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.

An interesting tax ruling having to do with bankruptcy was talked about in a recent tax information newsletter (see www.sapursteincpas.com).  Of course, as an Indiana consumer bankruptcy specialist who deals in foreclosures and debt, I found this story especially informative.

A couple had filed for bankruptcy recently enough to prevent them from qualifying for a mortgage.  Their son decided he would buy a home for his parents, and so he took out a mortgage based on his own credit record.  The parents were the only ones living in the home.  In fact, it was the parents who made all the mortgage payments and who took care of all the taxes and all the maintenance expenses.

The tax question that arose and was finally referred to tax court was:  Who gets to deduct the mortgage interest on their taxes - the son or the parents?  The court ruled that, even though the son was the actual owner of the home, the parents were the "equitable owners", the ones getting the benefit of living there.  The court considered the fact that the parents are taking responsibility of ownership, paying for taxes and upkeep.  Even though the parents are not liable for the mortgage, the court ruled that they could take the tax deduction for the interest portion of the payments.

One aspect of this story that I want to emphasize to readers is that each bankruptcy situation is different.  In this case, it appears, family members cooperated, working together to devise a plan that would work for them (rather than casting blame on each other, as unfortunately often happens in bankruptcy situations).  Apparently, too, the son and parents sought professional help to get a ruling in their special circumstances.  Both these steps (cooperation and support among family members and seeking professional advice) can prove extraordinarily beneficial in any bankruptcy situation.  As I say in many of my bankruptcy blog posts: Get help.  Devise a plan.  Work the plan.

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!"

Foreclosures have been featured a lot in the news lately.  In one of my very earliest bankruptcy blogs, Dis Or Dat? Foreclosure Or Bankruptcy?, I pointed out that there is no "one size fits all" solution, and that designing exactly the right plan for each client's situation is what my work as an experienced bankruptcy attorney is about.  In other words, in working with some clients, it's best to create a strategy focused on avoiding foreclosure, and in other situations, that may not be the way to go.

In deciding which form of bankruptcy to file, one of the factors to consider is that a Chapter 13 bankruptcy offers individuals an opportunity to save their home from foreclosure.  A chapter 13 can be referred to as a wage earner's plan of bankruptcy, because it is meant for people who have regular income coming in that they can use to make installment payments to their creditors. To qualify for a Chapter 13 bankruptcy, a person's unsecured debts (such as credit card bills, utility bills, and medical bills) must fall within certain limits (the number is indexed for inflation, and it's now $336,900.)  Their secured debt (such as car payments and mortgage) also must fall within a limit (now $1,010,650).  The process is quite detailed, one reason it's important to seek expert legal counsel.

The point I want to bring out here, though, is that, by choosing Chapter 13 rather than other forms of bankruptcy, individuals can stop foreclosure proceedings on their home.  If they are approved for a Chapter 13, they will "cure" their delinquent mortgage payments, but they'll be able to do that over time (three to five years), all the while keeping up with the regular mortgage payments and saving the home.

A second reason some people choose to file a Chapter 13 bankruptcy is that this kind of bankruptcy has a special provision that can protect co-signers on consumer debt.  In some situations, this can be very important in protecting the assets of parents, spouses, or adult children. (In a Chapter 7 bankruptcy, by contrast, co-signers are not excused from liability.

Over almost twenty-five years of practicing bankruptcy law in Indiana, one important lesson I've learned is that people's financial lives tend not to be cut-and-dried; each situation has different factors that must be weighed in coming up with a plan that is the least damaging to the people involved, as well as to their families, business partners, and creditors.  Yet it's important to choose a plan that offers bankruptcy clients the greatest chance for rebuilding their financial lives.  Sometimes, after a long day in my office or at the bankruptcy court, I find myself sighing, "It ain't easy, being a bankruptcy attorney!"  But then I remind myself how rewarding I find this work, because I know I'm helping people get a fresh financial start.
 

