Just two weeks ago, entrepreneur Chris Gardner was here in Indianapolis, sharing the podium with Tony Dungy and other inspiring presenters at the Exact Target Connections '08 email marketing conference.  And, while I was needed at my Indiana bankruptcy law offices and couldn't get away to hear him this time, as a bankruptcy lawyer in Indiana for so many years, I know Gardner's got the message every person who has ever faced bankruptcy needs to hear and take to heart.  In one of my earlier bankruptcy blogs, Talk About Success After Bankruptcy, I told the story of actor Will Smith who went from bankruptcy to global stardom.  Well, the character that Will Smith portrayed in "Pursuit of Happyness" is Chris Gardner.

A little quick background:  As a child and teenager. Gardner grew up with just about every negative influence life has to offer, including alcoholism domestic abuse, child abuse, and illiteracy.  The movie tells the story of how Gardner, a homeless man raising a toddler on his own, passed the stockbrokers' exam and became a trainee at Dean Witter Reynolds, going on to establish the Chicago brokerage firm of Gardner Rich & Co.. Now Chris is CEO of Christopher Gardner International Holdings, with offices in New York, Chicago, and San Francisco, and he's a noted philanthropist, speaker, and author.

Gardner's message is about overcoming obstacles and breaking cycles, and that's what makes it so very fitting for people making a fresh start after bankruptcy.  I often reflect that, when we face challenges, we can choose to take one of three paths: We can avoid the issue, we can throw blame around or get bogged down in self blame, or we can start focusing on the "OK, so now what?"  Over the past almost twenty-five years of helping literally tens of thousands of people through the challenges of bankruptcy and foreclosure, I've learned over and over again the lesson that Chris Gardner not only teaches, but personifies: No matter how difficult the situation, people can always change their lives. 

 

"Wouldn't a person be better off trying a credit counseling service first before consulting a bankruptcy attorney? I think, in my almost twenty-five years of working as a bankruptcy attorney in Indiana, this is the question I hear the most.  And, as I pointed out in my earlier blog, More About Looking In All The Wrong Places, I never take offense to the question.  First off, there's no such thing as the best course of action that holds true in all cases and for all people.  But, more important, I always remind myself that the person asking the question usually has only a very foggy concept of what credit counseling actually is.

What not-for-profit credit counseling agencies are supposed to offer is education - about good spending habits, about budgets, managing bill-paying, and so on.  Then, for a fee, many credit counseling agencies offer to negotiate with creditors (just as debt settlement companies do).  Recent probes found many of the agencies were tied closely to the for-profit creditors, and worked mostly for the good of the creditors rather than taking care of the debtors. Many asked consumers to remit the monthly payments to them, rather than to the creditors, and the agencies would take commissions "off the top".  But, even in cases where the credit counseling agency is doing its work in very legitimate fashion, a Chapter 13 bankruptcy might be a much better choice for individuals who have the ability to make regular repayments on their debts.

Here are some of the reasons I favor the Chapter 13 bankruptcy over having credit counseling agencies negotiate settlements with lenders:  First, and very important, even with the best credit counseling plan, the interest on the debt doesn't stop accumulating.  A Chapter 13 bankruptcy, on the other hand, allows an individual to pay the debt over a three to five year period with no additional interest accruing! That's huge.  Second, also very important, is that in a Chapter 13, the court deals with all the debts, making sure that no one creditor gets preferential treatment.  With a debt consolidation agency plan, no creditor has to negotiate at all - in fact, there are creditors who absolutely will not deal with credit counseling agencies.

Underlying all of my remarks is my firm belief that people who have serious debt problems need to know and to weigh all their options. And, like it or not, that includes legal options.  And, while you may see this as a bias in favor of my own profession, the fact is, only an attorney is qualified to discuss legal options. Even more powerful an argument, the bankruptcy court system can provide services that no debt consolidation company or credit counseling agency can ever provide - the court has the authority to prohibit creditors from attaching property, from foreclosing on a home, and can legally force creditors to accept partial payments of certain debts. 

In my earlier blog, When Is Chapter 13 The Best Bankruptcy Choice?, I explain that Chapter 13 bankruptcy law was created for people who are earning income and who, despite setbacks they may have suffered, have the means, along with the will, to make payments on their debts under the supervision and protection of the bankruptcy court.

As you might imagine, a very big item on the list of debts I help clients put together when I'm helping them prepare for the bankruptcy court process is "plastic", meaning past due and overextended credit cards and debit cards.  In fact, as I brought out in Will You Have Debit Or Credit With Your Meal?, with the fall in home prices combined with rising medical bills, food bills, and fuel prices, more and more people have gotten into financial trouble by using plastic to pay these everyday costs.  But if you thought the plastic problem was limited to the unemployed or lower income families and individuals, think again.  In many cases, the roots of the financial problems leading to my bankruptcy law offices trace all the way back to the college campus.

