This being tax season, it's no surprise that, as an Indiana lawyer for bankruptcy, I get a lot of questions about tax refunds. "Do I get to keep my refund if I file bankruptcy in Indiana?" (At least ten blog readers asked that very question, so I decided to devote today's blog post to how the new bankruptcy laws in Indiana relate to tax refunds.

There are two possible scenarios here: 

You file bankruptcy, already having received your refund.
(This  is an area where it's important to seek proper bankruptcy information in Indiana!)

a)   If you still have the cash from the refund, it becomes part of your assets, and must be listed in the bankruptcy paperwork.  You're entitled to keep a certain amount of cash, so it would depend on how much you have in total assets whether you got to keep the refund or whether it needs to go towards repaying creditors.

b)  You received the refund money before filing, and you've already spent the money. If the bankruptcy court finds you spent the money on luxuries and now are asking to have debts forgiven, the court will not look favorably on granting you a bankruptcy at all!   If you spent the money "properly", meaning on necessities such as making a mortgage payment, catching up on bills, or having medical or dental work performed, that will not count against you.


You've filed bankruptcy and expect the refund to come in soon.

At the Creditors' Meeting, the trustee usually asks debtors whether they're expecting any money to come in.  That's because the court wants to see if there are resources that can be used towards satisfying the debts.  It's possible that (beyond the exemptions, meaning cash and assets you're allowed to keep), the tax refund would be lost by becoming part of the bankruptcy estate (used to pay creditors).

One of the Columbus bankruptcy lawyers in the Mark Zuckerberg bankruptcy law offices there was asked a question about property tax debt.  First, property taxes aren't dischargeable in bankruptcy unless they became due more than a year ago.  But, even if property tax were to be discharged by the bankruptcy court, the property could not be sold until the lien was paid off (because there wouldn't be a clear title). The attorney is now discussing with this Columbus taxpayer whether or not filing bankruptcy might help stop foreclosure.

You know the old saying, "Timing is everything?"  That's something that comes to mind when it comes to tax refunds and bankruptcy.  You may have read this idea in my earlier blog posts, but it bears repeating: The timing of tax refunds and individual bankruptcy in Indiana is not a do-it-yourself decision!

As a debt consolidation lawyer and Indianapolis  bankruptcy attorney, I've always found foreclosure to be closely linked with bankruptcy.  Of course, legally speaking, these two issues are governed by two totally different sets of laws, but what I mean is this: when clients turn to me for help with financial problems, the threat of foreclosure on their home is invariably one topic they want to discuss along with exploring bankruptcy in Indiana.

If you've been reading my bankruptcy blog for the past few years, you know that my colleagues, the Anderson, Bloomington, Indianapolis, and Columbus bankruptcy lawyers in the Mark Zuckerberg law offices and I all help stop foreclosure by negotiating mortgage modifications.  I've been following closely all the different federal stimulus programs that help homeowners remain in their homes.

The latest program I read about actually isn't coming from the federal government, but from a private financial institution.  Citigroup announced two weeks ago a pilot program called Foreclosure Alternatives.  This program will not originally be available here in Indiana, only in Texas, Florida, Illinois, Michigan, New Jersey, and Ohio, where a combined 1,000 homeowners are expected to participate.  Then, depending upon the results, the program may be expanded to other states, including ours.

As part of providing bankruptcy information in Indiana, I often use the expression "buying time" when discussing bankruptcy, meaning time to organize a plan for handling debt.  The Citi plan offers time to homeowners threatened by foreclosure.  In a foreclosure, the lender takes control of the property and evicts the homeowner, usually within a few days. This foreclosure alternative plan is a form of deed in lieu of foreclosure, because Citigroup, the lender, takes control of the deed.  If no settlement is arrived at, homeownesr might still need to leave their homes, but:
 

• The program "buys" six months of additional planning time
• There is a less severe "hit" to the homeowner's credit report than a foreclosure might cause
• Citi is offering $1000 is relocation costs plus relocation counseling

Foreclosure alternatives are one form of "buying time", and buying time can mean getting help!

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

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

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

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

Which bills to pay first, and in which order:

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

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

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

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

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

Just about everyone who comes to see me to discuss filing individual bankruptcy in Indiana has had experience with debt collectors.  In most of those encounters, I’ve found, the debtors didn’t know what their rights were under federal law until it was too late.

