Hard Times Are Everywhere

Hard Times Are EverywhereAtlantic City isn’t the only place where the gambling industry has collapsed, and the host area may well collapse along with it.

Lawyers for Caesar’s Palace in Las Vegas are scheduled to be back in an Illinois courtroom to explain why their client refuses to consent to an involuntary bankruptcy petition. According to the Committee of Unsecured Creditors in the involuntary Chapter 11 proceeding, Caesar’s Entertainment Operating Company (CEOC) has a “statutory duty” to consent to the proceeding.

This is the case of the dueling bankruptcies. CEOC filed a voluntary Chapter 11 petition on January 15 in Chicago, three days after junior lenders filed an involuntary Chapter 11 in Delaware. Roughly $500 million in cash is at stake, and if the junior lenders win this hearing, they get the money.

Bankruptcy Procedure

A little over a hundred years ago, after the state’s silver mines played out, Nevada was so broke that there was talk of merging it with California or Arizona. CEOC is probably just the first domino to fall in Las Vegas, so that talk may soon resurface.

But, back to Camden. A typical Chapter 7 bankruptcy may take about six to nine months, from start to finish. Of course, not all cases are typical. Generally, however, the case goes something like this:

  • Voluntary Petition: Since no one forces the debtor to go to court, this petition can usually be amended or withdrawn at almost any time. Involuntary petitions are not uncommon in business proceedings, if the creditors feel the business has money to pay its debts but is refusing to do so.
  • Motion to Lift Stay: Occasionally, a creditor will seek special permission from the judge to ignore the automatic stay and foreclose on a lien. These motions are only filed when payments haven’t been made on a car loan or mortgage.
  • Notice: All creditors must receive notice of the proceeding. This process is largely mechanical.
  • 341: The “meeting of creditors” is really nothing of the sort, because moneylenders very rarely show up. In a Chapter 7, the debtors must typically furnish some documents, like recent tax returns, verify their identities, and answer a few yes/no questions from their attorneys.
  • Discharge: After the trustee is satisfied that everything is in order, the judge signs an order forgiving all unsecured debts. The debtors now have their fresh starts.

Additionally, the debtors must complete two counselling courses. One must be done prior to filing, and the other must be completed prior to discharge. These classes can usually be taken online.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500

Crisis Deepens In Atlantic City

Crisis Deepens In Atlantic CityA source close to the financial imbroglio in America’s Favorite Playground says that a Chapter 9 bankruptcy is “inevitable,” adding that the city “should have filed bankruptcy a year and a half ago.”

The official report from the state-appointed emergency management committee stopped short of this declaration, instead calling for a layoff of up to 30 percent of the city’s workers, pension cuts and debt deferrals that would save the beleaguered city an estimated $10 million this year. But with Atlantic City facing a projected $101 million budget shortfall in the upcoming fiscal year, it seems unlikely that even drastic budget cuts could turn around the city’s financial outlook. Emergency Manager Kevin Lavin admitted that the situation was much worse than the team originally anticipated. In addition to the anticipated shortfall, Atlantic City is already $397 million in debt.

Four of the largest casinos in the city have closed in the last year; as a result, the city’s tax base is about half of its 2010 level.

When Is Bankruptcy Inevitable?

If you are having money problems, consider speaking with a bankruptcy attorney. By holding out hope that nickel-and-dime budget cuts and extra few dollars will somehow turn things around, you are making the situation worse and putting yourself, and your family, through needless stress.

Specifically, look for the following warning signs as you contemplate filing a voluntary petition:

  • $10,000: Every family is different, but as a rule of thumb, if you owe more than $10,000 in credit cards, medical bills and delinquent payments, it will be very difficult to negotiate with creditors and repay that amount.
  • 90 Days: If you are more than two or three months behind on your house payments or car note, the lenders will attempt to repossess the collateral, despite any verbal assurances they make.

Chapter 7 can eliminate most unsecured debts in as little as a few months, while Chapter 13 debtors can repay debts over time under the protection of the federal government.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Rebuilding Credit After Bankruptcy

Rebuilding Credit After BankruptcyBankruptcy is one of the most negative events that can appear on a consumer credit report. Anyone who tells you otherwise is either sugar-coating the truth or is not very experienced in these matters. The key phrase is “one of” the most negative events, because most lenders consider repossession, foreclosure and referral to collections as more negative than bankruptcy – in most of those situations, the borrowers simply gave up.