A survey by student lender companies shows the average college grad carries close to $3,000 in credit card debt, with one in four having more than $5,000 in debt.  This is in addition to student loans (remember, these young folks haven't, in many cases, even begun to work!). College administrators have started paying attention to the problem, and have countered by setting rules about the marketing of credit to students on campus.  So, the newest tactic has been for companies (Walmart and Bancorp, for example) to sell "prepaid debit cards" to students.  While a typical debit card links to a checking account, the prepaid cards don't.  However, these cards tend to have high fees and less protection against theft or loss than credit cards.  In addition, prepaid debit cards don't help students establish a credit history.

Don't get me wrong - I understand parents need to find convenient ways for their students to pay everyday expenses, and the students need to have practice handling money.  It goes without saying that the college-educated will have greater job opportunities than those students who enter the work force directly from high school.  It's just that, as I counsel folks in my bankruptcy law offices around the state, I see people struggling under massive debt burdens that literally go back decades. What makes things so much more difficult, as I explained in More Government Help With Student Loans, it's almost never the case for student loans to be dismissed by a bankruptcy court.

A college education can be a key to a successful career, providing opportunities to qualify for the newer, technology and life sciences kinds of jobs. But, seen from my vantage point as a bankruptcy attorney in Indiana for more than twenty years, parents and college officials need to make sure Managing Money 101 plays an important part in the education of our young people!

A Wall Street powerhouse since 1850, Lehman Brothers has filed Chapter 11 bankruptcy.  A Chapter 11 bankruptcy allows a company to temporarily stop paying bills and yet stay in business under the supervision of the bankruptcy court.  This buys time for the creditors to organize a compromise plan so that the bankrupt company can make payments on the debt.

As a bankruptcy attorney in Indiana, I've dealt with tens of thousands of individuals, families, and small businesses.  While I'm not involved with giants like Lehman Bros., I take an interest in the workings of our federal bankruptcy law system and how it functions as a financial safety net.

Actually, there are many ties that Lehman Brothers has to business right here in Indiana.  Lehman helped finance Radio Company of America and Chrysler here, and, in more recent years, provided financial services to WellPoint.  In an even more direct tie-in, Lehman packaged and sold mortgages on homes in Indianapolis (many of them now in foreclosure).  In fact, it's precisely because borrowers in Indiana and other states stopped making loan payments that Lehman Bros. came up short on cash.

Back in March of this year, Bear Stearns was in financial trouble, and the federal government organized a bailout of that company.  Now, though, federal officials made a decision that it's no longer prudent for them to keep bailing out firms.  Unable to find either a buyer or a bailout, Lehman was forced to go the route of declaring bankruptcy.

As I pointed out in my earlier blog, Super Rich Or Bankrupt - You Could Be Anybody, it's rarely one factor that drives individuals to file bankruptcy, but rather a combination of pressures over long periods of time.  Pundits in the press are doing a lot of talking about the troubles some financial giants such as Lehman Bros. are having.  Individuals and small business clients are the people I'm seeing every day in my four bankruptcy law offices around the state.  Most of these  Indiana small clients can't use Chapter 11, but they can instead seek relief through either a Chapter 7 or a Chapter 13 bankruptcy process. If individuals can draw any lesson from the Lehman Brothers' story, it's to seek help and begin implementing a strategy at the first sign of distress.  

I learned something inspiring and yet humorous the other day…Apparently, the National Association of Chapter 13 Trustees, creators of the Academy For Consumer Bankruptcy Education, followed their own advice about saving money.  The organization's annual seminar in San Francisco focused on ways to educate consumers who have mortgage and auto financing issues.

Each day of the two-day conference started with a panel discussion, after which audience responses to each panelist's talk were recorded.  The room was too large to register response through hand-raising, and the conference organizers didn't want to spend money on expensive electronic mechanisms, so… they passed out kazoos.  If an attendee agreed with a panelist, he's just blow on his kazoo!  The second day, kazoos were replaced with police whistles.

The mission of the Academy is to raise awareness of Chapter 13 bankruptcy, especially as an option for homeowners who have fallen behind on their mortgage payments.  (In my earlier bankruptcy blog, Some Hopeful News For This  Bloomington Bankruptcy Attorney, I explained that Chapter 13 involves a three to five year repayment plan.)  The Academy aims to educate the public, along with non-bankruptcy lawyers, about Chapter 13 bankruptcy plans and foreclosures.