Since the purpose of my blog is to provide helpful bankruptcy information in Indiana, I decided to devote today’s blog post to bill collectors and how to best deal with them. As I’ve explained in many prior blog posts, bankruptcy itself provides instant relief from harassment by bill collectors. But even during the days, months (and sometimes years) that go by until people make the big decision to actually file bankruptcy, knowing how to react to the collection process can make matters a lot less unpleasant.

We talked it over, the Columbus bankruptcy lawyers who work in the Mark Zuckerberg bankruptcy law offices and I, and we agreed: more debtors need to know about the Fair Debt Collection Practices Act. The FCDCP is a federal statute specifically designed to stop unfair and abusive practices by collection agencies. (If debtors don’t recognize practices that aren’t legal, they won’t report the collectors to the proper authorities, meaning the Federal Trade Commission or the Indiana Attorney General.

The first thing you need to know is that a debt collector is anyone other than the creditor who collects debts for that creditor. So we’re not talking about the actual employees of a credit card company, auto company or other business collecting debts on behalf of their employer. Basically, debt collectors are outside contractors hired to do a job for creditors.

Some of the rules debt collectors must follow are detailed in a brochure provided by the Indiana Legal Services, Inc.. These rules include:
 

• Within 5 days after first contacting you, the collector must send a written notice telling you the amount you owe, the name of the creditor, and what to do if you believe you don’t owe that money, or you believe that the amount is wrong.
• The collector may use mail, telephone, telegram or Fax, but may not contact you at an unreasonable place or time.
• The collector is allowed to contact other people about you – and only once - solely for the purpose of verifying your location, and is not permitted to discuss your debt with anyone but you or your attorney.

As a debt consolidation lawyer as well as an Indianapolis bankruptcy lawyer, I’ve often helped clients get relief from the extra stress of dealing with collection agencies by helping them compose exactly this kind of letter, reminding them to send it by certified mail with “return receipt requested”.

Certified Financial Planner Ken Clark, in his book Getting Out of Debt, provides a sample Cease and Desist letter in the book’s appendix. Here’s the general idea:

The letter begins by saying “This serves as legal notice under the provisions of the Fair Debt Collection Practices Act to cease and desist from all communication with me.”

The letter goes on to make two points:

a) If the debt collector fails to comply, the debtor will file a formal complaint with the Federal Trade Commission.
b) The debtor chooses to work directly with the original creditor, not with any collection agency.

Many collection agencies don’t stop their efforts even after the debt has been discharged through bankruptcy in Indiana!  Of course, according to law, once a debt has been discharged, collectors have no right to demand payment.  But, with debt being “sold” from creditor to creditor, it often happens that a company is unaware that the debt has been paid off or discharged.  In fact, paralegals in the Mark Zuckerberg bankruptcy law office need to spend valuable time working on cases where debt collectors are still going after our clients years after they’ve emerged from bankruptcy.

Still, getting your response to bill collectors down in black and white can often make a big difference in terms of “turning down the heat” and the pressure of harassment.

Barry Corbin's name is not nearly as well-known as Nicholas Cage's, but Corbin just joined the list of celebrities who've filed bankruptcy. Far from rejoicing that another of the rich and famous is suffering from financial setbacks, I talk about stars' troubles only for purposes of illustrating how the bankruptcy safety net works.

Needless to say, as a bankruptcy attorney in Indiana, I must observe client confidentiality for the tens of thousands of clients whom I've helped with filing personal bankruptcy in Indiana, as well as for the thousands of clients who have filed small business bankruptcy in Indiana. When there's already a story in the news about a celebrity bankruptcy, by contrast, I am permitted to comment in my bankruptcy blog posts.

Barry Corbin, you might remember, was "Uncle Bob" to John Travolta in the movie Urban Cowboy, and played on TV in both the Dallas and Police Academy series.
It's interesting that just a year ago, I was writing about Michael Vick filing bankruptcy and using that news story to illustrate the different steps in the bankruptcy process, including the Creditors' Meeting.  Then, just a couple of months ago I was writing blog posts about Nicholas Cage filing bankruptcy, and, from my vantage point as a debt consolidation lawyer and someone who's been offering Indiana bankruptcy help for almost a quarter century,  analyzing some of the factors that led to that actor's troubles.

One factor common in all three of these celebrity bankruptcy stories is real estate.  When discussing Chapter 13 bankruptcy law in Indiana, I always explain that foreclosure and bankruptcy are two separate legal processes, even though in most client situations, both seem to play a part in the financial troubles.
 

