Jacksonville Bankruptcy Lawyer Blog

Jacksonville Attorney's Advice on Taking Control of Your Financial Situation

Wed, 22 Feb 2012 04:00:00 -0500

Jacksonville bankruptcy attorneys, and attorneys everywhere have faced record numbers of new clients with debt problems. The last five years have been devastating, with home values plunging and politicians screaming across the country that they have new solutions to help us from drowning in debt. There is no doubt that the economy will be the largest issue of the upcoming Presidential Election.
Statistics are a staggering example of our economic squalor. There were 1.4 million bankruptcies across America in 2011, up about a million cases from 2007. A million extra cases per year in only four years is a motivating factor, but what can we do about it?
Most people aren't sure what to do. Their jobs have lowered their pay or laid them off altogether, many of them are coasting by on savings and hoping for the economy to pick up. Many are depending on loan modifications that may never be granted. Even the government's Home Affordability Modification Program (HAMP) has been called a Scam.
Using credit cards to survive is like clutching a life raft with a pinhole in it. You can put a little air into it occasionally to get by, but without fixing the problem you're eventually going to run out of air and the ship is going to sink. I urge people to use credit if they must, but to recognize that this cannot go on forever.
One of the worst things I see is when people mortgage their home or take 401K withdrawals to try and support themselves through the struggle. In Florida, 401K accounts and most homesteads are exempt from collection by creditors in bankruptcy. Too many people try and use these funds to coast a little closer toward dry land, but it's often not enough. When these people file bankruptcy, those funds they used trying to avoid filing are gone. This is often a loss of tens of thousands of dollars that could have been used for rebuilding.
According to Bankrate.com, a home mortgage should not exceed 28% of your gross annual salary. If your home mortgage now exceeds this due to a loss of income, you should contact an attorney immediately about your options. Although many take years to accept it, a bankruptcy may be the only way to get out from under a house. By realizing this now, you may be able to preserve assets and restore credit sooner instead of spending years with your mortgage debt looming.
If you don't have mortgage debt and you have only credit card debt, you can follow Bankrate.com's Back-end ratio to see if you can afford your payments. Your Back-end ratio will give you a monthly budget amount that you can afford to pay toward your debts. If the total of your interest only credit card payments comes close to or exceeds this number, you should probably consider filing for bankruptcy.
Once you have these factors under control, save three months of living expenses in a savings account. Then you should be in a very secure place.
By taking the steps to control where your debt is headed today, you can be better prepared for the hard times to come. By contacting a Jacksonville Bankruptcy Attorney, we can analyze your financial situation to see if bankruptcy or some other option is best for you. You may call us at (904) 685-1200 for a free initial consultation.

Jacksonville Bankruptcy still linked to Underwater Homes

Tue, 21 Feb 2012 04:00:00 -0500

Although bankruptcy filing rates are down, the primary cause for most bankruptcies at my office is underwater home mortgages and the inability to pay those mortgages.
When someone applies for a mortgage, the bank (or mortgage broker) uses a variety of tools to determine the amount of money the applicant can borrow -and for how long. Of course, one of the factors that weighs heaviest is the borrower's ability to repay the loan. Although interest rates have varied greatly over the years, the term length of mortgages has generally increased. For instance, mortgages are usually thought to last thirty years, but now I have seen forty year mortgages and have even heard of fifty year mortgages.
Since the average age of a first-time homeowner is 34, a forty year mortgage would leave the buyer at 74 by the time they paid off their house. According to the CIA, the average American lives to be a little more than 78 years. This means that people (often couples) work almost their entire lives to pay off their homes.
Combine these grim facts with the idea that their home is now worth far less than they owe and that they have a decreased income and you have a person who is in dire need of bankruptcy if they are ever going to own a home at all.
If your home is underwater and you are unable to continue your payments, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Debt Collectors Calling My Personal Cell Phone

