Since, as a Certified Consumer Bankruptcy Specialist in Indiana (one of only a dozen in our state), I helped draft the part of the new bankruptcy laws in Indiana that deals in exemptions,  today's blog reader question about jewelry is the kind I'm very used to answering.  However, I need to start by pointing out that there's one word in this blog reader's question that no debtor should even think about, and that word is "hide".  When bankruptcy fraud is committed by a debtor, it usually means there was an attempt to hide assets or income from the court in order to qualify to file bankruptcy in Indiana. The bankruptcy system can function well only when there is full disclosure of assets, including cash and jewelry, and all debts. 

The good news for bankruptcy clients is that, in Indiana, we have exemptions that allow debtors to keep certain kinds and amounts of assets and still file bankruptcy.  The amount of these Indiana exemptions was just raised as of March 1 of this year.  Exemption limits now include $17,600 of a personal residence and $9,350 for other real estate plus tangible personal assets. Wedding rings would fall in the category of "tangible personal assets".

One very important step in the legal process of bankruptcy is the Creditors' Meeting, and a very important part of my work and the work of the attorneys in the Mark Zuckerberg bankruptcy law offices in Anderson, Bloomington, and Indianapolis, and of course the work of the Columbus bankruptcy lawyers who work in my offices there is getting the paperwork ready for the Creditors' Meetings. These are information-gathering meetings, not trials, of course, but, if you're filing bankruptcy, you need to be there and you'll be answering questions under oath.

The court will want to know why you've chosen to file bankruptcy, and whether you plan to file a Chapter 7 or to file under Chapter 13 bankruptcy law in Indiana. As your Indiana bankruptcy attorney, I would have helped you prepare for the meeting, and be there at your side during the process.

As part of preparing your list of assets, if you do own jewelry, getting a certified appraisal of that jewelry would be part of the task of preparing for the bankruptcy hearing.

When thinking about bankruptcy, don't think "hiding" - think preparing!

Today's bankruptcy blog reader's question is about IRS collectors.  It's a big challenge, stopping IRS collectors. Fortunately, my colleagues (the Indiana bankruptcy attorneys who work in the Mark Zuckerberg bankruptcy law offices) and I know that the new bankruptcy laws in Indiana offer remedies even when it comes to tax debt.

First, let me review the 5 conditions (for federal tax debt to be eligible for discharge under bankruptcy, these things need to be true):

• Due date of the tax return must be at least 3 years earlier than the bankruptcy filing.
• There must have actually been a tax return filed at least 2 years earlier than the bankruptcy
• The tax assessment that the collectors are after must be at least 240 days old.
• The tax return isn't fraudulent.
• The taxpayer isn't guilty of intentional tax evasion.

Whether or not your tax bills meet all the conditions for total forgiveness or discharge by the bankruptcy court, there's still a good chance that filing bankruptcy can be of some help.

When there is tax debt In a Chapter 7 bankruptcy, debts not discharged are assigned priorities for repayment.  Since secured creditors are at the top of thepriority list, the tax debt, which is unsecured, will be near the bottom of the list.  You might remain liable for payment at the conclusion of the bankruptcy, but you'll have time to work out a plan of attack.

In a Chapter 13 bankruptcy, the bankruptcy judge has the power to "cram down" or discount some debts, or at least create an installment plan for paying the tax debt over a five-year period while stopping penalties and interest from building up.

Remember that the automatic stay of bankruptcy puts an immediate halt to collection efforts by creditors, and that includes tax collectors!

 

As part of providing bankruptcy services in Indiana, I can never forget one thing.  Whether a bankruptcy is a Chapter 7, or whether we're talking about  Chapter 13 bankruptcy law in Indiana, a job is going to be part of the script.  Without well-paid jobs, debtors emerging from bankruptcy can't rebuild their finances or keep current on their debt repayment plans.

Just yesterday I shared news about three Indiana companies that are expanding their work force.  Today I have more pieces of good news about where the jobs are:
 

• RV LLC is locating a new manufacturing center in Marion, which will bring up to 300 jobs into the area.
• Caterpillar is recalling 100 workers that had been laid off in Lafayette.
• Centennial Graphics Group (a book publishing and binding company) is creating 48 new jobs in New Albany. (I'm especially glad about this, because the New Albany area is served by the Zuckerberg bankruptcy law offices in Bloomington, and by the Columbus bankruptcy lawyers who work in the Mark Zuckerberg law offices there.)                               

• The Whirlpool ice making plant in Evansville is being moved to Iowa, and the majority of Whirlpool jobs in Evansville are being shipped to Mexico.
• Meanwhile, there's some bad news about another corporation, one I've mentioned in earlier blog posts.  Accuride, also in Evansville entered Chapter 11 bankruptcy five months ago, and now they are emerging because the court approved their reorganization plan.  The bad news for Indiana, though, is that the Guinite subsidiary of Accuride in Elkhart, is closing, meaning 225 jobs will be lost.

Mind you, these are more than mere statistics to me.  As a debt consolidation lawyer and long-time bankruptcy attorney in Indiana, I'm "boots on the ground" helping those who've lost jobs get help.  Sometimes it's payday loan debt help or student loan debt help.  Sometimes my colleagues and I help stop foreclosure,  It all comes down to what I send yesterday: The times aren't going to be better until the job markets are!

There’s a “not-to-do” list to follow before filing bankruptcy.  As I explained in Monday’s Indiana bankruptcy blog post, you don’t want the bankruptcy trustee using “lookback” on you and discovering you’ve hidden or transferred assets in the two years leading up to filing bankruptcy. As a bankruptcy lawyer in Indiana, I can tell you that the other thing not to do if you don’t want to be the victim of a “lookback” is to take cash advances totaling $750 or more from any one credit card in the 70 days leading up to your bankruptcy filing.

With close to twenty five years as a debt consolidation lawyer providing bankruptcy services in Indiana, I can add a very important item to the not-to-list list: Don’t expend emotional energy blaming anybody or anything for your financial troubles or, worse yet, blaming yourself.  If you’re like just about every other client (and I’ve helped tens of thousands of people file personal bankruptcy in Indiana), you’re a responsible adult coping with setbacks beyond your control, just trying your best to stay afloat and take care of your own basic needs and those of your family.

