Seattle Bankruptcy Blog

Lehman bankruptcy - $1.1 billion in fees

2010-12-22T14:56:00.001-08:00

"While talk of the end of the bankruptcy boom is fast spreading, every month seems like holiday season in the Lehman Brothers bankruptcy, the largest in U.S. history. The tab for outside legal advisers and other professionals broke the $1.1 billion barrier by early December."

More here.

Isn't it Just Paperwork?

2010-12-13T18:26:00.000-08:00

So why do we care about the notes, mortgages, and other documents that were supposed to be transferred into these large mortgage trusts that we keep seeing in the news? Well, it could mean Doomsday for many large financial institutions in America. I'm not saying this would be a good thing or a bad thing - probably, a bad thing - most certainly, if the mortgage "pools" were found not to be securitized, it very well could cause the meltdown of the U.S. financial industry. There's a great description of exactly why on 4closurefraud.org. Here's an excerpt:

"If the notes and mortgages were not properly transferred to the trusts, then the mortgage-backed securities that the investors’ purchased were in fact non-mortgage-backed securities. In such a case, investors would have a claim for the rescission of the MBS, meaning that the securitization would be unwound, with investors receiving back their original payments at par (possibly with interest at the judgment rate). Rescission would mean that the securitization sponsor would have the notes and mortgages on its books, meaning that the losses on the loans would be the securitization sponsor’s, not the MBS investors, and that the securitization sponsor would have to have risk-weighted capital for the mortgages. If this problem exists on a wide-scale, there is not the capital in the financial system to pay for the rescission claims; the rescission claims would be in the trillions of dollars, making the major banking institutions in the United States would be insolvent."

More here.

Another "Real Housewives" bankruptcy

2010-12-11T11:14:00.000-08:00

James Bellino, husband of “Real Housewife of Orange County” Alexis Bellino, has filed for Chapter 11 bankruptcy protection for his company...Bellino is president of Global Marine, Inc. — a single-asset real estate corporation. A 7-page document filed Wednesday at U.S. Bankruptcy Court, Central District of California states that “after any exempt property is excluded and administrative expenses paid, there will be no funds available to unsecured creditors.”

The bankruptcy filing says the estimated number of creditors is between 1 and 49, and the estimated assets of Global Marine, Inc. are between $1,000,001 and $10 million. Bellino’s business is based at his 6-bedroom home in Newport Beach, which has been listed for sale and scheduled for a foreclosure auction.

More here.

The Giudices Get Sued!

2010-10-05T22:35:00.000-07:00

Your favorite Muppet-lookalike Teresa, and her husband juicy Joe Giudice (his legal name is Giuseppe; I will call them "T&J" for kicks) of "Real Housewives of New Jersey" fame were sued on September 2 by the government. Specifically, by the United States Trustee overseeing New Jersey. The U.S. Trustee is a division of the U.S. Department of Justice, given the significant job of serving as a "watchdog" for fraud and abuse in bankruptcy cases. A lawsuit in bankruptcy court is called an "adversary proceeding" and the complaint against Teresa and Joe was filed under adversary 10-2150 (the main case is 09-39032). Just this past Monday, T&J responded to the lawsuit! T&J are some bad apples -- allegedly, that is!

The complaint against our dear friends T&J sets out 5 counts or grounds on which the bankruptcy judge could deny T&J's discharge. Being denied a discharge is a serious affair; generally the bankruptcy trustee still sells any non-exempt assets (those above and beyond what the law says you get to keep), AND you still owe all your debts. You do NOT want to end up in that situation as it is the "worst of all worlds" (your stuff is sold off, but you still owe your debts). This all just highlights the importance of full disclosure when you file for bankruptcy. Anywho, the counts and allegations set forth in the complaint against T&J are as follows (references are to the sections of the bankruptcy code):

False oath or account, 727(a)(4)(A). Among other things, T&J allegedly didn't tell the court about a bank account, 2 pieces of real property, business interests, 3 cars and a boat (including a Cadillac Escalade, an F350, a quad, and the boat), several debts, a leased 2005 Maserati Quattroporte, $7,083.33 a month in income from starring on "Real Houswives," Teresa's website and business, and Teresa's publishing contract for "Skinny Italian." When you sign your bankruptcy petition, you do so under penalty of perjury, attesting that the documents are true and correct. Here, the U.S. Trustee is alleging that all the stuff left off of the initial schedules amounts to a "false oath or account" and that T&J should not get a discharge. The complaint also indicates that there is stuff that the schedules STILL have not been amended to disclose.
Concealing assets 1 year pre-filing, 727(a)(2)(A). Sometimes property is accidentally left off of bankruptcy schedules, but in this case the U.S. Trustee is alleging that the omission of the assets above amounts to intentional concealment.
Concealing assets post-filing, 727(a)(2)(B). The 3rd count is similar to #2, but deals with post-filing mischief. The U.S. Trustee is alleging that Teresa intentionally concealed her business and website "TG Fabulicious" (which was originally named TG Fabalicious) and approximately $300,000 in income that passed through a bank account at Lakeland Bank both before and after filing (and which was not disclosed on the initial schedules).
Falsifying or failing to preserve records, 727(a)(3). Allegedly, T&J have not filed tax returns for 2006-2008 but they represented to the court that they had filed them. Also, T&J allegedly failed (i.e., should have but didn't) to produce business records for one of Joe's business ventures.
The "what the heck is up with this?" section - failure to explain loss of assets or deficiency of assets, 727(a)(5). If you have been irresponsible and used assets or property to, say, go on vacation, or you gambled assets and money away, then the court can deny your discharge. The U.S. Trustee is alleging that T&J have not explained why they can't pay their debts with the "Real Housewives" income, or Joe's income (in 2008 he was apparently making $54,269 a month). If your case just doesn't add up, you have assets that you spent on things other than repaying your debts, then your discharge can be denied. If you have bought a bunch of stuff on credit cards and undervalue the stuff on your bankruptcy schedules, your discharge can be denied.

If you're interested in a copy of the complaint, you can download it from the New Jersey Bankruptcy Court website (you'll need a public access account), or please email me as I'd like to also find out who (if anyone) reads my blog. My next post will outline what T&J have to say (through their attorney) about all of this. Future posts will include information about what exactly inside that ~~Italian bordello that backs up to Interstate 287~~ Towaco, NJ house is being sold, so stay tuned.

How to Fix Bad Credit

2010-09-28T21:26:00.000-07:00

"How do I dig myself out of this mess?" Many of my clients ask this -- whether it's because they just filed for bankruptcy, or after years of struggling with not enough income and too many expenses. First, take a deep breath -- your credit score is not your life, and you are not a bad person just because you have bad credit.

And next, read this article for some tips on how to help clean up your credit score (yes, secured credit cards are a great way to improve your credit!).