Mon, 20 Feb 2012 04:00:00 -0500

This attorney is getting a lesson on just how annoying having creditors call you can be -and they aren't even my creditors.
Although I've had the same telephone number for over two years, creditors have started to call me looking for a person who I'll refer to as, "Tony Doe". Tony apparently gave his telephone number to multiple creditors long ago and has only recently fallen on hard times. Now I am receiving phone messages from a blocked number asking me to call a collection company with my reference number. They were sure to remind me in the message that, "You are now on notice." Even if I were Tony, I don't think being "on notice" has any legal relevance, though it was declared in a threatening tone. They left me this message despite the fact that my voice mail states that I am Attorney and who I am.
I quickly dialed the number back and was put on hold, when they finally got back to me I gave them the reference number and explained that I was not Tony Doe but could they please give him my phone number when they get a hold of him so that I could help him defend this debt. The creditor then promised that she removed me from their call list, though only time will tell.
If you have creditors calling you and would like them to stop, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Bankruptcies, Co-Signers and Authorized Users

Sun, 19 Feb 2012 04:00:00 -0500

Oftentimes when people prepare to file for bankruptcy we find that there are other people who appear to owe debts jointly with them. The rights and obligations of these people vary depending on whether they are Co-Debtors or Authorized Users.
A Co-Debtor is any person who has signed into a debt with someone else. A Co-Signer is a Co-Debtor. All bankruptcy petitions have a section dedicated to Co-Debtors.
While bankruptcy can remove your personal liability from a debt, anyone who is joint on that debt remains liable. Because of this, Co-Debtors are given notice when a case is filed and will be obligated to pay of the person filing bankruptcy doesn't.
Co-Debtors are different from Authorized Users as the latter is only authorized to use the debtor's credit. They use no credit of their own and the obligation does not show on their credit report. In most states (Florida included), Authorized Users have no liability on these debts even if they signed for the transactions, so even if the debtor files bankruptcy, they have no liability.
Determining who has liability for debts is not always clear. If you are considering bankruptcy and would like to speak with an experienced attorney about these matters, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Co-Debtor Stay in Chapter 13 Bankruptcy

Sat, 18 Feb 2012 04:00:00 -0500

When someone files for bankruptcy an automatic stay is put into place. The stay prevents creditors from making any collection attempts (calling, repossessing, selling) prior to obtaining court permission or, prior to the dismissal of the bankruptcy case.
A Co-Debtor Stay created by 11 USC §1301 occurs when the person filing bankruptcy owed a debt jointly with a non-filing person, typically a spouse. By virtue of being a co-debtor, creditors may no longer make collection attempts against the non-filing person as well. This becomes particularly useful when the creditor has a security interest, such as in a home. For example, if a couple was behind on a jointly owned homestead but one spouse individually owed a large amount of credit card debt, that one spouse could file a Chapter 13 bankruptcy, catch up on the mortgage arrears and simultaneously discharge their unsecured debts. While that spouse was in bankruptcy, the bank could not foreclose on the home as to the non-filing spouse because of the automatic stay protection.
Unfortunately, the Co-Debtor stay does not go into effect as to business assets or function in Chapters 7 or 11, so a conversion from a Chapter 13 to a Chapter 7 would cause problems.
If you have questions about how the co-debtor stay may be used to protect you or your loved ones, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Bankruptcy Fraudster Faces 5 Years in Prison, 3 Years Supervised Release and $250,000 Fine

Fri, 17 Feb 2012 04:00:00 -0500

John Pregent of Georgetown, Massachusetts plead guilty to one count of bankruptcy fraud involving a scheme to defraud creditors in the bankruptcy case of Technical Fabrications, Inc. (TechFab), his business.
The Chapter 7 case (businesses can only file Chapters 7 and 11) was filed July 26, 2010 in the Massachusetts District Court, Case No.: 10-18028 and intended to discharge the debts of the business. Normally, this wouldn't be a problem, however prior to filing the bankruptcy case and at his direction, Mr. Pregent had TechFab sell of valuable assets to a newly-formed company and had that new company pay him directly for the assets. This was done in an attempt to prevent TechFab's creditors from getting paid money from the liquidation of those assets. Pregent also failed to disclose these transfers (even under penalty of perjury), which probably explains why it took nearly two years to prove him guilty.
Unfortunately for Pregent, the Federal Bureau of Investigation got involved and he now faces a felony with up to five years imprisonment, three years supervised visitation and a hefty $250,000 fine. Sentencing is set for 2:30, May 5, 2012.
Bankruptcy was designed by our legislators as a means to get help to those who need it while not completely ignoring the rights and needs of the creditors. An attempt to defraud an already liberal bankruptcy system is exploitative, demeaning and gives a bad name to all of those who require bankruptcy protection.

