Boston Bankruptcy Lawyer Blog

Massachusetts Payday Loans and Bankruptcy

Fri, 27 Jan 2012 09:40:49 -0500

Many folks come to us to discharge their debts in Massachusetts bankruptcy and get a fresh start. Often we see payday loans on their credit report. Massachusetts has very strict laws regarding payday loans. There are no actual payday lenders in Massachusetts, so folks often use the internet. However, in Massachusetts, payday loans require full documentation, the due date of the loan must be in writing, there cannot be any pre-payment penalties, the whole transaction must be complete within 14 days, and there are strict rules on how unpaid loans can be collected against. Of significance, interest rates cannot exceed 23%. These consumer protections are why we don't see as many payday loans: they just are hard to get in Massachusetts. On the other hand, many of our clients have worked in other states, where the loans have become onerous.

In any event, payday loans are loans pledged against a worker's next paycheck. Seventeen states allow payday loans, which have, to date, been so under regulated that some interest rates exceed 400%. One report we read said interest rates were as high as 521%

We have written about consumer advocate and Harvard Law Professor Elizabeth Warren in the context of bankruptcy news and as the founder and initial leader of the Consumer Financial Protection Bureau, however, now that she has become a candidate for the United States Senate for Massachusetts, we will refocus our energies on the CFPB and it's new Chief, Richard Cordray. Cordray's first order of business after being an interim appointment (Senate confirmation was not an option) is conducting hearings on Payday loans. (Ironically, the Dodd-Frank Act of 2010 expressly forbids the CFPB from regulating non-banks until a director was appointed, and then the Senate refused to allow an appointment, adversely affecting consumers.)

Payday loan makers may provide a valuable service. If someone needs money immediately, is working, and will be able to secure that money by the end of the week or pay period, it would be invaluable to have access to a loan for that money instantly. However, folks that fit into this category are often taken advantage of. It is the protection of those workers that the CFPB is addressing in their public hearings and investigation.

The Consumer Federation of America undertook a study of payday loan providers and published their findings in August 2011. They claim that interest rates for a $500 loan was 652%, and in Kanas the range was from 378% to 780%. They found that some lenders circumvented state laws by using international forums to lend the money; some used Native American tribal bases for their lending. Among their many conclusions was that "payday loans are a debt trap."

If you search payday loans on the internet, you will find a lot of advertisements. The first one I found said I could get cash in one hour! All over the internet, of course. However, if you read the fine print, it indicated it was not available in Massachusetts. Another provider of payday loans used such cryptic language, even a Boston bankruptcy lawyer could not determine if they would provide a Massachusetts payday loan!

We applaud the efforts of the new CFPB to investigate these practices; we urge our clients to double check where they are getting loans from, what the interest rates really are, and what laws they are subjecting themselves to by taking out any loans.

Massachusetts Bankruptcy Cases Down in 2011

Thu, 26 Jan 2012 09:38:49 -0500

Personal bankruptcies were down in 2011, for the first time in several years, according to preliminary reports. The estimate is that 1.35 million personal bankruptcies were filed in the United States, which was down approximately 12.5% from 2010. As the Boston bankruptcy lawyer reported on January 5, 2011 in our bostonbankrutpcylawyerblog.com bankruptcies were up in 2010 by 9%, with over 1.55 million being filed in 2010. In 2005, the year the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 went into effect, there were over 2 million personal bankruptcies filed.

In Massachusetts, the specifics look like this: 19,777 total bankruptcies were filed in 2011. Of those, 75% were Massachusetts Chapter 7 personal bankruptcies and 25% were Chapter 13 bankruptcies. With a population of over 6.5 million, that is a rate of 300 bankruptcies per capita. We ranked 33rd of the 50 states and District of Columbia in rate per capita. The Massachusetts rate decrease in bankruptcy filings was 0.52%, significantly lower than the rate of decrease in the rest of the country.

The only state with an increase in bankruptcies in 2011 was Utah, where the rate was up a nominal 1%. The states with the largest decreases in bankruptcy rates were Nevada, where the decrease was 19% and Florida, where the decrease was 16%. Still, there are a lot of states with high bankruptcy rates, including California, Colorado, Tennessee, Alabama and Georgia.

In an interesting article published by Boy Lawless in Credit Slips in December 2010, it was predicted that there would be 1.457 million bankruptcy filings, based on a statistical analysis. We're not going to give a scholarly review of Mr. Lawless' analysis, but it seems to be fairly accurate, and, more significantly, Mr. Lawless says that the trend is what we should watch. His notion of the trend in bankruptcies decreasing was spot on. Lawless, a professor at the University of Illinois College of Law, has said that "consumer credit" is the "most significant indicator" of what drives bankruptcy rates.

Thus, we looked at consumer debt in the US. Credit card debt, which decreased between 2008 an 2010, increased in 2011. According to the Federal Reserve report on consumer debt, credit card debt increased 9% in 2011. Another measure of consumer debt, student loan debt, was up in 2011, with the total being $845 billion when measured in the middle of last year. This should be watched carefully because, unlike credit card debt, student loans are very difficult to discharge in bankruptcy.

Professor Lawless is proposing that federal bankruptcy petitions include a question about the race of the filer. This is because of recent evidence that black bankruptcy petitioners have been found to file Chapter 13 bankruptcies disproportionate to white filers.