As a bankruptcy attorney in Indiana for close to a quarter century, I applaud not only the effort to apply Chapter 13 bankruptcy solutions where that is appropriate.  On the other hand, I believe that clients would be best served by seeking out an attorney that is certified as a bankruptcy specialist rather than just a general practitioner (See Bankruptcy Attorney Certification: Not Just Paper On the Wall.)  As far as setting an example for wise use of money, I salute the National Association of Chapter 13 Trustees - a hearfelt "ka-zoo" to you!

As "The Bankruptcy Handbook" reminds taxpayers, getting on the wrong side of Uncle Sam by ignoring his notices is dangerous. Not only will that make government debt collectors angry, the amount of the outstanding tax debt will increase due to interest and penalties. On the other hand, as I explained in my earlier bankruptcy blog, Oh, Yes You Can Get Rid Of Back Taxes, the myth that you can never have tax bills discharged in bankruptcy is just that - a myth.  In fact, most income taxes more than three years old qualify for forgiveness under Indiana bankruptcy laws.  Too bad the two distraught taxpayers I read about didn't know that…

Just a couple of weeks ago in Birmingham, Alabama, a 48-year old taxpayer telephoned the IRS and made threats.  The IRS called the sheriff, who proceeded to the man's home, only to find him gone.  When the sheriff reached the man on his cell phone, he said he was on his way to drive his car off a cliff.  Instead, he drove to the IRS office and rammed his car into the building.  The taxpayer ended up in the hospital, with little to show for his efforts except for two broken windows in the building on which he'd taken out his frustrations.  Needless to say, the irate citizen still owes taxes, but now legal fees are added to his problems. 

The second taxpayer, this one an Iowa resident, claimed the IRS owed him a refund of all the income taxes he'd ever paid.  The Internal Revenue Service of the United States of America, he said, has no jurisdiction over him - he's a "citizen of heaven"! (In almost twenty five years of practicing bankruptcy law in Indiana, I sometimes think I've heard it all, but I confess I hadn't heard this one!). Now taxpayer #2 owes an additional; $250,000 fine.  (Needless to say, he's not getting the refund, from Heaven or from the IRS!)

These true stories are funny yet sad. Most important, they bring out how important it is for people behind on their taxes to work with an experienced consumer debt and bankruptcy professional, in order to make use of all the legal advantages available. There are three or four qualifications a taxpayer needs to meet in order to be excused from taxes under bankruptcy laws, and if those can be met, taxes are forgiven. Staying calm and visiting with an advisor doesn't make headlines, but it can sure save on hospital bills!

Professionals in different fields can and should learn from each other.  I know I try to do just that by reading journals from other professional fields, including employee benefits, general law, and financial planning.  I find this reading so rewarding, because, often, I can gain insights that help me provide the best and most up-to-date advice to my Indiana bankruptcy clients.  This week, I found a very interesting piece in a human resources and employee benefits journal that relates to the tie-in between financial health and mental and physical well-being.

"Employee Benefit Advisor" magazine talks about ways to help employees stop smoking and lose weight (both of these things present major challenges for employers trying to save on health costs).  Here's something I thought was so appropriate for people experiencing severe financial problems who are facing bankruptcy:  "Someone who loses twelve pounds with an eight-week weight-loss program may appear successful, but does he or she really have the skills needed for long-term weight management?"

One of the key misperceptions about bankruptcy, I've found over my many years in the practice of Indiana bankruptcy law, is that it is an "instant fix", a way to get rid of one's obligations.  The truth is, as I've emphasized in these bankruptcy blogs, bankruptcy is a process, with the most important part of the story being the sequel.  That's the part where clients work on rebuilding their financial lives, including building a whole new set of skills and habits, very much on the line of effective long-term weight management through building healthy eating habits. In Getting On Track After - Or Before - Bankruptcy, I recommended keeping a "check register" for each credit or debit card, which is a way of building the habit of tracking expenditures.  The bankruptcy legal process serves as a safety net, helping people get back on their feet.  But bankruptcy's far from an instant cure.  Life is going to continue to present financial challenges, and it's crucial that those people learn to practice responsible money management even in the face of those challenges.

In my earlier bankruptcy blog, Bankruptcy's Not An Option for Fannie And Freddie, I discussed the two mortgage giants that were placed under federal control, making the "implicit guarantee" of FNMA and FMAC mortgages a very explicit government guarantee.  As a bankruptcy attorney in Indiana who every day is advising clients about foreclosure on their mortgages, I was very happy to read about the latest effort to help homeowners struggling to avoid foreclosure.

Senators on the Banking Committee urged Fannie Mae and Freddie Mac to "freeze" foreclosures for at least 90 days.  The idea behind this freeze action would be to buy time for lenders to renegotiate loan terms with borrowers, to try to avoid foreclosures and to keep borrowers in their homes.

