As an Indiana consumer bankruptcy specialist, I've been dealing with debt, twenty-plus years and tens of thousands of people worth of it.  So, when I saw Indianapolis Business Journal managing editor Greg Andrews' piece titled "Firms With Debt In Check Starting To Reap Rewards" (Oct. 6 issue), I spent some time reflecting on how his observations jibe with my own experiences working with individuals and small business owners on debt issues and bankruptcy.

"In times like these", explains Andrews (referring to businesses' managing their balance sheets), "doing it well is what separates the winners from the losers." He goes on to report on how different corporations are handling their affairs in this brutal credit environment.  "Many executives who thought their firms had ample financial breathing room now aren't so sure.  No doubt, some are tossing and turning at night."

That last remark exactly describes what I'm seeing among individuals and small business owners.  I wrote about the situation in Not Business As Usual When Bankruptcy Looms.  Despite the myths about bankruptcy being the result of irresponsible overspending, truth is, the majority of people who arrive (no doubt after many, many sleepless nights), at one of my bankruptcy law offices around central Indiana, thought they had ample breathing room.  Almost to a person, they'd made their mortgage payments, done some savings for retirement, tried to teach their kids about handling money - the usual.  They just didn't see the job layoff coming, or the impossibly high costs of the unexpected medical disaster that hit a family member, or the enormity of the credit crunch that came back to roost on the small business into which they'd poured so much effort.

These people can't reap the rewards of getting their debt in check, at least not right now.  Greg Andrews talks about the companies in the winners' column who have enough cash to survive and even to take advantage of buying opportunities.  Many of my clients need help getting their debt in check to they can be winners again, and the only way they can hope to do that is with the help of the bankruptcy court system safety net.  IBJ quotes financier Warren Buffett's speech at the Berkshire Hathaway annual meeting, saying "Companies that need to tap credit markets to keep themselves going are beholden to their lenders." 

So many individuals - hardworking people who functioned ably within the system and believed in it are learning that truth the hard way.  And that's where you'll find me, at the junction of debt and debt-in-check, helping those who aren't in the winners' column just now.  (But, - just you wait!)

People who visit bankruptcy law offices have piles of bills, and a big part of my work as an Indiana bankruptcy attorney involves going through those piles of paper with them.  I almost always find myself wishing we'd been doing that pile-sifting a lot earlier in the game, because almost always what I find is that folks who cannot pay all their bills tend to choose the wrong ones to pay first.  They either pay the smallest bills, the ones they can get completely off the pile, or, worse, the companies with the most aggressive collection policies.  Although the best-case scenario would be one where all debts get paid, there are certain bills that have more immediate and more serious consequences if they're not paid.

In the immediate-consequences category would go car payments, rent or mortgage, and phone bills; if you don't pay those pretty much on time, life as you know it can pretty much stop happening.  The serious-consequences pile of bills would include federal tax bills, student loans, and child support.  Initial consequences might include having your bank account or other assets taken, or your wages garnished.

All of this is serious stuff, and, let me tell you, it happens to serious, hardworking people who just don't think clearly when everything starts to go wrong for them.  That's why I keep writing about how important it is to get legal representation as early in the process as possible (see Before Bankruptcy, The Brain Isn't Interested In Reality).  My work as a bankruptcy attorney for example, includes keeping cars from getting repossessed before it's too late, helping negotiate with mortgage lenders to stave off foreclosure, working with the IRS to work out installment payments for taxes, and dealing with the student loan authorities.  Most of these things relate to bankruptcy, but are the kinds of debt that can't be discharged in bankruptcy.

"When things get tough", they say, "the tough get going".  But, when bills pile up fast and furious, it often takes professional legal advice for people to realize what direction they need to get going IN!

If you want to see the "face" of our economy this year, we're told, just look at the sag in cosmetic surgery.  Since medical costs are one of the leading causes of bankruptcy, I make a special effort to stay on top of news reports having to do with healthcare in our country, and especially here in Indiana.  A recent CNN online piece discussed a survey in which 53% of cosmetic surgeons reported business being down by as much as 30%.

It's understandable that in tough economic times, spending on luxury items and services is negatively impacted. That's even more the case when prices for essential items are rising (see Add Some Water To Your Soup). The CNN article brought out a nuance I hadn't considered, though.  With the job market being so competitive, older workers sometimes consider that appearance improvements are not a luxury, but a necessity, to help them appear to be "at the top of their game" when compared with younger job candidates or co-workers.   So, what has happened, according to some of the medical professionals interviewed by CNN, is that, while cosmetic surgeries are down, there has been an uptick in cheaper, less invasive options such as Botox injections and wrinkle filler.  "Instead of shelling out $7000 for a face lift, patients spend $1000 for less dramatic results," says Dr. Patrick McMenamin, president-elect of the American Academy of Cosmetic Surgery.

