Bankruptcy, I've reflected more than once, represents the ultimate in compromise. Different parties with different needs share a dilemma.  Any compromise will never be 100% good for all the parties.  I like to refer to the Indiana bankruptcy court system as a safety net.  At the same time, after almost twenty five years of helping individuals and businesses use that safety net, I know it's still only a compromise and not the ideal solution to everyone's problems.  I always try to keep on learning more about bankruptcy and how it's handled in other states, and the other day I was reminded of the concept of compromise by something happening in New England.

A company called Haven Healthcare recently filed bankruptcy in Connecticut.  Haven Healthcare runs nursing homes throughout the area, including Rhode Island, New Hampshire, Massachusetts, and Vermont in addition to doing business in Connecticut. That means the company was a big payer of property taxes in those states, in addition to paying the state fees charged for operating nursing homes.  With the bankruptcy case now in progress, all those towns in New England are waiting to get paid those fees and taxes.  Then, while Haven is trying to reorganize under the bankruptcy plan, it's still taking care of patients.  Since the company rents some of its property, many landlords haven't been paid, and they, in turn, are having trouble keeping up with their own mortgages.  Reminds me of the TV commercial for a depression-treating drug. "Whom does depression hurt?" the commercial asks?  The answer: "Everyone!" It seems the bankruptcy court will have its hands full being as fair as possible to all the parties involved in this particular business bankruptcy.

As I repeatedly urge business owners and families - Get Help Early!  The earlier I can begin my work with clients (whether bankruptcy turns out to be advisable or avoidable), the fewer parties are likely to be hurt, and the hurt is likely to be less.

Personal bankruptcies almost always fall into one of two categories - Chapter 7 and Chapter 13.  As I know from having helped write the latest version of Indiana bankruptcy exemption law, these two types are, in a way, like the two sides of the income coin.  Simply put, consumers who have income might have the means to repay most or all of their debts over time.  Those who don't have income, either because they can't work or because they were laid off and haven't been able to find new employment, obviously can't repay their debts, and so they file Chapter 7 bankruptcy under which some of their debt can be discharged, or forgiven. 

In fact, during the more than twenty years I've been a bankruptcy lawyer in Indiana, one of the truly important functions of my work with clients is understanding the ins and outs of the "bankruptcy means test" so that I can advise clients which chapter of bankruptcy is most appropriate given all their circumstances.  While some clients have income from veterans' benefits or other government programs, it's fair to say that income and jobs are very, very closely related. And while most personal bankruptcies are the result of a combination of factors building up over time, job layoffs are certainly one of the big causes leading to bankruptcy along with medical costs and divorce.  The job market itself is changing, and finding new employment can be very challenging, as I wrote in It's Not Your Daddy's Job Market.

Some newspaper and magazine articles I've been reading lately talk about entrepreneurship in Indiana being up because of job layoffs - the idea being that people lose jobs, then start their own businesses.  Needless to say, it's not that easy; most people who lost jobs don't have enough money saved up to launch a business, and getting credit is a lot harder these days as well.  Sharon O'Donahue, executive director of Business Ownership Initiative of Indiana, interviewed for an Indianapolis Business Journal feature, advises getting creative.  "Today, it's about patchworking income - threading together sources of income that meet household needs."  I know one thing for sure: - clients emerging from bankruptcy will need to be especially creative as they work on rebuilding their financial lives, so the phrase "patchworking income" is likely to become an integral part of my discussions with my Indiana bankruptcy clients.

Visa and Mastercard aren't unhappy with their revenue, but the source of that revenue seems to be shifting.  Debit card use is growing faster than credit use, both giant companies report.  Since my work as an Indiana bankruptcy attorney deals with debt of all types, these trends are especially interesting and important to me as I advise my bankruptcy blog readers and bankruptcy clients.

Debit cards and credit cards each have their uses - and their dangers.  Debit cards are tied to bank accounts.  For consumers who swipe them for purchases exceeding those account balances, fees and late charges can be steep and swift.  Credit card companies have lowered many card holders' limits (because of the many defaults), and swift and steep are the late charges, penalties, and hikes in interest rates for credit card users who abuse their privileges.