Octomom Going on Welfare, Faces Foreclosure

2010-09-17T13:49:00.000-07:00

"[Nadya] Suleman has repeatedly fallen behind on her mortgage payments and her mortgage holder is ready to begin the foreclosure process "right now." She narrowly avoided foreclosure in April."

More at Huffington Post.

Too Much Shopping? Teresa and Joe Giudice of "Real Housewives" speak out about their bankruptcy

2010-09-01T08:03:00.001-07:00

Joe, a former successful real estate developer, explains that the bankruptcy filing had nothing to do with his wife's excessive shopping, and instead, was "almost all business" related.

"It was tenants not paying rent, and it was a bad situation with my business partner," who betrayed him and continues to tell lies about him, Joe claims.

Read more: http://www.nydailynews.com/gossip/2010/09/01/2010-09-01_real_housewives_star_teresa_giudice_is_humiliated_about_bankruptcy_i_learned_fro.html#ixzz0yI4MvbUc

You can view the Giudice's bankruptcy paperwork at the U.S. Bankruptcy Court's website (you must register for a public access account):

Borrowers Refuse to Pay Billions in Home Equity Loans

2010-08-11T23:42:00.000-07:00

"Lenders wrote off as uncollectible $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter."

Full story here.

Tax cut debate heats up

2010-08-11T08:59:00.000-07:00

I thought I'd take a break from the bankruptcy posts today and bring you some news about the debate on the George W. Bush tax cuts.

"Most of the tax cuts that were a signature domestic initiative of George W. Bush’s presidency carried an expiration date of Dec. 31, 2010, to limit the potential revenue losses; supporters assumed that they would be extended when the time came.
Extending them for the next 10 years would add about $3.8 trillion to a growing national debt that is already the largest since World War II. About $700 billion of that reflects the projected costs of tax cuts for those in the top 2 percent of income-earners."

Link to article here.

NPR buys a toxic asset

2010-07-23T10:28:00.000-07:00

National Public Radio has an interesting series on its purchase of a "toxic asset," a bond it purchased for $1,000 that is backed by subprime mortgages. They bought the bond back in December 2006, and even then only 94% of the mortgages inside the "pool" were current. As of July 2010, only 28% of the mortgages are current, and the NPR crew have received $449 total, or less than half of what they paid. Would you buy one?

More here.

Home loan modifications hard to come by

2010-07-23T10:21:00.000-07:00

Are you looking for a home loan modification? Good luck -- as it turns out, it really is like the proverbial needle in a haystack. According to the overseers of the federal home loan modification program itself, less than 390,000 have actually been granted modifications. But, don't blame the government -- Harvard Law School professor Elizabeth Warren confirms that oftentimes, the servicers stand to earn more money by foreclosing on borrowers' homes:

“In many cases, the servicers can continue to make more money if the family goes through foreclosure,” she said. “It’s just not a program that’s working for homeowners. It’s not a program in some cases that’s working for investors. And most importantly, it’s not a program that’s working for the economy over all.”

Full article is here.

Even the "Real Housewives" file for bankruptcy

2010-07-15T08:53:00.000-07:00

Teresa Giudice, of "Real Housewives of New Jersey" filed for Chapter 7 bankruptcy in October 2009. I have personally verified the filing -- the bankruptcy case is 09-39032-MS, filed in the U.S. Bankruptcy Court for the District of New Jersey (bankruptcy filings are public record, although if you are not a public figure, generally speaking nobody knows about your case other than the court, your creditors, and the bankruptcy trustee).

“While this is a personal matter, I realize that certain aspects of my private life will always be subject to scrutiny and distortion,” Giudice says in an exclusive statement to PEOPLE. “What is true is that due to the economy, most of my husband’s real estate ventures failed despite his hard work and effort. As a result, we looked to the Bankruptcy Court for a ‘fresh start.’ ” Link to article here.

At the time, castmate and fellow housewife Dina Manzo didn't believe it: "I think I would know if she was in that kind of trouble...[a]nd I think it's all kind of fabricated by a hater out there."

The Giudices are not the first "Housewives" cast to be in financial trouble. Sheree Whitfield and Jeana Keough have flirted with foreclosure and default. According to the Zillow blog and the associated links, Whitfield's ex-husband took the house in their divorce before the house was foreclosed on. The house was initially listed for sale at $2,850,000. Zillow indicates it was sold for $1,800,000. Jeana Keough's homes appear to have fallen into default so she could apply for modifications (see the first Zillow blog link).

And let's not forget Tamra Barney, who appeared on "Real Housewives of the OC." Besides her divorce from Simon, which is heating up again, her home at 3 Point Circle, Ladera Ranch, California closed on May 10, 2010 for $1,120,000, according to the Multiple Listing Service. A far cry from the $1.6 million original listing price!

P.S. Jeana Keough's home at 12 Shire, Coto de Caza, is listed as "for sale" on her business website -- for $3,700,000 (down from the original list price of $5,500,000). To me, based on the little I've seen of the show, Jeana seems like a pretty smart cookie with a good head on her shoulders -- let's hope her situation isn't actually as dire as the others.

Automated Debt Collection Lawsuits Engulf Courts

2010-07-13T21:40:00.000-07:00

"No group has definitive statistics on debt collection lawsuits, but federal regulators, collection lawyers and judges say the numbers have increased and are straining the court system.

Most consumers fail to show up in court, and those who do rarely have a lawyer. A court judgment gives debt buyers the ability to collect on the debt through actions like wage or property garnishment."

“What they are hoping to recover is the full dollar on some of it,” said Robert J. Hobbs, deputy director of the National Consumer Law Center, an advocacy group. “On most of it, they are hoping to recover 40 or 50 cents on the dollar. And they are hoping to do it with as little work as they can."

Critics say the business model for some debt buyers and law firms relies on such huge volumes of legal actions that mistakes and abuses are inevitable, in part because the lawsuits are often based on little more than a defendant’s name, address and alleged balance.

Full article here.

How Canada avoided a housing bubble

2010-07-07T09:21:00.001-07:00

"In the United States, [mortgage-backed securities] grew to nearly 40 percent of mortgage originations in the past 10 years. Canada's private securitization market remained constant at less than 5 percent of mortgage lending, enabling Canada to avoid a housing bubble and bust while also encouraging affordable homeownership."

Article here.

Personal BK filings up 14% for 1st half of 2010

2010-07-02T22:02:00.000-07:00

Personal bankruptcy filings are up 14% in the first 6 months of 2010. Link to American Bankruptcy Institute article here.

Bankrupt butcher's rotting meat

2010-06-16T11:26:00.000-07:00

Sometimes business owners in bankruptcy close their business after a bankruptcy, and sometimes their busienss falls into disrepair -- this is perhaps an extreme example.

"State and county officials are investigating complaints by residents of a Sparks neighborhood about the stench of hundreds of pounds of rotting meat left in an abandoned trailer in a bankruptcy dispute with a closed butcher shop."