Foreclosure pets, foreclosure fires, and now, foreclosure weeds - is there no end to the devastation brought about by home foreclosures?  As a consumer bankruptcy specialist in Indiana, I've been dealing with bankruptcy and foreclosure issues for decades, but I must confess I hadn't given enough thought to weeds.  Weeds make everything worse in a foreclosure.

By way of quick review, once a property is foreclosed, the Sherriff's Department holds an auction.  Meanwhile, until that Sherriff's sale takes place, whosever name is on the deed is responsible for the upkeep of the home. Overgrown, dirty yards are an eyesore in any neighborhood, negatively affecting the value of other homes nearby.  In some climates, the weeds dry out and become a fire hazard. In fact, fire officials warn that dry weeds should be kept at least fifteen feet from houses.

In cases where a builder files bankruptcy before selling all the homes in the addition, the homeowners who have moved in are stuck with the problem, and their homeowners' association may be stuck with the weed-whacking bill as well.

Some towns already have ordinances that allow officials to enter a foreclosed property and cut down overgrown weeds, I'm learning, and others are creating ordinances of their own as the problem gets worse.  Costs for the enforced weed-trimming are added to the taxes on the property, making homes even more of a challenge to sell.

Foreclosure of a home is certainly not something people would choose for themselves or for loved ones, but my experience over twenty-plus years as a bankruptcy attorney has taught me that in certain circumstances, foreclosure is actually the best option for a client (see Keeping Home, Sweet Home - It Depends!).  Abandoned pets, arson, weeds - these are all part of a foreclosure picture that could have been at least a little prettier.  If only people would face up to their situation and get help earlier in the process of undergoing financial difficulties, some foreclosures might be avoided, and there might be a whole lot less weed-whacking going on!

 

In my earlier bankruptcy blog, Affordable Housing At Mapleton Park, I highlighted an affordable housing project in the Fall Creek area of Indianapolis.  I explained that, as a bankruptcy lawyer in Indiana, I take an interest in all news that affects my clients.  I'm especially interested in news about two topics: housing and jobs.  You might even say those are the twin pillars of the rebuilding process after bankruptcy.  In my work with the bankruptcy system for the past twenty-plus years, I often find myself dealing with job loss and with housing loss through foreclosure actions.  As I help my clients rebuild their financial lives after bankruptcy, we'll be working on gains.  And that’s when those two factors will serve as keys to success: the availability of good jobs and the availability of affordable housing.  That's why I was glad to read in the North Indy Star last week that another affordable housing project is planned, this one in the South Broad Ripple area.

Carreau Design has already gained city land-use approval for an $18 million development project in the 4900 block of North College Avenue, to be called the Uptown.  The building will include street level businesses, with three stories holding 72 apartments.   Meanwhile, a neighborhood association has been organized called College Avenue Neighborhood Development Organization - CAN DO! for short.  Resident Susan Smith, who helped get this organization together, says, "We aren't talkers.  We're doers."  What a great motto that is for redevelopment in general, don't you think?  Those words, and this Uptown project really resonate with me as a bankruptcy lawyer.  After all, isn't that what bankruptcy is designed to do?  Redevelop people's lives, that is.  I'm proud to say, together with my bankruptcy clients, we CAN DO that!

In one of my earlier blogs, Money And Emotion Mixed In Bankruptcy, I discussed the fact that, in the course of almost twenty-five years guiding people through the bankruptcy court process, I've learned that debtors tend to have a lot of negative feeling going on.  Some of this negativity is caused by the financial problems they're facing, but often it's made worse by myths they've heard about bankruptcy, things that simply aren't true.  In that blog, I emphasized that fear, self-blame, and even despair are normal and natural emotions to have during a time of great financial stress.  Yet the only emotions that are going to be useful during a bankruptcy are hope and resolve.  There are things to be done, actions to be taken to handle matters (of course I'm there to help), and only the clients' inner strength, resolve, and focus can drive those actions.