• In the Michael Vick case, one of the biggest assets that was put up for auction in order to pay creditors was a luxury home he owned in Atlanta.
• Nicholas Cage had already lost two homes in New Orleans to foreclosure and needed to sell other properties at a big discount to raise money to pay creditors.
• Barry Corbin is trying to reduce costs by selling his home in Texas, using the proceeds to pay creditors.

In all three cases, the fact that real estate values have dropped has delayed the sale of the homes.  The drop in home prices is affecting many Indiana residents who are trying to downsize and keep their bills paid, but who are being forced to consider bankruptcy.

A second factor, tax debt, played a part with Nicholas Cage, but doesn't appear to be the issue with Barry Corbin. (According to Forbes, Nicholas Cage owes more than $800,000 in back taxes and penalties.)

The thing about the Barry Corbin case that really resonated with me (in fact, I was discussing this very thing the other day with the Columbus bankruptcy lawyers who work in the Mark Zuckerberg law offices there) is something Corbin's lawyer said about the reason Corbin needed to file bankruptcy:

"The types of movies that he is used to making, they are not making anymore."

In the course of my work as an Indianapolis bankruptcy attorney, it's very, very rare that I deal with a celebrity case.  The vast majority of my Indiana bankruptcy clients are everyday working people and small business owners. When most of these business owners first seek my help, they admit they are upset and even ashamed that their businesses are in trouble. Yet, as I learn more about their stories, I usually find these troubles were caused by changes in their industry that were beyond their control.

Things change, even when we most wish they would remain the same. Sometimes, they're "just not making them any more!"  That's when good people need society's help in the form of bankruptcy to give them a fresh financial start.

Just hearing about all the jobs coming to our state in the next year or two improves my mood!  As I help clients file individual bankruptcy in Indiana and help stop foreclosure on their homes, I feel more optimistic about their being able to take advantage of the fresh financial start available through the new bankruptcy laws in Indiana.

In just the first two weeks of this month of February, 2010, I learned that no fewer than a dozen sizeable corporations plan to hire new workers.  (The information I'll share with my Indiana bankruptcy clients and my blog readers today comes mainly from the Indianapolis Star, Inside Indiana Business, and the Indianapolis Business Journal.)

Because, as an Indiana lawyer for bankruptcy, I know that bankruptcy can spell relief only if my clients can earn income to rebuild their financial lives after emerging from bankruptcy, I'm constantly scanning the pages and surfing the Web to find news about employment in our state.

The Bloomington and Columbus bankruptcy lawyers who work in the Mark Zuckerberg offices there provide bankruptcy services in Indiana all the way to the southern border of the state, so I paid special attention to news of southern Indiana companies planning to hire.

• First, more than 2100 seasonal positions are being offered at Holiday World.  In fact, job fairs are being held this month.
• Mead Johnson is bringing 35 new jobs to Evansville.
• Berry Plastics is creating 250 jobs in Evansville.

In northern Indiana, there is good news as well.

• Morris Manufacturing and Sales, which makes auto components, expects to create 82 jobs near Ft. Wayne.
• Also in Ft. Wayne, Edy's Ice Cream is creating 120 new jobs.
• Vixen Composites, a recreational vehicle and commercial trailer company, is creating 34 new jobs in Elkhardt
• Seliga Plastics will have 150 new jobs to offer in Ligonier.
• Enert, Inc., parent company of Enerdel, is relocating to Elkhardt, bringing 415 new jobs.

In and around Indianapolis, there's good news, too. (Although I have bankruptcy law offices serving 38 different counties in Indiana, I operate primarily as an Indianapolis bankruptcy attorney.)

• Express Scripts pharmacy benefit management company is planning to add 182 jobs.
• Zipp-Speed Weaponry, which makes high-end bicycle components, is building a new center on the northwest side of Indy, bringing 105 new jobs.
• Bluefish Wireless in Zionsville is set to create 150 new positions.

A bit further away, there's good news from Brazil, and in the other direction, from Connersville,

• The Morris Manufacturing and Sales (in Brazil) will add 82 automotive component jobs.
• Carbon Motors' grant application to the U.S Dept. of Energy was deemed complete.  The potential is for 1,500 new jobs with that company.

Negative employment news seems to be taking up less space these days.

• Kmart is closing in Connersville, with 59 jobs scheduled to be lost.
• Ampcor metal casket company is closing in LaPorte, eliminating 50 jobs there.
• Radio manufacturer ITT Communications is cutting 60 positions.