Full article here.

Debtor's Prison Rises Again?

2010-06-14T21:11:00.001-07:00

"How often are debtors arrested across the country? No one can say. No national statistics are kept, and the practice is largely unnoticed outside legal circles. “My suspicion is the debt collection industry does not want the world to know these arrests are happening, because the practice would be widely condemned,” said Robert Hobbs, deputy director of the National Consumer Law Center in Boston.

Debt collectors defend the practice, saying phone calls, letters and legal actions aren’t always enough to get people to pay….."

Read more here.

Stop paying your mortgage?

2010-06-03T13:34:00.000-07:00

"A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by."

US bankruptcy filing rate near 5-year high

2010-06-03T10:03:00.001-07:00

"The pace of U.S. bankruptcy filings edged up in May to the second-highest daily level since 2005, reflecting the difficulty Americans have in working off excess debt even as the economy improves."

Article here.

Walking Away

2010-04-19T23:43:00.000-07:00

Some people are choosing to simply walk away from their homes in which they are underwater (i.e., they owe far more than the home is worth). Here's why:

"Brent White, a University of Arizona law professor, notes that a family who bought a three-bedroom home in Salinas, Calif., at the market top in 2006, with no down payment (then a common-enough occurrence), could theoretically have to wait 60 years to recover their equity. On the other hand, if they walked, they could rent a similar house for a pittance of their monthly mortgage."

Banks exacerbate the foreclosure crisis

2010-04-19T23:39:00.000-07:00

This is an editorial - but one with which I agree. "We have long called for using bankruptcy court to help resolve the foreclosure crisis. A big advantage of bankruptcy over government-subsidized modifications is that bankruptcy is a difficult process that does not entice anyone to purposely default in order to get better repayment terms.

Banks have argued for the status quo, in which bankruptcy judges are not allowed to modify the terms of primary mortgages, and they have prevailed in Congress and, apparently, within the administration. The result is an ongoing foreclosure crisis. It is time to revive the fight to open the courthouse door to bankrupt homeowners.

Hard Times Lead To Dramatic Rise In Bankruptcies

2010-02-18T14:32:00.000-08:00

"Personal bankruptcies rose more than 30 percent last year, with more than 1.4 million protection filings. Many middle-class Americans sought relief after losing jobs, seeing their businesses fail or facing foreclosure."

Full story here.

Muzak exits bankruptcy protection

2010-02-02T09:29:00.000-08:00

Even the company that pipes music into your favorite store at the mall had credit troubles.

"We filed for Chapter 11 with no plan on the table at all, and in less than a year we were able to achieve a fully consensual restructuring," said Edward Sassower, an attorney at Kirkland & Ellis who represented the company during the bankruptcy.

Full article here.

Flaws plague foreclosure relief program

2010-01-27T09:42:00.000-08:00

Ten months into the government’s third program in two years to stop a record wave of foreclosures, homeowners, housing counselors, consumer advocates and attorneys working with borrowers report that the latest effort is falling far short of its goal. In many cases, lenders are moving to foreclose even after homeowners get approved for loan modification, housing counselors and attorneys say."

Many of the urgent problems with the government’s $75 billion Home Affordable Modification Program, or HAMP, are systemic. They can be traced to its basic guidelines for lenders and mortgage servicers — the companies tasked with collecting payments from homeowners and forwarding them to the investors holding a homeowner’s mortgage.

The number of homeowners who have been helped by the program has been dismally small.

“The big names are among the worst-performing servicers,” according to ProPublica.

Full article on MSNBC is here.

Taco Del Mar files for bankruptcy

2010-01-27T09:19:00.000-08:00

"Founded in 1992 by brothers James and John Schmidt, Taco Del Mar grew to about 70 stores by 2002, most of them in Seattle.

It then embarked on an expansion spree, signing up contractors known as "master developers" who paid for the right to find franchisees and spot new locations. In exchange, the developers receive half of the franchisee's initial fees and ongoing royalties.

The number of restaurants mushroomed to 270 by autumn 2008, Destro said.

Revenue also exploded, from $950,000 in 2002 to $5.4 million in 2005. But expenses climbed faster — including more headquarters employees and payments to master developers, he said."

Story here.

Personal bankruptcy filings on the rise.

2010-01-05T13:25:00.001-08:00

Overall, personal bankruptcy filings hit 1.41 million last year, up 32% from 2008, according to the National Bankruptcy Research Center, which compiles and analyzes bankruptcy data. It is the highest level of consumer-bankruptcy fillings since 2005. Consumers rushed to file in 2005 before the new bankruptcy laws took effect in October of that year.

Chapter 7 filings were up more than 42% as of November 2009, compared with the same period a year earlier, according to the research center. November is the most recent month with analyzed data available. Chapter 13 filings rose by 12% and made up less than a third of 2009 filings as of November.

"That suggests it was largely ineffective," Ronald Mann, a law professor at Columbia University, said of the 2005 overhaul. "I don't think anybody who's knowledgeable about the bankruptcy system thought the statute was well crafted."

More here.

WSJ notes personal bankruptcy filings on the rise

2010-01-05T13:25:00.000-08:00

"Overall, personal bankruptcy filings hit 1.41 million last year, up 32% from 2008, according to the National Bankruptcy Research Center, which compiles and analyzes bankruptcy data. It is the highest level of consumer-bankruptcy fillings since 2005. Consumers rushed to file in 2005 before the new bankruptcy laws took effect in October of that year.

More here.

Little Relief for New Yorkers at Risk of Foreclosure

2009-12-30T09:53:00.000-08:00

"Ten months ago President Obama announced a $75 billion program to keep as many as four million Americans in their homes by persuading banks to renegotiate their mortgages. Lenders have accepted more than one million applications and cut three-month trial deals with 759,000 homeowners. But they have converted just 31,000 of those to the permanent new mortgages that are the plan’s goal.

In New York City, where 20,000 homeowners faced foreclosure this year, a recent study by the Center for NYC Neighborhoods found that lenders have offered new or trial mortgages to just 3 percent of the homeowners who have sought help."

Article is here.

GM Bankruptcy Loomed For Years

2009-12-29T13:59:00.000-08:00

"Insolvency has, in fact, been looming over G.M. for several years. In April 2005, for example, while markets were worrying about rating agencies downgrading the carmaker’s debt, G.M.’s onerous unfunded health care and pension liabilities looked to have punched a multibillion-dollar hole in its balance sheet. Even then, some suggested that a filing for Chapter 11 protection might be the only way to get G.M. back on track."

More here.

Lawmakers blast SIPC, Madoff bankruptcy trustee

2009-12-09T12:48:00.000-08:00

The court-appointed trustee, Irving Picard, is seeking to recover around $700 million from investors who unwittingly made money from the stunning Ponzi swindle — so-called clawbacks of bogus profits. Some people who withdrew significant amounts from their Madoff accounts have long since spent the money, then lost the rest of their savings in the fraud.