The other day, in a children's story collection, I found the most wonderful tale.  This story brings out the very point I was trying to make in that blog. (In fact, I believe I'm going to have everyone who's considering filing bankruptcy or who is threatened with foreclosure read this story.)  It's called The Magic Ring, and it takes place in the time of King Solomon. In the story, Solomon hears about a ring that has a magic quality: the ring makes a sad person happy and a happy person sad.  The king gives his chief general six months to locate the ring. The general travels far and wide, asking goldsmiths, silversmiths, merchants, sailors, captains of caravans from China and India - no one has heard of such a ring. Finally, an old man calls out to the general, and gives him a plain gold ring on which four words are inscribed. 

The moment Solomon reads the words on the ring, he, who has all the riches in the world and all the wisdom in the world, becomes sad, realizing how circumstances could change his life in an instant.  Yet Solomon realizes that the same four words could serve as tremendous comfort for people going through troubled times. Here's what was written on the ring: "This, too, shall pass."

Over the years, I've talked with literally tens of thousands of people, usually at the most trying times in their respective lives.  Experience has taught me that people are best off dealing with their own feelings rather than suppressing them.  At the same time, I know debtors need to make some very important decisions so that they can get through the bankruptcy process and move on with their lives.  Since I'm a bankruptcy attorney in Indiana, the focus of my work is helping people take informed action to improve their financial circumstances.  I think remembering the words engraved on Solomon's ring might help my clients- and me - keep matters in perspective. However bad the stuff is that's going on right then - this too shall pass!

Always alert for news that can be of use to my Indiana bankruptcy and foreclosure clients, I was very interested to learn about a tax provision spearheaded by Indiana Representative Baron Hill and Indiana senator Evan Bayh as part of the new housing bill.  In my earlier bankruptcy blog, Housing Bill Offers Help Avoiding Foreclosure, I explained the national housing bill just passed by Congress, which focuses on first time home buyers and on refinancing of mortgages.  In working on the tax break as part of the housing bill, Bayh and Hill wanted to help Hoosiers who are coping with declining home values and rising property taxes by adding a tax break for property taxes paid..

In order to understand this tax break, you need to know that up until now, only those folks who itemized their deductions on their federal tax returns were able to take a deduction for property taxes paid.  That meant that those people who claimed just the standard deduction couldn't get any advantage from having paid property tax.   Under this new provision, non-itemizers can deduct up to $500 of their property tax from federal taxes (families can deduct up to $1000).  It may seem like a small thing, but actually almost one million Indiana homeowners will be able to benefit from this break.

I talk with thousands of people in my bankruptcy law offices in Anderson, Bloomington, Columbus, and Indianapolis.  For some of these people, the new tax break will be "too little, too late".  In other words, the tax break will not provide them with enough savings to help them avoid foreclosure on their home or to stave off bankruptcy.  The way I see it, though, any financial benefit that can offer help to homeowners is an effort in the right direction.

Often, as part of my work as an attorney focused on consumer and small business bankruptcy, I find myself discussing a client's employee benefits from work.  Since I do my very best to keep up with developments in every area that can impact my clients, I read a journal called Employee Benefit Adviser. The July issue of this professional journal carries a very wise piece by Editor-In-Chief Robert Whiddon, called "Hope Is Not A Strategy". I was immediately attracted by the title, because, as I've stressed in so many earlier bankruptcy blogs, many small business owners keep hoping things will turn around for them.  Meanwhile, they put off putting some strategies into place that can help protect their assets in the event their business simply cannot survive.

I like Whiddon's attitude towards employee benefit planning and the advice he's giving employee benefit advisers: "We all fall into the hope trap.  We shouldn't anticipate or plan for failure, and it's important to tackle life each day with a sense of optimism.  But do we have specific plans to achieve the things we want to make happen?  'Sort of' and 'maybe' are too close to hope for my tastes."