On the other hand, as an Indiana lawyer for bankruptcy,  I need to help clients work on their TO-do lists in preparation for filing personal bankruptcy in Indiana. Since it can be very important not only to do the right things, but to do those things in the right order, I always advise seeking legal help at the very first signs of a financial downslide.

Having helped to draft the new bankrukptcy laws in Indiana, the itemsI would include on my recommended pre-bankruptcy to-do list fall into four general categories:

Which bills to pay first, and in which order:

A big part of my work is helping debtors prioritize their bills. Those decisions are based on two considerations:

• The immediate-consequence category of bills, the ones where, if you don’t pay, you get hurt now because something gets turned off or taken away.  This would include utility bills, rent or mortgage.  Other immediate-consequences bills are federal tax bills, student loan, and child support.  The consequences of not paying those could be having assets seized or having wages garnished.

• Some kinds of debt are not dischargeable in bankruptcy, so those are bills you want to pay first.  Secured loans (mortgages and car loans), taxes, and child support and alimony payments would fall in this category.  If there’s a good chance a debt might be discharged in bankruptcy, you probably don’t want to use your remaining dollars to make payments on that debt now. If you need student loan debt help, I can discuss that with you, but those bills will most likely need to be paid even after you file bankruptcy.

Filing bankruptcy puts an immediate halt to all the pressures of collection efforts through the automatic stay, buying valuable time for debtors to gear up and organize their paperwork according to the new bankruptcy laws in Indiana.

So, whether it Chapter 13 banrkuptcy law in Indiana that you're considering, or filing Chapter 7 individual bankruptcy, be sure you’re making both pre-bankruptcy lists and “checking them twice”: the to-do list and the not-to-do list for filing bankruptcy in Indiana.

Two law school professors have concluded that the bankruptcy system in our country is far from functioning as effectively and helpfully as might be. Ronald Mann of Columbia University Law School and Katherine Porter of the University of Iowa College of Law have written a paper on the subject, called Saving Up For Bankruptcy, and many of the things Mann and Porter talk about are things I wrestle with every day as an Indiana bankruptcy attorney and debt consolidation lawyer.

The main problem that Mann and Porter find is that "only a few of those for whom bankruptcy would be economically valuable ever choose to file."  Through interviewing industry professionals (attorneys, trustees, and judges) and through gathering data from judicial filing records, the two professors try to answer two questions:

• What distinguishes those who file from those who don't?
• What determines the timing of when people file bankruptcy?

Mann and Porter found out two very interesting things:

• Creditor collection activity does not force people into filing an immediate bankruptcy. Harassment from creditors wears people down over time, "like water dripping on a stone".
• The primary factor that affects the date on which people file is whether they have saved up enough money to pay the attorney and filing fees.

Based upon these findings, the two professors have two recommendations for changing the system:

• Collection calls need to be stopped through a "do not call list" -type mechanism. This would eliminate many of the costs of debt collection and take the needless pressure off the debtors. Excessive collection efforts, according to the authors, lead to inappropriate filings, not well-thought out courses of action by debtors.
• Low-income, low asset filers (the ones who really need the bankruptcy remedy) would have access to a simplified administrative process without the costs of the full court process that is the only option available today.

Until such time as this kind of recommendation can find its way into law, I continue to offer Indiana bankruptcy help. I caution all my Indiana bankruptcy clients and blog readers about creditors who call…and call…and call.  Under the new bankruptcy laws in Indiana, you have rights.  What's more, in this state you're allowed to record a telephone conversation so long as one party gives consent (that could be you!).  So, if you believe a debt collector is violating the Fair Debt Collection Practices Act, you can use a recording device on your telephone to gather evidence you can turn in to the Indiana Attorney General's office.

My own experience in providing Indiana bankruptcy help for the past almost twenty-five years bears out what Mann and Porter say about clients waiting to file because they need to save up money for bankruptcy filing fees (approximately $3,800 for Chapter 13 and approximately $350 for Chapter 7).  Like them, I notice a bankruptcy filing "peak" around the time people receive tax refunds.

Saving Up For Bankruptcy is certainly a thought-provoking paper.  Bankruptcy law has evolved over the years since 1815, when it was first established. As a certified consumer bankruptcy specialist, I have been involved in some of the changes in Indiana bankruptcy laws over the years. But, until the new bankruptcy laws in Indiana change again, all I can do is keep helping Indiana bankruptcy clients navigate the existing bankruptcy system.  The Anderson, Bloomington, Indianapolis, and Columbus bankruptcy lawyers who are my colleagues help me offer the most up-to-date information and Indiana bankruptcy services,  one client at a time.

Usually, whenever I or one of the Anderson, Bloomington, Indianapolis, or Columbus bankruptcy lawyers in the Mark Zuckerberg bankruptcy law offices is advising clients on mortgage matters, it's for the purpose of negotiating a mortgage modification with a client's lender. But, as more and more seniors are being forced to consider bankruptcy in Indiana, the subject of reverse mortgages has been coming up frequently is we meet with our clients.

By way of quick review, homeowners over the age of 62 can use a reverse mortgage to convert their home equity into cash they can use. As long as the homeowner continues to occupy the home, repayment is not due; the bank is repaid only when the house is sold.  Seniors are allowed to choose among three ways to receive money out of their home equity:

 

• A line of credit from which the homeowner can draw as needed.
• A monthly fixed amount for a fixed period of time.
• A monthly fixed amount for life. (This is calculated based on seniors' age at the time and the amount of equity they have in their home.

It appears today's bankruptcy blog reader chose to receive a fixed monthly payment out of his reverse mortgage.  His question is: How would filing individual bankruptcy in Indiana affect those monthly payments?

As a bankruptcy attorney in Indiana and also as a debt consolidation lawyer, I've been handling bankruptcy and foreclosure matters for decades. When a reverse mortgage is involved, though, matters become a bit more complicated. So the very first thing I want to emphasize to this blog readers is how important it is for him to seek expert legal advice on reverse mortgages before moving forward with an individual bankruptcy in Indiana.