FNMA and FMAC have the power to foreclosure not only on their own loans (meaning loans for which they are the actual lenders), and can also foreclose on loans they guarantee.  That means half the nation's residential mortgage market is involved in one of these two ways with Fannie and Freddie.

I'm often asked whether foreclosure of a mortgage is an inevitable part of filing bankruptcy, and in these bankruptcy blogs I've taken pains to explain that it is not.  In most cases, through filing a Chapter 13 bankruptcy repayment plan, a family's home can be saved from foreclosure.  In Dis or Dat? Foreclosure or Bankruptcy? I explained that each person's situation is different.  As I meet with clilents in one of my four bankruptcy law offices (Indianapolis, Anderson, Columbus, and Bloomington), it's important for us to discuss all the options.  Over the years, I've worked with tens of thousands of clients, and one size certainly doesn't fit all.  Often, where children are involved, a homeowner will try anything to avoid changing school districts, for example.  In other situations, where the clients' income has dropped dramatically, they are actually better off renting for awhile or at least downsizing

In all cases where foreclosure looms, though, it's worth talking with the lender and exploring all the options.  Certainly negotiating with lenders on behalf of homeowners is one valuable service I provide for my bankrtupcy clients.  So if you like, senators of the U.S. Banking Committee, you can add Mark Zuckerberg's signature to your letter to Fannie Mae and Freddie Mac!

I'm always on the alert for news about job opportunities for my Indiana bankruptcy clients.  There's a lot going on in our state…

On the negative front, 130 RV manufacturing jobs are leaving New Paris in northeastern Indiana, as Flexsteel closes its plant there.  Meanwhile, Monaco Coach eliminated 1400 within the past few weeks, affecting Wakarusa, Elkhart, and Nappanee.  One silver lining in all this is that all the RV-related layoffs qualified our state for a $10.4 million federal grant for worker retraining.

On the positive end, International Power Group plans to develop a $227 million waste-to-energy plan in LaFontaine, north of Marion, Indiana.  That plant would burn waste materials to generate methanol and hydrogen for fuel.  In North Manchester, Poet LLC, the U.S.' largest ethanol maker, begins production this week. 

In healthcare, Arcadia Resources, the health services company, will put its DailyMed pharmacy operations in Indianapolis and hire 130 workers over the next couple of years.  Wellpoint's Precision Rx Specialty Solutions expects to double its 450-employee work force, while Medco will open its automated pharmacy in 2009, hiring 1300 workers.

As a bankruptcy lawyer in Indiana for the past twenty-three years, I've seen many changes in our job markets.  Never before, though, do I remember the changes being quite so dramatic and so condensed into such a short period of time.  I'm keenly aware that, for workers laid off today, the space of time until all these wonderful new opportunities translate into new jobs for them may be much too long for them to stay financially afloat.  That's the reason I always advise seeking professional help at the very first signs of financial trouble (see Who's To Blame - You, Me, Or We? The Only Thing That Matters Is Getting Help In Time ).  It's important to begin strategizing before the financial setbacks become overwhelming.  The earlier in the process I can begin to work with clients, the greater the number of options from which they'll be able to choose.

I collect statistics, but it's no hobby.  In order for me to offer the best and most up-to-date advice to my Indiana bankruptcy clients, I must know what their opportunities will be to keep - or find - well-paid employment.  During the period of the bankruptcy, my Chapter 13 bankruptcy clients will need to keep up regular payments over a three to five year period of time.  My Chapter 7 bankruptcy clients will need to get back on their feet financially and keep all the bills paid on time.  With bankruptcy law offices serving 38 different Indiana counties, I'm always alert for news of hiring, layoffs, plant closings, and plant construction.

The month of July in general was not a good month for our state.  The U.S. Department of Labor says Indiana lost 16,500 jobs that month, third worst after Florida and Georgia.  The Hoosier bankruptcy clients I serve out of Columbus could be affected by the layoff of fifty employees by Batesville-based Hill-Rom.  Post-bankruptcy clients served by my bankruptcy law offices in Anderson could find news (both good and bad) about Delphi Corporation in Kokomo important.  Delphi will be cutting labor costs by 25% overall, and its Kokomo facility could be hard hit.  On the positive side, Delphi is revising its bankruptcy plan and the company is not going to be liquidated.  Some very good news for clients in the Anderson area is the announcement that Nestle is adding 135 jobs.  And in nearby Noblesville, there's very good news from Energel.  The manufacturer of batteries for hybrid and electric cars expects to add 850 jobs over the next four years, with most of those in Noblesville.

As I stressed in earlier bankruptcy blogs, (see Super Rich Or Bankrupt - You Could Be Anybody), there are quite a number of factors that contribute to financial problems leading to bankruptcy, and quite a number of factors that contribute to the rebuilding process after bankruptcy. The bankruptcy system is itself designed to serve as a safety net and a help in that rebuilding process.  WIthout question, though, the availability of steady, well-paying jobs is key to people getting back on their feet.