I found these words particularly apropos for both my individual bankruptcy clients and my small business bankruptcy clients in Indiana.  The financial troubles that lead to bankruptcy and/or foreclosure on a home or business property very rarely happen overnight.  In fact, after almost twenty-five years of dealing with clients' personal and business finances through recessions and periods of booming growth, I find that it's usually a combination of factors, piling up over months and even over a period of years, that finally become too much for clients to handle on their own. 

The earlier in the process that I enter the picture as a bankruptcy adviser, the greater the number of options will remain open for us to use.  Too often the result of just waiting and hoping, I find, is that troubles tend (both literally and figuratively) to compound.  Even if bankruptcy or foreclosure becomes inevitable, those clients that began planning with me at the first signs of trouble ended up with more satisfactory results.
 
As Whiddon so aptly points out, hope is not a strategy.  The funny thing I've found, though, is that having a strategy in place ahead of time really does offer hope.

As a consumer bankruptcy specialist, I always do my best to stay on top of the news - world news, national news, and particularly news that directly affects citizens of our state. There's certainly been no shortage of important news lately.  Today I want to highlight two stories that may seem like "tidbits" in the big picture of things, but I think they could be big for Hoosiers, and especially favorable for my Indiana bankruptcy clients.

On Thursday, July 24, Step #2 kicked in.  I'm talking about the three-step minimum wage hike.  The federal minimum wage jumped 70 cents to $6.55 an hour.  Big yawn, you think?  Think again.  First of all, last summer's Step #1 increase from $5.15 an hour was the first increase in more than ten years.  True, not very many workers earn only minimum wage (only 36,000 in all of Indiana, according to the Bureau of Labor Statistics).  Critics say employers will simply hire fewer workers or hire illegal ones.  What I see, though, is a general trend towards higher wages that favors the more educated and better-trained workers.  This trend will work in favor of bankruptcy or foreclosure clients who are trying to make a fresh start and keep up with debt repayment plans.

The second tidbit comes in the form of kudos for our Hoosier state.  For the first time in history, Indiana has earned a Standard and Poor's top credit score rating.  Given the flood damage and housing problems and job layoffs we've had, this is just an amazing accomplishment.  As a state, we will save millions of dollars a year in bond interest.  This will help our public school systems, in addition to helping speed up paying for the Lucas Oil Stadium, and it basically means more money can be devoted to all programs run by the state.  Indiana, by the way, was one of only nine states to earn this high a rating. 

I've said this many times before, and it bears repeating:  The most important chapter of any bankruptcy story is the sequel, the part where people rebuild their lives.  I'm no economist (as I've also noted before), but I can see that both these two news tidbits could mean big (and good) things for my bankruptcy clients in Indiana.
 

At the end of last month, I was happy to learn, the much-talked-of housing bill was passed by Congress. As a bankruptcy lawyer in Indiana for more than twenty years, I deal every day with the issue of foreclosure.  As I brought out in Keeping Home Sweet Home - It Depends, for some clients who simply bought "too much house", it might make sense for them to lose their home and downsize, perhaps arriving at a compromise with their lender to accept a "deed in lieu of foreclosure" or doing a "short sale".  For other clients (those with children for whom it's important to stay within a certain school district, for example), it's better to make every effort to preserve their present home.

This new bill does several things, and I'll mention just three of the big ones here:
a) It provides the Federal Housing Administration with $300 billion to go towards offering fixed rate mortgages to debt-ridden homeowners.  b) It offers tax breaks to first time home buyers, including low-income buyers.  c) It gives states $11 billion in tax-free bond backing to make low interest loans, to build low income rental housing, and to refinance subprime mortgages.

Bankruptcy and foreclosure are closely related, and on both, I always advise asking for professional help at the first signs of trouble.  The new housing bill, particularly in light of the fact that President Bush dropped his earlier opposition to it, means problems are being addressed.  And that's been the core of my work for the past twenty-plus years - addressing problems head-on, helping clients create a strategy, and helping them begin the process of making a fresh financial start.