Some of the factors that the bankruptcy court will be considering include:

• If a debtor's equity in his/her home doesn't exceed the Indiana exemption of $15,500, he or she can keep the home, even in a Chapter 7 bankruptcy.
• In the case of a reverse mortgage, the "equity" is the unused income that has yet to be paid out to the owner.
• Filing bankruptcy does not constitute a default against the reverse mortgage, so foreclosure is not an issue.

About the income:

• As part of filing bankruptcy, the homeowner must report all sources of income.  That would include the reverse mortgage payments.
• In a Chapter 13 bankruptcy, that income would be considered in created a debt repayment plan.

Every bankruptcy situation is different.  Designing the right strategy for each client is part of the skill required of a certified consumer bankruptcy specialist, and is what makes my work so interesting after all these years of practice.

"Business Bankruptcies Rise More Than Individuals'", I read in Businessweek the other day. 

As an Indiana lawyer for bankruptcy these many years, I offer bankruptcy services and bankruptcy information in Indiana only, so I was curious to verify if those 2009 statistics are consistent with what happened in our state.

Based on information supplied by Bloomberg News, here's what I found out:

First, when it comes to personal bankruptcies filed per capita, our state ranked fifth of the fifty states last year. However, unlike the case nationally, the percentage increase of "commericial" versus "non-commercial" bankruptcies, in Indiana it was about the same (25% increase) percentage increase compared to 2008. Bloomberg counts a rise in individual bankruptcy in Indiana from 7,970 in 2008 to 9,283 last year, while "commercial" bankruptcies went from 566 in 2008 to 717 last year.

Talking about these numbers with the Columbus bankruptcy lawyers who work in the Mark Zuckerberg bankruptcy law office there, we agreed that problems in the auto manufacturing industry played a major role in Indiana's troubles, both directly and indirectly.  My own experience in dealing with small business bankruptcy in Indiana has shown me several interesting and sad aspects of the situation here: 

Indiana is home to many, many small businesses.  Many of those are tied to the auto manufacturing industry or to other manufacturing, perhaps as suppliers of parts or services to multi-national corporations.  According to recent federal data, there are more than half a million small businesses in Indiana.

It's very difficult to separate personal and business matters in small business bankruptcy in general, and I've found that to be definitely the case here in Indiana, with personal and business finances, more often than not, intertwined. Loans for the business were personally guaranteed, backed by owners' assets. Personal money was put into the business, and money was withdrawn from the business for personal use.  One result I've seen is that, while legally a business can file bankruptcy in its own right, in the real world the client is often forced into personal bankruptcy in Indiana along with his/her business.

This intertwining of "commercial" and "non-commercial" bankruptcy simply isn't stated or even directly reflected in any of the statistics I read.   Nevertheless, I believe the connection between personal finances of small business owners and the finances of the businesses they own is a key factor in explaining why the percentage increase in personal bankruptcy in Indiana and the increase in business bankruptcy in our state are just about neck-and-neck.

 

The debate is old as the hills - well, old as the Bible, anyway. Years ago back in law school, as well as days ago in the offices of the Anderson, Bloomington, and Columbus bankruptcy lawyers who are Mark Zuckerberg bankruptcy law associates, the question is asked and asked over again: Is it moral to file bankruptcy and ask to have one's debts "forgiven" by the courts?

There's no question bankruptcy is legal - in fact, the bankruptcy court system in the United States and the U.S.  federal bankruptcy laws themselves have functioned for almost two hundred years.  In 1915 the Supreme Court wrote that bankruptcy laws were meant to give "honest debtors a chance to start afresh free from the obligations and responsibilities consequent upon business misfortunes."

What's the debate, then? Well, giving someone a second chance is definitely a value in American culture, but so is the idea of living up to one's obligations and keeping one's promises.

Harvard law professor Elizabeth Warren is co-author of a study on medical costs as a cause of bankruptcy, said in testimony before the Senate, "Most debtors are filing for bankruptcy not because they had too many Rolex watches and Gameboys, but because they have no choice."

As a bankruptcy attorney in Indiana for almost twenty-five years, I most definitely agree.  When debtors come to me seeking Indiana bankruptcy information, often it's months and even years they've been trying to deal with financial troubles caused by factors beyond their control.  These debtors are often filled with negative feelings about themselves, even though, in the majority of cases, they've been responsibly handling their money affairs for many, many years until an extended illness or layoff wrecked all their plans.

When it comes to student loan debt help. I find the same thing is true.  None of my clients who are filing bankruptcy in Indiana went to school planning to fail - they studied, often juggling full-time work schedules, family needs, and classes, in the hopes of building a better life.  (Another myth I often hear is that bankruptcy cannot be of any help with student loans. The truth is, while most student loan debt cannot be discharged in bankruptcy, I am often able to be of help negotiating with lenders on behalf of my clients.  Meanwhile, as other forms of debt are addressed through the bankruptcy, that can free up cash to make payments on student loans)

Back in the 1800's when the Supreme Court was debating whether to create bankruptcy laws in this country, they looked to the Bible, and particularly to Deuteronomy 15: 1-11: At the end of every seven years, you must cancel debts….

The Supreme Court recognized, from a practical point of view, that when you are swamped with debt, you are unable to provide for yourself and your family. You are a drain, rather than a contributing member, to our economy. As one attorney put it, "This latest recession showed us that the best-intentioned and smartest business people in the world can makefinancial mistakes or can suffer financially without fault." 

Miranda Marquit , in Many Christians are Faced With The Bankruptcy Option, writes, "After all, we have a moral obligation to be good stewards of what God has given us.  On the other hand, there are many circumstances beyond our control that can lead to crushing debt….It is important for Christians to carefully consider all their options….Ultimately, the decision is one you make between you and God."

As an Indianapolis bankruptcy lawyer and also a debt consolidation lawyer, I think all debtors, no matter what their religious beliefs, need to consider all their options. In fact, only after discussing all the options with an experienced legal professional can any person make the decision that's right for them.