I continue to be a student of bankruptcy law in action.  Even after more than twenty years serving as a consumer bankruptcy specialist in Indiana, in order for me to offer my clients the most accurate information and advice I follow bankruptcy court cases in other states as well as here.

Last month there was an important ruling by a bankruptcy judge in Massachusetts.  By way of quick review so you'll understand the background, in a Chapter 13 bankruptcy the debtor must have enough income to make payments to creditors under a three to five year plan supervised by the bankruptcy court trustee.  Once the basic monthly bills and living expenses are paid, the debtor is expected to use the rest of his or her income towards repaying creditors.

Well, in this case a woman had filed bankruptcy under Chapter 13 and her repayment plan had been approved by that Massachusetts court.  At the same time, this woman was making contributions to her 401K plan at work.  You might think the court would tell her to stop making 401K contributions for retirement until she'd finished paying off her debts.  But the court ruled instead that she should be allowed to "pay herself first" by saving for retirement.  Not only were the contributions exempt from current income tax (see Money Double Exempt in 401K), but the bankruptcy court followed a policy of protecting a person's right to save for retirement, even when that slowed down the process of repaying debt.

This all goes back to the fact that the bankruptcy system is designed to serve as a safety net and to give people a chance to rebuild their lives and to have a secure future despite their present troubles.  Helping people navigate through the system has been my work for all my professional life, and I was very, very gratified to read how that system continued to work effectively in the case of the woman in the Massachusetts bankruptcy court.

As part of the 2005 revisions in bankruptcy law, bankruptcy courts are required to collect statistics.  The 2007 numbers are now in, and, as a bankruptcy attorney in Indiana, I found them very interesting and important, yet very much in line with my own twenty-plus year bankruptcy experience.

First, the numbers:  There were 822,590 cases of bankruptcy in the U.S. in 2007, of which 61% were Chapter 7, with almost all the rest being Chapter 13 repayment plans.  The median average monthly income for all the people who filed bankruptcy was $2490 (It was actually $2150 for those filing Chapter 7 and $3146 for those filing Chapter 13 bankruptcy.)

As I explained in my earlier blog, Some Hopeful News For This Bloomington Bankruptcy Attorney, Chapter 13 bankruptcy filers must have an income that is enough for them to make regular payments to their creditors.  According to the bankruptcy statistics compiled by the courts for 2007, median monthly expenses came to $2482, so the Chapter 7 filers would not have had enough left over to make catch-up payments on debt, while the Chapter 13 filers had approximately $600 a month on average to devote to paying down the debt.

Meanwhile, another group, the Institute For Financial Literacy, was compiling their own 2007 statistics.  This nonprofit organization gathered information on more than 36,000 consumers who had sought credit counseling prior to filing bankruptcy.  The study reported that the average American seeking credit counseling is Caucasian, married, employed, age 33-44, with at least a high school education, with women more likely to file than men.  Almost all of them were earning (or had been earning before a job loss) less than $30,000 a year.

The primary problems leading to bankruptcy, according to the Institute, were overextended credit, job loss, and illness or injury.  These are precisely the causes I've been writing about in my bankruptcy blogs. 

Bankruptcy statistics are hardly the happiest of numbers, but my reason for sharing them goes back to the message I share with Oprah WInfrey (See Bankruptcy Blog Shares Message With The Oprah Show):  You're Not Alone!

As I've pointed out so many times before in these bankruptcy blogs, dealing with financial problems by casting blame never helps matters and almost always hurts.  Since married couples' financial issues are, by definition, intertwined (see Together For Debtor Or Worse), I've found it's especially important for couples to work together -  with their adviser as well as with each other - to tackle issues in coordinated fashion. During the more than twenty years I've worked with debtors to help; them through the bankruptcy process, not to mention having been married myself for all that time, I've learned how important it is for couples to discover ways of comfortably discussing money matters.

David Berky, in an article called "Why Do We Always Fight About Money?" writes that fights about finance boil down to lack of communication and selfishness.  Problems occur when an important financial decision is made by one spouse without input from the other.  Then, the need to be right vs. wrong in making financial decision is often very strong, Berky points out, especially in men.  Women often feel their partner is "talking down" to them.

When it comes to the kind of serious and very stressful financial difficulties with which I typically help clients in my bankruptcy law offices around the state of Indiana, it's all the more crucial, I find, to do what Berky calls "leaving your ego outside the door." Important decisions with far-reaching consequences will need to be made.  As I emphasized in my earlier blog Who's To Blame, You, Me, Or We?, the most important thing is not casting blame but getting - and using - help in time.  By the time couples (and sometimes business partners) are sitting in my office to discuss strategy, money has become a very sore spot in the relationship. Despite this (and maybe because of this stress and "soreness", it's a time to remember to talk in a patient and respectful way.  It's time for forgiveness, and most important, it's time to talk FUTURE!