The "natural order" of things has been for folks to use debit cards for everyday spending, use credit cards for larger purchases, and then to tap home equity for the very biggest expenditures.  Now, with the fall in home values happening at the same time as rising medical costs, food costs, and fuel prices, the pressure has been in a downward direction. Bigger and bigger purchases are being done with credit and then debit cards.  Very unfortunately, the next step down has been payday loans, a surefire route to ruination (see Who's Paying For All The Ads For Payday Loans - And Why?).

There's often no easy answer for families and individuals caught in a vise of medical costs, job layoffs, and sometimes divorce.  That's why the message I try so hard to convey in this bankruptcy blog is unchanged:  Get help at the first signs of financial trouble.  Things can get better, but, believe me, waiting will lead to nothing but worse.

Always on the alert for good news about jobs in Indiana, I was happy to read about three developments in Indianapolis and neighboring Plainfield.  After almost twenty-five years of helping clients through the process of filing bankruptcy and then through the process of rebuilding their financial lives, I appreciate the high importance of job opportunities for these clients.

Wireless distributor Brightpoint Inc., I learned, is moving its headquarters from Plainfield to northwest Indianapolis.  The company will be occupying twice the space it now has in its new headquarters in Indy, while keeping its distribution and logistics facilities back in Plainfield.  More than 100 new workers will be hired. The great irony here is that Brightpoint was occupies space in Premier Properties, whose owner has filed bankruptcy (I wrote about this in Bankruptcy Auctions Scheduled For ATA And Premier Properties).

Just as Brightpoint is moving east, construction is beginning on a gigantic bulk warehouse facility in Plainfield in the AllPoints Midwest Park.  This is especially welcome news, given that the credit crunch nationally has made it difficult for many commercial developers to finance projects.  Even though there are no official tenants as yet, Duke and Browning already have financing in place for the twelve million square foot facility. 

Also in Plainfield, Amazon.com is in the process of leasing extensive warehousing space and is expected to employer 1200 workers during the coming two years.

I'll tell you, news like this brings a smile to the face of this Indiana bankruptcy attorney!

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

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

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

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

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

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

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

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

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

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

An Arizona company owns Tuchman Cleaners now, but most people around Indianapolis still think of the dry cleaning chain as a native son.  I know I do.  Tuchman has been laundering and dry cleaning clothes here for more than sixty years.  It was sad learning that Tuchman's owner, National Dry Cleaners, has filed bankruptcy in Phoenix.  Tuchman, with its 30 Indianapolis locations, is being put up for sale as part of the bankruptcy plan.

In my bankruptcy blog ATA Business Bankruptcy Plan Blown To Bits, I explained that, in a business bankruptcy, debts are not discharged by the court.  Instead, assets are sold to raise funds with which to pay creditors. Part of the reason for any business to file bankruptcy is to "buy time", enough time to sell some of its assets.  In the case of ATA, the efforts to sell assets while keeping the business running did not work.  In More Companies Coming Out The Other Side of Bankruptcy, I talked about three companies which were able to reorganize through the bankruptcy process and continue to do business with their customers.  I'm hoping the National Dry Cleaners story will end that way as well.  Meanwhile, I'm rooting for Tuchman stores to keep open, perhaps under new ownership. National Dry Cleaners CEO Ken Lyng remarked that daily operations at Tuchman will not be interrupted.

Having served as a bankruptcy attorney in Indiana for more than twenty years, I've helped clients through each of these steps of the bankruptcy process.  As part of that process, a company or individual will file a statement about the reasons they chose to turn to the bankruptcy courts for help.  National Dry Cleaners lists increased energy costs, environment cleanup costs, and the general economic downturn as factors that hurt their business.  Although my work concentrates on personal bankruptcy and small business bankruptcy (rather than on national chains), there are many elements common to all cases of bankruptcy.  You'll notice that the three main causes cited by National Dry Cleaners have nothing to do with mismanagement, theft, or scandal.  In other words, the problems were not due to mistakes made by the leaders or employees of the company.  All the causes originated outside the company and were powerful enough to impact the company negatively.

I see this very often when I work with small business owners who are forced into bankruptcy through circumstances basically beyond their control.  Whatever the size of a business, even with dedicated efforts to run it well, it can be overwhelmed by outside forces. It's so apropos, in a way, for us, particularly those of us in Indiana who think of Tuchman as uniquely Hoosier,  to hope is that the bankruptcy process will help National Dry Cleaners make a "clean" start.