1 in 4 homeowners underwater

2009-11-24T13:36:00.000-08:00

The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.

Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.

Exemptions

2009-11-03T10:00:00.000-08:00

1. When a debtor claims an exemption using a specific dollar amount that is equal to the value placed on the asset by the debtor, is the exemption limited to the specific amount claimed, or do the numbers being equal operate to “fully exempt” the asset, regardless of its true value?

2. When a debtor claims an exemption using a specific dollar amount that is equal to the value placed on the asset by the debtor, must a trustee who wishes to sell the asset object to the exemptions within the thirty day period of Rule 4003, even though the amount claimed as exempt and the type of property are within the exemption statute?

These questions are set for oral argument today in a case titled Schwab v. Reilly that is pending before the U.S. Supreme Court. See more at this link.

CIT Group files bankruptcy

2009-11-02T12:33:00.000-08:00

'The lender, which funds about 1 million businesses such as Dunkin’ Brands Inc. and Eddie Bauer Holdings Inc., plans to exit court protection next month after bondholders voted in favor of a “prepackaged” plan. None of CIT’s operating subsidiaries, including Utah-based CIT Bank, were included in the filing, and operations will proceed as normal, CIT said in a statement.'

So called "prepack" bankruptcies are an effective tool for businesses to exit the bankruptcy process quickly and efficiently. Essentially, a "prepack" Chapter 11 is one where a business in trouble negotiates with its creditors prior to entering bankruptcy -- at least enough to allow it to confirm a plan of reorganization, a detailed document which tells the court, creditors, and the public how the company plans to reorganize, and if, how, and which creditors will be paid back. Prepacks are authorized under Bankruptcy Code Section 1126(b), which says a court can confirm a plan that was solicited before the commencement of the case, provided that (i) the pre-petition solicitation was in compliance with applicable nonbankruptcy law, rule, or regulation governing the adequacy of disclosure in connection with such solicitation, or (ii) if there is no such applicable nonbankruptcy law, rule, or regulation governing adequacy of disclosure, that the solicitation conducted occurred after disclosure of “adequate information,” as defined in Bankruptcy Code Section 1125(a)(1).

Should medical bankruptcies be treated differently from other bankruptcy cases?

2009-10-20T18:19:00.000-07:00

"The Rhode Island social worker, with a master's degree, said she and her husband were not among the uninsured. They lost everything, even though insurance covered the majority of nearly $5 million in treatments for her son Finnegan, who was hospitalized in intensive care for 13 months before he died last March. Finnegan Burns, who lived to be only 4 1/2, had cystic fibrosis.

During his illness, Burns and her husband took leave from their jobs as debts piled up. They cashed in retirement funds, sold belongings including their second car, and received upward of 30 calls a day from creditors — who called their cell phones while they were with Finnegan in the intensive care unit."

Bodies pile up in Detroit morgue; poor too broke to afford burials

2009-10-01T17:37:00.000-07:00

"Inside the Wayne County morgue in midtown Detroit, 67 bodies are piled up, unclaimed, in the freezing temperatures. Neither the families nor the county can afford to bury the corpses. So they stack up inside the freezer."

"The number of unclaimed corpses at the Wayne County morgue is at a record high, having tripled since 2000. The reason for the pile-up is twofold: One, unemployment in the area is approaching 28%, and many people, like the Vickers, can't afford last rites; two, the county's $21,000 annual budget to bury unclaimed bodies ran out in June."

Tavern on the Green files BK

2009-09-17T09:59:00.000-07:00

New York's iconic Tavern on the Green has filed for bankruptcy. Read more here.

“If they knew they were having trouble paying their regular suppliers — well, to contract with a small specialty company like ours is an unconscionable way to do business,” said Todd Neufeld, owner of the Twisted Balloon Company in Brooklyn. He is owed $2,200 for balloons and balloon artists at Tavern’s Mother’s Day celebration last May.

Reader's Digest to file for bankruptcy

2009-08-18T00:45:00.001-07:00

Another one bites the dust.

High-end resort hotel used by AIG goes into receivership

2009-08-16T23:09:00.001-07:00

The St. Regis Monarch Beach in Orange County along Pacific Coast Highway, has been taken back by the bank. Creditor Citigroup has foreclosed on the property. You may remember this resort as the one where AIG spent nearly half a million on a retreat for its top salespeople. From the article in the LA Times:

The hotel's place in an infamous recession-related scandal has made its problems worse, investment banker Donald Wise of Johnson Capital said.

The taint arrived by association with AIG, the giant New York insurer that, because of massive wrong-way bets on the mortgage markets, became the largest recipient of bailout money from the federal government.

Just weeks after receiving its first $85 billion in federal funds, AIG shelled out more than $440,000 at the St. Regis for rooms, wining and dining, spa treatments and rounds of golf to reward 100 top salespeople.

Renters lose rental homes to foreclosure

2009-07-06T18:13:00.000-07:00

A conflict between federal and state law makes things even more confusing for renters whose landlords have allowed rental homes to fall into foreclosure.

Insured, but bankrupted by health crises

2009-07-01T04:49:00.000-07:00

Another stark reminder that even those with insurance are only steps away from the brink. Medical catastrophes can bankrupt people with careers and homes in the blink of an eye.

Debt settlement firms under fire

2009-06-29T16:20:00.000-07:00

"Debt cut in half? Don't count on it." Here's an article about debt settlement firms. Note that these "firms" do not offer an "alternative" to bankruptcy -- but they do offer a great way to ensure you'll end up having to file for bankruptcy.

Paper Avalanche Buries Plan to Stem Foreclosures

2009-06-29T09:41:00.000-07:00

Around the country, thousands of people are seeking loan modifications. The main obstacle? The lenders and their gargantuan bureaucracies. If you are seeking a loan modification on your mortgage, be prepared to be diligent and to expect exasperation.

http://www.nytimes.com/2009/06/29/business/29loanmod.html?em

Goldman Sachs and the bubble

2009-06-29T09:05:00.000-07:00

Here's an interesting article on Goldman Sachs and GS's role in the real estate bubble, the oil bubble, and several other "bubbles."

GM files for bankruptcy

2009-06-02T12:36:00.000-07:00

Splashed all over the front pages - GM filed for bankruptcy on Monday, June 1, 2009. The General Motors bankruptcy is the 4th largest by asset value.

We get a lot of questions about what the GM bankruptcy means, and how it will affect the U.S. economy. Read more about it here.

65% of modified mortgages will default again

2009-06-02T12:27:00.000-07:00

65% of modified mortgages will default again, says study.

Mortgage modifications will only be helpful for homeowners if they can afford the modified payment. One of the many reasons that we see people is that their mortgage payments are far too high -- even with a good job, Seattle and King County continue to rank among the most unaffordable places to live.