As a bankruptcy lawyer in Indiana for the past two and a half decades, I've helped many, many people gradually rebuild their financial lives after bankruptcy.  While these clients may not be in a position to afford even the less expensive forms of cosmetic treatment while they're working on rebuilding their financial lives, the principle outlined by Dr. McMenamin would be a very appropriate one for them to follow.  Rather than foregoing all discretionary spending (Spartan diets of all types are difficult to maintain over time), buying "cheaper and less invasive" would be a good standard to follow.

As I mentioned in Airlines, Air Purifiers, And Small Business Bankruptcy, my work as a bankruptcy attorney in Indiana over these more than twenty years in practice focuses on individuals and small business owners, not on the mega-corporations whose bankruptcies, mergers, and takeovers are the stuff of headlines. However, in order to offer the very best information and advice to my clients, I'm constantly combing the business news so as to better understand the job market, the economy, and the housing markets in the country and especially in the different parts of our state of Indiana.

After more than two decades of observing these things, through good times and bad, I'm come to realize that, no matter at what point in the economic cycle we find ourselves, there always seem to be winners along with losers.  Take now, for instance.  Obviously, things are difficult in our state, with job layoffs, high costs for food and gasoline, and record numbers of bankruptcies and foreclosures.  Yet, on one single page of the Indianapolis Star, I found three stories that serve as a perfect example of the fact that silver linings and cloud covers are combined, with hopeful news holding its own despite everything.

This was a week or two ago, and on the left side of the page I read a story about Columbus, Indiana - based Irwin Financial suffering in a big way because of the credit crunch.  After failing to unload $1 billion in home equity loans, then failing to gain help from other banks, Irwin was forced to issue new stock to raise money.  Timing was terrible, since Irwin's stock had already lost 50% of its value this year.

Right next to that story was a headline about the expansion of e-mail marketing firm Exact Target, with that company announcing that it's doubling its workforce and creating a $25 million technology center.  Then, again on the same page, I found a feature story about the Pull-A-Part auto salvage chain that is profiting from the fact that people are keeping their cars longer.

I'm not being a Pollyanna here.  As an attorney who every day helps people deal with the all-too-real and all-too-immediate issues of bankruptcy, I know only too well that the Exact Target technology-based workforce expansion won't happen in time to help some of my clients who were laid off from manufacturing jobs.  What I want to bring out, though, is there's always another part of the economic cycle ahead, always a good reason to do the difficult things now in order to be able to enjoy the better times that come later.

I can't even tell you how many stories I've heard about "wheels".  It makes me feel very sad when someone arrives at one of my Indiana bankruptcy law offices in desperation because the bus doesn't go anywhere near their job and their car was just repossessed. Their children have doctor's appointments they can't get to, and they don't live near a grocery or pharmacy.  Obviously, folks who've had a car repossessed have other debt problems, too, but having a repo person come on to your property and take your car seems like the ultimate indignity.

For my blog readers, here's the scoop on car repos… when a lender takes your car back, it'll get auctioned.  You're given notice of where and when, and you get a chance to buy the car back.  If you can't, though, the car will get sold to someone else, probably for less than you owe on the loan, especially when the costs of repossessing, storing, and selling it are added.  You'll still end up owing the deficiency (with interest accumulating, of course).

What other choices are there?  First, contacting the lender to try and lower the payments for as long as three months while you get back on your feet, or asking the lender to extend the term of the loan so payments will be lower than they've been.  Then, filing bankruptcy will put a stop to collection efforts (that's called the automatic stay - see Oh, Yes, You Can Stop Being Harassed!), giving you some time to work out a plan to possibly hold on to the car. In fact, if you file a Chapter 13 bankruptcy before the car is sold, the creditor will have to return the vehicle even if it's already been repossessed. (A Chapter 13 will allow you to pay for the car over as long a period as 60 months.  That, in most cases, will result in a lower interest rate.)  In any event, a big part of the work I end up doing with clients who come to me in time is helping them keep their cars, especially when that makes the difference between their being able to work or not.

The absolutely most important message I need to get across in this blog post is that you need to address the problem before a payment is missed, when you see things going downhill.  There will be a whole lot better chance that way of keeping you wheeling along.

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.

Everyone knows it's a buyer's market in Indiana housing these days, but first-time home-buyers haven't been flocking to make their move.  Much of the reason for the stall has been the mortgage market - lenders are much stricter nowadays about who qualifies for mortgage money, requiring higher down payments and a more solid work and credit histories than might have been true just a couple of years ago.  A new tax credit, though, is helping get first-timers going. 