Gary Busey files Chapter 7 Bankruptcy Liquidation

Thu, 16 Feb 2012 04:00:00 -0500

William "Gary" Busey of Malibu, California filed for Chapter 7 bankruptcy protection on February 7, 2012 citing less than $50,000 in assets and over $500,000 in liabilities.
Gary, who starred in the original Lethal Weapon film alongside Mel Gibson and Danny Glover claimed to have snorted cocaine off of his dog, "Chili" with a straw as recently as 2008. While such a history would render a average citizen unemployable, Busey appears to still be making films although two of the most recent titles are horrors titled as Piranha3DD and Mansion of Blood. With any luck, he'll be able to pull of a "Vincent Price-esq" image for himself.
For now, the court awaits the remainder of Busey's paperwork as he filed a bare bones petition and the documents that were filed on his behalf do not have his original signature. While this may lead one to think they could be fraudulent, it is not likely as many bankruptcy attorneys forgo original signatures of the majority of related papers.

Teamsters Threaten to Strike if Judge Grants Hostess Rights to New Collective Bargaining

Wed, 15 Feb 2012 04:00:00 -0500

The Teamsters make up more than 90% of Hostess's work force and have threatened to strike if the judge in Hostess's Chapter 11 case allows the company to cut wages and benefits for employees. Information explaining what these benefits and wages are is not readily available.
The Teamsters Union, founded in 1903, has a history of aggressively fighting for the rights of it's members. Dennis Raymond, director of the Teamsters Bakery and Laundry Conference, stated that, "This vote shows that, while our Hostess members are willing to take significant steps to save the company, they can only go so far,".
It looks to me like these Hostess members may be go so far as the unemployment line, especially if the business cannot become solvent. If the court finds that the business cannot be profitable, it may be divided up and auctioned off to the highest bidder. It's possible that Teamsters may not lose jobs in that scenario, but it's becoming a tired cliche for unions to strike businesses out of existence.

Former Adult Film Actress, Former Billionaire Divorcee Files Chapter 7 Bankrutptcy

Tue, 14 Feb 2012 04:00:00 -0500

Twenty-two years ago Patricia Kluge divorced her husband of nine years and was given one of the largest divorce settlements in history at one billion dollars. The annual interest rate as predicted by People Magazine was $1.6 million a week. Even so, the former actress of, "The Nine Acres of Nakedness" managed to deplete those assets to less than $2.6 million in real and personal property in a little more than two decades.
Mrs. Kluge and her husband listed $123,000 worth of personal property as exempt on their petition including a $5,000 wine collection and a $80,000 wedding/engagement ring set. §34-26 of Virginia's exemptions allows for wedding rings and bands of any value.
Perhaps shedding some light as to what caused Kluge to plunge financially, I would note that her mansion, once listed for £62 million, finally sold for £9.3 in mid-2011.
I do wonder how she and her husband qualified for Chapter 7 bankruptcy when their Schedule I income was reported as $188,376 a year when Virginia's median income is $64,288 per year, but that's between them, the courts and the U.S. Trustee.

Bankruptcy Conversion

Mon, 13 Feb 2012 04:00:00 -0500

Bankruptcy is complicated. If you're represented by counsel, your attorney will ask you questions and based on your answers, will advise you on which of the four chapters of bankruptcy available to individuals you may want to file. Sometimes choosing the chapter that will put the client in the best position hinges on a single fact or two -and sometimes facts change.
Fortunately, the legislature realized the possibility of changing facts in bankruptcy cases and created a solution, 11 U.S.C. §706. This provision allows a debtor to convert their case to another chapter. Of course, the debtor still must pass the qualifications for the chapter to be converted to, such as passing the "Means Test" for a Chapter 7 or being under the debt limits of Chapter 13.
If you would like to meet with an attorney to discuss the possibility of Bankruptcy, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