As I tell everyone who is having financial difficulties, bankruptcy is definitely a remedy of last resort!

new Indiana bankruptcy laws

 

The times they are a’changin’, mostly for the better.  At least that’s how it appears from my vantage point as an Indianapolis bankruptcy attorney and debt consolidation lawyer. What I mean is that job opportunities in Indiana seem to be staging a comeback.  True, a good number of the jobs I read about are not available immediately. 

My Indiana bankruptcy clients who need to show income in order to qualify for a Chapter 13 bankruptcy debt repayment plan may not be helped by jobs coming later this year or into the next calendar year. Still, as I continue to provide bankruptcy information in Indiana, it’s important for me to keep my blog readers and clients up to date on the job markets in our state.

One positive development scheduled for Indianapolis (where the main bankruptcy law office of Mark Zuckerberg is located) in 2010 involves Ohio-based homebuilding Fischer Group.  Fischer expects to be offering 150 or so jobs here as it expands in the Indianapolis housing market.

Longer range positive news for Indianapolis comes from Stericycle, a medical waste disposal company planning to expand its operation by moving some of its other branches from other states into its facility near the Indianapolis airport.  Stericycle expects to create more than 100 additional jobs by 2011. Another company expanding in Indianapolis is insulin manufacturer Elona Biotechnologies.  The company expects to add 70 jobs in Greenwood.

With Indianapolis being home to so many different colleges and community colleges, one issue that often arises is that clients need student loan debt help.  Since student loan debt is almost never discharged in bankruptcy, it’s crucial that debtors have regular income coming in from employment to keep up with the student loan debt repayments.

The Columbus bankruptcy lawyers who work in my office there were happy to learn that Dorel Juvenile Group is expanding in Columbus and expects to create 100 jobs there by 2013.

Shorter-term, in Terre Haute, the good news is that Best Buy Co. is opening a new store, creating 80 new jobs. Again, because of the colleges and universities in western Indiana, these new jobs should be of advantage to people in need of help paying student loans.
But, speaking of Indiana State U., the university itself announced it will need to cut up to 100 jobs. Another piece of not-so-favorable news comes out of Plainfield, west of Indianapolis, where Duke Energy announced it will be trimming an unknown number of jobs.

Cities and towns north of Indianapolis are serviced by the bankruptcy law offices of Mark Zuckerberg in Anderson.  Some long-term good news is that B&J Specialty, Inc., a supplier of automotive molds and dies, plans to add 21 workers by 2012.

In a way, the most hopeful piece of hopeful news for employment is the furthest away from actually happening. A proposed ethanol pipeline reaching from South Dakota to New Jersey would create more than 7,000 jobs in Indiana, pending a loan guarantee from the U.S. Department of Energy.

Long-range or short-range, as an Indiana consumer bankruptcy specialist, I know jobs are a good thing, helping Indiana bankrutpcy clients emerge from bankruptcy and have a chance at a fresh financial start.
 

In rebuilding after bankruptcy in Indiana, you've gotta start somewhere.  Author Paula Langguth Ryan, in Bounce Back From Bankruptcy, suggests the five-minute-a-day plan: "Take five minutes every day to commit to building your relationship with money," Ryan advises.  "Turn those good intentions into firm commitments and step out in faith, leaving the fear behind," she adds.

You can find the premise of Bounce Back right in paragraph 1 of Chapter One of the book, and, after spending more than twenty years as a debt consolidation lawyer offering bankruptcy services in Indiana to tens of thousands of individuals and small business bankruptcy clients, I heartily agree with Langguth-Ryan's statement:

"Your credit problems can be a thing of the past, starting today, whether your bankruptcy was a Chapter 7 or Chapter 13, if you take your time and move step-by-step through the process of getting financially fit."


"Credit can be a scary topic, especially for those who have recently filed for bankruptcy protection through the federal court system," observes Women's Personal Finance.net, offering a three-part to-do list for rebuilding credit:
 

• Get a secured credit card, one with a savings account attached.
• Join a credit union. (Women's Personal Finance suggests a credit union might be more willing than a bank to offer small loans to help the credit-rebuilding process.
• Contact a support group or two.  Realize you're not alone.

Financial Football Training Camp is a financial literacy project cosponsored by the NFL and VISA.  The premise of that program is that better knowledge of how credit works can lead to better financial management habits.  "Credit cards can be extremely valuable tools.  But they can also get you into trouble if you're not careful with them."

The people who visit one of the bankrukptcy law offices of Mark Zuckerberg in Anderson, Bloomington, and Indianapolis don't need that reminder.  The people who visit with the Columbus bankruptcy lawyers who work in my office there don't need that reminder, either. People who come to me needing payday loan debt help don't need to be reminded how debt can pile up quickly. The truth is, people rebuilding credit after bankruptcy don't need to be reminded how difficult it is to manage credit card debt.

But the opposite extreme, credit phobia, isn't healthy either, Women's Personal Finance.net emphasizes, explaining how important it is to get back on the "credit horse" after a fall as hard as bankruptcy.

• Filing bankruptcy in Indiana
• Saving up money
• Rebuilding credit  

The reason I'm absolutely on track with the five-minute-a-day deal is this:

All three stages of bankruptcy involve stress.  But, when people face up to their problems instead of trying to avoid them, they have a much, much better chance of letting go of negative feelings and getting on with their lives.

I have to confess - helping people get on with their lives is really what being a bankruptcy lawyer in Indiana is all about for Mark Zuckerberg!

 

Small business bankruptcy in Indiana has been the subject of a lot of discussion lately, including in my Indiana bankruptcy blogs last week. Those blog posts triggered quite a number of questions from readers wanting to know more.  While Chapter 13 and Chapter 7 bankruptcy is what readers usually ask about, there has been particular interest in Chapter 11 bankruptcy as a way to try to keep a business going and give it a fighting chance to recover from the recession.

One reader has posed a question I believe might be of interest to other readers and clients.  She is trying to make a decision between two things:

• Filing Chapter 11 bankruptcy for her small business (like Chapter 13 bankruptcy in Indiana for individuals, Chapter 11 for businesses is based on a debt repayment plan)
• Using the services of a debt management consultant.