Chapter 7 Bankruptcy means a fresh financial start for you and your family, and there are some proven methods to help you raise your credit score.

Correct Inaccuracies

Theoretically, all the debts included in Schedule E should have a remark that the account was included in bankruptcy. Pragmatically, some do and some don’t. Sometimes the entity is a recent debt-buyer who did not receive notice of the filing, sometimes the paperwork gets lost in the shuffle, and sometimes the moneylender simply refuses to update its records.

The Fair Credit Reporting Act gives you the power to dispute any inaccuracies in your report. It may seem tedious to contest every little error, but when you are rebuilding your FICO score, every point counts.

Be Realistic

When you seek a mortgage loan or other credit, you will pay a higher interest rate and you may even be denied altogether, if it is too soon after your discharge. Always be upfront with the lender by informing the loan officers about your credit history before they run your report. If at least twelve or 18 months have passed since the discharge, you have no new problems and you have a reasonable explanation for what happened, most lenders are willing to work with you.

Pay Bills

One of the best ways to build credit history is to borrow money and timely repay it. A secured credit card is a good option for many families. Watch your credit report, because some cards state that they are secured, and your FICO score may not increase as much. There is some debate as to whether you should leave a small balance on the card or pay it off every month. The best thing to do is to experiment with both methods, and see how it affects your score.

Also, pay your existing bills on time, especially those accounts that are reported to the credit bureaus, like home mortgages and auto loans. Never leave a balance and do not be even one day late, if at all possible.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Special Asset Issues

Bankruptcy and Special Assets

Bankruptcy and Special AssetsIf you have decided to file for bankruptcy as a way to get a fresh financial start, you may have concerns about how the bankruptcy filing will affect certain articles of property. What about any money you have received or are eligible for through an inheritance? What about your retirement plan assets? Will you have to reclaim property given to friends or family, or that you’ve recently sold or given away?

Inheritance and Bankruptcy

Whether or not the proceeds of an inheritance will be accessible to the bankruptcy trustee in a Chapter 7 proceeding depend on two issues:

  • Whether your state allows you to claim an exemption on an inheritance—the law varies from state to state
  • When you received the inheritance—if you have already received the inheritance when you file, or if you receive the inheritance within 180 days of filing, it must be included in a Chapter 7 proceeding

Retirement Plan Assets and Bankruptcy

As a general rule, money put into a retirement plan is exempt from access to pay creditors in a bankruptcy proceeding. This includes profit-sharing plans, defined benefit plans, 401(k)s, IRAs and money purchase plans. The only retirement assets that may be taken by the bankruptcy court are Roth and traditional IRA plan assets in excess of $1,245,475.

Gifts to Friends or Family or Items Recently Sold

A significant gift to a friend or family member within two years (under federal rules) of a bankruptcy filing can qualify as a fraudulent transfer. Some states will look back as far as seven years. As a general rule, if the bankruptcy court finds a transfer to be fraudulent, it will require that the property or its value be returned to the bankruptcy estate. It may also prohibit you from completing the bankruptcy.

Items sold at fair market value typically don’t qualify as a fraudulent transfer, but a sale for less than market value may have the same consequences as a gift.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Dealing with an Aggressive Creditor

Protecting Yourself from Creditor Harassment

Protecting Yourself from Creditor HarassmentMost of us want to pay our bills in a timely manner, and we often try hard to work with creditors when we get behind. But some creditors are relentless, calling and writing incessantly in an attempt to collect a debt. Some will call at all hours of the day or night. Some will call your friends and neighbors. Some will badger and berate you over the phone. There are ways you can deal with overly aggressive creditors.