In our sister country to the north, Canada, bankruptcy statistics can be instructive. Their swings tend to be less dramatic than ours. According to the Office of the Superintendent of Bankruptcy in Canada, the rate of bankruptcy in Canada fell by approximately 8.1% last year. Further, in Canada, there more folks filing "consumer proposals," a Chapter 13 style bankruptcy, in which a percentage of the debt is paid back.

Race and Choice of Chapter 7 Verses Chapter 13 Bankruptcy

Sun, 22 Jan 2012 09:52:44 -0500

An important new study, entitled "Race, Attorney Influence, and Bankruptcy Chapter Choice," undertaken by University of Illinois Law Profession Bob Lawless, along with colleagues Jean Braucher, of University of Arizona and Dov Cohen, also a professor at Illinois (in psychology and law), outlines some serious potential problems in the bankruptcy process, in the United States.

The study, by the Consumer Bankruptcy Project, indicates that black bankruptcy petition filers use chapter 13 at a higher rate than chapter 7. In fact, blacks are about two times a likely as whites to file Chapter 13, with the black Chapter 13 rate at 54.7% and the white rate at 28.6%. Asians were found to file Chapter 13 at 24.4%, and Hispanics at 21.7%. Our bostonbankruptcylawyerblog.com has a mission of keeping clients informed of news such as this study.

Let's review the difference between the two types of bankruptcy. Chapter 7 bankruptcies are generally cheaper to file, allow folks to kept most of their assets and discharge most of their debt. Homes are protected under the Massachusetts Homestead exemption, pensions are protected, but other assets are limited. In fact, under Chapter 7, most debts are discharged within 90 days, and petitioners get a "fresh start." Chapter 13 bankruptcies, however, require that petitioners repay their debts, based on income, over a period of time up to 5 years. Thus, Chapter 13 offers less relief and costs more. Further, Chapter 13 cases fail at a significantly higher rate: the plans are difficult to comply with month after month, year after year. Circumstances change. If so, why are a disproportionate number of black filers using Chapter 13?

The professors undertook two studies. They first looked at actual statistics from the federal bankruptcy filings each year. After considerable analysis, they determined that "African Americans are much more likely to file chapter 13, as compared to debtors of other races," according to their abstract.

Second, and quite troubling, the professors sent out surveys to bankruptcy attorneys, similar to, but not including, this Boston bankruptcy lawyer. The survey included questions about a hypothetical African American couple, Reggie and Latisha, of the African Methodist Church and a white couple Todd and Allison, of the United Methodist Church. Unfortunately, the surveyed attorneys recommended the "fresh start" Chapter 7 bankruptcy disproportionally to the apparent white couple, and the more financially burdensome and more expensive Chapter 13 bankruptcy to the apparent black couple. The professors make a significant point. Are lawyers, judges, trustees, indeed the whole system, biased? If so, how do we fix it? It's a complex system, often tossed about by politicians, including the ones who were sucked into passing the Bankruptcy Act of 2005.

The study will be published in the Journal of Empirical Legal Studies sometime in 2012, so we don't have all of their statistics yet. But they inform that the statistics are the same across the country, and includes the south, where Chapter 13 rates are higher in general.

Now, there are going to be academics, politicians and community leaders who object to many aspects of the study. Hopefully, they will prove these distinguished academics wrong. But, in the mean time, it may be instructive to look at some of the facts after we get the full paper. Some details we do have, however: blacks file Chapter 13 at a higher rate than homeowners (54.6% verses 47.1%). Given that most folks have all of their wealth in a home, and homes are protected by homesteads, this is a troubling statistic they have uncovered.

Social Security Numbers and Massachusetts Bankruptcy

Wed, 18 Jan 2012 11:26:57 -0500

We are often asked how to file bankruptcy in Massachusetts when our clients do not have a social security number. This question comes at the intersection of bankruptcy and immigration law. All bankruptcy petitions have a page in which you are expected to report your social security number. However, the bankruptcy code does not require that page of the standard petition to be completed. Nevertheless, many folks who do not have a social security number are concerned about filing for Massachusetts bankruptcy.

Thus, for those folks who have a social security number, of course, a Boston bankruptcy lawyer would put that on the social security number reporting page. That page of the Petition and Schedules undergoes protections by the Bankruptcy Court. However, it is generally used by the Trustee at the 341 Meeting of Creditors to compare with the petitioner's social security card. We always instruct our clients to bring their license, or state identification, along with their social security card, for identification at the hearings.

For folks who do not have a social security number but who have a United States Individual Tax Identification Number ITIN, we advise that they use this number. If you don't have at ITIN, you can secure one by going to the IRS website. Many of our clients work in the United States, pay taxes using their tax identification number, but do not have a social security number. This is how they can file for bankruptcy in Massachusetts.

As indicated above, we check all state identifications and social security cards or tax identification cards before we complete the Petition and Schedules. You can never ever use someone else's social security number or tax identification number. This will result as a fraud on the Court, which is, of course, a federal crime. This would affect your status if you did not have legal status in the US.

For immigration advice, we refer to Massachusetts immigration lawyer Joshua Goldstein. According to Attorney Goldstein, there is no known reporting from the United States Bankruptcy Court to the Immigration Court. Nor has he seen any correlation between bankruptcies and reporting to immigration.