Since I am not familiar with all the details of this bankruptcy blog reader's situation, all I can do is offer some general facts from my more than twenty years' experience as a debt consolidation lawyer and Indianapolis bankruptcy lawyer, as well as from the experience of the Columbus bankruptcy lawyers who work in my office in that city.

From the question itself, I can surmise some possible factors in this business owner's predicament:

• The business is having financial difficulties.
• She would prefer to explore options to continue, rather than close her business.
• She believes that the difficulties are temporary and can be overcome in the long run
• She wants to buy time to make the decision whether to close or not.
• She's already decided to sell her business, listing it with a business broker, but the high level of debt is too strong a negative for buyers.

Certainly negotiating with lenders is a step any business owners need to explore.  What I've found, over the many years of working with creditors and debtors is this: Some creditors are willing to accept even dramatic reductions in repayment, because they perceive they'd still be getting more, and sooner, than they would if the debtor small business filed a Chapter 11 bankruptcy case that could drag on for years.

On the other hand, small business owners themselves need to have a realistic perception about new bankruptcy laws in Indiana and in particular what Chapter 11 small business bankruptcy can and can't accomplish.

As Debbie White correctly explained on Buzzle.com,
"This form of small business bankruptcy is not designed to be a debt absolution plan, as many people erroneously think.  Chapter 11 small business bankruptcy is actually designed as a quite stringent plan in which a conservator is appointed to take charge of the business assets to apply them to the repayment of all the business debts."

One positive and important thing that any bankruptcy accomplishes is that it offers relief from creditors' collection attempts.

Whenever it comes to answering a question that begins with the words "Which is better…?", you can be sure that, until I've met the client and learned all the details of the situation, my answer is almost certainly going to be "It depends!"

Today I have three pieces of hopeful news to share. Believe me, as an Indiana bankruptcy attorney, it brings me pleasure to begin this third week of my third year on a happy note. Don't get me wrong - the bankruptcy law offices of Mark Zuckerberg have been established in Indiana for almost twenty five years.  But 2010 marks the beginning of my third year offering Indiana bankruptcy information through blogs.

Looking back, I would say that 10-15% of my blog posts have had to do with the employment markets in Indiana.  Needless to say, the many job layoffs over the past couple of years have been a big contributing factor in the rise in bankruptcy in Indiana.  But that's not the reason I devote so much blog space to employment-related topics.  It's just that, as I've stressed so often before, the most important part of bankruptcy isn't the filing part - it's the emerging part. And emerging from bankruptcy means getting back on your financial feet, which takes income.

• If you file Chapter 13 individual bankruptcy in Indiana, you need to have a regular income that allows you to keep up with your debt repayment plan.  If, through helping you file that Chapter 13, I've been able to keep you in your home and get rid of your second mortgage, you still need income to keep up payments on the first mortgage!
  
• Even if many of your debts were discharged through Chapter 13 bankruptcy laws or Chapter 7 bankruptcy laws,  you may need income to pay child support. 
  
• Even after I've provided student loan debt help, there may be regular student loan payments to make.  In all boils down to income, and that means employment, doesn't it? 

One piece of good news is very welcome for many blog readers and bankruptcy clients in Indiana: Congress has extended its COBRA subsidy for the next six months.  That means thousands of jobless Hoosiers will be able to have affordable health insurance, at least for the first half of this year.  This latest legislation extends the 65% government subsidy of the premiums to a total of 15 months after layoff.

Meanwhile, I learned, Hilex Poly, the plastic bag recycling company, is adding 21 jobs at its North Vernon plant, using a supermarket take-plan plan called Bag-2-Bag.

On a longer-range but even larger scale, there's good news about Think City cars.  A 415-employee electric car battery manufacturing plan is being established in Elkhardt.  While the plan won't be fully operational until 2013, this is excellent news for two reasons: First, the idea is "to put the first relatively affordable electric car on American roads, bringing Indiana to the forefront of the new, "green manufacturing" stage. Second, Think buys all its components from other companies, which can indirectly boost employment overall.  As the Indianapolis Star's Ted Evanoff and Bruce Smith put it, "Indiana's plugged into an auto revival."

Revival, fresh financial start - those are the kind of results the Indiana bankruptcy services I provide are meant to bring.  Those results can happen only with a revival in job opportunities.  Looks like we're headed in the right direction!

I read a lot, everything from professional journals on law, financial planning, tax, employee benefits, and education - all with an eye to providing the most up-to-date Indiana bankruptcy information and advice to my Indiana clients and blog readers. A couple of weeks ago, I read an article in the Chicago Tribune that touched on two subjects close to my heart - service members and job markets.  The story highlighted Illinois guardsmen returning from duty and having difficulties getting back into the job market.

For the past twenty years and more, I've been offering Indiana bankruptcy help, as well as help with small business bankruptcy in Indiana. Over the years, I often had to help servicemen and women deal with payday loan debt help.   

Fortunately, in 2007, new laws were passed making it illegal for creditors to grant high-interest payday loans and car title loans to members of the military.

In several ways, our bankruptcy laws in Indiana allow for special accommodations for soldiers and veterans, including, of course, guardsmen. Besides preventing service members and their families from being evicted from a home, the interest rates that can be charged on their credit cards is capped, and all legal proceedings against them are postponed.

One of the most important concessions offered to military personnel has to do with the bankruptcy means test.  Generally speaking, people who earn more than their state's median income (as measured by family size and Census Bureau Median Family Income numbers), do not have a choice of filing either Chapter 7 or Chapter 13 bankruptcy. The bankruptcy means test is adjusted, though, for both active military and needy vets, including guardsmen, so that they are allowed to have more income and still have the choice of filing Chapter 7 bankruptcy.

"According to the law," explains Chicago Tribune writer James Janega, "members of the guard and reserves who return to work from active duty are entitled to be treated as if they had never left.  If their job still exists, they are supposed to get it back." That means, he goes on to clarify, that if others with the same job description have been let go, the returning guard members may be out of luck.

"I'm pretty worried about it", said one guardsman. "If I get released from orders and the checks stop coming in, the bills don't."  That's where the Indiana bankruptcy safety net might need to go on active duty!