As an Indiana bankruptcy attorney for two and a half decades, I'm usually dealing with homes years after they were purchased, helping folks make difficult decisions about foreclosure.  As I brought out in my earlier blog, Can Bad Habits Lead To Bankruptcy?, most bankruptcies, despite the myths, are not caused by irresponsible spending, but by catastrophic events such as extended illness, job loss, and divorce.  The same thing is true of foreclosures.  Despite the press and the myths, most foreclosures are not the result of irresponsible lending practices or even of "buying too much house", but derive from the same often unforeseeable combination of negative life events.

One aspect of this new tax credit plan for first-time home buyers, an aspect of which I heartily approve, is that it helps individuals who have good credit and who have enough income to qualify, get into a house without , as Dave Caveness of Carpenter Realtors points out, "pushing lenders to make irresponsible mortgage lending decisions."  The second thing I like about the tax credit plan itself is that it's not a give-away, but an interest-free loan from the government to first-time home buyers.

The tax credit applies, by the way, only to homes purchased between April 9, 2008 and July 1, 2009, and it's worth 10% of the purchase price of the home, with a ceiling of $7500 per buyer.  The credit must be repaid over fifteen years.  If the home is sold before then, the loan comes due.  One "escape clause", though, is that the repayment is due only if there is sufficient capital gain from the sale of the home; otherwise, the loan's forgiven.

Some realtor friends see the plan working already, if only on a small scale, to create some activity in the housing market.  Needless to say, our local economy could use it.  Always on the alert for good news that can help my Indiana bankruptcy clients rebuild their financial lives, I'm hoping this, as the song goes, "could be the start of something big".

As a bankruptcy attorney in Indiana, I can't help but notice that, all too often, serving our country can lead to a fight for one's financial life back at home.  In Pentagon Sees Risk In Soldiers' Debts, I talked about a Pentagon report on the severe debt loads that actually prevent many soldiers from obtaining their security clearance to go overseas. In a later blog, I shared word of the Moneywise education program funded by the Foundation for Financial Planning especially for soldiers (see Moneywise Program Reaches Out To Military).  My work as a Board-certified consumer bankruptcy specialist, dealing with thousands of people each year, including some veterans, has convinced me how crucial it is for soldiers and guardsmen to avoid the traps of payday loans and car title loans that have gotten so many military families into spiraling debt.

I was very happy to find out about programs that our own Lilly Endowment here in Indianapolis put into place just a year ago to help returning Indiana veterans.  Several aspects of those program are especially relevant to my work as a financial counselor to debtors. First, grants of up to $10,000 are available to Indiana National Guard families who "have suffered significant financial hardship as a result of active duty service." Job retraining for veterans is offered through Crane Learning and Employment Center for Veterans in southwest Indiana, and a multi-million dollar grant was made to the Roudebush VA Medical Center to help pay for sophisticated medical and rehabilitation treatment for veterans. In addition to these benefits through the Lilly Endowment, the State of Indiana offers veterans' housing programs, property tax deductions, education and job placement benefits.  

Handling medical costs, finding well-paid employment, finding good housing, and managing debt repayment - these are issues for all individuals. All of these play a role in the rebuilding process after bankruptcy, and, when these needs are not satisfied, all are leading causes of bankruptcy.  Veterans often need - and deserve - extra assistance getting back on their financial feet.  I'm proud of the efforts being made in the state of Indiana to provide this special help to these special people who've served us so loyally.

All the studies confirm what I already knew from more than twenty years as an Indiana bankruptcy attorney: Most people who file bankruptcy have suffered an illness, a job loss, an accident, a divorce, or other catastrophic event, and what they generally aren't  is compulsive gamblers or shoppers running up frivolous debt.  There's been lots of press about job losses and foreclosures and how those relate to Indiana's rising number of bankruptcies. One aspect of the situation, though, that's not gotten nearly enough coverage is the tie-in between bankruptcy and identity theft.

Identity theft is the use of another person's information in some way involving fraud and deception.  Not only is this type of crime an increasing problem in and of itself, a significant number of identity theft cases relate to bankruptcy cases.  To understand this, it's important you know that laws about debt and bankruptcy apply to any debt, including debt incurred through theft of someone's identity.  At first blush, you might wonder why anyone would even want to steal the identity of a person who's filing bankruptcy - after all, their credit is no good!  So the second thing you need to understand is that in most cases bankruptcy actually improves one's credit, to the point that credit offers flood in, making the debtor an ideal target for identity theft!

Bankruptcy-related identity theft doesn't need to mean stealing a credit card or other ID and using that to open a telephone account, buy clothes, furniture, or gadgets, or, worse yet, drugs.  The Executive Office for U.S. Trustees in Washington, D.C. reports cases where people bought real estate using stolen identities, or transferred part ownership in property to a bankrupt person to stave off foreclosure - the different permutations seem endless.  The Executive Office handled one case where a five year old boy was served papers directing him to attend a creditors' meeting for his bankruptcy, and another where an employee obtained a professional license using someone else's identity and then later filed bankruptcy in the name of the identity theft victim!