Just for your information, social security numbers are not random! There is a method to the assigning of numbers. Since 1936, the Social Security Administration has been issuing social security numbers. It has become a requirement to have one. However, it is difficult to figure out the formula. For example, if you were born in Massachusetts, the first three numbers should be between 010 and 034. Of course, there are some changes - before 1973 the numbers were based on where the applicant applied, since then, the central office issues the number by zip code. The second set of numbers is relative to time of application chronologically. Thus, someone with 01 in that second series applied for their social security number before someone with 99 in that series. The third set of numbers is merely the sequential number within each group. There are no 0000s and no 666s, however!

Massachusetts Chapter 13 Bankruptcy Update

Wed, 04 Jan 2012 11:23:26 -0500

After practicing bankruptcy in Boston for over 25 years, we often get asked questions about Chapter 13 bankruptcy. We focus mostly on Boston Chapter 7 bankruptcy cases. One important advantage of the Massachusetts Chapter 13 bankruptcy is that it offers you the chance to bring down the amount that you owe to your creditors. When you lower the secured debts that you owe it is called a cram down. The typical feature of a secured debt is that if you are not able to repay the debts, you have to return that item to the person or entity that holds the security interest. For instance, if you are not able to repay the mortgage loans that you have taken to purchase a house, furniture or a car, you have to return that asset to your lender. It is to be noted that cram down option is not applicable to a house. When you take out loans to purchase a car or furniture, you are required to make a number of monthly payments in order to pay the principal and interest. Sometimes, it may take years to repay the loans. However, the value of the asset which you are financing continues to depreciate. In fact, the value of the underlying asset often depreciates faster than the loan is being repaid.

Suppose you purchased a car two years ago. The current price of that car may be around $10,000, but the amount that you still owe on the loan may be around $12,000. This phenomenon is known as "upside down." Withina few years after you make a real purchase, the value of that item depreciates to such a level that its current value falls short of the remaining balance that you owe on the loan that took to purchase that item. Chapter 13 bankruptcy has the provision to cram down these types of debts. Under the provision of Chapter 13 bankruptcy, you will be required to pay the amount which is equal to the value of the property and the interest on the remaining balance.

Cram down in bankruptcy is a court mandated way to lower down a part of your original contractual debt obligations. Here the court replaces the original contractual value of the property with its current market value. A cram down is an excellent financial tool which is used to curb your secured debts, especially with respect to Chapter 13 bankruptcy plan.

In order to get the benefits of a cram down, some time must have elapsed since the filing of the bankruptcy. This time period is not fixed for all asset classes, but varies with the nature of the asset class. In order to cram down a car, you must own the car for a minimum of 910 days since you filed for bankruptcy. All Chapter 13 cases go through the Massachusetts bankruptcy court, where the US Trustee appoints an interim trustee to supervise the case during this time. After 910 days, you can replace the original outstanding balance of the car loan with the currently value of the car. Various items that can be crammed down include jewelry, furniture and appliances. In order to get the benefit of cram down, you must own these items for a minimum of 1 year after filing for bankruptcy.

Blog guest author Sam is a Community Member of Oak View Law Group Community and has made contributions through various articles written on subjects related to bankruptcy and consumer law.

What Happens After A Chapter 7 Discharge When the Creditor Sues You?

Sun, 01 Jan 2012 11:41:03 -0500

As a Massachusetts bankruptcy attorney, I regularly tell clients that a Chapter 7 bankruptcy discharge gives you a "fresh start" and that all dischargeable debts are discharged by federal law. Those debts include, but are not limited to, credit card bills, personal unsecured loans, and remaining balances on motor vehicles and home mortgages that have been returned to the lender. They don't include student loans, some taxes, and numerous other protected debtors.

Recently, however, Capital One Financial Corp, tried to see if they could squeeze a few dollars out of folks who had legitimately filed for Chapter 7 bankruptcy and had their debts discharged. Capital One is the tenth largest bank in the US. For example, a woman from Hawthorne, New Jersey, filed for bankruptcy protection and secured a discharge. Nevertheless, Capital One filed a lawsuit against her for $4,266. Capital One dropped the state lawsuit once exposed, however, in a separate case filed in federal bankruptcy court by the debtor, resulted in litigation.

In the 2008 Massachusetts Capital One case, the US Trustee found 5,600 cases in which Capital One attempted to collect on discharged debts! The investigation began when Massachusetts couple filed bankruptcy, discharged a debt from Capital One, and fourteen (14) years later, Capital One tried to collect on $5,542.50 debt! The company entered into an agreement to turn over 2.2 million bankruptcy claims from 2005 to 2010 for an independent audit. The claim above, while not in Massachusetts, seems to have originated just after that period of time.

In the bankruptcy court audit, it was determined that Capital One had made that "mistake" 15,500 times! Capital One disputes the number but has not provided their own number of mistaken lawsuits notwithstanding the recent settlement in Massachusetts. The total amount of monies in those claims was $24.7 million.

In Mississippi, a bankruptcy judge is demanding discovery from Capital One on the issue of suing people who have already discharged their Capital One debt. The judge is demanding "some proof" that the lawsuits are not a "malevolent effort to go out and collect a debt that's been discharged."

There is a huge market in buying distressed debt. Capital One has their own employees do their collection work, thus not giving up on the fees associated with farming out debt collection. However, the aggressiveness of the debt collectors is often illegal.
When a creditor files a "proof of claim" form that debtors file there is a rule that false filings can result in a fine of up to $500,000 and five years imprisonment. It doesn't seem to be that Capital One has had many fines notwithstanding their behavior. It seems ironic that when individual debtors make a "false statement" the trustees are all over them, often threatening criminal action where the statement was merely a mistake and often of no consequence. Of even less consequence, but of some irony, is that the founder and chief executive officer of Capital One bank https://www.capitalone.com/ is named Richard Fairbank.