The Role of Tax Refunds in Bankruptcy

Sat, 11 Feb 2012 04:00:00 -0500

A commonly overlooked issue when it comes to bankruptcy is what happens to the debtor's tax refund. Income tax refunds are treated like any other asset owned by the debtor except that it is still being held by the government. The Trustee has an interest in a pro-rata share of the refund based on the month you file because the refund has been earned up to that point. If you file at the end of April, the trustee could have an interest in 4/12ths of your next year's tax return. When someone files for bankruptcy protection, they are only allowed to keep a limited amount of assets, called exempt property. These exemptions are limited and are declared at the time of filing the petition. If the trustee has any objections to these exemptions, he or she must formally announce those objections within thirty days of the filing of the bankruptcy.
There are a few different strategies on how to deal with refunds. Some attorneys suggest that the debtor wait until they get their refund, spend the refund on reasonable and necessary living expenses such as gasoline, groceries, healthcare etc. and then file for bankruptcy. Others suggest that the debtor adjust their deductions (if there's enough time to do so) so that the return will be smaller or non-existent. If possible, I prefer to use the debtor's remaining exemption amounts to cover the trustee's interest in the return. If the trustee would get $400 and the client is eligible to keep $400 due to their exemptions, I can use the exemption to let the client keep the money.
Although it's not often an attractive option, the debtor can also simply give up the whole tax return if they feel their exemptions are better used elsewhere.
If you have questions about keeping your tax return in a bankruptcy, or some other kind of bankruptcy question, contact a Jacksonville Beach Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Tenancy by the Entireties

Fri, 10 Feb 2012 04:00:00 -0500

Tenancy by the Entireties, only permitted in a few states, is a term unknown even to many attorneys. The lack of knowledge of it's existence helps to illustrate the stupidity of it's application: Spouses must intend to hold property as "Tenants by the Entireties" to be afforded it's protection, yet nearly no one knows that this system (or any system) of ownership exists.
There are several ways people can hold property. Tenants in Common is fairly frequent. Another is Joint Tenants with Rights of Survivorship. Each of these open a different can of worms in different areas of law. What Tenancy by the Entireties (TBE) can do, is allow a bankruptcy filer to keep their property provided that the property is held by a non-filing spouse provided that the property is held by TBE and that the property is not under-secured. Fortunate for Florida debtors, the inherit flaw of requiring the owners to intend TBE is overcome by the courts now presuming that TBE is intended if the couple is married and the property is acquired pursuant to the requirements of TBE. TBE requires that property be acquired at the same time for both spouses, they must have the same title, same interest in the property, have the same right to possession and, of course, be married.
If you have questions about TBE, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

What is bankruptcy?

Thu, 09 Feb 2012 04:00:00 -0500

It is generally accepted that bankruptcy's origins began in the Torah and Old Testament within the Book of Deuteronomy Chapter 15:1-2 as well as under Mosaic law. The story loosely translated states that all debts shall be forgiven at the end of every seven years. From this our founding fathers outlined bankruptcy rights and courts in our Constitution. Even today we have maintained the "end of every seven years" rule by allowing a Chapter 7 discharge to be achieved only ever eight years (eight being the end of seven).
These holy books also say that a person who is freed from debt-bond should not be left empty handed. The idea behind this is that releasing a person from debts does no good if they must then incur new debts to survive -they need some amount of property with which to rebuild. Again, our country has followed this wisdom, this time by creating bankruptcy property exemptions. By allowing debtors to retain some property, they will be better suited to rebuild and will be less likely to become 'slaves' to debt again.
There are many complexities to bankruptcy that you should know before you make the life changing decision to file. If you'd like to sit down with me for an hour to see if bankruptcy is right for you, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