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

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

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

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

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

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

One of my earliest blogs, I Never Thought I’d Be Here, got its name from the six-word statement I and my colleagues hear so often in our law offices around the state of Indiana. If Fannie and Freddie were people, they’d probably be making that very statement just about now.

“Fannie Mae” is a nickname for the Federal National Mortgage Association, and “Freddie Mac” is the nickname for the Federal Home Loan Mortgage Corporation.  Both are giant mortgage companies, falling into a category all their own, because, while they are not government agencies but shareholder-owned corporations, both companies are government-chartered.  Together, they guarantee more than half of all home mortgages in our country, some six trillion dollars’ worth.

FNMA and FHLMC buy mortgages from lenders, package them into investments, and then guarantee the principal and interest on those investments.  Over the years (FNMA was founded in 1938, FHLMC in 1970, both before I began my bankruptcy law practice), there’s been an “implied guarantee” behind the mortgage securities of Fannie or Freddie, meaning it was understood that the U.S. government would stand behind them if the need arose. Well, as of July 13th, that implicit guarantee became an actual guarantee.  The U.S. Treasury announced it is ready to provide whatever dollars are needed to keep Fannie and Freddie in healthy condition. 

I’m certainly no economist, but I do know a thing or two about safety nets.  For more than two decades, I’ve been a part of the U.S. bankruptcy safety net, counseling with tens of thousands of people – individuals, families, and business owners.  That bankruptcy safety net helps keep our economy going.  The new “explicit guarantee” provides the same kind of safety net for mortgages, ensuring that people will be able to finance home buying and investors will feel safe providing the cash for those loans by investing in mortgage obligation investments.

All in all, from my point of view as a consumer bankruptcy specialist and as someone who counsels people on financial matters, this is evidence of a system working the way it’s supposed to and of government making good on its promises.

Part of the bankruptcy court process with which I have been dealing for the past twenty-plus years involves auctions. People usually associate auctions with estates, but often a bankruptcy trustee will convert assets into cash to pay creditors by holding an auction.  Two local companies have assets put up for auction within past weeks.  The first, ATA Airlines, closed back in April (seeATA Bankruptcy Plan Blown To Bits), but it took until a couple of weeks ago to wind up the loose ends in the company's headquarters.  Hundreds of ATA items are being auctioned off to the public here in Indianapolis at the headquarters on the west side of the city, but also in ATA's former Chicago office, all under order of the U.S. Bankruptcy Court.  The items include office furniture and equipment, but also specialty aviation equipment. 

More recently, Premier Properties, the retail development company that owned the Metropolis mall in Plainfield, changed their plan to reorganize into a liquidation bankruptcy.  In this case, the auction will be held at the Hamilton County Fairgrounds.  The Premier auction will include assets of the business owner, such as scooters, electronic theater equipment, and exercise equipment.

As a bankruptcy attorney in Indiana for more than two decades, I've seen many different situations in which business assets are liquidated to satisfy debts.  As I explained in Yes, Your Business Can File Bankruptcy Without You, unlike personal bankruptcy, in which certain debts may be discharged (meaning legally forgiven in part or in full), the law does not provide for a business' debts to be discharged. All available assets must go towards repaying the creditors of the business.  With ATA, a publicly held corporation, the personal assets of business owners (in this case the shareholders) are not involved.  In the case of Premier Properties, where there was one principal owner, (developer Christopher White), the owner's assets may be involved as well.

The overriding principles behind the bankruptcy system are to provide a safety net that encourages entrepreneurs to take business risks and keep the economy moving, while at the same time fairly protecting the creditors who themselves took risks by lending money to those businesses.

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

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

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

Scanning the entertainment section of the paper the other day, I noticed that the Broadway hit "The Wiz" is playing in Indianapolis.  Now, I was not yet born when this story began, but as a consumer bankruptcy specialist in Indiana, I know the very interesting and sad saga behind the show. It all started with the book upon which this wildly popular play "The Wiz" is based, "The Wizard of Oz", which was first published in the year 1900.  The then 44-year old author was L. Frank Baum, and he enjoyed enormous success with his book - for a time.  In fact, within the first two weeks of publication, the book sold 10,000 copies, and the first year sales totaled 90,000. Then Frank Baum decided to expand upon his success, producing a very expensive slide show with an orchestra based on Oz.  Unfortunately, neither of those ventures was well-accepted, and when that show closed, Baum was forced to file bankruptcy.