How does this affect Massachusetts bankruptcy debtors? If you have Capital One as a creditor, be extra careful of their filings. However, be sure to work with your Massachusetts bankruptcy lawyer to carefully list all debts. Following your Massachusetts bankruptcy, keep your attorney up to date on any and all letters and of course lawsuits by former creditors.

Massachusetts Bankruptcy Court Sanctions Attorney

Mon, 19 Dec 2011 09:19:35 -0500

The rules of procedure in Massachusetts bankruptcy court are clear; just as the rules of civil procedure are in state and federal courts: When you file a "complaint" to initiate a civil lawsuit in court, the rules require a "short and plain statement" regarding 1. Jurisdiction, 2. What is the "claim" and 3.What kind of relief is sought.
In our Massachusetts bankruptcy blog we have discussed bankruptcy sanctions. This article is about sanctions on an attorney.

In a proceeding in Bankruptcy Court, a Massachusetts bankruptcy attorney filed a complaint in a Boston Chapter 7 case called an adversary proceeding. That is, following a filing for bankruptcy protection to discharge the debts of his client, the attorney, on behalf of his client filed a lawsuit within, or on top of, the bankruptcy proceeding, for relief beyond and in addition to the discharge of consumer debts. In the case In Re: Koufos, Peter (USBC) https://ecf.mab.uscourts.gov/cgi-bin/show_case_doc.wawb.v3.4?159,393231,,64057834, (Chapter 7 Case No. 10-23579-JNF; Adv. P. No. 11-1185) (Oct. 21, 2011). The Complaint is an attempt to stop a foreclosure action by US Bank. However, instead of short and plain paragraphs which are clearly established by the rules, the attorney's complaint resorted to "innuendo, invective, hearsay...with rhetorical questions [in a] hyperbolic attack" on the mortgage lending industry.

Unfortunately, in an attempt to point out the abuses of the mortgage lenders, the bankruptcy attorney got carried away with "ad hominem attacks and irrelevant and prejudicial" remarks in the complaint. Complaints should not be testimony and should never be replete with rhetorical questions such as: where did the debtor's money go after the bank took the payments? In this case, the complaint has 161 paragraphs of information, which, I believe the Court found too much like a motion for summary judgment, in essence, arguing the case, and too little like the short and plain statement outlining the case.

Count one, which is a request for relief stating that the bank does not have standing to foreclose, has 40 more paragraphs of testimony like information along with argument. The second count is another "standing" type of count requesting declaratory judgment against the bank, and, while only 10 paragraphs, has opinions on what the law is and quotes from cases. Again, it seems like a summary judgment legal argument rather than a Complaint under the rules. Count three is a RICO count, which, again, quotes case law, incorporates federal statues and argues the case. Count four is a Massachusetts 93A, however, fails to state that a 93A Demand letter was sent, which is a requirement by the law. It does argue why it was not necessary. Count five argues a civil conspiracy, citing federal and Massachusetts case law. Count six is a brief Unjust Enrichment count. Count seven is, or should be, paired with the 93A count, regarding violation of Massachusetts Chapter 140. Count seven seeks to rescind the mortgage. Count eight, ironically plead as one count but really is two counts, requesting intentional inflection of emotional distress and negligent infliction of emotional distress. As a Massachusetts personal injury lawyer, I would suggest pleading this as two counts because they require proving different elements.

In any event, the 310 paragraph, 45 page Complaint with exhibits totaling 673 pages, was too much for the Court to ignore. The defendant bank followed the rule by notifying the attorney ahead of time, giving him the opportunity to withdraw or amend the Complaint. The Massachusetts bankruptcy court and Judge Feeney perhaps went easy on the attorney, considering the possibilities. The Court cited Federal Rules of Bankruptcy Procedure 9011, essentially saying that the attorney failed to make an "adequate inquiry" on statements before filing the claim. The Complaint is "anything but 'a short and plain statement of a claim showing that the pleader is entitled to relief.'" The Court ordered Rule 11 sanctions of $1,000.00 to be paid, not to the Court, but to a non-profit legal organization that benefits consumers. The Court didn't give us a vote, but we would advocate that the sanction be paid to the National Lawyers Guild, where I am on the Board of the Lawyer Referral Service.

Massachusetts Ice Cream Bankruptcy and Pensions

Fri, 16 Dec 2011 10:11:42 -0500

Everyone in Massachusetts is a fan of Friendly's Ice Cream. Founded in the 1930s, it has been a family establishment throughout the Bay State for generations. Now, however, the company is mired in federal bankruptcy court and the new owner stands accused of fraud regarding the treatment of their pension obligations. Here's what's going on.

The current owner of the Friendly Ice Cream Corporation is a company based in Florida called Sun Capital Partners. They are a private equity firm. They filed a Chapter 11 bankruptcy www.neilburnslaw.com in October, 2011. This closed the remaining 60 stores and put over 1,200 workers into unemployment. Friendly's lists $76.4 million in assets and $181.4 million in liabilities. $105 million of this is underfunded pension obligations.
In a bankruptcy court filing, the federal Pension Benefit Guarantee Corporation, filed an objection to the proceedings, claiming that Sun Capital Partners committed fraud in their transactions with respect to Friendly pensions. If not stopped, the FPGC says 6,000 former employees will lose pension rights. Here's what they allege: before putting Friendly into Chapter 11 reorganization, the PBGC says Sun put the assets of Friendly's into one corporate entity. Next, they filed bankruptcy, attempting to get rid of the obligations on the pensions. Then, another Sun entity made a bid for Friendly's assets. If they win the bid, they will have bought their own company without the $100 million in pension obligations they owed before the bankruptcy!