As of April 2009, the average cost of a home (based on closings) in King County is still hovering around $400,000. You really might want to think twice about whether you can afford to be a homeowner in Seattle -- the "American dream" of homeownership has been a factor in many Americans having to file for bankruptcy.

Chrysler files for bankruptcy

2009-04-30T23:49:00.000-07:00

Chrysler and 24 of its wholly-owned subsidiaries filed for Chapter 11 protection today. Chrysler is the first American automaker to seek bankruptcy protection since Studebaker in 1933. The New York Times states that the president "forced" Chrysler into bankruptcy, although the petitions were voluntary.

Designing and creating cars that consumers actually want to buy is no easy feat, and moving products from the drawing board into production could take a long time. Will bringing in new ownership (in the form of Fiat) help Chrysler to turn itself around? Will this be a reorganization or will the reorganization fail and become a liquidation? According to the New York Times, over 70% of debt holders have already approved Chrysler's plan of reorganization; but it is too early to discount the minority stakeholders.

Without a doubt, the Chrysler bankruptcy raises more questions than it provides answers, at least in this early stage.

Montana man wins $311,000 in federal court

2009-04-20T13:20:00.001-07:00

A Montana man named Timothy McCollough sued a North Dakota law firm for violating collection laws and won $311,000 in a jury trial in Montana federal court.

Read all about it here.

Preakness Stakes at Pimlico Race Course

2009-04-14T18:12:00.000-07:00

Even racetracks go bankrupt. Off to the races!

Why health insurance just isn't enough

2009-04-01T22:04:00.000-07:00

Every day, I hear tragic stories of unemployment, brushes (or sustained experiences) with poverty, and things that have been done to my clients that are just plain wrong.

Many people who think they are safe, that they are covered, who have jobs and health insurance, are just as vulnerable as the uninsured. One major illness can bankrupt you.

Here is a compelling story about how cancer is viewed as a "chronic illness" by health insurance companies, and the associated medical bills are often not covered.

Economic crisis a crisis of confidence?

2009-03-26T22:28:00.000-07:00

"Running scared" would be an apt characterization of people's feelings about the economic crisis.

Here's an article highlighting the climate in our neighbor city to the south, Portland, Oregon.

Most consumers just a paycheck or two away from bankruptcy

2009-03-23T10:49:00.000-07:00

Surveys confirm what I believe to be true - that most Americans are just a paycheck or two away from bankruptcy.

Most shocking (or not): 29% of Americans who earn $100,000 or more a year would have trouble paying the bills after just one month of unemployment!

This demonstrates how important it is to have emergency savings. It can be difficult to build an emergency fund, but over time it can help decrease reliance on credit cards, as the emergency fund is used for items such as home or car repairs that are frequently paid by credit card.

Why AIG should fail

2009-03-18T01:18:00.000-07:00

I believe that if legislators really, truly wanted to decrease the number of bankruptcy filings, they would take a long, hard look at long-range systemic problems that need to be fixed. Specifically, things about the way our economy works that encourage inequity, imbalance, and the redistribution of wealth from one sector to another.

One of the "systems" that I have long felt was overdue for an overhaul is the way that business executives, securities brokers and dealers, and financial-industry types are compensated. Many bonuses are vastly disproportionate to the performance of a company, the performance of an underlying stock, and also what is "reasonably necessary."

I'm not the only one who thinks that the way Wall Street earns its money is wrong. Here's a Harvard Business blog article explaining why AIG must fail -- it must fail because a sea change in the way business management is compensated is long overdue.

412 bankruptcy filings in King County in January

2009-02-27T09:58:00.000-08:00

Bankruptcy filings are a good indicator of how the economy is doing. Unfortunately for the economy, bankruptcy filings are on the rise. More than 1,900 households declared bankruptcy in January, according to a report on court statistics in this article.

As the economy continues to worsen, bankruptcy filings will only continue to rise. Keep in mind that bankruptcy filings can be high even when the economy is doing well, since there is more entrepreneurism and people are more willing to take large financial risks.

Religious institutions file for bankruptcy too

2009-02-27T09:37:00.000-08:00

The Jesuits of the Oregon Province have filed for bankruptcy. Many dioceses across the U.S. have had to file for bankruptcy as a result of having to pay out millions of dollars in various sexual abuse cases.

The province says it has paid over $25 million to claimants, but attorneys representing the alleged victims of sexual abuse believe the bankruptcy filing will keep claimants from receiving fair and full compensation for their injuries.

Read the full news story here.

Banks should bear responsibility of their irresponsible lending practices

2009-02-22T20:53:00.000-08:00

There is legislation pending in Congress right now that includes a provision amending the bankruptcy code so that judges could modify home mortgages in bankruptcy. The bill is, predictably, being opposed by the mortgage lending industry.

Click here for an excellent example of why banks should not get away with blaming consumers for their irresponsible lending practices that are largely to blame for the current foreclosure mess. A $1.5 million condo in Bellevue (an upscale suburb of Seattle) on a $20,000 income? That's what happened, and it hurts everyone when lending standards are so lax.

15 Companies That Might Not Survive 2009

2009-02-09T10:09:00.000-08:00

Economic uncertainty is the name of the game. As consumer bankruptcy is the last resort when individuals have either suffered a calamity (job loss, illness, unemployment), so is corporate bankruptcy sometimes the last resort for companies that have lived beyond their means, or have tried to keep their companies alive, even when their business model was unsustainable to begin with.

Here's a Yahoo! news article discussing 15 companies that might not make it through the year.

Fallout from LandAmerica bankruptcy

2009-02-01T11:54:00.000-08:00

LandAmerica is a large title insurance company that offers a variety of other services. Title insurance insures your lender against the risk of superior liens (superior to the mortgage they are about to give you). Both LandAmerica and its subsidiary, LandAmerica 1031 Exchange Services ("LES"), are currently in Chapter 11 bankruptcy.

LES was a subsidiary of LandAmerica. LES customers who had received proceeds from selling property with LES and had their money "parked" with LES while they looked for replacement property (to have the income tax deferred) lost all of their money because LES (allegedly) used the funds to pay other LES customers who had invested in risky "auction-rate securities." The main claim the 1031 exchange customers have against LES is that the money was supposed to have been held in trust, and that LES breached that trust when they misused the funds.

It is entirely possible that the LES customers will receive nothing. How can we have allowed this to happen? Among other things, insufficient oversight and regulation of corporations. The fox has been allowed to guard the henhouse (and eat the hens without any consequences) for far too long. One can only hope that the new administration will be the touchstone for bringing about much-needed changes in this area.

Read more by clicking here.