When it comes to jobs in Indiana (a subject in which I have an intense interest as I help my Indiana bankruptcy clients rebuild their finances), the president of the Fishers Town Council, Scott Faultless, hit the proverbial nail on the head:  "Businesses are looking to come to a site where they can find employees with the requisite level of education and the ability to get additional education close by" (Indianapolis Business Journal, July 14-20). 

The past couple of months, I've been writing in these bankruptcy blogs about new jobs that are being created all over Indiana.  The crucial thing, though, for people who've suffered job layoffs and are trying to avoid bankruptcy and foreclosure, as well as for people emerging after bankruptcy and trying to get their finances back on track, is that they must be able to qualify for these newer, high skill/ high tech jobs that are coming to our state.  I'm especially thinking of the folks who filed Chapter 13 bankruptcy, taking on a three to five year repayment plan.  Well-paid jobs are essential if these plans are to succeed.

Fishers, Indiana just hired Mark Long, who built I.U.'s Energy Technology Center, to spearhead the development of a new Research and Technology campus in Fishers.  Meanwhile Indiana has been adding bioscience jobs faster than all other types, in fields including medical devices, agriculture, medical research, and pharmaceuticals. Indiana now has almost 50,000 bioscience jobs.

The challenge will be to fill those jobs, not only with new graduates, but with retrained mature employees from manufacturing and other industries.  Training will be the byword for our state.  Training will certainly be the key for many of my Indiana bankruptcy clients as well as for those I'm helping avoid bankruptcy or foreclosure.

My banker friend R. (who shared the sad story about the Oregon homeowner who'd waited until it was too late to get help avoiding foreclosure) told me his thoughts, as a real estate banking professional, about that story and about the "mortgage mess" in general.

"In this case, the reason the man got behind on his mortgage isn't the important thing. People tend to want to look for blame.  I think it's almost ingrained in us to do that now.  It doesn't matter if the man originally got his mortgage by looking only for the lowest rate and not seeking the advice of an experienced mortgage lender.  It doesn't matter if he lied on his application to inflate his income.  It doesn't matter if his mortgage lender got him approved for a mortgage that was high risk just to make a commission.  I don't know if any of those things happened and frankly don't want to know.  The bottom line and lesson here is that the homeowner waited too long to get help, just hoping that things would 'work themselves out'. I don't know this individual well, but it's pride, in my experience, that has been the reason people don't seek help."

"It's important to remember", added R., "in this mortgage environment, banks really don't want to own your home.  There are options to help people in trouble, and it's extremely important to get out in front of the trouble immediately.  It could be the difference between losing or keeping your home."

My goodness, R.!  You must have been reading my bankruptcy blogs - I couldn't have made the case any better than that!

Although my bankruptcy law offices are all in the state of Indiana, I like to stay on top of bankruptcy, foreclosure, and consumer debt news in other parts of the country. R., my banker friend from Portland, Oregon (the one who told me the story I shared in West Coast Story About Blockbuster Builder Gone Bankrupt) told me another true story, this one about a foreclosure that might have been prevented, but wasn't.

R. received a call from a client saying a neighbor of his needed R.'s help and advice. The neighbor then got on the phone and explained to R. that he'd be losing his home to the bank in one week.  The house had been appraised at $650,000 or so, and the mortgage balance was just under $400,000.  R. began calling around to his own bank people and other lenders, but a loan package couldn't be put together quickly enough.  In fact, had there been just two more working days, a private temporary loan might have been worked out and the foreclosure might have been postponed long enough to obtain permanent refinancing.  The worst of it is that, in Oregon, the owner loses his equity in a foreclosure.  By waiting too long to get help, this debtor lost all his options, and also the equity he'd built up in the home..

