For nearly 150 years, one concept in bankruptcy has remained unclear. The bankruptcy code provides that debts can be discharged unless the filing party demonstrates "fraud or defalcation." The former legal issue is pretty well understood, but "defalcation" has long been a nebulous concept.
]]> Recently, the U.S. Supreme Court clarified what exactly this legal concept means. According to the justices, defalcation is a situation in which a person trusted with financial assets demonstrates "gross negligence" and "knowledge that what he or she is doing is improper." If that definition cannot be met in a court of law, then it's likely that debt discharge can proceed.The top court's ruling came as the result of a man that was designated trustee for his late father's trust, which only included a life insurance policy. Even though all of his siblings were also designated as beneficiaries of the trust, the man issued loans from the policy and personally benefited, but paid all the money back with interest. His siblings claimed that he breached fiduciary duty and demonstrated defalcation. Now, however, his bankruptcy case could move forward, because the justices handed his case back to an inferior court for judgment.
When a person is considering bankruptcy, it is important for them to understand exactly what their legal rights and options are. Claims of malfeasance could derail a filing for months or even years, which would also delay much needed financial relief. Being fully informed and prepared can help bankruptcy proceedings move along smoothly and efficiently.
Source: Thomson Reuters News & Insight, “Justices finally say what 'defalcation' means,” Lawrence Hurley, May 14, 2013
]]>Robo-signing is considered to be the practice of approving important financial documents, relating to foreclosures or debt collection, without actually examining them. Through this process, a number of people in need of debt relief have faced unwarranted scrutiny from lenders.
]]> Just as lenders became the subject of lawsuits for unfair, sloppy foreclosure actions, some lenders are now facing legal claims for failing to accurately handle debt collection. In order to collect debt, lenders must sign affidavits. However, many of these sworn legal statements have been approved without being verified. As a result, people are facing multiple collections actions on the same debt or are being held responsible for debts incurred as the result of indentity theft.When lenders fail to act carefully, borrowers are usually the ones who pay the price. As a result, it's important to not only take every collection action seriously, but also to make sure that banks aren't relying on flawed practices to collect debts.
Of course, it can be inimidating to deal with mortgage lenders alone when seeking out debt relief options. However, it's important to remember that a person doesn't have to go through this alone. By seeking out the appropriate advice and resources, financially distressed Detroit residents can find the solutions they've been seeking.
Source: Fox Business News, "Robo-Signed Collection Cases Under Fire," Fred O. Williams, April 26, 2013
]]>The son of the company's founders made the decision to buy the company during the bankruptcy proceedings. By purchasing the company from the investment group that most recently owned it, the man was able to restart operations. In fact, most of the company's former employees are expected to return to work at the Oakland County headquarters.
]]> According to reports, the company was unable to obtain financing to remain open as the result of a dispute between stakeholders in the investment group that owned the publisher. The business was pushed into Chapter 7 as a result.When speaking about the acquisition, the son of the former owners was excited about being able to keep his family's company in operation. Additionally, the company intends to honor existing coupons and release next year's coupon book on schedule.
In this case, the bankruptcy process provided legal protection to the struggling business until a buyer came forward. Filing for bankruptcy prevents creditors from trying to collect debt while businesses work on getting finances back in order.
Of course, Chapter 7 may not be the best course of action for every business. In some instances, a company may qualify for Chapter 11 bankruptcy, which would allow them to shed debt and reorganize in order to keep the business operating. Financially distressed business owners in Michigan could benefit from consulting with an attorney to sort through available debt relief options.
Source: Detroit Free Press, "Coupon book publisher bought out of bankruptcy, rehiring employees," JC Reindl, April 25, 2013
]]>In 2010, the federal Department of Energy approved a $529 million loan to help the company develop its product. After a portion of the loan was distributed to the company, financial troubles began to set in as the company failed to maintain enough capital to continue research and ramp-up production.
]]> Currently, the struggling business is seeking out new investors in the immediate wake of a large-scale layoff. An official for the company indicated that business bankruptcy may become an option if they cannot secure an adequate financing.To complicate matters, Congress launched hearings to investigate what happened to the company. Some observers worry that this move was unnecessary and could scare away potential investors that would allow the company to move forward.
If efforts to find capital and other debt relief measures are unsuccessful, bankruptcy may be an option. Although it's unclear what type of bankruptcy the company would file, they would be able to pay back creditors and lift the burden of debt. If the company is eligible for Chapter 11 bankruptcy, they could shed debt and remain in business.
Whatever happens in this case, the financial troubles at Fisker show the difficulty of trying to develop an innovative product in a recovering economy. The hope is that the company will find a way out of debt and help lead the auto and energy industries toward sustainable solutions.