The federal Pension Benefit Guarantee Corporation is looking at the fact that the transfers occurred just prior to filing for bankruptcy. Experts claim it does not pass the bankruptcy "smell" test, especially because different entities of Sun were involved.

We are not corporate bankruptcy specialists, however, we did represent one party in one aspect of another ice cream related Boston bankruptcy matter: Brigham's.

The message here is to both plan for bankruptcy and to deal honestly with creditors before bankruptcy. The Chapter 7 personal bankruptcy rules are clear. For example, payments to creditors within a certain period of time prior to filing bankruptcy in Massachusetts are scrutinized. If you pay off a loan to your brother in law the week before you file for protection against other creditors, it will likely be cited as fraudulent. We work hard to teach all of our Boston bankruptcy clients to work within the rules.

Another common example is with respect to real estate. Too many folks do not understand joint ownership. When your parents put you on the deed to their home on the Cape, you now own the house. You can file a Petition to Partition and force the sale. You may be appalled at the notion of selling your parents home out from under them, but the fact that you have the right to do so gives the bankruptcy trustee the right to also. Thus, if your family did have this situation, you would have to plan for it before filing. We can help you do that. The good news, with respect to real estate, is that the Homestead Act can protect the equity in the home you live in, up to $500,000.

Finally, by way of further example, back to pensions and ice cream - most pensions are protected under the bankruptcy statute. Before we file, however, we check to be sure your pension is protected, and secure the proper documents to prove this to the bankruptcy trustee.

Massachusetts Foreclosures, Credit Scores, and Bankruptcy

Mon, 12 Dec 2011 12:31:07 -0500

As a Massachusetts bankruptcy lawyer, clients, or potential clients, who are facing the prospect of foreclosure, often consult us. They want to know their rights and what options they have. Usually they want to keep their home. And they can often do so by keeping their mortgage current and discharging their credit card debt. If you can make the mortgage payments but not the credit card payments, you may be able to protect your home and qualify for a chapter 7 bankruptcy. Our Massachusetts bankruptcy and consumer blog is here to give some guidance.

Some want to walk away from their home; they are too far behind in making mortgage payments, the payment amount or interest rate is too high, or the house is just too much. Often the mortgage company forecloses and does not go after folks for the difference between the foreclosure sale price and the balance on the mortgage, if any. However, the difference between the foreclosure sale price and the remaining amount on the loan can be taxable as a "gift" by the federal Internal Revenue Service. This is not true, however, if you discharge that amount in a Massachusetts bankruptcy. If you have no other debts, it may be worth the cost, however, if you have significant unsecured debts, such as credit card debt, a Chapter 7 bankruptcy in Massachusetts may make sense in giving you a fresh start.

There are other options such as "deed in lieu of foreclosure" and short sale. Often these make sense, however, generally not if someone is filing bankruptcy in Massachusetts.

Massachusetts foreclosure law has been challenged a great deal lately. In Bank of New York v. Bailey, 460 Mass 327 (2011) the Supreme Judicial Court said that foreclosing lenders and their attorneys must have proper documentation to prove title before proceeding with a foreclosure. There were a series of cases decided by the Supreme Judicial Court and the Land Court that requires lenders, especially those lenders who where not the original lenders, to prove that they had proper mortgage documentation to get clear title. See US Bank Association v. Ibnez, 458 Mass. 637 (2011)

Massachusetts credit scores are often a concern of our clients. Our general advice is that if someone is being foreclosed, they should try to pay all other bills, especially credit card bills. A foreclosure drops a credit score about 100 to 140 points, but, by paying the other bills, you can rebuild your credit score. While a foreclosure will likely stay on your credit report for seven years, if you stay current with other debt obligations, your score will not take as big a hit. Of course, if you have a foreclosure on your credit report, you are not likely to get the best interest rate. You may, however qualify for a loan if you can show that a hardship caused the foreclosure; you are even more likely to qualify if you can make a significant down payment toward the new home.

Fannie Mae, the federal lender which buys mortgages on the secondary market, prevents any government financed loans for at least seven years. However, this is only if the default was when you could have paid. Documentation that shows the family emergency, loss of job, or similar circumstances surrounding the default and foreclosure, would help.

Year End Planning for Massachusetts Clients

Mon, 28 Nov 2011 10:09:52 -0500

As we enter the final weeks of the calendar year we post this blog article to inform Massachusetts consumers of a few things they can do to reduce taxes and keep their retirements accounts active. Our Massachusetts Financial Planning for 2011 blog article in our http://www.bostonbankruptcylawyerblog.com/ blog should be revisited.

Tax planning basically involves two things: deferring income and reducing taxable income. Deferring income may seem counter intuitive, but it can reduce your taxable income this year.

Defer income to 2012 if you can; any year-end bonus that you are entitled to could be requested or given in January. Thus, you will not be required to pay the tax until 2012.

Pay deductibles in 2011; these could include medical bills, interest payments, state and local taxes, including property taxes.