The supreme irony about this tale is that, several years after Baum died, Samuel Goldwyn bought the movie rights to The Wizard of Oz for $40,000.  Today, more than a century later, you and I can attend the new Indianapolis showing of "The Wiz", which has delivered millions of dollars in profits, but of course too late to benefit even the descendants  of the imaginative author of Oz.

Even though the seeds of this bankruptcy were sown several generations before my time, as the adviser to many small businesses that file bankruptcy in Indiana, I understand only too well what happened.  Business owners - all business owners - take risks.  They invest their time, their expertise, and often their life savings in ventures which they believe have a good chance of success.  But sometimes, factors beyond their control undermine their chances.  It might be a general downturn in the economy or in their particular field.  It might be a medical problem that struck the business owner or a family member, or even an expensive divorce.  Quite often, decisions that you and I, in hindsight, might agree were solid at the time, turned out not have been so good given later circumstances that could not have been predicted.  The bankruptcy court system is there to serve as a safety net for just those reasons.

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

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

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

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

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

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

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

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

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

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

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

Every month or so, I like to keep my bankruptcy blog readers up to date on the job market in our state.  As a bankruptcy attorney serving clients in 38 Indiana counties with offices in Bloomington, Columbus, Anderson, and Indianapolis, I’m always on the lookout for news that has to do with the availability of jobs.  That’s because, as I’ve often explained, having a regular source of income and benefits is extremely important to my clients who are rebuilding their financial lives following a bankruptcy filing.  Clients who have filed a Chapter 13 bankruptcy probably already have regular jobs, or at least sources of regular income, but it’s important that layoffs not derail their bankruptcy debt repayment plans.  Clients who have filed Chapter 7 bankruptcy, on the other hand, need to gain control of their regular finances and keep bills paid.

Overall, Indiana has lost about 12,000 manufacturing jobs this year.  To put our situation in perspective, however, it’s important to mention that the 5.8% unemployment rate in Indiana is lower than that in Illinois, Kentucky, Michigan, or Ohio.

Negative news during the past month included the bankruptcy filing by Steve & Barry’s, a discount retailer in Washington Square and Lafayette Square shopping malls. Logistics companies, one of our strong suits in Indiana, are suffering from high fuel costs.  Two trucking companies have filed bankruptcy, Tradewinds (in Arcadia) and Icon Transportation (in Indianapolis).  Chrysler announced a plan to cut 1000 jobs.  (While they say most of the effect will be on jobs in Michigan, the cut could affect Chrysler's 670 salaried workers in Kokomo.) Indianapolis-based Davis Homes closed down for good, affecting not only their own employees, but possibly construction workers and suppliers from other firms as well.

On the good news front, Nestle is expanding its Anderson plant by 260,000 square feet, while Cooper Tire & Rubber Company is moving into a new building in the Franklin Tech Park.  Meanwhile, in Terre Haute, N.E.W. Customer Service announced it would create 480 new jobs by 1011.  In northern Indiana, Zimmer Corporation announced it will be needing at least 100 new workers. Right near where I live and shop, Nordstrom at Keystone Crossing Fashion Mall announced it will be hiring 250 workers to staff its new store.

Bankruptcy is all about rebuilding and fresh starts.  Observing all the changes in the job market in Indiana, I need to remind myself that sometimes demolition needs to be done before new structures can rise.  The advice I offer my clients - keep learning, seek training, plan the work and work the plan.

There’s hardly anyone I know who doesn’t love the crunch of Vlasic pickles, but, as I learned earlier this month, Vlasic itself is in quite a pickle.  Back in January of this year, Vlasic turned to a Delaware bankruptcy court for Chapter 11 bankruptcy protection against creditors while the company looked for a buyer to bail it out of financial troubles. 