Source: The Detroit News, "Exec: Fisker may file for bankruptcy," David Shepardson, April 25, 2013
Our firm has experience helping businesses through the bankruptcy process. To find out more, please see our Livonia bankruptcy page
Personal bankruptcy is often seen as a solution to eliminate debt and get back on the path to financial stability. While this is definitely a viable and sound option for many people struggling with debt, it's still important to understand what filing for bankruptcy means before deciding to file.
]]> First of all, bankruptcy often allows consumers to discharge a large share of their debt, but not all kinds of debt qualify. Namely, student loans, tax debts and unpaid child support aren't covered by bankruptcy. As such, individuals must work to pay back these debts through a repayment plan or liquidation, depending on what type of bankruptcy they qualify for.It's also important to understand that every person filing for bankruptcy has to go through credit counseling. During this time, consumers work through their finances and monthly budget to develop a plan for the future. Unfortunately, however, it's easy to get caught up with credit counseling agencies that can turn out to be financially harmful as well. As such, it may be best to work with an experienced attorney who can help a person through this process.
Of course, Chapter 7 or Chapter 13 bankruptcy may not be the best fit for everyone looking to get out from under their debt. As such, it may be best to explore their options and Financial Literacy Month may be the appropriate time to do so.
Source: My Fox Philly, "Know these bankruptcy facts before you file," Andrew Housser, April 15, 2013
Our firm has experience helping Wayne County residents solve debt issues. To learn more, please see our Michigan credit counseling page.
In a recent court decision, however, a woman received approval to have $25,000 worth of student loans discharged. By demonstrating that she was "destitute" and had no means to pay back the student loan debt, the court granted an exception to the typical rule. The woman in this case had paid as much as she possibly could over the course of 11 years and could no longer afford to do so in the future.
]]> If a court allows this kind of debt to be discharged, it's likely that extraordinary circumstances were at play. People facing this kind of financial stress could benefit from consulting with an attorney to explore all available options to find lasting relief.Knowing that student loan debt won't be discharged in most cases, it's important to understand some of the potential debt relief options available to financially stressed graduates. For those who meet the income requirements, Chapter 13 could be a viable option. Under this type of bankruptcy, some debts are discharged, but the rest are paid off over the course of three to five years.
Although Chapter 13 may not be the best solution for everyone, being allowed to pay back student debt over time can provide enough leverage for individuals to find a clear path to financial independence.
Source: ABA Journal, "7th Circuit OKs $25K student-loan discharge for 'destitute' paralegal," Martha Neil, April 10, 2013
To learn more about the topics discussed in this post, please see our firm's Detroit Chapter 13 page.
When lawmakers changed bankruptcy laws in 2005, there was concern that people weren't honest about their bankruptcy filings. Whether or not concerns about fraud were valid at the time, Congress installed rules for auditing bankruptcies through the U.S. Trustee Program. Since then, the program itself has run into financial trouble and has been suspended for an indefinite period.
]]> In light of this news, a number of observers believe this change may actually help consumers looking for swift, effective debt relief. When an audit is ordered, it holds up the bankruptcy process. Furthermore, many audits determine that there are "material misstatements" in the documents provided to the court. Even though it isn't entirely clear what constitutes this problem, it is often seen as another reason why bankruptcy cases are delayed.Financially distressed consumers often can't wait around for relief, which is exactly why they make the decision to file bankruptcy in the first place. Waiting several weeks for an audit that won't turn up any discrepancies may become more than just an inconvenience.
Although bankruptcy trustees will not designate cases to be audited for the foreseeable future, it's still important to make sure everything is accurate when filing. The bankruptcy code is immensely complex, so it is helpful to consult with an experienced attorney when preparing to pursue debt relief.
Source: The Wall Street Journal, "Bankruptcy Watchdogs Suspend Debtor Audits," Jacqueline Palank, April 1, 2013
Our firm has helped Michigan residents through personal bankruptcy. To learn more, please see our bankruptcy page.
Not long ago, the man made the decision to file for Chapter 7 bankruptcy, which will hopefully allow him to shed nearly $11 million worth of personal debt. Court documents show that the man's obligations -- including over 350 creditors -- significantly outweigh any assets he currently holds.
]]> Liquidation is a major component of the Chapter 7 process. By selling off a large share of his remaining assets, the Michigan businessman may begin to pay back his creditors. Once that step is complete, the court will then discharge a large share of qualified debt. This will allow the man to regain control of his financial life and begin to move forward once again.As part of the personal bankruptcy proceedings, the brewery owner and the bankruptcy trustee assigned to the case met with debtors to discuss repayment. A number of the individuals who showed up were investors in the brewery. The trustee told the individuals at the meeting that they would be more likely to receive payment if additional assets turn up.