Two days ago in my Indiana bankruptcy blog, I wrote about Freight Masters Systems, an Indianapolis trucking and logistics firm that filed bankruptcy.  Yesterday, I responded to a reader's question about whether Chapter 7 or Chapter 13 was more advantageous for a small business seeking Indiana bankruptcy help. 

Since my blog is part of an effort on my part to provide useful bankruptcy information in Indiana. I think it might be helpful for my blog readers and Indiana bankruptcy clients to understand why Freight Masters Systems chose Chapter 11, and what the special requirements and advantages are of that form of bankruptcy.

Linda Ekstrom Stanley, a bankruptcy trustee in San Francisco, wrote:  "Chapter 11 is a valuable tool.  It gives small and large businesses alike a breathing space from their creditors, a chance to reorganize, a 'fresh start'.  It provides a unique opportunity to restructure the results of past mistakes for future success."

As one of the Columbus bankruptcy lawyers that work in my offices there often tells clients, "The most important thing to understand about Chapter 11 is that it is appropriate only when there are real possibilities for the business to survive."  Chapter 11 is meant for a business that is having financial difficulties, but these are expected to be temporary.  If debt repayments can be reduced or at least postponed, there is real hope that the business can once again become successful.

In fact, once the Chapter 11 bankruptcy is filed with the court, the debtor has 4 months to file a plan of reorganization with the bankruptcy court, and the creditors have to agree to that plan.

I'm a debt consolidation lawyer as well as a small business bankruptcy attorney in Indianapolis, so, when I'm sitting down with owners of a small business to evaluate options and plan a strategy for bankruptcy, there are some hard questions I need to ask:

1.   What really makes more sense - liquidating the business altogether and starting over with a new business - or reorganizing this one? Will you have the capital to start a new business?

2.   Do you, the owners, truly have the ability to make this particular kind business profitable again, despite whatever obstacles there are in your industry?

3.   What kind of debt do you have?  Is it mostly secured debt (those assets will be returned to the creditors) or unsecured?

4.    Do you, the owners, understand that a Chapter 11 reorganization plan will require quite a bit of time and effort to keep up with the monthly reporting that will need to be done all through the process?

As Indianapolis bankruptcy lawyers, my colleagues and I often refer to Linda Ekstrom Stanley's description of how strict a discipline the Chapter 11 process involves.  "Too often," she says, "the debtor's principals are stressed-out entrepreneurs accustomed to operating in an unstructured environment.  Chapter 11 is like a bucket of cold water."

In addition to heading an office of Columbus bankruptcy lawyers, I'm a bankruptcy attorney and debt consolidation lawyer in Indianapolis, Anderson, and Bloomington, serving 38 counties in our state.  I've had a lot of experience offering small business bankruptcy services in Indiana, and needless to say, during this recession, there have been many more than usual small businesses needing Indiana bankruptcy help.
 
My experience has taught me that personal and business matters are intertwined for most small business owners.  Besides the business-related financial problems, such as slow-paying customers, squeeze from suppliers, difficulty in obtaining or renewing credit, downturn in the industry, and all the other typical business problems, business owners have  the same individual problems that face their friends and relatives. 

Some business owners, for example, need student loan debt help, either on their own behalf or on behalf of their children. Some are going through a divorce along with the business challenges. For all those reasons, it often happens that in offering Indiana bankruptcy help to the  individuals who own the business, at all  the Mark Zuckerberg bankruptcy law offices, we ended up helping those same individuals file personal bankruptcy in Indiana, either along with, or in place of, small business bankruptcy. 

Generally speaking, in the past year, U.S. consumers and businesses filed bankruptcy at a pace that made 2009 one of the worst years on record, with more than 1.4 million petitions submitted nationally. The bankruptcy lawyers in  the Columbus tell me they're seeing an increase in business/personal combined bankruptcy filings as well.

In the national bankruptcy statistics, remember, the business and personal bankruptcies show up as separate cases. But what I need to add in providing Indiana bankruptcy information is what the statistics don't reveal , which is the great extent to which personal bankruptcy is combined with small business bankruptcy in Indiana.

It is definitely true (as I often find myself explaining in answer to bankruptcy blog readers' questions), if a small business is held in the form of a corporation, partnership, or LLC, the business is a separate legal entity and CAN file bankruptcy in its own right, without the owners themselves filing bankruptcy. However, that often isn't the way things actually happen.

In either event, whether a small business bankruptcy is filed with no personal bankruptcy or in combination with a personal case, there are essentially two types of bankruptcy that a small business can use when it needs Indiana bankruptcy help:

Chapter 7:

Chapter 7 is a liquidation bankruptcy, but it is different from a liquidation bankruptcy filed by an individual, in that businesses don't get their debts discharged.  Chapter 7 provides for an orderly liquidation of the business under the direction of a bankruptcy trustee.  The advantage is that shareholders have no costs, and collection efforts are halted through the Automatic Stay.

Chapter 11:

Chapter 11 bankruptcy is meant for a business that is suffering severe financial difficulties, but where there is a good possibility for that business to survive if its debt repayments can be reduced or postponed. What is different about this kind of Indiana bankruptcy is that the debtor (the business) remains in control as a "debtor in possession", becoming a "fiduciary" for the creditors.  A special committee of unsecured creditors is formed to supervise the process along with the owner.

Because Chapter 11 is an ongoing process, the owners of the business are going to need to devote a lot of time and effort to the extensive financial reports that need to be turned into the Indiana bankruptcy court during the "rehabilitation" period, all the while dealing with the day-to-day challenges of running the business. The reporting may require additional professional consultants and accountants, which adds to the financial burdens that are already causing problems.  

In essence, Chapter 7 bankruptcy is an ending process. Chapter 11 is a continuing process that buys time to consider future direction.

So, which is "better" for a small business - Chapter 7, or Chapter 11?

One thing for sure: No matter what form it takes, bankruptcy is a very bitter pill for any business owner to swallow. My job in offering bankruptcy services in Indiana is to help each business owner evaluate all available options and make the decision that best fits that situation.  I wish I could give a one-size-fits-all answer, but I can't. I dedicate my efforts to offering Indiana bankruptcy help.  But, when it comes to selecting which type of bankruptcy - Chapter 7 or Chapter 11 -  is going to provide the most help, the onl;y answer is - IT DEPENDS!