In my bankruptcy blogs, I've been emphasizing the fact that bankruptcy is a process rather than an event.  One very important step in that process is the creditors' meeting.  This is a meeting that takes place within 45 days from the time a bankruptcy is filed, and it's a meeting that's presided over by a bankruptcy trustee appointed by the court. The meeting might be in an office or in a private room at the federal courthouse, and you attend this meeting along with your attorney.  The main idea behind the creditors' meeting, as the name implies, is to give the creditors a chance to ask you questions about the information on the bankruptcy forms you've turned in.  In most cases, creditors don't show up at the meeting, but they're invited.  For you, on the other hand, it's a command performance - you've got to show up or your bankruptcy case can be dismissed.

As a bankruptcy lawyer in Indiana for almost twenty-five years, I've attended countless creditors' meetings along with my clients.  In fact, a big part of the work I do is helping folks gather all the required documents and information, fill out the forms correctly, and then go over the questions that might come up at the creditors' meeting.  Generally speaking, the bankruptcy trustee will first ask about the reasons you filed bankruptcy - was it a business failure, an illness with high medical costs, loss of a job, a divorce, or a combination of several of these factors?  The trustee will ask you to verify that all your assets are listed on the forms, and will want to know how the value of those assets was determined.  You'll be asked if, within the two years before you filed, you transferred any assets to family members or friends.   You'll also probably be asked if you're expecting any money to come in from inheritances, from a tax refund due you, or from a settlement from an accident.  In short, the trustee and the creditors want to be sure that you've fairly represented what resources can be used towards repaying your debts.  Also, the trustee will ask why you chose to file under either Chapter 7 or Chapter 13, and will be assessing your situation to see if you qualify for the form of bankruptcy you've selected.  (As I explained in It's Knowing Which Bankruptcy Buttons To Push, an important part of my work with clients is choosing a strategy that is most appropriate in that specific situation.)

The creditors' meeting is only one part, but a very important part, of the process of a bankruptcy. These meetings are usually very low-key, information-gathering meetings, not anything like the confrontational trials that you see on TV shows.  At the same time, remember, these meetings are part of the court system.  That means you'll be under oath when you answer the questions. (If the trustee decides you are lying, the case will be dismissed, and no debts can be discharged.)

In Why Hire An Attorney To File Bankruptcy? I explained that perhaps the most important role an attorney plays is to make sure the financial disclosure process is done correctly.  In my close to 25 years of bankruptcy law practice in Indiana, I've worked with tens of thousands of people, and helped fill out thousands upon thousands of details on hundreds of thousands of forms.  All of this is part of the process.  Believe me, that process is so much smoother when things are done right from the get-go!    

As a bankruptcy lawyer with offices in Bloomington and Columbus, Indiana, as well as in Anderson and Indianapolis, I'm always interested in news from the different counties in our state.  Two newspaper items about the bankruptcy process caught my eye the other day.  The first had to do with Casino Aztar in Evansville, and I was interested in that news because I actually have a couple of clients from Bloomington who commute to Evansville to work in the casino.  The second item was about Steve and Barry's, whose discount clothing stores are in two of our Indianapolis malls. 

So that you'll better understand my comments about these two companies, in an earlier bankruptcy blog, ATA Business Bankruptcy Story Demonstrates The Process, I emphasized that bankruptcy is not an event that happens one day and then is over.  Instead, whether we're talking about a business bankruptcy or a personal bankruptcy, bankruptcy is a system that goes to work to restore financial stability to a company's or an individual's situation. The process goes through different stages, and could last months or, in rare cases, years.

Going back a bit, the original Chapter 11 plan presented to the bankruptcy court by the owner of Casino Aztar (a plan approved by the court) involved selling the casino to a Nevada company called Eldorado Resorts.  (As I had explained in previous blogs, a business bankruptcy filing often buys time to seek a buyer for a company that is in financial trouble.)  But now, the owners have come back to the court with what it thinks is a better plan that would raise more money to pay Aztar's creditors.  Instead of selling Aztar to Eldorado, the owners are now petitioning the bankruptcy court to put the casino up for auction.

Meanwhile, the bankruptcy court approved the acquisition of Steve and Barry's by a company named BHY Holdings for a price of $163 million.  Under the arrangement, the new owners will keep the majority of Steve and Barry's 276 stores open, eight of which are here in Indiana. In this case, a sale turned out to be the best strategy.