As I emphasize in many of my bankruptcy blog posts (see Going, Going, Gone On Home Foreclosures), during the twenty-plus years I've practiced bankruptcy law, I have been urging folks to get professional advice as soon as their circumstances take a downward turn.  The earlier I can help clients explore different options and negotiate with their creditors, the more options will be open to them.

As of the beginning of this month, all but one of the 38 Indiana counties served by my Indiana bankruptcy law offices have been added to the federal disaster declaration list. This is one of those bad news/good news things I am so used to in my line of work.  What I mean is that, when clients come to see a bankruptcy attorney, they're wrestling with bad news, not good.  Nevertheless, it's good news that they've sought professional help, so we can get to work on them making a fresh start. I think the news about the disaster list falls in the same category. Obviously the flood damage is very, very bad news.  The fact that help is available for eligible individuals and businesses to recover from the effects of severe storms and flooding, though, is the beginning of something good.

The latest two counties to be added to the list are Hendricks (Danville area) and Tippecanoe (Lafayette areas).  Officials from the Indiana Department of Homeland Security and the Federal Emergency Management Agency (FEMA) made the announcement on July 1st.  Counties already included are Adams, Bartholomew (which I mentioned in my blog on Columbus, With HUD Help, Columbus Homeowners Hit By Flooding Might Avoid Foreclosure), Brown, Clay, Daviess, Dearborn, Decatur, Gibson, Grant, Greene, Hamilton, Hancock, Henry, Huntington, Jackson, Jefferson, Jennings, Johnson, Knox, Lawrence, Marion, Monroe (Bloomington area), Morgan, Owen, Parke, Pike, Posey, Putnam, Randolph, Ripley, Rush, Shelby, Sullivan, Vermillion, Vigo, Washington, and Wayne.

As a personal and business bankruptcy attorney in Indiana, it's vital that I help my clients locate and then navigate all the resources available to them to avoid foreclosure, negotiate with creditors, and then, if bankruptcy is inevitable, select which class of bankruptcy filing is best for their situation.  Many Indiana residents were under severe financial pressure even before the flooding, due to some combination of the usual factors that lead to bankruptcy (medical expenses, divorce, job layoffs, housing crisis, and tax liens).  Storm damage to homes and business in these counties only added to the problem. But apparently help is not merely on the way - it's here!  My task is to help people find and use that help. 

Being a bankruptcy lawyer in Indiana is all about help - giving help and finding help.  Lately, Indiana homeowners in many of the 38 counties I serve have been needing all the help they can get.  Columbus, in Bartholomew County, is one of the four cities in which I have bankruptcy law offices, and that area was one of the hardest hit.   In an earlier blog, For Flood Victims, FEMA Aid Can Help Without Hurting In Bankruptcy, I talked about the special aid offered through FEMA (Federal Emergency Management Agency), through the Small Business Administration, and through the Indiana Bureau of Motor Vehicles.

Helping clients avoid foreclosure on their home (whether they are renters or owners) often plays a large part in the assistance I offer through my four Indiana bankruptcy law offices. It's important for me to be familiar with all the resources available to clients facing possible foreclosure.  It was welcome news to me, therefore, when HUD (U.S. Housing and Urban Development) announced support for homeowners and low-income renters forced from their homes during the severe storms.  There are several varieties of help offered, but one of the most significant is that HUD is granting immediate foreclosure relief by granting a 90-day moratorium on foreclosures of FHA insured home mortgages.  HUD also urged loan servicing companies to offer loan modifications, re-financings, and to waive late charges.  What's more, HUD has a loan program for rehabbing homes that are salvageable. These relief efforts are being offered in almost all the counties I serve, but Columbus was certainly one of the hardest-hit , with hundreds of homes and dozens of businesses severely damaged or even totally destroyed.

Emerging from bankruptcy always involves rebuilding of financial lives.  Now, because of the flood damage, many of my clients will be involved in rebuilding of another sort as well.  By helping my clients locate and take advantage of all the different flood assistance resources, I'll be involved in their rebuilding process on both counts!

