Wednesday, April 18, 2012

Bankruptcy Filings Top One Million Again

New numbers detail the extent of bankruptcy filings in the last year. According to the Administrative Office of the U.S. Courts, the number of non-business bankruptcy filings in the 12 month period ending September 30, 2011, were as follows:

Chapter 7:     1,001,813
Chapter 13:      413,699
Chapter 11:          1,811

Breaking down the numbers even further, the National Bankruptcy Research Center and Professor Ronald Mann, of the Columbia Law School, found that the top states in total number of filings were:

1. Nevada
2. Georgia
3. Utah
4. Tennessee
5. California

They further went on to analyze filings by county and found that the top five filing counties were the following:

1. Shelby County, TN (Memphis)
2. Riverside County, CA (Riverside)
3. DeKalb County, GA (Decatur/Atlanta)
4. Clark County, NV (Las Vegas)
5. San Bernardino County, CA (San Bernardino)

Interestingly enough, they've also found that the top 10 counties so far in 2012 are all located Georgia and Tennessee.

Filing bankruptcy can be complicated and confusing. For more information on Chapter 7 and Chapter 13, or for a free consultation, call me at 330-605-3508 or visit my website at

Sunday, March 18, 2012

The Myth of Medical Bills in Bankruptcy

One surprising myth that seems to persist is that medical bills are not dischargeable in bankruptcy. Although the origin of this myth is uncertain, it's one that I hear repeated by people who come into my office. The easy response is that, of course, medical bills are dischargeable.

Medical bills are one of the main reasons that people seek bankruptcy protection. In fact, a report issued by the American Journal of Medicine estimated that over 60% of people in bankruptcy were there solely due to medical bills. Just last year, the Kaiser Commission on Medicaid and the Uninsured issued a report that estimated the number of uninsured Americans had reach 50 million. Many people who are uninsured (or underinsured) can suddenly find themselves with tens of thousands of dollars in medical bills due to an accident or illness. And most of those who cannot afford insurance have no ability to ever re-pay what is owed.

One of the problems with the persistance of this myth is that some people who might be otherwise best advised to seek bankruptcy protection may not seek the help that they need. It is always best to seek the advice of an experienced bankruptcy attorney to review your situation and see if bankruptcy is the right answer.

Filing bankruptcy can be complicated and confusing. For more information on Chapter 7 and Chapter 13, or for a free consultation, call me at 330-605-3508 or visit my website at

Wednesday, February 29, 2012

How Settling With Credit Card Companies Can Increase Your Taxes

Oftentimes, clients come into my office confused about their options. They have a general idea about what bankruptcy is and how it works, yet they are bombarded daily with advertisements about settling their debts without bankruptcy. What they never hear is that settlilng with credit card companies may mean higher taxes in the long run.

When banks, collection agencies or other lenders settle debts for less than the balance due, they are required to file a Form 1099-C with the IRS. The Form reports the cancellation of debt and the amount forgiven (the difference between what you owe and what you settle for) is considered income to the debtor.

While some debtors may feel better about settling the debts without filing for bankruptcy, they need to understand that there are real tax implications for doing so. So how is bankruptcy different? Debt that is discharged in a bankruptcy is not subject to taxation as forgiven debt. This is because technically the debt is not forgiven, your creditors are just prohibited from collecting on it.

In the end, many people may find that they've traded in a bad creditor for the worst creditor of them all, the IRS. It's important to speak with an experienced bankruptcy attorney about whether or not filing bankruptcy is your best option.

Filing bankruptcy can be complicated and confusing. For more information on Chapter 7 and Chapter 13, or for a free consultation, call me at 330-605-3508 or visit my website at

Monday, February 21, 2011

Need to Get A New Car? You Might Want To Do It Before Filing For Bankruptcy

A question clients frequently ask me involves the timing of buying a vehicle when filing for bankruptcy. The question of whether it's better to buy a vehicle before filing for bankruptcy or after filing is a good one.

If you're filing a Chapter 7 bankruptcy, there can be a few advantage to buying before you file. First, you may have a lower interest rate. After filing, you'll be able to get a car loan easily, but the interest rate is likely to be around 25%. Sometimes clients will actually have decent credit scores before filing that may allow them to get lower interest rates. Even a few percentage points can make a big difference over the life of the loan.

Second, many clients of mine find themselves in the unfortunate position of having to buy a vehicle at a "buy here, pay here" lot. These dealerships specialize in catering to low-income or bad-credit customers. As such, many of the cars are low quality and unreliable. The prices are inflated and the interest rates are exorbitant. If you buy the vehicle before filing your case, it is a pre-petition debt and is dischargeable. Of course, if you want to keep the vehicle you'll most likely have to sign a Reaffirmation Agreement that still makes you liable on the loan, but it gives you some time to evaluate the vehicle before being stuck with it. This is because you can rescind the Reaffirmation Agreement until you receive your discharge. If you do, you can return the vehicle without being responsible on the loan anymore. Because the average Chapter 7 case lasts about four months from filing to discharge, you can keep it and use the pendency of your case more or less as an "evaluation period". If you purchase the vehicle after your case is filed, it is a post-petition date. If something happens to it or it's repossessed, your out of luck and you're still liable on the car loan.