The companies I mentioned in today's blog post are medium to large-sized firms.  But my more than 20 years providing bankruptcy information in Indiana have taught me that, when midsized and large firms expand, that's good news for my small business bankruptcy  clients in Indiana who are suppliers to those larger firms.

Let's keep that good news coming!

As a debt consolidation lawyer in Indiana, one of the many things I do is help stop foreclosures.  Well, one evening while driving home, I tuned into the Howard Clark Show on WIBC, and heard him discussing short sales and foreclosures.  Howard was offering a special tip to listeners who were interested in buying distressed real estate, so that banks wouldn't "demolish their credit scores."

Clark's tip was referring to credit checks. When investors wanted to bid on a home being sold in a short sale or on one being sold by a lender after a foreclosure, the banks would run a credit check on every bidder, and do that every time they bid.  That resulted in a lot of credit inquiries showing up on bidders' credit reports.

As an Indianapolis lawyer for bankruptcy, I often give clients who have emerged from bankruptcy the same kind of advice when they're shopping for a car:  Avoid multiple credit inquiries.  I recommend to the Bloomington, Anderson, and Columbus bankruptcy lawyers who work in the Mark Zuckerberg bankruptcy law offices in those cities that they tell their bankruptcy clients the same thing.

Here's what I mean.  If you take a look at your own credit report, you'll probably see multiple credit inquiries listed on it.  Businesses you never heard of might be thinking of trying to get you as a customer.  Prospective employers might have checked your credit report.  An insurance company might have inquired.  Or you might even have requested a check on your own report.  None of these are any problem.  The only inquiries that can negatively affect your credit score are the ones generated when you apply for new credit.

That's why Clark Howard was warning would-be bidders on distressed property about the potential damage to their credit ratings. He explained to listeners that, until their bid was actually accepted, there was no legitimate reason for the bank to check their credit score.  For the same reason, in offering Indiana bankruptcy help, I advise clients who have filed and emerged from individual bankruptcy in Indiana to bring along a copy of their own credit report when they visit different auto dealerships to try to find a car.  That way, they won't have multiple potential lenders all make inquiries with the credit bureaus.  And that way, their credit scores won't be "demolished". 


 

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

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

 

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

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

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

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

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

About the income:

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

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

"For many people owning a small business and being financially independent is what the American dream is all about," begins a paper about the causes of small business bankruptcy by Professors Bradley and Cowdery of the University of Central Arkansas.

I and my colleagues who are bankruptcy attorneys in Indiana's four Mark Zuckerberg law offices couldn't agree more.

Yesterday, in my Indiana bankruptcy blog, I shared statistics from Bloomberg News comparing the percentage growth in business bankruptcy and individual bankruptcy in Indiana.  While composing that blog, I got to thinking about the thousands of Indiana small business bankruptcy clients with whom I've worked over the years and what I've learned about the way entrepreneurs operate. 

First, while not a single one of those clients went into business even considering "failure" as an option, reality is that a large majority of small businesses do end up failing.   Given how devoted to the success of their businesses my clients all seemed to have been, why was it,  I often asked myself, they were now being forced to consider bankruptcy?  Just as with clients to whom I offer individual bankruptcy help in Indiana, I came to the conclusion that these small business failures were often due to factors beyond the owners' control.

As an Indianapolis bankruptcy attorney and debt consolidation lawyer, I was interested in reading the results of a research project conducted more than ten years ago by the U.S. Small Business Administration about the reasons small businesses fail.

In response to a survey, business owners offered the following factors leading to business failure and small business bankruptcy :
 

• Outside business conditions (competition, costs of doing business)
• Financing (loss of capital, inability to secure loans)
• Inside business mistakes (management mistakes, poor location, loss of clients, poor recordkeeping)
• Tax problems
• Disputes:  (lawsuits, contract disputes)
• Personal: (illness and divorce)
• Calamities: (fraud, theft, natural disasters, accidents)

Every one of these problems, often several in combination, is something I've found in the stories told to me by my own small Indiana business bankruptcy clients. In the recent recession, financing problems have been particularly acute, with customers "slow-paying" their invoices, with suppliers on the other hand demanding timely payment, with increased costs of inventory, plus the lack of available capital to expand and adapt to new technology - small business in Indiana has been "squeezed".

After so many years (coming up on 25 !) of offering bankruptcy services in Indiana to both individuals and small businesses, the picture that comes to my mind when I  think of small business bankruptcy in Indiana is this:  a mini-car being pushed from three sides by "semi trucks". 