Insurance failures

2009-01-28T12:39:00.001-08:00

"The Safety Net She Believed in Was Pulled Away When She Fell" is a compelling and heart-wrenching tale of Debra Potter, a former sales representative for UnumProvident, the nation's largest disability insurer. Diagnosed with MS, UnumProvident questioned whether she was really disabled, and refused to pay. Until her family ran through most of their savings, pulled a child out of college, and hired a lawyer.

There is such a societal stigma attached to bankruptcy. What many people do not realize is that they are a single medical diagnosis or a job loss away from having to file. Bankruptcy is, in a way, the bottom-line "safety net." When the early safety nets like insurance fail, there is little choice.

Iceland's government topples amid financial mess

2009-01-26T10:04:00.000-08:00

America is not alone in its economic woes: "Iceland's government topples amid financial mess." According to the article, "thousands have joined noisy daily protests in the last week over soaring unemployment and rising prices."

Some other articles I've read state that the global economy is going through a recession. I don't have a particularly sophisticated opinion about this, but I believe that the global economy will stay in the recession for a very long time. Like a pendulum, the economy swings back and forth, and although the length of the swings sometimes varies, there's always a swing back to compensate for a swing forward.

Legal Job Market Tightens

2009-01-14T09:22:00.000-08:00

I enjoy my practice area, and am incredibly glad that I do what I do -- help people resolve their financial difficulties. Although being a bankruptcy attorney is not without its difficulties and frustrations, at the end of the day I go home and feel good about what I do.

Lawyers are not immune to the economic downturn. The legal job market has tightened significantly. It's a stressful time for young attorneys with "hefty student loans," as this article says.

When I graduated from law school almost 7 years ago, tuition at my law school was about $22,000 annually. I know the situation is even more dire -- Seattle University's law tuition is over $30,000 a year. I'm not sure what the answer is, but I know that something has to change about the number of law school graduates that law schools are pumping out. Law schools are largely seen as a cash cow for universities -- the capital required besides the building is mostly human capital (faculty and staff salaries, etc.). But if the number of legal jobs can't keep up with the number of law school graduates, it will be continue to be extremely difficult for new lawyers to pay their their student loans because their job options are limited.

NY Fed Researchers say US Mortgage Meltdown Linked to 2005 Bankruptcy Law

2009-01-12T14:29:00.001-08:00

Three researchers from the Federal Reserve Bank of New York recently published a paper linking the mortgage mess to the 2005 bankruptcy reform act.

The paper’s lead author, Donald P. Morgan, a research officer at the New York Fed, said last week in a phone interview that he was “99 percent confident” that the bankruptcy reform law was a major reason for the foreclosure crisis and the falling housing prices that have affected virtually every homeowner in the country. Here's an excerpt from this Kansas City Star article about the research paper:

The National Association of Realtors recently reported that the average sale price of an existing home fell 12.3 percent, to $224,200, over the 12 months ending in November.

“Before the reform, overindebted households might file bankruptcy and get rid of their credit card debt, and that would free up income to pay the mortgage,” Morgan said. “The new law blocks that escape route and forces better-off households to continue paying credit card debt, which makes it harder than before to continue paying the mortgage.”

The conclusions of Morgan and his colleagues echo earlier findings that the new law’s tougher requirements appear to have increased the number of people defaulting on their mortgages or walking away from their homes rather than seeking bankruptcy protection.

Click here for the NY Fed website, where there is an article abstract and where you can download a PDF copy of the actual research paper.

Foreclosure Crisis Affects Churches

2008-12-27T00:03:00.000-08:00

“We were kind of like that young married couple that really stretched for their first home,” said Bevan Unrau, the church’s senior pastor. “But I don’t think we’re completely unique.”

The era of easy credit has begun taking its toll on even the most sacred of borrowers, religious institutions.

Columbia, South Carolina and the recession

2008-12-22T19:26:00.000-08:00

"As the American economy sinks deeper into one of the more punishing recessions since the Depression, frustration and fear color the national conversation."

Bush changes tactics - $17.4 Billion Bailout approved

2008-12-19T10:09:00.000-08:00

Well, it looks like Bush ignored his advisors and the sense of the GOP Congressmembers yet again -- a $17.4 billion emergency loan and bailout package was approved today.

I find this turnabout to be particularly confusing since yesterday I blogged about Bush's thoughts about an auto-industry bankruptcy. Now he is saying, "Chapter 11 is unlikely to work for the American automakers at this time." A little confused here - although I doubt the Bush administration will address this "one position today, another tomorrow" tactic.

Here's an interesting piece on NPR; a tax attorney and bankruptcy attorney comment on a prospective GM bankruptcy. After listening to this, I'm not sure that a GM bankruptcy would result in a reorganization -- it might effectively end in a liquidation. Whether that's good or bad remains to be seen.

Prepacks and the Bush plan

2008-12-18T10:05:00.000-08:00

A "prepackaged" or "prepack" bankruptcy case is a strategy that businesses use to adjust their debts in a Chapter 11 case. Normally, the majority of negotiation with creditors is done prior to filing the bankruptcy case, which can simplify what is otherwise a lengthy and complex process. The time spent in the Chapter 11 is shortened, and a business can focus on, well, business as usual more quickly.

Prepack bankruptcy cases have been used as a business strategy, to take potential asbestos defendants in and out of bankruptcy cases quickly, but some commentators believe that these "asbestos prepacks" largely benefit plaintiffs' attorneys and bankruptcy attorneys. I certainly believe that some of the behavior in these cases warranted closer investigation, and that such cases are breeding grounds for unethical and potentially illegal practices. Here's an interesting article about a doctor whose questionable x-ray review techniques were discredited by a federal judge as being "manufactured for money."

President Bush is indicating that an "orderly bankruptcy" would be best for the auto industry. His press secretary was quoted as saying, "There's an orderly way to do bankruptcies that provides for more of a soft landing. I think that's what we would be talking about." The article doesn't say, but his staff may be thinking about a Chapter 11 prepack. It will be interesting to see what role the president's administration plays in preparing for such a bankruptcy case, which would undoubtedly be among the most-watched commercial bankruptcies this year.

State unemployment funds drying up; tough times for retirees

2008-12-15T09:40:00.000-08:00

It is a frightening truth that states' unemployment funds are being exhausted around the U.S. This is worrisome - unemployment insurance makes up part of Americans' "safety net" that includes bankruptcy. Mercifully, Washington (state) appears to be doing fine - although with the reports of a budget deficit during the governors' campaign, we are not immune.

Times are tough for everyone, even retirees. Here's an article in the Seattle PI talking about the double or triple whammy for retirees - a decline in house values and retirees' inability to sell their homes, the disappearing act by investments that retirement plans were built on, and then the money that retirees may have put into a retirement home or village, which often was a substantial sum and may or may not be refundable.

I'm glad I help people access the "safety net" when they are in dire financial circumstances, but it doesn't make the economic pain any easier for those who are mired in it right now.

Bankruptcy for GM?