When a person gets behind in paying debts, creditors begin to take action. And, when that happens, as I've warned many times in earlier bankruptcy blogs, it's time for the debtor to take action, too.  Telephone calls at home and at work from creditors could be just the beginning.  Foreclosure proceedings may be started against a debtor's home.  Automobiles may be repossessed, along with other property.  If creditors obtain a court order they may garnish wages, put liens on property, even seize bank account.  Working with a bankruptcy attorney can help avert a good deal of the ensuing pain, provided steps are taken before matters become worse.

Despite some myths, most bankruptcies are very private affairs. The rare exceptions tend to involve well-known local business leaders or political figures.  These unfortunately cases serve as a reminder of how business failures can sink even the most experienced of entrepreneurs.

Sometimes the first episode of a story is a Chapter 7 business bankruptcy.  Then, sometimes, a personal bankruptcy filing will follow, especially if the business was involved in lawsuits and ends up losing in one or more of those.  In the background there might be tax issues compounding the problem.  With wages garnished to pay back taxes, it can be very difficult to catch up and begin to rebuild financially.  Although, as I explained in my earlier blog, It's The Business, Stupid!, corporations and LLC's can file bankruptcy without the owner himself filing, the cumulative effect of many business debts and back taxes owed can resulted in personal bankruptcy even for some very once proud business personalities.
As a bankruptcy attorney in Indiana specializing in both small business bankruptcy and personal bankruptcy, I'm saddened but not surprised when I encounter, in my work with clients,r the sequence of events I just described    Almost all small business owners' personal and business finances are closely intertwined.  In fact, a 2005 study published in the California Law Review reveals that more than 20% of personal bankruptcy filings are business-related.  The bankruptcy system is designed to provide a safety net and a fresh start in situations like this. For a free capitalistic system to work, entrepreneurs need to be willing to take risks.  The fact that there is a "last resort"  in place when the best efforts fail serves as encouragement to do just that.

As a bankruptcy lawyer with one of my four Indiana offices located in the city of Anderson, I'm always alert for news affecting that town.  Anderson has been particularly hard hit by the General Motors pullout, which began in the mid-seventies and accelerated in the 90's, eliminating more than 20,000 jobs.  Many downsized workers, some who faced medical illness along with job loss, ended up filing bankruptcy.  Retail establishments of all types suffered, because there was little money for customers to spend; the entire area was in economic blight.   Some familiar symptoms included increasing numbers of people using expensive debt consolidation services and payday loans.

Today, slowly but surely, Anderson is rebuilding, in large part due to a project called the Flagship Enterprise Center, a collaboration of Anderson University and the City of Anderson.  Flagship is a business incubator and accelerator, using engineers and other experts, many once employed at GM plants and research facilities, to help "host" new companies.  These companies include automotive firms, but also software, medical equipment, and other product lines.  Thirty of these fledgling companies are still housed at the Flagship Center itself, which is off Exit 22 of the I-69 highway.

As a bankruptcy attorney in Indiana, I know how crucially important it is for our state to create new, good-paying jobs.  For debtors emerging from bankruptcy, their getting back on track financially will depend in large part on the availability of jobs that can in turn provide steady, decent wages.  One of Flagship's functions is to help companies recruit and train workers in the newer technologies and businesses that are replacing the old manufacturing plants.  Increased hiring by these new enterprises in turn will mean more money being spent in local stores, beauty salons, restaurants, movie theatres, and furniture shops.  I hope that, over time, employment growth will mean fewer people buying groceries using credit cards or turning to payday loans to tide them over to the end of each month.  I expect it will mean fewer foreclosures and more people buying health insurance, opening bank accounts, and investing in IRAs.   In Madison County, Indiana, as the Broadway song goes, "This could be the start of something big."