From one direction, you have the big businesses that are downsizing and even closing, thus offering fewer and fewer opportunities for the small business to supply parts and services to those big businesses.  In another direction are the customers who are hurting financially themselves and can't make timely payments to the small businesses. Yet a third kind of pressure is coming from the lenders, who are calling credit lines and refusing to offer new credit.

Add to all of this the fact that in the vast majority of small business situations, the personal finances of the business owner are mixed in with the business finances, and it's easy to see why, especially here in the state of Indiana, small business is big, but also, in many cases, in big trouble!

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

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

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

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

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

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

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

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

 

Over my many years dealing with personal bankruptcy in Indiana, there have been many changes in the economy, as well as changes in the form of new bankruptcy laws in Indiana.  As 2010 begins, I’ve been reading what different news services are predicting about bankruptcy trends, and paying attention to what the Indianapolis, Anderson, Bloomington, and Columbus bankruptcy lawyers who work in the Mark Zuckerberg law offices in each of those places are seeing, hearing, and reading. 

“The number of Americans filing for personal bankruptcy rose by nearly a third in 2009,” says the Wall Street Journal. Since I offer Indiana bankruptcy help, I was interested in the statistics quoted in WSJ from the National bankruptcy Research Center comparing the different states. Because of the recession, bankruptcy was up in every state (2009 compared to 2008), with Arizona showing the greatest increase (79%), and Nebraska the least (12.2%).  Indiana was in the middle with a year-over-year increase in the number of bankruptcies filed of 32.8%.

The nonprofit Institute For Financial Literacy that provides bankruptcy-related counseling and education added that “the housing crisis and high unemployment have prompted more people to file for bankruptcy who may never have considered the option before.”

As an Indianapolis bankruptcy attorney and debt consolidation lawyer, I’m experiencing that exact thing, with more middle to upper class people filing bankruptcy in Indiana.
Richmondbizsense in Virginia says bankruptcy lawyers there used to see a lot of single parents filing for bankruptcy, but now they’re seeing more middle and upper-middle class families prepare bankruptcy filings,“folks with a good income, maybe two folks working and one loses the income..”

Christine Wilton of California, in Bankruptcy Trends for 2010, predicts “We will see continued high numbers of filings throughout 2010.” Wilton expects more small business bankruptcy to occur as well this year “as this sector continues to tailspin from the economic recession ripple effect”.

Wilton concludes her article by saying “Bankruptcy will be the new “black’ for many Americans seeking financial freedom from debt.” Whether that prediction is borne out in reality this year or not, my plan is to continue offering bankruptcy help in Indiana, including student loan debt help and payday loan debt help, one family, one individual at a time.

In The Two-Income Trap, Harvard Law School professor and bankruptcy authority Elizabeth Warren, together with co-author Amelia Warren Tyagi, write about guilt-free default in bankruptcy.

Now, there’s a question that comes up all the time in the course of my work as an Indianapolis bankruptcy attorney and debt consolidation lawyer – Is there such a thing as guilt-free default? My associates who work as my Columbus bankruptcy lawyers and those who work in the Anderson and Bloomington Mark Zuckerberg bankruptcy law offices deal with this issue every day of the week  as well:
 

• What about all my bills that will never get repaid?
• These companies lent me money, so aren’t I obligated to pay them back?? (This is where all the self-blame and guild rear their heads…)

I’ve been offering Indiana bankruptcy help for almost twenty-five years and dealing with personal bankruptcy in Indiana, so these are no new questions for me, but I like the way Warren and Tyagi handle this issue in ther book, by offering a few reassurances and a warning.
 

• Lenders (credit card companies and banks) took a calculated risk when they lent you money.  Every lender hopes to make money on every loan, but they know a certain percentage of loans will default. “The interest charges and penalty fees are designed to cover those risks.”
• Debtors have no need to worry about never being able to obtain credit again.  “Within six months of filing for bankruptcy, 84% of families surveyed received unsolicited offers for new credit.

• “Whatever you do, don’t reassume any old debts that were discharged by the courts.” According to Warren and Tyagi, one in four families signs on to reassume debts that were discharged by the bankruptcy court, mostly out of fear of having purchased goods repossessed.

So, if your debts have been discharged under the new bankruptcy laws of Indiana, you might ask, What about the guilt? If you borrowed money, aren’t you morally (even if no longer legally) obligated to pay it back?