A means test and trustworthy advice can help clarify what debt relief option will be most suitable in a given situation. Typically, a person must have relatively low levels of regular income in order to qualify for Chapter 7 bankruptcy. As such, liquidating assets and clearing debt can prove to be a reliable legal tool for those in need of debt relief.
Source: Lansing State Journal, "Michigan Brewing founder: 'No bags of money'," Steven R. Reed, March 12, 2013
Source: Lansing State Journal, "Michigan Brewing Co. founder files for personal bankruptcy," Steven R. Reed, March 12, 2013
]]>According to reports, Hostess sold the rights to Twinkies to two investment firms. A leader from one of the firms has indicated that production could soon enough that the snack cakes might be back in stores this summer. He has also expressed his interest in expanding the brand by creating new flavors.
]]> The sale of Twinkies, along with a couple of other Hostess snacks, cost the investors $410 million, since it's widely considered the most valuable brand for sale. Beyond this transaction, the bankruptcy court also approved the sale of Wonder bread, which was also packaged with a number of other products.When a business chooses to go forward with Chapter 7 liquidation bankruptcy they agree to sell off assets, which can include brands and other intellectual property, in order to pay back creditors. This typically means that a business also intends to shut down operations.
Liquidation of assets is only one aspect of the bankruptcy process. Although it is the primary mechanism used to pay back debt in this type of bankruptcy, there are often a number of other issues businesses need to settle along the way. By working alongside a trusted legal professional, a business can make the decisions that will work most effectively to clear their debt.
Source: The Associated Press, "Twinkies sale approved by bankruptcy judge," March 19, 2013
What's more is that many young people not only emerge from college with difficulty finding a steady job, but also with significant amounts of student loan debt. Without enough income to pay back the loans, it's not hard to see how the desire for debt relief at a young age can develop. Unfortunately, student loans aren't dischargeable in personal bankruptcy, which may make it a less appealing debt relief option.
]]> This predicament faced by many young people in Michigan -- and nationwide -- is exactly why some people are looking for non-traditional ways to fund their education. A business startup called "Pave" has emerged as one alternative to traditional loans. Under this arrangement, students are viewed as investments with backers. If a student finds success in their career, they share a portion of their earnings with the "investors." This gives incentives to both parties to find success.Although an arrangement such as the one created by Pave works around many of the problems associated with traditional student loans, it also raises questions about grappling with less traditional forms of debt. As more alternatives emerge, what will happen to the money offered to students if students are unable to find a job right away?
As young people deal with various forms of debt in an uncertain economy, they may have many more questions that deserve answers. The important thing to remember is that there are ways to effectively handle debt and personal bankruptcy may be among the options to help individuals find the path to financial security.
Source: USA Today, "Pave: alternative to costly college loans," Hadley Malcolm, March 5, 2013
]]>Detroit has been on the losing end of that battle, fighting to remain solvent for many months. According to current reports, the city has a deficit of about $327 million and owes more than $14 billion in long-term debt.
]]> The city's finances have become so bleak that Michigan Governor Rick Snyder recently declared Detroit to be in a financial emergency. If the state takes over, a three-member emergency loan board appointed by the governor would select an emergency manager to manage the city's finances. If that happens, Detroit would become the sixth Michigan city to be put under state control.On an individual level, the same approach to unmanageable debt can also achieve positive results. With either a Chapter 7 or Chapter 13 individual filing, a consumer will request court intervention. The court's involvement means that creditors no longer can take collection actions against the individual, pursuant to the court-imposed automatic stay. That breathing room can help an individual debtor once again regain financial footing.
Bankruptcy laws also provide different options, depending on the long-term goals of a filer. Individuals with significant equity in assets such as a house or car may prefer a Chapter 13 filing. With the court's help, an individual in Chapter 13 will make payments to creditors through a court-approved repayment plan, typically over a period of three to five years. At the end of that period, most of an individual's debts will be discharged. An attorney can advise potentials struggling with debt of these various filing options.
Source: Bloomberg, "Michigan Governor's Move Sets Detroit Takeover in Motion," Chris Christoff, March 3, 2013
]]>According to a survey by the website Bankrate.com, 45 percent of Americans have more credit card debt than savings. That is only a slight improvement over the last two years. A senior financial analyst with Bankrate.com intimated that clearly the lessons of the recession aren't being paid attention to by enough people.
]]> The risks of not having enough money in savings are many, with the main risk being that you'll need to file for bankruptcy if you have an explosion of debt and no means to pay it off. Of course filing for bankruptcy may be preferable in some cases, but it is not an easy process as it can affect your credit worthiness for years.Figures from the U.S. Commerce Department also back up the alarming survey results. According to the federal agency, the personal savings rate was 6.5 percent in December. While that's an improvement over recent months, the amount of income that people are socking away has still been much too low during the last few decades.