Tax rates are set to remain the same for 2012; there are six tax rates, 10%, 14%, 25%, 28% and 35%. Long term capital gains will be taxed at a maximum rate of $15% next year too, however, if you are in the 10% or 15% tax bracket, you will pay 9% on capital gains! Knowing all of this may help you in year end tax planning.

If you had to pay the alternative minimum tax (AMT) in 2010, beware of it for this year; if your income went up unexpectedly, look into this before year end. The AMT disallows various deductions, so check with your tax advisor or a computer tax program.

Massachusetts's small business owners should consider purchasing qualifying capital because in 2011 you can take advantage of the 1005 depreciation deduction. This goes down to 50% for 2012 acquired property. The maximum amount for 2011 is $500,000, however, in 2011, the maximum amount is $139,000.

Massachusetts home owners should consider making energy efficient home improvements because this deduction goes from 10% this year to 0 in 2012. Such improvements include certain roofs, windows, doors, insulation, energy efficient furnaces and hot water heaters,

2011 is the last year that folks over 70 to make a charitable contribution from your IRA or other deferred retirement account and not pay any tax on the distribution. This applies up to $100,000. This also counts towards your minimum required distribution for 2011.

Each year you must take at least a minimum IRA or 401k distribution for everyone that is over 70 ½. There is a steep penalty for those that fail to do so. Most plans administrators, such as Fidelity, Schwab, Vanguard or your employer, will complete the calculation for you.

Finally, what should our Boston bankruptcy and Massachusetts bankruptcy clients do with respect to their retirement accounts? Since most retirement accounts are bankruptcy protected in Massachusetts, they should consider contributing as much as possible. In 2011, the IRA contribution limits is $5,000, and $6,000 if you are over 50. This is the same for Roth IRA accounts. There are phase For our 401k clients, the limits are $16,500, and $22,000 if you are over 50. 403(b) and Section 457 participants have the same limits. This is different for "highly compensated employees."

For articles regarding Massachusetts motor vehicle accidents, Boston car accidents and motor vehicle injuries in Massachusetts, see our Massachusetts injury blog.

Bankruptcies Down in Massachusetts

Thu, 17 Nov 2011 11:26:26 -0500

Massachusetts bankruptcy filings fell in October 2011, which was the fourth straight month that we saw a decline in bankruptcies throughout the country. It is not clear if this was because folks have better control of their credit or because the next big wave, with respect to foreclosures, has yet to hit. It is also possible that lenders are not lending as much so folks are not credit restricted. The American Bankruptcy Institute reports a 19.6% decrease in personal bankruptcy filings in October 2011, from the October 2010 filings. Further, total consumer debt fell in the past two years. We have reported the decrease in Massachusetts bankruptcies in numerous blog posts. The news continues to be good!

And October had 2% fewer personal bankruptcies than September this year. For the year, the Administrative Office of the U.S. Bankruptcy Courts reports that the number of business and personal bankruptcies are down approximately 8% over the past year. By the end of the third quarter, September 30, 2011, the number of personal bankruptcies was 1,417,326.

Bankruptcy filings for 2011 are as follows: 353,082 total in the first quarter, with 252,338, or 71% as Chapter 7 no asset personal bankruptcies; 367,487 total in the second quarter with 265,759 or 72.32% as Chapter 7 cases. These statistics are from the American Bankrutpcy Institute. It is interesting to note that the percentage of Chapter 7 filings, as compared to all non business filings, has fluctuated from a low of 60.86% in 2007 to what appears to be the new normal, of numbers in the nigh sixties and low seventies since that time.

On the other hand, home foreclosures have slowed to the point where it will take perhaps more than eight years to clear out the 2.1 million homeowners considered delinquent on their mortgages. While this may be slowing the filings now, it could have the effect of increasing bankruptcy filings soon, and in the future.

Personal bankruptcy has even factored into the current presidential race; noted attorney Gloria Allred recently represented Sahron Bilek who accused Republican a presidential candidate of sexual harassment. Ms. Bilek's personal bankruptcy filing was pointed out by the candidate as having a "long and troubled history, from the courts to personal finances." Regardless of the politics, and the unfortunate incident, with personal bankruptcies more prevalent they are affecting folks in ways other than credit scores. This is one way we do not normally anticipate that a bankruptcy will affect our clients.

Earlier this year in our blog, http://www.bostonbankruptcylawyerblog.com, we reported that 13% of all Americans have considered filing for personal bankruptcy. Nevertheless, our antidotal evidence is that personal bankruptcies in Massachusetts are down significantly. It seems that the wave hit hardest last year and this year folks are still hanging in there, negotiating their mortgages, perhaps not paying but not being foreclosed on either. We see more and more folks not paying their mortgages, but having some legal hook to keep them in their homes - a foreclosure gone bad by the bank, a lender that is not moving quickly, or the courts stopping a foreclosure for some reason.

Low Cost Boston Bankruptcy Lawyer

Thu, 03 Nov 2011 09:58:06 -0500

The costs and attorney fees for filing for bankruptcy in Massachusetts has increased, of necessity, since the Bankruptcy Abuse and Protection Act of 2005. We try to be the Boston low cost bankruptcy lawyer because our clients demand top quality effective legal representation at a fair and reduced cost.

The cost for attorney fees can be found by simply calling us; we can generally undertake an intake and you can talk to a lawyer for a low bankruptcy fee quote during your phone call. Reduced fee Massachusetts bankruptcy lawyers are also a function of your income and assets, along with the difficulty of your case.