Maybe, say Warren and Tyagi.  “If everyone had stayed healthy and you hadn’t lost your job, you would have paid your debts… But that didn’t happen.”  You were obligated, yes, they explain.  But you’re also obligated to keep a roof over your head and your family’s head, put food on the table, and get the medical care you need. 

The bankruptcy safety net was created to give honest debtors like you a chance to rebuild. Elizabeth Warren and Amelia Tyagi agree:  “Give yourself the best odds of getting exactly what you need from the bankruptcy judge – a fresh start!”

 

Today's bankruptcy blog reader's question hints at a very sad picture - a home going up for public sale.  While I'm not familiar with the details of this particular case, as an Indianapolis bankruptcy lawyer for so many years, I'm unfortunately all too familiar with the general picture.

A "Notice of Public Auction Sale" has been posted, perhaps because the reader's home was seized for nonpayment of federal taxes. Perhaps it's the mortgage lender that has foreclosed on the property.  In the course of a bankruptcy, the bankruptcy court may employ an auctioneer to manage a public sale of a property. In any case, it appears that, for this reader, there's a "Sheriff's sale" going on.  The frightening answer to the reader's question about when eviction might take place is - "Soon, very soon, perhaps within the week of the public sale."

It's rather rare, in my experience offering bankruptcy services in Indiana for more than twenty years, for the bankruptcy court to force the public sale of a home if the debtor files bankruptcy.  Remember, in the new bankruptcy laws in Indiana there are exemptions (In fact, I helped write the exemptions portion of the Indiana bankruptcy laws), and one of those is the Homestead Exemption, allowing Indiana residents to keep their homes if they have little or no "equity" in those homes.

Apparently, in this blog reader's situation, the exemption did not apply and eviction looms.  The reality is that, with an eviction on his record, our reader is likely to encounter difficulties in renting an apartment. This is unfortunately true not only in the "big city", but in the smaller cities and towns as well, as the Anderson, Bloomington, and Columbus bankruptcy lawyers who work in the Mark Zuckerberg offices tell me. 

As any doctor will attest, preventive medicine is the best kind, and it's no different in my professional as a debt consolidation lawyer and consumer bankruptcy specialist in Indiana. Whenever possible, I like to spend time talking with clients about debt management, and about individual bankruptcy in Indiana.  I help clients negotiate with lenders, and represent them in arranging mortgage modifications.  Sometimes the best advice for a client is to let the home go into foreclosure given financial circumstances that have changed for the worse.  Never is it a pleasant picture when someone is in danger of immediate eviction from a home.

At least according to Women's Personal Finance.net, "The myths and the madness behind the realities of bankruptcy…can sometimes have more wrong information than the only hair stylist in town."

I'm certainly no expert on women's hairstyles or hairstylists, but, as an Indiana bankruptcy attorney, I've always known that women often bear the brunt of a financial crisis.  That's why, as part of offering bankruptcy information in Indiana through my Indiana bankruptcy blog and the four Mark Zuckerberg bankruptcy law offices around Indiana, I devote special attention to helping women file personal bankruptcy in Indiana and to helping women take advantage of the fresh financial start bankruptcy can offer.

As the Women's Personal Finance website is careful to explain, filing bankruptcy doesn't "erase" a woman's credit record. Even after debts have been "discharged" or forgiven by the Indiana bankruptcy court, the debts will remain on the credit report, but the balance from each creditor will be changed to zero.  (What that does is stop additional negative marks from being added, but late payments in the past remain on the record, even though the balances due are eliminated.)

The Consumer Federation of America estimates that single women comprise almost 40% of bankruptcy filers.  USA Today agrees, stating that "Recession Can Hit Hard in Families Headed by Women" (May/4/09 issue).

My own experience bears this out, and I've found that women need to protect their own welfare and the welfare of their children. Often a woman-to-woman talk with one of the female professionals in my bankruptcy law offices is the start of hope for clients who'd been given a lot of incorrect information about their options.

One of my favorite sayings, one that women, in particular, seem to appreciate, is "Bankruptcy comes in cans."  Women need to understand that, even though bankruptcy is not what they might have envisioned as being part of their lives, there are many, many advantages in using the Indiana bankruptcy help our laws have provided to:

• stop repossessions
• stop foreclosure on a home
• stop creditors from harassing them and their family members
• wipe out credit card debts
• stop wage garnishment
• get rid of back taxes

As a board-certified consumer bankruptcy specialist, one of only a dozen in our state, I don't know a thing about women's hairdressing or hairdressers.  I do know a lot about being an Indiana lawyer for bankruptcy for women!

