That has since fallen by 11 percent, which amounts to a total debt reduction of more than $1 trillion.

However, not all consumers have been able to reduce their debt burden. Despite an improving economy nationally, it is certainly still true that many continue to suffer from the aftermath of the economic recession that had a particularly heavy impact in Florida. Moreover, credit card debt can have a high interest rate, causing it to spiral out of control very quickly. To gain control over the debt, legal options may be available.

Source: Business Insider, "9 Cities Where Americans Cut Their Debt The Most ," March 7, 2012

South Florida real estate broker files for Chapter 7

2012-03-11T00:38:24Z

Florida readers may be interested to know that a well-known real estate broker in the Miami area has recently filed for bankruptcy. The broker, William Holly, filed the Chapter 7 bankruptcy petition on Feb. 10. Of interest to readers, though, is that by declaring Chapter 7, Holly may be able to relinquish his debt and be given the opportunity to eventually emerge from the process with little or no debt.

Like so many others, including both brokers and homeowners, Holly appears to be a victim of the housing crisis. In a statement that he released to the press, he cited the real estate collapse in south Florida as the primary cause for his financial difficulties. In his petition, he listed specific debt of $3.2 million, although there may well be a lot more as the petition also reportedly included "a number of other debts listed as 'amount unknown.'"

]]> In particular, the real estate broker owes $2.85 million to ACG-Miami Green LLC, which helped him with the development of an office building. But like many Florida residents, he also holds credit card debt. Additionally, Capital Bank has a $190,000 judgment against him.

Restructuring these debt obligations and putting himself back on the path toward financial independence will not be simple matters. However, by filing for Chapter 7 bankruptcy, he may be able to stop creditor harassment while he works under the protection of a court to satisfy his outstanding debts. In this case, Chapter 7 may well be beneficial because even though it entails the liquidation of many of his assets, it will also afford him the opportunity to be able to relinquish all his debt.

Source: South Florida Business Journal, "Broker William Holly files Chapter 7 bankruptcy ," Paul Brinkmann, March 1, 2012

Florida Senate bill would streamline foreclosure

2012-02-29T03:24:28Z

Since the housing crisis hit Florida in 2008, many residents of the state have either experienced foreclosure firsthand or have witnessed a neighbor enter foreclosure. However, the banks that have initiated these foreclosures have not always followed the appropriate procedures, and they were recently on the receiving end of a lawsuit filed by numerous states that they settled for $26 billion. Nonetheless, a bill pending in the Florida State Senate seeks to streamline and accelerate the foreclosure process.

The $26 billion settlement is in regards to the robo-signing scandal. Evidently, many banks had been signing off on foreclosure documents without necessarily reading the information in them or verifying that information. In some cases, the documents may well have been phony.

]]> Under the Florida State Senate bill, banks would find it easier to foreclose upon homeowners in certain cases. For example, if the home is abandoned and the homeowner has not participated in the foreclosure process, then the final foreclosure judgment is sped up. Likewise, when a member of a condominium or homeowner association owes dues, then those who are owed money may file a request for a final foreclosure judgment. Moreover, they may do so without an initial hearing.

However, the bill also has some provisions that may protect homeowners. For one, a bank would need to meet a higher standard of proof to show it is the owner of the mortgage. Secondly, in cases where a bank is still owed money following a foreclosure sale of certain dwellings, the time it has to go after the balance is shortened to one year. As the Florida State Senate continues to consider the bill, homeowners who are facing or are in foreclosure may wish to assess their legal options when dealing with the bank.

Source: Tampa Bay Online, "Florida Senate panel advances bill to speed foreclosures," James L. Rosica, Feb. 20, 2012

Fewer bankruptcy filings for middle district of Florida in 2011

2012-02-24T02:07:50Z

Even as the national economy begins to rebound, it is no doubt true that many Florida residents continue to face financial hardship. Often through no fault of their own, many have found themselves unable to meet their financial obligations, including making their mortgage payments or paying off their credit card debt. Nonetheless, there was a recent note of good news in that bankruptcy filings decreased by nearly 20 percent from 2010 to 2011 for the middle district of Florida.