Clearly, we all need to be vigilant about our information, being very cautious about giving out our Social Security numbers and carrying around credit cards, not to mention periodically checking credit reports.  When a bankruptcy proceeding is involved, there's all the greater need for a watchful eye.  In a worst-case scenario, discharges of debts that have been granted by the bankruptcy court can be revoked, and the burden of setting the record straight falls on the debtor.  This is just one more important reason to seek the advice of an experienced bankruptcy attorney.  The U.S. Trustee staff is not allowed to offer assistance to victims of identity theft.  When I work with bankruptcy clients, one aspect of my work is to gather and submit all the necessary legal documents in such a way that their information is protected.  This is crucial, since, as part of the process in a typical bankruptcy, the financial information filed with the court becomes a matter of public record (with the exception of the Social Security number).

The bankruptcy court system, as I emphasized in Getting On Track After - Or Before - Bankruptcy, serves as a safety net for individuals and business owners, enabling them to make a fresh start.  As I help my clients rebuild their finances after bankruptcy, "Look to the future and protect your identity" is definitely the motto we adopt.

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!

In my earlier bankruptcy blog, I shared insights gained from reading professional journals in the field of employee benefits.  Another area I enjoy reading about is financial planning.  As a bankruptcy attorney in Indiana, I find learning from colleagues in related professions helps me provide the best advice to my own bankruptcy clients.

Dennis Holland, vice president of First Command Financial Services, had the most interesting research to share about how people's mental health relates to their financial health.  First Command found that "individuals who engage in the disciplined process of saving money on a monthly basis experience an emotional 'high' in their feelings of financial security over those who do not."  What is so fascinating is that, according to the research, it doesn't matter whether an individual's actual savings balance is high or low.  It's the process of putting money away consistently that drives feelings of confidence and optimism.

The other side of this research is the effect of debt on the middle income consumer.  The study found that short-term debt most affects individuals' feelings of financial stability.  The more credit card and personal debt a family carries, the Journal reported, "the less financially secure they feel, the less optimistic they are, and the more stretched they feel on a month-to-month basis."

As I described in my blog In Bankruptcy, Forgiveness Means More Than Discharging Debt, often people facing bankruptcy are under extreme stress and have low self esteem.  A big part of my work as their bankruptcy counselor is helping them see past that stress so that they can make the needed decisions and navigate the bankruptcy court process.  Once the legal part of the bankruptcy is completed, the rebuilding process can begin.  Dennis Holland says, "As the rate of savings to debt increases, families feel increasingly optimistic and less stretched."  That is exactly the effect I witness every day in clients as they gain some relief through the bankruptcy process and are in the process of rebuilding their financial lives.  They feel increasingly optimistic and confident about their future, and less and less stretched.  Helping my clients get to that stage of rebuilding their emotional health along with their financial health is really what the work I do as a bankruptcy attorney is all about.

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'm always on the lookout for bargains that can benefit my Indiana bankruptcy clients and bankruptcy blog readers.  If you opened a credit card account, car loan, or mortgage any time during the past twenty years, you probably qualify for some new "freebies".  A recent class action lawsuit settlement by TransUnion, one of the three major credit reporting bureaus, could mean free credit reports and other free services for consumers.  Under the $75 million settlement, TransUnion must provide unlimited access to TransUnion credit scores, the ability to block third parties from viewing credit histories, and…free credit monitoring. 

Who qualifies to receive these freebies?  Anyone who had an open credit account (with a merchant or lender registered with TransUnion) between January 1987 and the end of May 2008 gets to choose between two options.  The first option is six months of free credit monitoring (a value of just under $60).  This option includes the possibility (but not certainty) of receiving an addition cash settlement.  Option #2 involves nine months of free credit monitoring (a value of $115) with no possibility of any further cash settlement.

Why the freebies in the first place?  In my earlier blog, The Cavalry's Coming To Fight Abuse By Credit Card Companies, I detailed how the Federal Reserve was cracking down on unfair and deceptive credit card practices.  Well, in this case it was a credit bureau that was accused of unfair practices.  TransUnion allegedly sold private consumer information for marketing purposes, a violation of privacy laws, and the free offers are part of the settlement negotiated by TransUnion. To register for either option (which must be done BEFORE SEPTEMBER 24TH), call 1 866 416 3470 or visit the website at www.listclassaction.com.

As a bankruptcy attorney in Indiana, I believe that any services that help consumers stay informed about their own credit ratings are valuable, and I wanted to pass the information about TransUnion along to my blog readers and clients.  Clients who are rebuilding their financial lives after bankruptcy will find it especially important to stay informed as they work to gradually improve their credit ratings.  But checking credit scores periodically is a good idea for all of us.