After delving into the topic of small business bankruptcy in Indiana in my  blogs last week,  I received some questions from readers, and in today's blog post I'm going to answer a question concerning child support payments. 

From the reader's question, you can almost picture the situation:  There's been a divorce.  The non-custodial parent makes his or her income running a small business in Indiana.
The business probably began suffering financial difficulties even before the divorce, and the owners used dollars from their business to pay household and personal expenses. 

Or, it might have been the opposite situation, where personal income was used to try to keep the small business alive. In either case, the business and personal finances were intertwined up until the divorce. 

Now that the divorce is complete, the only source of income for the non-custodial business owner is - the business. With the recession, it's been a challenge to keep things going, and an even bigger challenge to come up with enough money to make the child support payments.

Now, the owner is thinking about finding a debt consolidation lawyer or someone to provide help with small business bankruptcy in Indiana.  He needs to know what his options are.  He wants to learn about small business bankruptcy in Indiana, but he's still  hoping to keep the business alive. 

The question is, under the new bankruptcy laws in Indiana, what will happen with the child support payments he owes?

First, as any bankruptcy lawyer in Indiana would explain, debts that cannot be discharged though bankruptcy include:

• certain taxes
• student loans
• debts incurred by driving intoxicated
• alimony and child support

As I've continued to provide Indiana bankruptcy help over the past twenty-plus years, 
I've often needed to explain that bankruptcy, same as is true of other valuable tool, cannot fix every problem. That's true for individual bankruptcy in Indiana, and equally true for small business bankruptcy. 

Certainly, the earlier in the process clients sit down with me to consider all options, the more help I'm able to offer. Still, even with the tens of thousands of successful bankruptcy situations that have been handled in the four bankruptcy law offices of Mark Zuckerberg over the years, I must admit there are some financial problems for which Indiana bankruptcy is simply not the "fix-all".

I'm fond of explaining that bankruptcy comes mostly in "cans"', but there are some "cannots" as well.  Child support is one of those "cannots", I'm afraid. 



 

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

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

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

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

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

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

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

Just yesterday, offering bankruptcy information in Indiana through my blog, I used examples of big corporate bankruptcies to illustrate how the small business bankruptcy system works for my Indiana bankruptcy clients.

Today, however, let's talk personal bankruptcy in Indiana.  This time, I'll use three examples of celebrities who filed bankruptcy last year to illustrate some of the causes of the individual bankruptcy I see right here at home.

1.   Movie actor Stephen Baldwin filed bankruptcy in 2009, after his mortgage company began foreclosure proceedings against him.

Over my many years handling individual bankruptcy in Indiana, I often need to explain to clients that foreclosure and bankruptcy are two separate legal processes. (Proposals to allow bankruptcy judges to modify mortgages were not approved by Congress.) Designing exactly the right strategy to fit the situation of each client who needs Indiana bankruptcy help, a strategy which may or may not include foreclosure, is a big part of what being a board-certified consumer bankruptcy specialist is all about for me. 

2.  Former major league baseball All-Star Lenny Dykstra of the New York Mets, filed bankruptcy because some gigantic business deals failed and led to many expensive lawsuits.

One of the things I often find is that business dealings and personal finances have not been separated, so that business failures are intertwined with personal financial failures, leading to bankruptcy. The Columbus bankruptcy lawyers who work in the Mark Zuckerberg offices there twll me that often a Chapter 11 small business bankruptcy will quite often be paired with the need for a debt consolidation lawyer on a personal level as well.

Comedian Sinbad was forced into bankruptcy because of a lien on his income for failure to correctly file taxes on some of his hit DVD's.

It is crucial for people behind on their federal and/or Indiana taxes to work with an experienced consumer debt and bankruptcy professional in order to make use of all the legal advantages available.  Getting on the wrong side of tax authorities is dangerous. However, it's a myth that you can never have tax bills discharged in bankruptcy.  In fact, most income taxes more than three years old qualify for forgiveness under Indiana bankruptcy laws.

In all my nearly twenty five years as an Indiana bankruptcy lawyer I have had only a handful of movie stars or sports star clients.  But, helping tens of thousands of clients deal with problems relating to foreclosure, tax liens, lawsuits, and small business issues, making Indiana bankruptcy laws work for them? That's exactly the stuff of which an Indiana bankruptcy lawyer's career is made!