The Fair Debt Collection Practices Act

In recognition of the abuses of debt collectors, Congress enacted the Fair Debt Collection Practices Act, empowering the Federal Trade Commission to monitor and regulate for abusive, unfair or deceptive practices. The FDCPA prohibits a wide range of actions perceived as harassment or misrepresentation, including:

  • Calling outside of specific hours
  • Communicating information about a debt to a third party
  • Threatening actions that the creditor or collection agency cannot take
  • False statements about a debt owed

Taking Legal Action

If a creditor or collection agency violates the law, and refuses to stop doing so after a written request, you can take legal action in court. In many instances, if you can successfully show violation of the law, you can get attorney fees and court costs, in addition to statutory and other damages. However, the legal action will not necessarily make the debt go away. Even if you can demonstrate that a creditor or collector violated federal law, you will still owe the debt until you pay it or the creditor/collector discharges it.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

The Automatic Stay in Bankruptcy

The Benefit of the Automatic Stay in Bankruptcy

The federal bankruptcy laws were enacted to give individuals and business owners a way to get a fresh financial start. But Congress also recognized the need to provide relief from aggressive collection efforts. That relief comes in the form of the automatic stay.

When you file a bankruptcy petition, whether in Chapter 7 or Chapter 13, the automatic stay automatically goes into effect. The automatic stay prohibits your creditors or their representatives from calling, writing or taking any action outside of the bankruptcy proceeding to try to collect a debt from you. The automatic stay applies to creditors and their legal counsel, collections agencies, and most governmental entities. Some specific provisions of the automatic stay include:

  • Foreclosure proceedings—An automatic stay will suspend (but not terminate) foreclosure proceedings
  • Evictions—The automatic stay can stall the eviction process for a few days, unless your landlord has already obtained a judgment of possession or can show that you are endangering the property
  • Utilities—Typically, an automatic stay will suspend the disconnection of services for up to 20 days
  • Wage garnishments—The automatic stay stops any garnishment proceeding

Exceptions to the Automatic Stay

You cannot use the automatic stay to stop or suspend:

  • Criminal proceedings
  • Child or spousal support actions
  • Some tax actions
  • The withdrawal of funds from your paycheck to repay a pension or retirement plan loan

The bankruptcy court has the authority to lift or remove the automatic stay, if a creditor can show that the stay serves no purpose. If you have real property with no equity, and have no way to make payments on the property, the bankruptcy court may lift the stay so that your lender can foreclose and protect its interests.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Is Your Past Haunting You?

The Zombie Apocalypse probably won’t occur, but these creatures can still haunt your credit report, even if you filed bankruptcy.

Also known as debt scavengers, zombie debt-buyers purchase delinquent credit card accounts, overdue payday loans and other unsecured debt that the original lender wrote off as uncollectible. Since the debt may be eight or nine years old, or even older, the purchaser only pays a few cents on the dollar for the right to collect the account. Typically, after running a skip trace to find the debtor’s current contact information, the letters and phone calls begin.

Legally, a debt-buyer is supposed to provide written verification of the debt upon request. Since these accounts are so old, the original records may have been lost or destroyed. Many time, a zombie debt-buyer may only have a name, account number and outstanding balance.

Dealing with Zombie Debt During a Chapter 7

If you get a call from a debt collector before your bankruptcy is discharged, tell the caller that you have hired a bankruptcy lawyer and provide them with your attorney’s name and phone number. That’s all you need to do. Do not volunteer any other information and politely refuse to answer any questions. If you receive a letter, give it to your attorney.

If you get another call or letter, repeat the same process. Do not argue with the person about the debt. Let your lawyer handle that for you.

Dealing with Zombie Debt After a Chapter 7

Once you receive your discharge order, keep a copy of both the petition and order close at hand, because you’ll probably need them again.

Monitor your credit report closely. If another debt-buyer appears, be proactive and send them a copy of the discharge order. If they call, politely give them the case number and discharge date and then hang up. If they keep calling, you may need to speak to an attorney to get the harassment to stop.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

The Two Most Common Personal Bankruptcy Options

Your Personal Bankruptcy Options

If you are considering filing for personal bankruptcy protection, you can easily be confused about the different options available to you. Here are the basic options for obtaining personal bankruptcy protection.

Chapter 7 Case

In a Chapter 7 bankruptcy proceeding, you are allowed to replace with most debts certain debts in exchange for the sale of some of your assets. There are some limitations on the debts you may discharge. Customarily, you cannot discharge the debt on secured assets—homes or cars—and still keep the property. Additionally, child support and alimony arrearages cannot be wiped out in bankruptcy, and student loan and tax debts are very difficult to discharge.

With respect to things you are financing like your car or home if you want to keep it you have to continue to make the payments. If the thing you are financing is work less than what you owe, you have the option to give it back to the lender and owe them nothing or keep it but continue with the payments.