What are the new requirements in the BAPA? Why are attorney fees higher than they used to be? We will attempt to outline some of the requirements under the new law here.

First and foremost, bankruptcy attorneys must now verify all of the information our clients provide. Income? We need to review your tax returns and updated pay advices. Credit card debts? We need to review copies of the bills and your credit report. Secured debts? We need copies of your mortgages and car loans. Assets? We need to review the documents regarding your home, car, and your 401k plan.

Another significant new requirement for the bankruptcy attorney is to complete the Means Test. This can require substantial legal work, especially on some bankruptcy petitions. The Means Test requires that personal bankruptcy filers have family incomes below the "mean" of the people in their state. The mean numbers, for different sized families, changes every year or so, as a function of the state income numbers. The means test in Massachusetts numbers changed, in fact decreased, representing Massachusetts median income. However, if your family income is above the mean, your attorney needs to apply state maximum costs for various categories.

The new law also increases the number of years a consumer may file for Chapter 7 bankruptcy protection from six years to eight years. The reason for this is, of course, to protect creditors and prevent consumers from filing too often. Of course, this does not increase the fees.

Bankruptcy credit counseling is another part of the new BAPA law. This credit counseling class must be completed before a personal bankruptcy Petition can be filed with the Bankruptcy Court. The class, which takes one to two hours over the internet, enables you to evaluate your personal financial situation, review alternatives to filing a personal bankruptcy, and establishing a personal budget plan. The cost is $30 to $50 depending on the company. The companies that are certified by the Bankruptcy Court will forward the certificate to your attorney's fax or email immediately upon completing the class.

Bankruptcy financial management counseling is the change in the BAPA law that effects our clients last. The class must be taken within 45 days of the creditor's hearing. This requirement requires the debtor to take a class over the internet, or telephone, to learn the three fundamentals of financial management: the benefits of establishing short term and long term financial goals; teaching how to create a family budget; and, how to balance a checkbook and reconcile monthly bank statements. The goal is to teach financial management to avoid future bankruptcies.

Finally, there is an increased filing fee of $299. Most folks have to pay the fee. However, if your income and assets meet the requirements to waive the bankruptcy fee, we prepare and file the motion to waive the fee at no charge.

Personal bankruptcy costs more as a result of the new laws. We try to help all of our clients by keeping our Massachusetts personal bankruptcy fees as low as possible. We work with our bankruptcy clients, in every case, to keep the fees down as low as possible. Call us.

Halloween Is Not Time To Be Scared Of Credit Scores

Mon, 31 Oct 2011 10:39:03 -0500

Credit scores are important to Massachusetts legal consumers. Why? They have an effect on your ability to get good interest rates on vehicle loans, personal loans and home mortgages. They can even have an effect on getting hired for a job. However, in a recent Visa credit card study, a large percentage of those surveyed believed that age, race, language and gender factored into someone's credit score. None of those attributes are a factor in determining credit score. Nor do address, assets, or employment history factor in to one's credit score. Another misunderstood factor is when creditors take a credit counseling class. This does not have an adverse effect on one's credit score. So while there may be a need to be afraid of Salem witches and goblins this Halloween, there is no need to be afraid of working on your credit score: all factors that go into your score can be changed.

In fact, 25% of those surveyed believed that their address, or the town where they lived, would have an impact on a credit score. Over 38% believe that age is a factor in the credit score. 21% thought that ones ability to speak English had an effect on credit scores. Almost 16% felt that race was a factor. A full 60% of those surveyed believed that employment history was a player in credit scoring. 53% believed that their assets and savings were a credit score factor. None of these factor into credit scores

While loan applications may ask for some of the information above, your credit score is not determined by any of the above. This is critical because Massachusetts consumers need to know that working on improving their credit score is possible. Improving your score could lead to getting that better rate on a mortgage or other loan.

Credit scores, as we have reported on before in our Boston bankruptcy blog and in our Massachusetts bankruptcy website information, are determined by the following factors: 35% on payment history, which includes payments on credit cards, loans, mortgages, car loans, and also bankruptcies, judgments, and other court related credit information; 30% on the amount you owe on credit accounts, including how far maxed out you are on your accounts such as credit card limits and home equity lines; 15% on the length of your credit history, which includes the time you have owned various credit cards and the activity on those cards; 10% on new credit, including the number of new accounts and new inquires as to your credit; and 10% on the types of credit used, that is auto loans verses mortgages verses credit card use.

The Visa survey found that 42% of Americans did not ever review their credit scores. So, perhaps it's time for some to go to www.annualcreditreport.com and request your score. Check for mistakes. Write to the credit reporting agencies to correct those mistakes. It could make a huge difference in the amount you pay in interest on your next vehicle loan or mortgage refinance.

Finally, keep in mind that the easiest ways to improve your Massachusetts credit score are 1. Pay your bills on time; 2. Pay down credit card debt, of course the cards with the highest interest rates first; 3. Don't max out your available credit as this has an adverse effect on the reporting agencies' algorithms, which like a debt to credit ratio of less than 35%. It may be hard work but it's not scary if you have the information you need to work on your credit score.

BOO!

Massachusetts Bankruptcy and Foreclosure News

Thu, 27 Oct 2011 11:35:34 -0500

Boston bankruptcy lawyers are often contacted to file Massachusetts bankruptcy to stop a foreclosure. Sometimes they need to file bankruptcy so that they can discharge their consumer debt, giving them the funds available to avoid foreclosure. Sometimes, our clients buy property at foreclosure sales. Today's blog entry on http://www.bostonbankruptcylawyerblog.com/ is concerning buying foreclosed property.