As a debt consolidation lawyer in Indiana, as you may imagine, I deal with folks from many different walks of life, including military service members and veterans.  Just last week in my blog, I discussed the problem of returning Indiana guardsmen who come home to find their jobs eliminated.

Despite several very good programs (both federal and state) being in place to help veterans, sometimes the financial challenges of this recession are so overwhelming  to veterans that filing individual bankruptcy in Indiana is the only chance they and their families have to make a fresh financial start.

I was very encouraged by two pieces of news:

• The Department of Defense announced an increase in military service members’ Basic Allowance for Housing.  This benefit applies to uniformed service members who are on permanent duty within the U.S. who required civilian housing.  This allowance has goneup 2 ½% over last year’s level. 
• There has been an increase in the GI Bill for education as well.  Veterans can have $1321 per month towards education costs. 

By way of providing the most up-to-date debt consolidation and bankruptcy information in Indiana, I work to keep up with benefits available to service members and veterans.  Besides the benefits mentioned above, here in Indiana, there are a number of programs to help veterans:

• 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 services for veterans are offered through Crane Learning and Employment Center for Veterans in southwest Indiana.  (The Columbus bankruptcy lawyers who work in the Mark Zuckerberg bankruptcy law offices there are very involved with veterans in surrounding counties.)
• Medical rehabilitative treatment is available for veterans through the Roudebush VA Medical Center in Indianapolis (where my primary bankruptcy law office is located).

After almost twenty-five years’ service as a bankruptcy attorney in Indianapolis and 37 surrounding counties, I know only too well that Indiana veterans often need extra assistance in getting back on their feet financially.  I’m proud of Indiana’s efforts to show gratitude to our military veterans.

And, when the bankruptcy safety net is needed, the professionals in my Indiana bankruptcy law offices stand ready to serve.

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

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

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

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

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

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

Chapter 7:

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

Chapter 11:

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

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

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

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

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



 

The old saying "One thing leads to another" is certainly true when it comes to small business bankruptcy in Indiana. I've provided bankruptcy services in Indiana over the past twenty five years, and also served as a debt consolidation lawyer. One common thread in small business bankruptcy appears to be that the financial troubles of big businesses ends up affecting the small ones that serve as their suppliers, vendors, and distributors.

That's exactly what appears to have happened with Indianapolis-based Freight Masters Systems, a logistics and trucking firm that filed Chapter 11 bankruptcy two weeks ago. Freight Masters' troubles appear to have begun when they lost a lot of business from Boeing Corporation when that company began to be squeezed by the recession. Then came Chrysler's bankruptcy, and Freight Masters had been doing a lot of work for Chrysler.

Many small businesses use their receivables as collateral to borrow money for operations and expansion.  Because Chrysler was in such an unstable financial position, banks refused to lend money against Freight Masters' receivables from Chrysler.  That severely cut down on the cash available for Freight Masters to keep going. The company is hardly alone in its financial struggles; nearly 400 trucking firms filed bankruptcy in just the second quarter of 2009! Many personal bankruptcy cases in Indiana, needless to say, were related to those small business bankruptcy.

By way of background, Chapter 11 is typically used to reorganize a business.  The company functions in many ways as a trustee, with a duty to protect the rights of creditors and to file monthly operating reports to show the court how the reorganization is progressing.  The fact that the owner chose Chapter 11 means he intends to try to keep the company alive.

As an Indiana small business bankruptcy attorney, I believe there are a couple of "lessons" to be gleaned from reading about the Freight Master bankruptcy:

1. It's largely a myth that bankruptcy, either small business bankruptcy or personal bankruptcy, comes as a result of reckless spending or poor business decisions.  In fact, many years of dealing with bankruptcy in Indiana have taught me that both individuals and small businesses are often brought down by forces beyond their control.  Even when a small business is well-managed, sometimes outside forces, including problems of big businesses, create bad timing and lead to small business bankruptcy. And, even when an individual has successfully managed his or her financial affairs in the past, a combination of factors can derail the best financial plan.

2. Today, small businesses, and particularly those related to automotive and trucking, are being caught in a "perfect storm".  They have difficulty obtaining credit at the same time as customer orders are being reduced and customers are slow to make their payments.

I'd like to add best wishes from Mark Zuckerberg,  as well as from the Columbus bankruptcy lawyers who work in my offices there, to those expressed in an Indianapolis Business Journal editorial:

"One of the city’s minority-owned businesses has fallen on hard times, and we wish its founder and CEO, Gene McFadden, the best in pulling back onto open roads."