Under the revisions to the federal bankruptcy laws in 2005, you must now qualify for Chapter 7 by submitting to a means test, where the bankruptcy court determines if you make too much money to be in Chapter 7, in which case your options are to file Chapter 13 or no bankruptcy.

Chapter 13 Reorganization

In a Chapter 13 petition, you work out new payment arrangements with your creditors, agreeing to settle your debts over a three-to-five year period. Often, you will be able to get late fees and penalties waived. As long as you honor your new commitments, your creditors cannot make any additional efforts to collect on a debt.

The Automatic Stay

Whether you file for protection under Chapter 7 or Chapter 13, you are immediately entitled to the protection of the automatic stay, which prevents your creditors from calling, writing or taking any legal action outside of the bankruptcy proceeding to collect a debt from you.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

The Floating Check Controversy

At the moment you file a Chapter 7 Bankruptcy, all your nonexempt cash and non-cash property technically becomes part of the bankruptcy estate. An interesting question arises concerning the funds in checking and other Demand Deposit Accounts (DDAs).

Assume that you paid your $2,000 monthly mortgage payment on Monday with a check and filed bankruptcy the next day. The money would probably still be in your account, because your check hasn’t cleared yet. Or assume that the mortgage company automatically drafts your installment payment on the 5th, and you filed your petition on the 4th. Once again, the $2,000 is in your account but is not “your money” in any practical sense.

If the trustee files a motion for turnover demanding that you reimburse the estate $2,000, what happens then? This is known in some circles as the “floating check” controversy. With proper bankruptcy counsel and guidance, you can avoid being stuck in this unfortunate situation. If not, you can find yourself facing a motion for turnover from a bankruptcy trustee.

Response to a Motion for Turnover

The wording of Section 542(a) of the Bankruptcy Code is quite clear: any entity with possession of property belonging to the bankruptcy estate “shall deliver to the trustee, and account for, such property or the value of such property.” Yet the purpose of bankruptcy, according to Supreme Court Justice John Paul Stevens, is to give the “honest but unfortunate debtor” a fresh start in life. Debtors cannot get a fresh start if they are delinquent on their financial obligations.

Some bankruptcy attorneys argue mootness in these situations. Simply put, there must be a live controversy for the courts to decide. For the most part, judges do not issue advisory opinions or make decisions about hypothetical matters. There may have been $2,000 in the account that may have belonged to the bankruptcy estate, but the money is gone now so there is no basis for a motion for turnover. A finding for the debtor does not necessarily prevent the trustees from collecting. They may be able to file avoidance actions against the payees to recover the funds.

At the very least, these arguments give you leverage when negotiating with the trustee, who may be willing to accept a lesser amount, let you pay the money in installments, or both.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

How Long Will a Bankruptcy Affect My Credit?

How Long Will a Bankruptcy Filing Impact Your Credit?

If you have opted for bankruptcy as a way to get your finances under control, you may be wondering how long the bankruptcy filing will remain on your credit report, and how long it will have an impact on your ability to obtain credit.

How long the bankruptcy will actually appear on your credit report depends on the type of bankruptcy you filed. With Chapter 7 liquidation, where you permanently discharge debts, your credit report will reflect the bankruptcy filing for 10 years. With Chapter 13, though, where you agree to repay your creditors under new terms, the bankruptcy filing only shows up for seven years. There are some situations where the bankruptcy may stay on your credit record for a longer period. For example, if you apply for a loan in excess of $150,000, the potential lender may see the bankruptcy filing, even though it has been more than 10 years.

How to Minimize the Impact of a Bankruptcy on Your Ability to Obtain Credit

When a potential lender considers your creditworthiness, they will likely look at your credit report. In many instances, though, that will be only one of many factors. Many lenders are far more interested in what you have done lately, as opposed to what you did a number of years ago. If your credit report shows that you have made all payments in a timely manner since your bankruptcy, a lender may be inclined to extend credit, perceiving that you have developed new habits, or that the bankruptcy was the result of an illness, injury or other unforeseen incident, and not the result of poor money management.

The other important thing to do, if you want to improve your chances of getting credit, is to minimize the use of available credit. If you have a credit card, don’t use it unless absolutely necessary, and pay it off every month or as soon as possible.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.