The data is based on filings with the U.S. Bankruptcy Court for the Middle District of Florida, which covers Orlando, Tampa, Jacksonville and other cities throughout Florida's mid-section. In 2010, there were 66,689 bankruptcy filings with the district court. However, this fell to 53,555 filings in 2011. That number includes 51,166 nonbusiness filings.

]]> Of the nonbusiness filings, the vast majority were Chapter 7 bankruptcy petitions. An individual who files under Chapter 7 may be able to eliminate most or all of their debt, although many of their assets are also liquidated in order to satisfy the debt. Chapter 13 filings, though, made up roughly 25 percent of the nonbusiness filings. Under Chapter 13, a debtor attempts to reach a repayment agreement with his or her creditors.

As Florida continues to pull out of the economic recession, its lingering impact may still affect many individuals. For those who are having difficulty paying their bills or who may even face foreclosure, bankruptcy could be an option. Through bankruptcy, a debtor may be able to get control of their finances and eventually emerge from the process with a sound financial footing.

Source: Jacksonville Business Record, "Bankruptcy filings drop in Florida's middle district," Feb. 8, 2012

Florida struggles with high foreclosure rate

2012-02-18T15:26:48Z

It is often hard to face the threat of foreclosure, especially for those who have lived in their home for many years. Right now, according to a report by the Mortgage Bankers Association, Florida has about one-fourth of the nation's foreclosures. That is up a percentage point from the end of 2010, while other states, such as California, have dropped in foreclosures.

Professionals blame Florida's judicial foreclosure procedure for the high numbers. In Florida, each foreclosure case has to be approved by a judge. Across the nation, 29 states do not have this requirement.

]]> In some Florida cities, there is a growing backlog of foreclosure cases. Tallahassee has an estimated 368,000 cases on the waiting list. While homeowners are fighting for their homes, they are also fighting for their rights. A newly proposed bill that would decrease a bank's deadline to seek deficiency judgment from five years to two years is slowly passing through House. Those against the bill fear it will reduce rights for homeowners.

Right now about 14 percent of home loans in Florida are in foreclosure. New Jersey follows with 8.2 percent. Interestingly, of the 16 states with the highest percentages of foreclosures, all but one require a judge to sign off on a proceeding.

On the plus side, the Mortgage Bankers Association reported that the percentage of homeowners who missed payments but were not yet in foreclosure has dropped slightly from the last quarter and has come a long way since 2009.

Losing a home to foreclosure can be a devastating circumstance, but there are steps homeowners can take to protect their home. Bankruptcy is sometimes an option, as it stops foreclosure proceedings immediately, even if a creditor has a judgment against you and plans to sell your house.

Source: TCPALM, "Florida has one-fourth of nation's foreclosures," Kimberly Miller, Feb. 17, 2012

What are your rights when it comes to old debts?

2012-02-07T17:01:32Z

While residents in Florida are working hard to keep above mounting debt, the United States government is trying to lend a hand when it comes to past due debt and the threat of debt collection. Every state has rules that govern the debt collection industry, setting a statute of limitations as to how long debt collectors can legally hassle consumers for money.

Recently the Federal Trade Commission (FTC) took a stand against one of the nation's largest consumer-debt buyers, claiming they were deceiving consumers when it came to their debt collecting practices. The FTC claims the company did not tell consumers that the debt they were seeking was too old to legally collect. They also sent inaccurate information to credit reporting agencies. Many debtors were also not aware that paying even a small portion of the debt would extend the statute of limitations.

]]> In a recent settlement, which is still pending court approval, the company did not admit fault but did agree to some terms. Under the settlement, the company agreed to tell consumers that it cannot sue them for time-barred debt. That is debt that has run out of time in terms of the statute of limitations. They also need to explain to consumers that even if they make a partial payment, they still cannot sue them for the debt. Finally, among other agreements, the company agreed to disclose to customers in writing about a negative report before putting it on a consumer's credit report.

The government has also published a new publication to inform consumers about their rights when it comes to time-barred debts.

Source: Washington Post, "Have old debts? Read up on your rights," Michelle Singletary, Jan. 31, 2012