Saturday, September 27, 2014

US News and World Report Article - 5 Bankruptcy Myths Debunked

I found this article while looking for something else. This is a decent, if only brief, look at some of the misconceptions surrounding bankruptcy. The one most people to believe is:

"1. People who file for bankruptcy are financially irresponsible. "There's always going to be some kind of abuse, but it's far more likely that people run into very serious personal problems in one of three areas: losing their job, going through a divorce, or suffering a serious illness," says Walter W. Miller Jr., who teaches bankruptcy law at Boston University School of Law."

Or worse yet, people believe if they file for bankruptcy protection, they will be perceived as financially irresponsible. This has been my experience for the most part.

If you want to read about more misconceptions, this is a short article worth a look:

Monday, September 22, 2014

My bankruptcy won't take my child support payments ... Right?

The short answer is probably not. But it isn't as cut and dried as many people seem to think when they come into my office. In 522(d)(10)(D) of the Bankruptcy Code, it states support is exempt "to the extent necessary for the support of the debtor and dependents." Since Pennsylvania Support Guidelines are directly connected to the estimated costs of rearing children, a creditor would be hard pressed to argue the support payments are not necessary for the support of the debtor and dependents. I suspect most states support orders are based on similar estimates; therefore, the exemption should apply.

Image courtesy of renjith krishnan at
But I ran into a different situation in a recent case. I met a debtor who has an outstanding support order and accrued arrearages that was in excess of $12,000.00. Her children had reached age of majority and were out of her home. During our initial, the debtor simply stated, "I received $10,000.00 of the arrears but it doesn't count because it's child support, right?" That statement triggered the preliminary review I'm discussing here.

As I stated above, normal support payments to a debtor with minor children are really safe under the exemption. Through the interview, I found the $10,000.00 payment had been spent down legitimately on living expenses. So, I think the exemption is not at issue here. But I believe the child support exemption could be challenged for cash that is accumulated in an account from child support. I think the fact the children have left the household reinforces the challenge. Finally, I would be concerned if the total arrears were still over $12,000.00 or more. I would be concerned a trustee might want to take the claim over as they do personal injury and other claims.

Now I'm not sure what the final result would be on many of these issues if a creditor or the trustee challenged the exemption. My preliminary research did not reveal any cases on point. I have discussed the issue with more experienced bankruptcy attorneys and they see the issues I'm raising but have no more insight than I have. I also believe this issue is not common when it is an issue, I suspect the value is not so great as to cause a challenge.

The main point here is I never want to surprise my client with bad news if I can prevent it. Even in what seems like a routine consumer bankruptcy case the devil is really in the details. (similar point in one of my earlier blogs - These are issues that need to be identified, reviewed with the client, evaluate the risk in light of the clients' goals, and identify alternate plans to maximize exemptions.

Tuesday, September 16, 2014

Who's Collecting your Debt?

Image courtesy of graur razvan ionut
The truth is you really don't know if it is the person who actually and lawfully owns it or someone who stole it like people steal identities. An article the New York Times Magazine lays out the world of debt collecting in:  "Paper Boys: Inside the Dark, Labyrinthine, and Extremely Lucrative World of Consumer Debt Collection"

Here are some excerpts from the article I found interesting and informative:

"As he soon discovered, after creditors sell off unpaid debts, those debts enter a financial netherworld where strange things can happen. A gamut of players — including debt buyers, collectors, brokers, street hustlers and criminals — all work together, and against one another, to recoup every penny on every dollar. In this often-lawless marketplace, large portfolios of debt — usually in the form of spreadsheets holding debtors’ names, contact information and balances — are bought, sold and sometimes simply stolen.

For Wilson, none of it was personal. Instead, he saw the challenge of collecting in very professional, even empirical terms. He’d developed his own quasi-scientific taxonomy, grouping debtors into some 38 different species or types. For example, a D.H.U. (Debtor Hung Up) was a sorry specimen because he had hung up the phone and would probably do so again; a C.B. (Call Back) was a better prospect, because he had at least bothered to call back; a Promised to Pay had potential, because he acknowledged that the debt was his; a Broken Promise had failed to honor his guarantee, but that wasn’t entirely bad because you could now use that against him; and a Broken Payment simply needed a little nudging because he had started to pay and just needed to get back on track. Using a software system that Wilson developed himself, he could program the office’s auto-dialer to call only those debtors who fell into certain classifications. One day, I watched as the auto-dialer at his office called Broken Promises, Broken Payments and C.B.s.


Yet Wilson’s pitch — you owe the money, and now you need to pay — was both simple and perfectly legal. In most states, you can still try to collect on a debt even after its statute of limitations has expired. As the Federal Trade Commission notes on its website: “Although the collector may not sue you to collect the debt, you still owe it. The collector can continue to contact you to try to collect.” Wilson knew the rules and used them to his advantage. As far as I could tell, that’s what Wilson loved about collections: It was a hustle, but a legitimate hustle..."

Many times, clients ask, "I really need to discharge my old debt. It's going to fall off my credit report." I always explain that they do not want it to pop up with some collector that buys old debt. It much easier to say it was discharged and move on. This way, they never have to question, is the call legitimate or a scam... is it a collectible debt ... can they really take me to court? If the debt is unsecure and you listed it on your bankruptcy schedules, these questions are answered with the discharge.

Don't fall prey to this collection system. If you are having financial trouble and have collectors hunting you, you may want to consider bankruptcy before you throw good money after bad and worse yet pay your money to a thief. This is an interesting article and I would recommend it to anyone.