 

It's not personal, but of course it is - small business bankruptcy, I mean.

The number of Indiana small business bankruptcies continues to increase.  As a bankruptcy attorney in Indiana who's provided legal counsel for small business owners for many, many years, I feel special empathy for entrepreneurs who've sacrificed to build their businesses, only to come to the realization that their business is in grave danger. They may start by asking my advice as a debt consolidation lawyer in an attempt to help their business survive, but end up needing Indiana bankruptcy help.

According to the Pittsburgh Business Journal, small business bankruptcy filings across the nation jumped more than a third during this calendar year. Many of these businesses start out filing Chapter 11 bankruptcy, meaning the companies are hoping to restructure and survive, and merely want to "shelter themselves from the financial storm."

What I and the Columbus bankruptcy lawyers who work with me there are finding is this: Many small business owners who start out with filing Chapter 11 bankruptcy are forced to convert to Chapter 7 liquidation bankruptcy.  They simply cannot find funding from the bank or from investors to complete a successful Indiana Chapter 11 bankruptcy reorganization plan.   

A year and a half ago, I was filling my Indiana bankruptcy blogs with examples of companies who had successfully emerged from bankruptcy.  I talked about Hancock Fabrics using bankruptcy to buy time to hold going-out-of-business sales.  I told how W.R. Grace used bankruptcy to allow them to continue making contributions to their employer retirement plan.  I shared how Dura Automotive had emerged from bankruptcy as a new public company.

Today, however, small businesses seem to be caught in what Cal Bellamy, partner with Krieg DeVault LLP, calls "the perfect storm".  They have difficulty obtaining credit from the banks for daily operations.  Meanwhile, orders are being reduced from their customers, and many customers who do order are slow to pay.

Georgia State University professor Jack WIlliams summed up the situation: "I think what we're seeing is a significant increase in bankruptcy filings in the small business area, among businesses that would have traditionally weathered the economic storm."

Over the years, many small Indiana business owners have sought my advice, not expecting to file bankruptcy, but simply wanting to protect themselves by managing debt.
The realities today for small business owners are quite harsh.  If sales are down and going lower, lenders may refuse to grant any more credit.  As Moody's Investors Services put it, "It's a terrible time to be cash-poor."

As a small business bankruptcy attorney in Indiana, I find myself doing a lot of empathizing - and a lot of work these days with entrepreneurs.  I often need to remind business owners that it's precisely for situations like theirs that the bankruptcy system of law was created, and that it's precisely those kinds of situations my professional life is all about! 

Of all the clients who turn to me for Indiana bankruptcy information and those who turn to me as a debt consolidation lawyer, the older ones typically have one good thing going for them, namely their Social Security benefits.

That's because Federal law makes Social Security benefits exempt from creditors' claims.  That law includes retirement benefits from Social Security as well as disability benefits.  What that means is, with the exception of the IRS, even creditors who have legal judgments against a debtor cannot intercept Social Security payments or take that money away from a recipient after it's been paid.

Typically, when older clients file bankruptcy Chapter 7 in Indiana, I find it's due to just one or two primary factors.  There might be medical costs beyond what is covered by Medicare and supplementary insurance, and that might be the reason older folks seek Indiana bankruptcy help. Parents sometimes have exhausted their own savings helping adult children who have lost jobs or themselves been hit by medical emergencies. Sometimes a child has applied for Social Security disability benefits, but the long, long delays have financially drained both that adult child and his or her parents.

In recent months I've been seeing a problem of a different sort with Indiana bankruptcy clients in their early 60's. This problem comes up with people who, at some point in their careers, worked for the government. 

It all comes back to the "Windfall Elimination Provision", which basically states that, "if you receive a pension from a federal, state, or local government based on work where you did not pay Social Security taxes, the pension you get based on that work may reduce your Social Security benefits."  (The concept is logical: Social Security benefits are based on the worker's average monthly earnings adjusted for inflation. But since no wages were withheld for Social Security while that person worked for the government, he/she should not collect a government pension and in addition receive the same amount of social security benefits as someone who had had Social Security wages withheld throughout their career.) 

A second, related, law is the Government Pension Offset that affects spouses and widows/widowers of someone with a government work history.

Now, both these laws have been around since 1983, so there's no new news here.  The fact is, though, until recently, I had never run up against this situation in any of my four Indiana bankruptcy law offices. 

In today's tough economy, though, what's happening is that more people are being laid off and claiming Social Security benefits beginning at age 62 (rather than waiting until their "normal retirement age", which might be age 65 to 67.  Based on the statements (you know, those annual statements Social Security sends out to everyone age 50 and up) those people had no way of knowing what the offset was going to be. 

And those offsets can be a nasty surprise indeed.  For individuals with overdue medical bills for whom the layoff put an end to their plans to work for three to five more years, receiving a greatly reduced Social Security benefit can be financially devastating. 

It's interesting that at the same time as I was beginning to see clients experiencing a problem with their social security benefits being so much smaller than expected, the Journal of Financial Planning (in order to offer the most up-to-date legal advice about debt consolidation and bankruptcy to my clients, I read professional journals in employee benefits, taxation, and financial planning) ran an article on that very topic.  Authors Joseph McCormack and Grady Perdue, professors at the University of Houston-Clear Lake noted that "the people hurt most by the GPO are generally workers that are receiving very small pensions."

In a book I reviewed in a previous blog post, Elizabeth Warren asks who the people are who are in so much financial trouble.  Well, were you to ask the same question of Mark Zuckerberg, based on my long career as a bankruptcy lawyer in Indianapolis and around central Indiana, you'd get the same answer.  That answer really applies to people in their sixties caught by surprise by the reduction in their Social Security benefits they need for basic support:

“…ordinary, middle class people…”

Without well-paid work, it’s difficult to keep debt collectors at bay.  That’s why, as part of offering Indiana bankruptcy information, and maintaining four bankruptcy law offices around the state, it’s important for me to keep my bankruptcy blog readers and Indiana bankruptcy clients updated on employment in our state.