In a recent case handed down by the Massachusetts Supreme Judicial Court, Massachusetts foreclosure procedures were at issue. Actually, it was the validity of the title that the buyers of foreclosed property received that was the issue. As a result, the buyer did not have legal "standing" to file the lawsuit. Without standing, your case will be dismissed. Before we discuss the case, we will try to explain standing. If you are injured as a result of a Massachusetts car accident, you have "standing" to file a lawsuit against the person who caused the collision. If you observed the accident and feel that the driver was driving too fast, you do not have "standing" because you were not injured; you don't have a cause of action against anyone. You are simply a witness. If you buy a house and the title is at issue, you would normally have "standing" to file a lawsuit against the seller. After all, you paid money, you are living on the property, wherefore you should be allowed to file a lawsuit in the local courts to determine the quality of your title.

In this case, Francis J. Bevilacqua v. Pablo Rodriguez, Mr. Bevilacquo bought, or thought he bought property in Haverhill. The property had been foreclosed on by the bank, against Rodriguez, because of an unpaid mortgage. Rodriguez departed. Bevilacqua bought the property at a foreclosure sale. There was a problem with the title so Bevilacqua filed a claim in Massachusetts Land Court to validate, or clear, his title. The Land Court determined that Bevilacqua did not have legal standing to file the lawsuit, so it dismissed the case with prejudice. He appealed. The SJC took the case from the Appeals Court to decide the issue. The Court called the case "highly unusual" because the defendant, Rodriguez, never appeared. In other words, Bevilacqua filed a lawsuit, the defendant failed to answer for file any appearance opposing the lawsuit, yet he still lost. Twice! But because the bank never followed the proper procedures, it never had the ability to foreclose. Wherefore, Bevilacqua never had record title, so he could not even allege "standing" to file the lawsuit.

In a blog article in our sister state of Maine, bankruptcy Attorney Richard Olson says this about the case: buyer beware. Be sure you have record title. Attorney Olson says do your homework before buying property at a foreclosure sale; hire an experienced title attorney to be sure you can get good title. Litigating a case in the Land Court and before the Supreme Judicial Court just may add costs that are unacceptable to get title. This is especially true when the banks have clearly mishandled the title documents and the foreclosure does not necessarily provide for clear title.

Social Security and Massachusetts Bankruptcy

Mon, 24 Oct 2011 11:21:04 -0500

The good news is that the Social Security Administration has announced that next year, for the first time since 2009, there will be a cost of living adjustment in Social Security benefits in the amount of 3.6%. As a Massachusetts bankruptcy lawyer, I often get asked: can the Massachusetts Bankruptcy Trustee take my Social Security Check? Does Social Security get factored into the Means Test in Massachusetts?

First, let's review why there is a 3.6% increase coming. 55 million people will get the Cost of Living Adjustment (COLA) in their Social Security check starting January 2012. Approximately 8 million Supplemental Security Income (SSI) beneficiaries will get the same increase in benefits. Since 1972, this there have been COLA adjustments, based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers from last year's third quarter to this year's third quarter. It is the US Bureau of Labor Statistics, in the Department of Labor, that determines the CPI-W. For the last two years, as many of our Massachusetts consumer clients know, there was no increase in CPI-W, and therefore, no increase in the cost of living adjustment in their monthly Social Security checks.

It is also important to note that in 2012 there will be an increase in the wages that can be taxed for Social Security: from a maximum of $106,800 to $110,100. This is based on the average wages increase. Everyone is taxed 15.3%, for Social Security and Medicare, up to the maximum. If you are employed, your employer pays half, or 7.65%, and, of course, that is factored into salaries. If you self-employed, you pay the full 15.3%. Except, of course with the government and taxes there is an exception, and in 2011 the exception is good: this was reduced by 2% for 2011!

The SSA estimates that the average monthly social security benefit starting January, 2012 will be as follows: $1,229 for all workers; $1,994, for a retired couple; $2,543 for a widowed mother of two; $1,184 for a senior who is widowed; $1,892 for a disabled worker or spouse with children; $1,111 for a disabled worker.

But, again, how would this affect someone asking for a fresh start in Massachusetts filing for bankruptcy? The easy answer is that no, Social Security income is not calculated as a part of the Means Test. The Means Test, a part of the 2005 changes in the US Bankruptcy Laws, requires that all people filing for Chapter 7 personal bankruptcy complete a "test", which is a form attached to the bankruptcy Petition. The test evaluates the income of filers, and if you are over the maximum incomes for your category, you may have to file under a different Bankruptcy Chapter such as Chapter 13. Thus, if you have a certain amount of part time income, plus Social Security income, you will be able to exclude the Social Security income from the test.

The Means Test really has two parts. First, if your income for the six months prior to filing is below the Massachusetts' median family income, for a "family" your size, you can simply "pass" the test. Thus, if you have income plus Social Security income, the Social Security income is excluded, which helps our many of our Massachusetts bankruptcy clients. The second part of the test only need be taken if your income exceeds the Massachusetts median family income. Many of our Boston bankruptcy clients pass this test simply by showing the details of their expenses, some actual expenses and some standardized Massachusetts expenses, therefore proving that they are in need of Chapter 7 bankruptcy protection in Massachusetts. The Trustee and the Court will look at those expenses to see if there are "special circumstances" such as medical or unemployment situations.