On the down side, if you purchase a vehicle before your case is filed and you have too much equity in the vehicle, your case trustee may seek to seize the vehicle and sell it. Also, if someone is going to be giving you a vehicle outright, it may be best not to title the vehicle in your name until after your case is filed, depending on the value of the vehicle and your available bankruptcy exemptions. The Ohio bankruptcy exemption for equity in a vehicle is currently $3,450.

Within the context of a Chapter 13 bankruptcy, there are also advantage to purchasing a vehicle before your case is filed. Because it is a pre-petition debt, you can include it in your Chapter 13 bankruptcy at (most likely) a reduced interest rate, currently 5.25%. If you choose to purchase a vehicle after the filing of your case, you'll need to first talk to your attorney. This is because you need to get court permission to incur any significant debt after your Chapter 13 is filed. This usually involves filing a motion with the bankruptcy court. The court can also require you to get multiple competing bids and may deny your motion if it is not satisfied with the vehicle you are trying to obtain. It can be a time-consuming and burdensome (although sometimes unavoidable) process.

The pitfalls with getting a vehicle before your Chapter 13 are similar to those involved in a Chapter 7. Although your Chapter 13 trustee won't take the vehicle, the excess equity in the vehicle may mean that you end up paying more through your Chapter 13 plan to your creditors. As always, it's best to discuss these issues with a qualified bankruptcy attorney before filing your case.

I'm an experienced Canton bankruptcy attorney who's filed or managed over 1,000 cases. For more information on Chapter 7 and Chapter 13, call me at 330-605-3508 or visit my website at

Sunday, November 14, 2010

Why Not Use A "Debt Settlement Company" And Avoid Bankruptcy?

If you believe that "debt settlement companies" and "debt negotiation companies" are interested in helping you out and are looking out for your best interests, then perhaps you've considered investing in unicorn farms as well. Know who may be your best friend in paying your debts? Your bankruptcy attorney.

The fact is that debt settlement companies have bills to pay too. Some are not-for-profit and some are. But one way or the other, they have employees to pay. So how do they make their money? If a company is not-for-profit, then they are getting their funding from credit card companies. If they don't charge you a fee, then they have to be receiving their funding from somewhere. If they're funded by credit card companies, do you think they're going to do what's in YOUR best interest?

Other companies will charge you a fee for their services. If you use them, you'll find yourself in a situation where you're not only trying to pay your debts (with interest), but you're paying exorbitant fees to this debt settlement company too. And the fact is that many of them do not properly account for the money they receive from their "clients". They may pay your creditors slowly or not at all. And when the creditors don't get paid, who do you think they're going to start coming after? (Hint: the answer is "YOU"). Other companies have a system whereby they hold onto your money until there is enough on hand to pay off one creditor. Does this make sense to anyone? I can tell you that the other creditors will not sit by and patiently wait in line to get paid. Not to mention that many of these companies are just plain shady. Ever hear of Ameridebt? The were one of the largest companies out there "helping" consumers. That is until the Federal Trade Commission shut them down. Guess they weren't so helpful after all.

Almost weekly I have clients come in who are getting sued while working in one of these programs. This is usually the tipping point when they decide that, despite their best efforts, it's time to go in another direction. Unfortunately, some of them have wasted thousands of dollars trying to make arrangements that eventually fail. It's understandable that people want to pay their bills. But you have to understand that you ABSOLUTELY WILL NOT get honest information from these companies. No matter what your situation, they will try to sell you on a plan that is "doable". Chances are, however, that the only thing it will do it fatten their wallets at your expense.

So what to do? If you're thinking about dealing with one of these companies, talk to a bankruptcy attorney FIRST! Sound backwards? Actually, it's the smartest thing you can do. Any good bankruptcy attorney will present you with all of your options and honestly evaluate your situation. Many times, I've advised potential clients who wish to pay back their debts that they should not file for bankruptcy. And for those who want to, but who cannot realistically do it on their own, we explore the option of a Chapter 13 bankruptcy. And bankruptcy attorneys are required to provide you with a written contract that outlines their services and all of the costs. And most good bankruptcy attorneys will give you a free consultation where you can learn about Chapter 7 or Chapter 13 bankruptcy.