You might imagine that I, as a consumer bankruptcy specialist in Indiana, spend most of my time involved in bankruptcy court.  But a good part of my work with clients involves foreclosure issues.  Often I'm helping to negotiate settlements between homeowners and lenders, using strategies such as short sales, deeds in lieu of foreclosure, or some form of mortgage refinancing.  I've been doing these things for almost twenty-five years.  But, because of the severe mortgage and real estate crisis of the last two years, I'm involved more and more often with renters who are losing their home to foreclosure.  In many of these instances, even before the housing crisis, a family or an individual was already financially squeezed for one or more of the usual reasons: job layoff, medical expenses, or divorce.

For home renters, discovering (often in very sudden fashion) that their home's owner is now a bank or investment trust that wants them out, it's a very difficult situation.  Even if they're allowed to stay in the home for now, the owners, stuck with properties they can't sell, very rarely perform needed repairs or take care of the utility bills.  At any time, the renters could be notified that they need to move.  Tenants who don't obey immediately could be served an eviction notice, and, with one of those on the record, it will be very hard to find another landlord willing to rent to them.  I'm learning that this very situation is a lot more common than I realized - according to one statistic I read, more than one third of all foreclosures nationwide are rentals.

Do renters have rights?  I'm finding out more about the issues.  Leases are typically for one year.  That means, in most cases, the mortgage predates that lease.  As long as 30 days' notice is given, the renters have no legal right to remain, because the rule is that foreclosure nullifies a lease if the mortgage was in place ahead of the lease.  So, what can renters do?  They could take the owner to small claims court, demanding reimbursement for moving costs, expenses for finding a new place, etc.. 

The irony about all this is that the smartest move on the part of the bank or real estate trust who has taken over ownership would be to actually keep the tenant in the house just as long as possible while the place is being listed for sale.  Empty houses tend to drop in value without upkeep (often vandals target empty houses, too).  I advise renters to turn the tables, asking the new owner for rent concessions in exchange for sticking around and keeping the house in decent shape.  Foreclosures seem to be hurting everybody….

Harvard's most popular class isn't on law or business; it's a class on happiness.  Tal Ben-Shahar, author of the book "Happier", teaches the positive psychology course, based on research done by Harvard in partnership with the University of British Columbia. The studies show that, unless people are so extremely poor that each extra dollar would make an enormous difference in their lives, getting more money generally doesn't lead people to have more positive feelings.

One of many books written on the subject, Sonya Lyubomirsky's "The How Of Happiness" explains this effect by observing that people tend to be made happy by experiences rather than by possessions.

In my work as a consumer bankruptcy specialist for longer than two decades, I've made my own study of the mutual effects of money and happiness.  It's obvious that, for individuals who are consulting an attorney in my field, that experience is hardly one of the high points of their lives.  In fact, many are near-exhausted from stress, nearing the last stages of a long struggle to "keep things together" for themselves, their families, and, often, for their businesses.  As I described in an earlier blog, Bankruptcy Blog Shares Message With The Oprah Show, I try hard to convey two messages to my clients: "You are not alone!" and "Help is here!"

It's interesting that the British Columbia/Harvard study was mentioned in last month's issue of the Journal of Financial Planning.  College students surveyed ahead of the study thought extra money would indeed add to people's happiness.  But the study itself revealed that people who shared the money with others proved to be happier than those who spent it on themselves.

My own "fix" on these study results is this:  Many bankruptcy clients suffer from feelings of embarrassment and shame as we discuss foreclosure, bankruptcy, and business failure.  These clients are focused on their own feelings.  Everyone else, they think, will pity them or look down on them, so they feel isolated from others.  I know that focusing on others will help them heal.  And, while these clients have no extra money to share with others at this point in their lives, they can share their time and their affection and friendship.  I try to turn their attention away from themselves and their immediate problems, and have them focus on the fresh start they'll be making towards their future as they emerge from bankruptcy.