While it’s true that filing bankruptcy brings an immediate halt to all legal action and debt collector harassment (through the automatic stay), and even after I've provided payday loan debt help and sometimes student loan debt help, the object is for debtors to emerge from bankruptcy.  Chapter 7 bankruptcy clients need to get back to managing their finances and keeping the bills paid; Chapter 13 bankruptcy clients need to keep up with their court-supervised repayment plans. None of this can happen without steady income coming into the household.

The Department of Workforce Development announced that federal legislation has provided up to 20 weeks of additional unemployment benefits.  Eligible Hoosiers, whose benefits have been exhausted, can apply for that extension starting today, according to Inside Indiana Business. The newest rules require that anyone collecting unemployment insurance benefits must apply for one job and look for work at at least two additional locations each week they collect benefits.

Some good news came from Beckman Coulter, the California-based biomedical test equipment company, which is expanding for the second time in Indianapolis. The company plans to add up to 100 jobs in our state.

Unfortunately, I learned, Caterpillar plans to lay off at least that number of workers from its plant in Lafayette.

USA Counties IN Profile, which provides current federal statistics on demographics and economic factors, shows that Indiana ranks #16 in population among states, with 6.3 million people.  Of these, 2.8 million are workers.

For the past close to twenty five years, I’ve been working to help people in Indiana navigate the bankruptcy court system.  But, in order for the bankruptcy system to succeed as a safety net, though, it’s plain - We need to put more workers back to work!

 

As a bankruptcy attorney in Indiana, I wear several "hats".  I'm a debt consolidation lawyer.  I offer payday loan help and student loan debt help, and small business bankruptcy help. But one thing I almost always have to do is prepare clients for the "test". 

The bankruptcy “means test” is a way for the court to determine if someone’s eligible to file bankruptcy. The point of the test is to compare your last six months of income with the median income earned by all Indiana residents over the same half-year period of time. In this case, less is better, because if your household income is less than the median amount, you probably qualify to choose either Chapter 7 bankruptcy or Chapter 13 bankruptcy; if your income exceeds the median amount, Chapter 13 may be your only option.

I'm constantly reassuring clients that the means "test" is not an exam that they have to take.  It's just a measurement that helps us decide what kind of bankruptcy options there are from which to choose.

A very important update in the Indiana bankruptcy information I offer is that the federal standards for bankruptcy were changed just three weeks ago, on November 1, which means the regional test standard numbers that apply in each locality changed as well.  With so many Hoosiers unemployed, the median income numbers have naturally gone down. Who dictates the changes? The U.S. Census Bureau and the U.S. Trustee publish a table that is used by the bankruptcy courts in each state. 

As part of the means test, certain deductions for expenses are allowed.  There are deductions for food, clothing, household supplies, personal items, housing and utilities, and vehicle operation expenses.  “Other necessary expenses” include taxes, mandatory payroll deductions, term life insurance, education for employment, and healthcare. As you may imagine, after all these deductions are applied, the income amount that is left is much smaller, making it more likely that the individual will have the option of filing Chapter 7 bankruptcy.

On the other hand, it’s important to remember that the whole idea behind the means testing is to ensure that only debtors who truly need relief should be eligible to file Chapter 7. Ironically, when the median income figures drop, that often means fewer people will be eligible to file a Chapter 7 bankruptcy, and they may need to file a Chapter 13 debt repayment plan instead. Because of this, one North Carolina attorney referred to the means test “a mean test”. 

The Census Bureau Median Family Income is keyed to family size.  As of November 1, for example, the Indiana median income number for households with one income earner is
$40, 828.  For families of two, the number is $52,554, for families of three, $59,650, and for families of four, $70,873.

Seems strange, doesn’t it?  While it doesn’t happen for the majority of my Indiana bankruptcy clients, it’s possible to have too little income to pay the bills, yet, at least according to the bankruptcy means test,  have “too much” income to file bankruptcy!
   

 

When big businesses file bankruptcy, things typically don’t bode well for smaller businesses.

As a longtime bankruptcy attorney in Indianapolis, I was not very happy to learn that Indianapolis-based Norwood Promotional Products is seeking Chapter 7 bankruptcy protection.  As the second-largest company of its type in the U.S., Norwood’s not the type of bankruptcy case for which I provide bankruptcy services in Indiana. (For the past twenty-plus years, I've been providing Indiana bankruptcy help for individuals and small businesses. However, as part of providing Indiana bankruptcy information in my blog, I report on companies that declare bankruptcy or who are hiring and firing employees.) 

Back in July, I reported in my Indiana bankruptcy blog that Norwood had used Chapter 11 bankruptcy to buy time to solve its financial difficulties.  Norwood ended up selling many of its divisions to a foreign buyer. Now, apparently still unable to handle its debt, the company is being forced to liquidate through Chapter 7 bankruptcy.

Norwood’s failure is a symptom of our times, I’ve concluded.  With so many salespeople out of work, fewer logo-emblazoned pens, calculators, and mouse pads are being handed out, I imagine.

I wasn’t any happier to read the latest news on another corporation, CIT, that I’ve been following in these bankruptcy blog posts.  CIT is filing Chapter 11 bankruptcy and trying to restructure its own debt, while continuing to provide lending to thousands and thousands of medium-sized and small businesses.

CIT is BIG – its bankruptcy will be one of the biggest in U.S. corporate history.  It’s also OLD – almost 101 years in existence. The bankruptcy will be what is called “prepackaged”, meaning that CIT’s lenders have actually agreed to support the bankruptcy, and those lenders will become the new owners of the company.

As a bankruptcy and debt consolidation lawyer in Indianapolis, where there are so many small businesses, I'm very interested in the CIT case.   Many of my Indiana small business owner clients are dependent on “factoring” their accounts receivable in order to have cash for stocking up for holiday selling, maintaining payroll, and covering expenses. In fact, many small businesses use factoring to keep their doors open and their suppliers and workers paid, hoping to avoid filing bankruptcy.

In “Born Again Business After Bankruptcy”, I explained how companies can sometimes emerge from the bankruptcy court process even stronger than before, ready to carry on building their business. In filing Chapter 11 bankruptcy, CIT is trying to protect all the small business owners who depend on them for cash.