2008-12-11T23:43:00.001-08:00

Now that the auto industry bailout appears to have stalled in Congress, can a bankruptcy filing by GM be far behind? I agree with this article in the NY Times which says that a Chapter 11 case might not be so bad. Although it would be painful and a tragedy for the workforce of GM to lose their jobs, the article points out that most of the value for shareholders has already evaporated. And most of GM's pension obligations have already been funded or financed, according to the article -- which could mean a GM bankruptcy wouldn't have the catastrophic and nightmarish effects on retiree and employee retirement benefits as, say, the United Airlines Chapter 11.

Lately I've been learning that I'm actually much more conservative than I thought when it comes to some economic theories. I believe that market forces should be allowed to play out, although I do believe that the role of the government is to protect its citizens from things like pollution, unsafe work environments, and the like. I think that, even if GM's reorganization failed and the company liquidated, the auto industry could become more efficient.

My family shares the same story as many Americans. We owned several American cars, but we were largely dissatisfied with their reliability, design, and quality and eventually only bought Japanese cars (Toyotas, which we found to be rock-solid reliable). It is no surprise to me that the American auto industry is having extreme financial difficulty. Giving huge rebates to your customers can help sell cars in the short term, but over the long term a car company has to produce cars that its customers actually want. Wouldn't it be good to see an American auto industry that really made products that not only Americans want to buy, but that the rest of the world wants to buy? Maybe some streamlining of the auto industry could help make this happen.

The mortgage companies aren't willing to work with you

2008-12-10T22:11:00.000-08:00

Remember the $300 billion foreclosure prevention package passed last summer? It was supposed to help up to 400,000 homeowners stay in their homes. Well, the New York Times reports that due to the various requirements, fewer than 200 people have applied for the program since it started in October. Yet another program unveiled by the FDIC was supposed to help over 65,000 homeowners whose loans were held by IndyMac, the failed bank taken over by FDIC. But that program benefited only 7,500 people.

Why don't these programs work? In my opinion, the short answer is that banks and financial institutions are quick to extend their paws to receive government and taxpayer money, but when it comes to their own being generous and helping individuals and families in financial distress, they act as nothing more than simple hypocrites. There's a famous saying that "a banker is someone who lends you his umbrella when the sun is shining, then wants it back the instant it starts to rain." MBA types in bank management must realize that dreaming about expected profits is like dreaming about the proverbial "pie in the sky." Banks could cut their losses if they were actually willing to work with borrowers and help them afford to keep their homes. Everyone would benefit. Keep in mind that the research shows that even borrowers who qualified for prime rate mortgages were often put into subprime mortgages simply because mortgage brokers made larger commissions on subprime loans.

Still, I believe that Congress must pass legislation allowing bankruptcy judges to modify the terms of mortgage loans, or we will continue to see no real relief from the mortgage and housing crisis.

100 new bankruptcy cases a day in Washington

2008-12-09T09:28:00.000-08:00

If there is any doubt that bankruptcy filings are a symptom of tough economic times, the Seattle Times reports that there are over 100 new filings a day in Washington State. King, Clark, Pierce, and Snohomish counties accounted for 60% of the increase in bankruptcies in Washington.

Tribune files for bankruptcy protection

2008-12-08T11:46:00.000-08:00

Article in the Seattle PI here: Tribune files for bankruptcy protection

Can I keep my car?

2008-12-04T10:21:00.000-08:00

Many of my clients want to know if they can keep their car if they file for bankruptcy. The general answer is, "yes, usually." The real answer depends on a number of factors. Most importantly, whether there is a loan against the car, who the lender is, and the value of the car.

If you are filing a Chapter 7 case, the bankruptcy trustee will sell your car if s/he would end up with money for your creditors. Say you own a used Toyota worth $10,000, but you owe Bank of America $7,000. We'll pretend your exemption is $3,000 -- the trustee will not sell your car because there will be nothing left for your creditors after paying Bank of America and paying you your exemption. However, to keep the car you must remain current on your payments or reach an agreement with the bank to get the payments current.

If you own the Toyota free and clear, then the trustee would probably sell the car, as even after paying you your exemption of $3,000, there will be $7,000 with which to pay your creditors. The trustee will incur some costs to sell the car, but nonetheless there would be some recovery for your creditors.

If you are filing a Chapter 13 case, the bankruptcy trustee does not sell or liquidate your property for you. However, your unsecured creditors must receive at least as much as they would get if you had filed Chapter 7. This is in section 1325(a)(4) of the bankruptcy code and is called the "liquidation test." You don't have to actually be eligible for a Chapter 7 as the test assumes a hypothetical Chapter 7. So, in our example above where you own the Toyota free and clear, your unsecured creditors must receive at least $7,000, possibly reduced by the costs of selling the car. Chapter 13 repayment plans last from 3 to 5 years.

One wrinkle on secured debt and cars is that some creditors will repossess a car post-bankruptcy even if the payments are current. Some purchase and loan agreements have what is called an "ipso facto" clause. These provisions say that if you file for bankruptcy, it is considered a default of the loan agreement, and the lender can take the car back. Most lenders are smart enough to realize that they will lose a lot of money if they enforce this clause after bankruptcy. Ford Motor Credit, Chrysler Financial, and GMAC are, however, reported to be taking cars back after a bankruptcy filing.

In some states, "ipso facto" clauses are not enforceable, or state law may say that lenders can't repossess cars for a non-monetary default (i.e., a lender can only take the car back if you are behind on payments). In any event, if you are thinking of filing for bankruptcy you will want to definitely consider whether keeping a financed car is in your best interest anyway.

What is the Automatic Stay?

2008-12-03T09:50:00.000-08:00

STOP! That's basically what the automatic stay does when someone files for bankruptcy. Section 362 of the bankruptcy code stops all collection action (lawsuits, collection calls and letters, repossessions, foreclosure sales, garnishments) or action against the debtor or her property, prohibits contact with the debtor, and essentially means that creditors need to pay attention to the bankruptcy case, as their sole remedy at least while the bankruptcy case is pending will be through the bankruptcy court. In Chapter 13 cases, the stay also protects a codebtor. The stay is much like a temporary injunction -- and the debtor doesn't need to do anything but file a bankruptcy case. The filing of the bankruptcy case invokes the protection of the automatic stay. Creditors who willfully violate the automatic stay (knew about the bankruptcy case but took action anyway) will be subject to sanctions.

There are some exceptions to the stay, such as for child or spousal support proceedings, or in certain cases where the debtor has filed for bankruptcy before. Creditors can also request that the stay be lifted, or terminated, for a variety of reasons. Normally there must be no equity in the property (above and beyond exemptions and costs of sale), and the property must not be necessary for the debtor's reorganization. Generally in a Chapter 7 case, there is no legal defense to a motion to lift the stay, as a Chapter 7 is fundamentally a liquidation proceeding.