Changes Proposed to Judicial Foreclosure Procedure

Wed, 08 Feb 2012 04:00:00 -0500

As I've said before, there has been a steep decline in foreclosure filings, however a recent article in The Florida Bar News by Gary Blankenship, explains that despite the decrease in foreclosures last year, there appears to be an enormous backlog of foreclosures yet to come.
Linda Goodner, a States Courts Administrator recently appeared before the Senate Criminal and Civil Justice Appropriations Subcommittee to discuss what changes would be needed to handle the estimated 368,000 foreclosure cases pending in courts across Florida as well as the cases that are yet to be filed. In her estimation, there will be another 380,000 cases filed by 2016 -at which point she anticipates that foreclosures will return to normal.
One proposal came from Representative Shawn Harrison who proposed that banks be given the ability to pursue non-judicial foreclosure in exchange for giving up their rights to file deficiency judgments. This is an interesting proposal.
To allow banks to foreclose on homes non-judicially could mean infringements on home-buyer's rights. We've already seen numerous procedural violations by a multitude of lenders. Obviously, taking the judicial process out of the equation could be unreasonably risky for lenders who wanted to keep their homes. On the other hand, the forfeiture of the right to assess a deficiency judgment could drastically reduce the need for bankruptcies, which would be a huge financial and credit benefit to many Americans.
It is impossible to say what the best system for handling foreclosures in our current dilemma is, but a change in judicial procedure would be welcome.

Real Housewives of New Jersey's Teresa Giudice and her Husband sued for Fraud, Concealing Property and Falsifying Records in Bankruptcy

Tue, 07 Feb 2012 04:00:00 -0500

The final adversary proceeding in the Chapter 7 bankruptcy of Teresa and Giuseppe "Joe" Giudice is now closed. An adversary proceeding may be thought of as "case with in a case". This adversary proceeding was filed by the United States Trustee seeking to deny the Giudices a discharge of their debts. The trustee's one-hundred-and-twenty-five allegations indicate what may be the true nature of a "Real" housewife and her husband.
Some of the allegations include:
1. Non-disclosure of any bank accounts, vehicles, copyrights or intellectual property.
2. They also disclosed their combined monthly income to be $3,250 for Joe and $3333.33 for Teresa (plus assistance of $10,000 per month from family members).
3. They failed to disclose ownership of 393 Lexington Ave., Clifton, NJ and 399 Lexington Ave., Clifton, NJ.
The Giudices both signed this petition under the penalty of perjury.
There are generally two reasons why you wouldn't disclose the truth: neglect or fraud. By not disclosing their personal property, they would be allowed to keep that property if the trustee or creditors did not object. By citing only about $79,000 in annual combined income, they'd probably qualify for Chapter 7 bankruptcy in New Jersey, where the median income is very high (you must be under the median for Chapter 7). By not disclosing whole houses, they could potentially keep them if the trustee or creditors did not discover them. But the trustee did discover them and sent them a letter requesting documents relating to these items.
Within a month of the trustee's letter, the Giudices filed amended documents listing one of the pieces of real estate, four vehicles, a Maserati lease and three previously unlisted businesses. Teresa's reported income more than doubled.
It appears that the trustee wasn't satisfied with their answers and subjected the Giudices to a 2004 examination (similar to a deposition). Under oath, Teresa disclosed that she had a Lakeland Bank account, a previously undisclosed business and a previously undisclosed book deal for her now published book, "Skinny Italian." Her husband Joe disclosed that he had not actually filed taxes for 2006, 2007 or 2008 (although he'd provided the Trustee with copies of returns previously), disclosed another business and disclosed that he collects rent from two other commercial businesses.
Teresa's now disclosed bank account at Lakeland Bank showed $106,819.90 in deposits in the seven months leading up to their case filing and $192,620.90 during the three months AFTER the case filing. She also disclosed that she'd been paid $250,000 as an advance on her book.
Now, I must admit that these were all allegations and that none of them were specifically proven to be true. Pursuant to a consent agreement, Teresa was denied a discharge acknowledging "...her desire to resolve the Adversary Proceeding without the need for further inquiry or litigation, and without her making any further admissions..." her husband was also denied a discharge.
Bankruptcy fraud is a crime punishable by imprisonment and fines. When someone attempts to lie about their income hide assets in bankruptcy, it is an insult to everyone -those filing bankruptcy themselves and those who can and do pay their creditors. When an attempt to defraud occurs at this magnitude, I think that only imprisonment should follow. These two should be investigated thoroughly and if these allegations are true, they should go to jail for their crimes.
The Giudice's bankruptcy case remains open.