Michigan residents should heed the warnings put forward in these figures. It's recommended that you have at least three months of salary in a savings account that could help you weather a short-term financial storm. Of course no one can properly prepare for prolonged unemployment or catastrophic illnesses, but it is never too early to start putting money aside.
Source: ABC News, "Nearly Half of Americans Have More Credit Card Debt Than Savings," Susanna Kim, Feb. 25, 2013
]]>The former staff member, Christine Beatty relocated to another state in an effort to stay out of the spotlight after the scandal that ended in her serving time in jail for lying in court about her affair with the mayor. She was ordered to pay restitution to the city of Detroit over the incident and reportedly still owes the city just over $83,000. Ms. Beatty's attorney said she is meeting her obligations to the city and that remains high on her list of priorities.
]]> Ms. Beatty's attorney also stated that her income has been drastically reduced in the past year and circumstances have made it necessary for her to file for bankruptcy protection in Georgia where she currently resides. By filing for bankruptcy she will have more income in which to focus on meeting her obligations regarding restitution to the city. Once a person files for bankruptcy all collection efforts by creditors must cease until the bankruptcy petition is completed by the court.The majority of her personal assets, which are listed as a vehicle not yet paid for, a $220,000 mortgage and miscellaneous household items will most likely be exempt from the process. If she has significant equity in the home she will most likely be required to sell it in order to pay down some of the creditors listed in her bankruptcy filing. If there is little to no equity in her home she may be allowed to keep making payments to her mortgage lender.
If she is under water on her mortgage it may be in her best interests to attempt to sell the home in a short sale or pursue a strategic foreclosure if at all possible. Bankruptcy offers a number of protections to consumers who find themselves in so much debt they are no longer able to keep up. A bankruptcy attorney can advise someone struggling with debt on the various options available to them to seek debt relief and start a new financial chapter in their life.
Source: WXYZ, "Christine Beatty sheds debt in bankruptcy, but still owes city of Detroit thousands," Julie Banovic, Feb. 5, 2013
Our Detroit law firm helps families and individuals learn about bankruptcy options and other debt relief strategies so they make a fresh financial start for a better future.
]]>Most people remember Anthony for her sensational trial and acquittal on charges of killing her 2-year-old daughter in 2011. Media outlets were glued to the months-long trial that captured the nation's attention. Anthony recently filed for Chapter 7 bankruptcy in an attempt to erase much of her debts stemming from her legal troubles.
]]> According to her bankruptcy petition, which was filed in U.S. Bankruptcy Court in her home state, Anthony has $792,000 in debts with just $1,100 in assets and no income coming in.Her largest debt is approximately $500,000, which she owes to her criminal defense attorney. She also owes $145,660 to the local country sheriff's office for investigative costs and $61,505 in court costs. She also owes the Internal Revenue Service $68,540 for unpaid taxes. It's unknown how long the taxes have been due, but taxes due to the federal government within the last three years are not dischargeable in bankruptcy. Some of the legal judgments, like the court costs and investigative fees, however, may be dischargeable.
It's important to know what debts you can and can't get rid of before filing for bankruptcy. An experienced bankruptcy attorney will be able to answer many of your questions and find out if filing is the right option. For some people, negotiating with creditors to consolidate debts may be a better option.
Source: USA Today, "Casey Anthony files for bankruptcy in Fla.," Jan. 27, 2013
]]>The news could mean that more young adults will be seeking bankruptcy protection than in prior generations. According to the study, people born between 1980 and 1984 have about $5,700 more in credit card debt than people born 30 years earlier and approximately $8,200 more than those born 60 years earlier.
]]> The academic study, which will is published in the journal Economic Inquiry, examined Capitol One credit card records for more than 32,000 people from the years 1997 to 2009.One of the most obvious reasons for the explosion in credit card debt for younger adults is the lingering effects of the recession. Young adults face one of the worst job markets in generations, and wages are not growing as they have in years past. People are also taking on more in student loan debt, which could mean having trouble paying for other expenses.
But one psychology professor pointed to another alarming trend: the growth of the Internet. The professor said that online shopping has made it much easier for savvy, young adults to make impulse purchases and charge them to a credit card.
One of the things that many young adults need to worry about is how to properly budget. Setting reasonable spending limits and living within those limits is key to maintaining financial stability. While bankruptcy can happen because of factors outside of your control, putting money aside for emergencies can be helpful.
Source: The Huffington Post, "Credit Card Debt: Study Predicts Millions Will Die In The Red," Laura Rowley, Jan. 22, 2013
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