I have handled several cases involving creditors who refuse to hire legal counsel and do not understand the importance of respecting the automatic stay. Creditors who violate the stay -- beware!

Once a debtor receives a discharge, creditors must pay careful attention not to violate the discharge injunction. Section 524 of the bankruptcy code essentially takes the concept of the automatic stay and makes it permanent -- creditors cannot ever take action against the debtor or the debtor's property, generally, to collect on a pre-bankruptcy debt.

The provisions of the automatic stay and the discharge and they way they operate are somewhat complex, but the basic concepts are simple -- creditors must STOP once a bankruptcy case is filed, and stop forever once a discharge is entered.

Bankruptcies up 40% in Washington

2008-11-26T10:52:00.000-08:00

We've been very busy here in the last month. Surprising on the one hand, since we are not a high-volume shop that handles dozens of cases each month.

On the other hand, this article in the Seattle Times says bankruptcy filings are up 40% compared to the 2007 filings. And this is just through the end of October! More than 18,000 filings!

Even if I were not a consumer bankruptcy practitioner, I never felt that the 2005 reform act would do much, in the long term, to discourage people from filing. You can make it harder to "get through the gate" but you can't change the number of families and people in financial distress. It would be like trying to control the costs of medical care by shutting down a bunch of hospitals -- the same number of people would still be waiting to get in -- and they'd be in far worse shape than if they had gotten help right away.

If you're in financial trouble, contact my office to talk about how we can help.

Bankruptcy or Foreclosure? Questions About Secured Debt

2008-11-25T18:05:00.000-08:00

Clients often ask me whether they should file for bankruptcy or whether they should continue making payments on a house they can't afford. The answer, like many things, is not simple.

There's a lot of misinformation floating around the internet, like this article at MSNBC that indicates that a bankruptcy "that doesn't include the house" is better. I agree that a bankruptcy is the lesser of two evils, but stating that you can file and "not include the house" is inaccurate.

When you declare bankruptcy (and I do mean by a filing in a U.S. Bankruptcy Court - not just telling your friends you are broke), you must disclose all of your debts and all of your assets. You cannot pick and choose. You cannot choose to "include" some debts and not others; this is not for you to decide. A good rule to keep in mind is that different debts are treated differently. Your credit card debts will be discharged, and because the lender did not take a security interest in any collateral, the lender's methods of recourse are tapped out.

However, with secured debt such as a home loan or a car loan, your personal promise to repay the debt is gone. Again, you do not get to choose whether to "include" the debt or not. If you want to keep the property, you will have to continue to keep making payments. If you do not make payments, the lender can take the property away from you.

People who made small downpayments or no downpayment at all are normally better off filing for bankruptcy first. Better to be proactive than to let a property fall into foreclosure and to have that show up on your credit report - and often, people must file for bankruptcy after a foreclosure anyway, depending on their state law.

A British Lesson on Auto Bailouts

2008-11-19T17:17:00.000-08:00

Anyone remember Triumph? No? The NY Times has another interesting and relevant article related to the proposed auto industry bailout here.

Let Detroit Go Bankrupt

2008-11-18T21:09:00.000-08:00

I'm not a huge fan of men named after a baseball glove, but this op-ed makes a lot of good points - and waxes a little poetic about the American auto industry besides.

My Article in the King County Bar Bulletin

2008-11-15T08:12:00.000-08:00

I recently wrote an article for the King County Bar Bulletin, looking at some of the changes to the bankruptcy laws created by the 2005 reform act. Click here to read my article -- comments and feedback are appreciated.

Here's a quote: '[The 2005 reform act] changed bankruptcy practice in many ways. In practice, the “new code” has accomplished the opposite of Congress’s stated goals in many ways. Ambiguous provisions have unleashed a flood of litigation, causing unnecessary expense for debtors and creditors alike. However, the core provisions of bankruptcy’s “safety net” are still there, giving relief to individuals and families in financial distress even in these uncertain economic times.'

Recognizing Reality

2008-11-15T00:22:00.000-08:00

A quote (and a thought) from an editorial recently published in the Seattle Times, called "A Questionable Bailout of America's Big 3 Automakers":

"Bankruptcy cancels unpayable claims. It ends unsustainable practices. It is harsh, but it is a way of recognizing reality and adjusting to it."

A new economy

2008-11-14T23:49:00.000-08:00

I've been hearing about the "new economy" since before the late-90s-and-hangover dot-com bubble was burst. Yes, we truly are living in a new economy if the sea changes in the fundamental structure and operation of our economy, financial, and capital markets over the last century are any measure. I don't think anyone would disagree that the problems facing our nation today are complex, serious, and that we need the help of American leaders from all disciplines to come up with intelligent and workable solutions to our economic problems.

I've also been thinking about blogging for quite some time, as my five years' practice as an attorney has made me a more informed and opinionated attorney, consumer, and consumer attorney. My main goal in starting this blog is to occasionally post some of my thoughts, musings, and ramblings about the economy, bankruptcy, and the law. I've had several personal blogs that came and went, but the details of my daily life are admittedly just not that exciting.

A bit about me and my legal career: I've been a practicing attorney for a little over five years now. I finished my legal studies when Enron and Andersen were collapsing and there were few jobs in my chosen area (tax) let alone in the legal profession generally. I struck out on my own and handled a wide variety of cases including commercial litigation, real estate, juvenile dependency, employment investigations, and bankruptcy. After 6 months I was recruited to open the Seattle office of a Chicago-based, high-volume bankruptcy law firm. I worked there for just shy of two years and handled hundreds of cases.

I lived, worked, and breathed the boom and bust of the bankruptcy reform act, and was laid off after the precipitous drop in bankruptcy filings in 2006; experts say that most of the people who would have filed during 2006 and part of 2007 filed before the effective date of the bankruptcy reform act.

For the next two years, I worked for myself and continued to learn about bankruptcy and about the effects of the new laws. In April of 2008 I joined my present firm, where I continue to practice primarily consumer bankruptcy, but where I also practice real estate and tax law. My partners are a family law attorney, an estate planning, business, and litigation attorney, and another bankruptcy attorney.

One of the most ill-named laws ever to be passed in Congress was and is the 2005 "Bankruptcy Abuse Prevention and Consumer Protection Act." I share the opinion of many other bankruptcy practitioners and commentators -- that the Act was largely ineffective to stop the perceived abuse of the bankruptcy system (the controls in the prior bankruptcy law kept abuse to a minimum already), and did little or nothing to protect consumers from unscrupulous creditors. In my experience there are many more egregious examples of creditors who play fast and loose with the rules -- not consumer debtors. If Congress wants to stop abuse of the bankruptcy system, it should examine creditor abuse at least in equal measure.

It's been an interesting ride on the roller coaster of the "new economy," and I hope you'll stick with me for the duration, dear reader.