Now the Vlasic company has filed a plan with the court based on a buyout of Vlasic’s assets by a firm named Hicks, Muse, Tate and Furst, Inc.  In an earlier bankruptcy blog, Should You Renew Your Vows With Your Creditor?, I explained that one of the functions of a Chapter 13 corporate bankruptcy filing is to “buy time” to seek a purchaser for company assets.  Under the plan in this case, most of Vlasic’s assets have been sold to Hicks, Muse, Tate, and Furst, Inc., raising $370 million. The most familiar brands were included, - the pickle line, Open Pit barbecue sauce products, and North American frozen foods. These proceeds will be combined with proceeds from several smaller asset sales, the combined cash will be used to pay creditors.  Since there is still not enough to pay all the creditors in full, secured creditors will be first in line to receive payment.  Debts to unsecured creditors will be only partially repaid, and, sadly, there is going to be nothing left for the shareholders. 

So that you can make sense out of this story, I’ll remind you that, in a business bankruptcy, unlike the case with a personal bankruptcy, the court does not have the power to discharge debts. Therefore, all available assets must be sold to satisfy creditors, with the secured creditors (who lent money to the company based on tangible assets such as real estate, equipment, or supplies) being first in line, followed by the unsecured creditors.  As I brought out in an earlier blog, Michael Vick Files Chapter 11 Bankruptcy, the underlying principle in a personal bankruptcy case is to offer people a chance at a fresh financial start.  In a business bankruptcy, by contrast, the purpose is to help the filing company execute a plan to fairly repay its creditors.  I can’t help wondering, though: Will pickles under any other name be as crunchy?

Earlier this month, an attorney for former Falcons quarterback Michael Vick filed Chapter 11 bankruptcy on his behalf. What makes this filing in a Virginia federal bankruptcy court so unusual is that Vick himself is serving a twenty-three month sentence in a U.S. penitentiary in Leavenworth, Kansas. The top seven creditors listed in the case are owed almost $13 million. $3.75 million of that is a debt Vick owes the Falcons on his signing bonus. Through his conviction for bankrolling dogfighting, the Falcons claim, he breached his contract with the team.

As a bankruptcy attorney in Indiana for almost twenty-five years, I’ve seen my share of unusual circumstances related to bankruptcy filings.  The reason I mention this specific story about Michael Vick relates to a remark made by one of Vick’s attorneys: “He is in the process of paying his debt back to society for the federal prosecution.  This will give him the opportunity when he gets out, to start his life fresh.”  That concept of a fresh start in life really sums up the principle behind the bankruptcy system in our country.  The Vick case involves a celebrity; most of the individual bankruptcy cases with which I typically deal in my four Indiana bankruptcy law offices involve the private affairs of everyday working people.  This case involves debts in the millions of dollars; most of the cases in which I’m involved deal in much smaller amounts.  The underlying principle, though, remains the same – sometimes people need society’s help in the form of the bankruptcy safety net in order to get a true fresh start.  

A person's credit history (also known as credit score or credit file), is a detailed record of how he/she has managed debt over time. It lists credit accounts and their outstanding balances, how often the individual was late in paying an account, whether any account for that person was ever turned over to a debt collector, whether the IRS ever put a lien on that person's assets, and whether any creditor ever obtained a judgment against that person after a lawsuit.  The credit history also shows whether that person ever filed bankruptcy.

Each of the credit reporting agencies collects information from public records and then maintains that information in a computerized database.  The information can then be sold to anyone the law says is entitled to use it.  Basically that includes five groups:

Creditors use your report in deciding whether to increase or decrease credit limits, or even whether to cancel the account, as well as to decide whether to lower or raise the interest rate you're being charged or to leave it as is.

Employers initially use your report to help decide whether to hire you.  Later, the report helps an employer decide whether to give you a promotion (or a demotion), or whether to fire you.

Insurance companies use your credit report to decide whether to sell you insurance and whether to charge you standard rates or increased rates.

Landlords use the credit report to help decide if they want to rent you an apartment - or an office for your business. The landlord wants to know if he can depend on you to keep up your rent payments.

Government agencies use the credit record to help decide if you are to be given a security clearance or perhaps a special license for which you've applied.

Your credit record can be restored after bankruptcy.  While a Chapter 7 bankruptcy will stay on your credit report for ten years and a Chapter 13 for seven years, you will be able to rebuild your credit. 

As a bankruptcy attorney in Indiana for almost twenty-five years, the one thing I want to stress to everyone is this: Your credit report is your passport.  Don't leave home without it. You won't get very far!