As a consumer bankruptcy specialist in Indiana for almost twenty-five years, most of my work is with individuals, along with some small business bankruptcies, rather than with big companies like Steve and Barry's or Casino Aztar.  But I think it's important for people to understand how the bankruptcy system works as a process rather than a one-time event.  My work involves helping folks navigate the steps of this process so that they can emerge from bankruptcy and begin on the "sequel" to the story, the part where they begin to rebuild their financial lives.

Always alert for news about the job market that can affect my Indiana bankruptcy clients, I learned recently that the Charles Schwab discount brokerage investment company is closing its customer service center in Fishers, a move that will eliminate some 800 jobs over the next couple of years.  There's a big silver lining in this cloud, though; Schwab is moving the center to Woodfield Crossing on the north side of Indianapolis, and expanding its workforce at the new center to 1,100 jobs!

The availability of jobs is a key factor for my clients as they rebuild their lives after bankruptcy.  In my earlier blog A New Job Might Mean A New Kind of Job In Indiana, I explained that Chapter 7 bankruptcy clients who've had some or most of their debts discharged by the court need to keep their bills paid and regain control of their finances, while Chapter 13 bankruptcy clients must keep up with their three-to-five year debt repayment plans.

While reading about the firm Charles Schwab (whose namesake retired a number of years ago), I couldn't help recalling the story of another man named Charles Schwab, founder of Bethlehem Steel, one of the wealthiest men of his generation.  That Charles Schwab ended up filing bankruptcy and having the mortgage on his mansion foreclosed on by Chase Bank.  When that earlier Charles Schwab died in 1939, the once multi-millionaire's debts amounted to $300,000 more than his assets.

Why do I collect historical trivia like the story of the first Charles Schwab?  First of all, my work in drafting the bankruptcy exemption laws in our state had me delving into case histories of various bankruptcy court rulings.  More important, though, I find it often helps clients who are facing their own bankruptcy situations to know that plenty of folks - good folks, hard-working folks, successful folks - have been down that road as well.

Over my many years of working with Indiana bankruptcy clients, I've seen many different  sets of circumstances that gradually build into unmanageable debt loads.  Job layoffs, medical costs, and divorce are still the big three factors leading to bankruptcy, but there are other factors as well, including small business failure, lawsuits, and resetting subprime adjustable rate mortgages.  Rarely is there one sudden event; it's usually a combination of factors building up over a period of months or even years.  Folks begin abusing credit and debit cards, selling stuff, and cashing in stuff.  Sometimes that "stuff" includes life insurance policies.

In my ongoing effort to keep up with the news and with all facets of financial planning that can help me advise my bankruptcy clients, I subscribe to different journals and newsletters on employee benefits, tax issues, real estate, and financial planning.  In the August issue of Financial Planning magazine I found an article on life insurance that has some valuable information.  "Clients' unwanted life insurance policies can be abandoned, surrendered, donated, or even sold in a rapidly expanded secondary market", the article pointed out.

Now, for most people, the money they would receive from cashing in a whole life or universal life insurance policy isn't going to be enough to avert bankruptcy or foreclosure.  And allowing a term insurance policy to lapse by not paying the premiums may mean losing needed family protection.  Bankruptcy law, in fact, tries to protect people's life insurance.

As I've mentioned in earlier blogs, I helped write the exemption section of the latest Indiana bankruptcy laws, and life insurance on a debtor's life is one of those exemptions (meaning that in most cases, the policy can't be taken by creditors to satisfy the debt).

In some cases, though, life insurance protection is no longer needed.  Perhaps the original purpose of the insurance was to fund college education for a now-grown child.  Perhaps the purpose was to back up a buy-sell agreement for a business that no longer exists. For this type of situation, the article discusses life settlements.  A life settlement is a sale of a life insurance policy to investors.  This is no brand new idea - last year alone, $15 billion worth of life insurance settlements were transacted.  In many cases, the sellers received more money than they would have received just cashing in the policy.  

Just as I always remind readers when I talk about the economy that I am no economist, I need to mention that I'm certainly no life insurance expert.  What I do want to emphasize is that individuals and families in debt should, as early as possibly in the process of dealing with a deteriorating financial situation, seek out professional help.  Then all options can be explored, including how to best deal with life insurance policies.

I read a lot, and I keep finding tidbits to share with my bankruptcy blog readers that bring out concepts I think are important.  John Herman, in his business book "Hermanisms", recalls three basic Air Force emergency rules to follow when an airplane is falling:

1. Identify the problem
2. Maintain aircraft control
3. Land (eject if needed) as soon as practical.

John Herman suggests that business owners follow the same rules when their business is failing badly.