Monday, September 15, 2014

From USCIS: DHS Announces 18-Month Extension of Temporary Protected Status for Sudan

Secretary of Homeland Security Jeh Johnson will extend Temporary Protected Status (TPS) for eligible nationals of Sudan for an additional 18 months, effective Nov. 3, 2014, through May 2, 2016.

Current Sudanese beneficiaries seeking to extend their TPS status must re-register during a 60-day period that runs from Sept. 2, 2014, through Nov. 3, 2014. U.S. Citizenship and Immigration Services (USCIS) encourages beneficiaries to re-register as soon as possible once the 60-day period begins. USCIS will not accept applications before Sept. 2, 2014.

For more information:

Tuesday, September 9, 2014

"STUDY: For children, there is NO 'amicable divorce'"

A study led by Dr. Jonathon Beckmeyer of Indiana University, found that children's problems were no worse if parents continued to fight with each other after the divorce. As an attorney who tries to keep divorces as civil as possible, this is a tough study to take. The article states:

"The impact of the split on youngsters is just as devastating whether or not the mother and father keep cordial links, it found. These recent findings undermine a Government-backed consensus that the harm caused to children by separating parents can be limited if the couple remain friends."

Image courtesy of smarnad at
I find this study difficult to believe. It definitely seems counter-intuitive. Unfortunately, couples will continue to divorce. It would be nice if they didn't. I wonder how it would compare to broken couples that stay together for the kids. Is the broken family the issue or the separation?

I guess a closer look at the study itself might be more enlightening. No matter what, this is not a reason to be unreasonable. Interesting read. less

Friday, September 5, 2014

Let's not fight over the things we agree on...

Image courtesy of digitalart at
It is amazing how reasonable people can get so twisted when in a legal battle. I cannot tell you how many times I have a client who is basically in agreement with the other side on several issues in the case. They tell me what they want the other side wants the same thing and everything is fair for all the parties. But as soon as the one party starts telling the arbiter (conference officer, hearing officer, master, or judge) the areas of agreement, the other party seems to get defensive or agitated.

I had a conference in a family matter this week. The parties were in complete agreement as what the outcome should be. It was just a matter of getting it into an order. In fact, the conference officer offered a possible change thinking it might be more convenient for the parties. They both supported each other to keep everything as they agreed. My client is a good client and reasonable when I talk to her on the phone or in my office. But through the entire conference, her main concern was that the other side would "dictate" the terms, which amused me because both parties wanted the same thing. I told her, "let's not fight over the things we agree on."

Too many times people seem to want to fight over things that are of no consequence. Mostly I think, it happens as a backlash from things that happened during the relationship. As an attorney, I believe it is part of my job to try to keep my clients focused on the areas the parties don't agree on and to help clients keep things in perspective when their emotions are starting to take control.

So if you feel that emotion welling up inside you, think about your ultimate goal. If you are getting what you want or need at that moment in your case, don't pick a fight. There is no reason to. Save your strength and energy to for the issues you don't agree upon. If you can do that, it should make things a little easier.

Monday, September 1, 2014

OH MY GOD! ... I'm going to be sued! ... let's file bankruptcy... NOW!

Image courtesy of Stuart Miles at
But is this the time to panic? I don't think so. If you are contacted by a creditor with the threat that they are planning to file a lawsuit, don't panic yet. First, that is probably what the creditor is hoping for and that you will offer to settle the claim without legal action. You have time to consider your response. Before a creditor can take any action to collect on a debt, he will need to prepare and file a complaint; serve the complaint on you; allow you time to respond; if you respond, allow time to schedule a hearing date; and have a judgment entered against you. After judgment is entered, it becomes a lien on real property (a home).  If you do not have real estate, the creditor must complete additional legal actions to have the sheriff come out to your home to levy on personal property.

This process provides plenty of time to assess your options, including planning your bankruptcy. This week, I had a call from someone who was thinking about bankruptcy. I could tell he was shopping attorneys but he had a couple issues that needed to be considered. I knew the answer but I always try to double check issues I haven't visited recently. Anyway, I called the client back the next afternoon to confirm my thoughts and he told me, "I had to file today because my ex-landlord told me he was going to file a lawsuit against me for $6,000."

My bad because I obviously didn't hear something that was important to him. But from everything he told me, he had no real legal reason to file that day. The client will probably be fine and it is not inappropriate to file the day you meet your attorney. My approach is a little different.

As I said above, I think of bankruptcy as a plan. Unless there is a sheriff's sale scheduled the next day, I like to pull all the client's financial data together and analyze it trying to find the potential challenges and best time to file. My personal preference is to have the bankruptcy filed sometime before judgment because a judgment can add another dimension to the case. I think many treat bankruptcy as a routine general remedy; however, I look at a bankruptcy more like a chess game. There are certain moves that need to be taken at certain times. If you miss a move or your timing is off, you jeopardize the case. With all this said, the person who called me was panicky and in reality he probably had a few months to plan if they were needed.

On the other side of the problem, I don't necessarily advocate people wait as long as possible either. I had a recent client who dodged a judgment creditor for about 12 years. He didn't own real estate so the creditor never had a lien on a home and he put off the sheriff's levy once. He, along with his family, endured more stress than necessary especially since he ended up filing anyway. Plus, he paid on other debts he didn't need to. So holding out and dodging creditors isn't always a good plan either.

The bottom-line here is don't panic if someone tells you they are planning to sue you. They usually tell you to in an effort to squeeze their money from you. Instead of a knee-jerk reaction, talk to an attorney to pull everything together to examine your options including bankruptcy. It takes time for a credit to sue a debtor. Use it to your advantage.