As a bankruptcy attorney who's provided counsel for small business owners for many, many years, I can truly relate to this part of the John Herman book.  I've never been in the Air Force, but I imagine that trained pilots know they've been entrusted with a highly complex, expensive piece of equipment.  It has to be an extremely wrenching decision for them to eject from their plane.  From my own work over the years, I know how much courage it takes to "eject" from a business that was built on so many hopes and dreams.  In my bankruptcy law offices in Anderson, Bloomington, Columbus, and Indianapolis, I've talked with many small business owners who sacrificed their health and their personal life to build their business, and so I have an idea of how awful it feels when they realize their business can't survive.

First and foremost, as I stressed in my earlier bankruptcy blog, Before Bankruptcy, The Brain Isn't Interested In Reality, if a financial adviser such as a bankruptcy attorney can help, the sooner you seek out that help, the better. The earlier some objective strategizing can be started, the greater the number of options available.  As John Herman explains, just as with the failing airplane: 1. Identify the problem (this is the point to begin seeking help).  2.  Steady the business.  3.  Safely exit the business. If your business is really failing, Herman points out, don't crash with it.  Get out alive.

As a bankruptcy attorney in Indiana, I find myself doing a lot of work around business "crash sites".  But it's precisely for these situations that the bankruptcy system of law was created, and it's precisely those situations that my professional life is about:  Wishing financial problems would go away doesn't make them go away.  As Herman says, "It is what it is."  I help people walk away alive, so that, after the dust has settled and the crash site has been cleaned up, they can decide to go build a new airplane if they want to!

As I see it, staying on top of the local, national, and world news is part of my job as an Indiana bankruptcy lawyer.  For clients emerging from a Chapter 7 bankruptcy, finding or holding onto steady work is a key factor in their making a new financial start.  For those emerging from a Chapter 13 bankruptcy, which involves making regular debt repayments, holding steady work is crucial to their plan's success.

The rising cost of fuel has been in the news a lot lately, and it's had several direct effects on the job market here in Indiana.  2008 has been a very difficult year in the automotive industry, with many layoffs.  Now another 300 jobs will be eliminated in Kokomo, I learned.

On the flip side of the coin, the logistics business has been growing rapidly in our state.  Logistics means packaging and transporting goods, and that means fuel.  Since Indiana is within one day's drive to just about anywhere in the U.S., our very location means savings on shipping costs (both truck fuel costs and air shipping costs). Because of that, Amazon.com has plans to hire more than 1600 people in Munster, Plainfield, and Whitestown.  All of this is extremely relevant to my work, as my bankruptcy law offices serve 38 Indiana counties.

Also in the positive column of news relating to fuel, Polaris Laboratories plans to double its work force.  Polaris is a fluid analysis lab company that tests oils, fuels, and coolants.  Their work results in companies savings millions of dollars in equipment downtime and equipment replacement.

As a bankruptcy attorney in Indiana for more than two decades, I've witnessed many changes in our local economy.  Since so many of our Indiana jobs were manufacturing-related, improvements in technology hit our job market especially hard.  In fact, for many years now, Indiana has led the nation in per-capita bankruptcy filings. Many of the layoffs that played a part in clients filing bankruptcy came as a result of these shifts in manufacturing employment. It's very encouraging to me to see there are several silver linings in the clouds caused by fuel costs.

Knowing my work with homeowners in debt, a friend's parents shared an article from their AARP magazine called "Focusing On Foreclosures".  According to a statistic from the Mortgage Bankers Association quoted in that article, more than 31,000 Indiana homes were in foreclosure during the first quarter of 2008 alone!  As a bankruptcy attorney in Indiana for twenty-plus years, I'm often asked whether bankruptcy always involves foreclosure, and whether foreclosure can help avoid bankruptcy. In an earlier bankruptcy blog, Dis Or Dat? Foreclosure Or Bankruptcy?, I explained that each client's situation is different.  When I meet with folks in one of my Indiana bankruptcy law offices, we discuss all options that can help them get a handle on their financial problems.  The best plan might mean allowing a foreclosure (or using a Deed in Lieu of Foreclosure or Short Sale strategy), or it might involve keeping the home and using a Chapter 13 bankruptcy repayment plan.

The AARP article focused on the Indiana Foreclosure Prevention Network, which is a partnership among government, the private sector, and community groups (including AARP).  The IFPN developed a hotline that is available for calls from consumers twelve hours every day of the week, and also has a website that provides debtor information and education.  The organization holds events to bring debtors and lenders face to face to try to work out settlements and avoid foreclosure.

My own experience in dealing with literally tens of thousands of individuals in debt has taught me one important lesson that I try to convey to readers in all my bankruptcy blogs.  That same lesson is emphasized in the AARP article in a quote from Sherry Seiwert, executive director of the Indiana Housing and Community Development Authority: "The earlier they call, the better we will be equipped to assist them," she states.  And I, veteran bankruptcy attorney Mark Zuckerberg, say, "Amen to that!"