I'm an experienced Canton bankruptcy attorney who's filed or managed over 1,000 cases. For more information on Chapter 7 and Chapter 13, call me at 330-605-3508 or visit my website at

Monday, October 18, 2010

Thinking of Filing for Bankruptcy? - You're Definitely Not Alone

In 2005, Congress changed the Bankruptcy Code with Orwellian-sounding Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Despite the impressive sounding name, BAPCPA has done little to prevent bankruptcy abuse and has done nothing to protect consumers. It's real purpose was to reduce the number of people filing for bankruptcy by making it more difficult, more costly and by forcing more people into Chapter 13 repayment plans as opposed to Chapter 7. It appeared as if the credit card and banking industries had gotten more than their money's worth from President Bush and the Republican Congress.

Yesterday we "celebrated" the 5-year anniversary of the effective date of BAPCPA. What better way to memorialize the day than to take a look back and see just what effect BAPCPA has had on the number of bankruptcy filings 5 years later.

Every year, an administrative agency known as the Administrative Office of U.S. Courts (AOUSC) is required to issue a report about certain bankruptcy statistics. The statistics for 2009 are available and the numbers are hardly surprising. They reveal the following:
  • In 2009, there were 1.4 million consumer bankruptcy cases filed, an increase of 32% over 2008!
  • Approximately 71 percent were Chapter 7 cases, and 29 percent were Chapter 13 cases (down from 34% in 2008).
  • In 28% of Chapter 13 cases, debtors indicated that they had filed for bankruptcy in the previous eight years
  • In 2004 there were 1,597,000 cases filed
  • In 2005 there were 2,039,000 cases filed
  • In 2006 there were 597,000 cases filed
  • In 2007 there were 819,000 cases filed
  • In 2008 there were 1,086,000 cases filed
  • In 2009 there were 1,400,000 cases filed
So what do these numbers mean? Obviously, there were the most filings in 2005 due to the fact that many people rushed to file their case before the law changed. But if we could chart these numbers on a graph, we would see that the number of cases filed last year is just below the number filed the year BEFORE the law changed. Based on the trend and the continued condition of the economy, it's easy to see that the number of filings for 2010 should surpass the number of filing in 2004. In short, BAPCPA temporarily reduced the number of filings, but five years later, we're already back to the pre-BAPCPA level.

But hasn't BAPCPA reduced the number of people filing for Chapter 7 and pushed them into Chapter 13 plans? After all, that was one of its goals. A closer look at the numbers shows that in 2004, the percentage of consumer bankruptcy cases that were filed under Chapter 7 amounted to (drum roll please) . . . 71%! Exactly the same percentage as in 2009. So five years down the road, BAPCPA has neither reduced the number of people filing for bankruptcy, nor has it changed the percentage filing for Chapter 13.

Is there a lesson to be learned? Essentially, we find ourselves in the same position that we were in before the law changed. Of course, now there are additional burdens, cost and expense for debtors, their attorneys, trustees, creditors and the courts. To what end? A Congress and President who knew little if anything about bankruptcy pushed through a measure that has made the process a hassle for everybody, including the very banks and credit card companies that paid them for it. Based on the results five years later, maybe they should ask for a refund.

Filing bankruptcy can be complicated and confusing. For more information on Chapter 7 and Chapter 13, or for a free consultation, call me at 330-605-3508 or visit my website at

Friday, September 24, 2010

Getting a Tax Refund? - Speak To Your Attorney Before You File For Bankruptcy

The next few months will bring us into tax season. Don't think so? Then you're not thinking about the ramifications of your tax refund on your bankruptcy. The fact is that for cases filed from about November 1 through April, the issue of tax refunds has to be considered. Here are a few of the basics about whether or not you'll get to keep that tax refund.

As an initial matter, your bankruptcy trustee has an interest in your tax refund. The trustee's job is to find any property that is not exempt, seize it, liquidate it and use the proceeds to pay back your creditors. Although some trustees are more aggressive than others in pursuing property, they all look at tax refunds as a way to bring some money into the bankruptcy estate.

Here are some of the important things to know. First off, if your case is filed before the end of the year, then the trustee will only be entitled to a prorated portion of the refund. For example, if you filed on December 1, 2010, the trustee would only be entitled to pursue roughly 91% of your 2010 refund (11/12th). Got it? And every day that passes, he or she will be entitled to pursue a greater percentage. If you file after the first of the year (e.g. January 1, 2011), then the starting point for the trustee is the entire refund.

There is, however, good news. A debtor's best friend in bankruptcy (beside their attorney) is the exemption. Let's look at some of the specific exemptions that we use in Ohio to keep some, or all, or the tax refund out of the hands of your bankruptcy trustee.


An exemption is a legal right for the debtor to place certain property beyond the reach of creditors or the bankruptcy trustee. There are exemptions listed in the Bankruptcy Code for certain property ("Federal exemptions") and exemptions for individual states as well. For the most part, in Ohio we use the exemptions provided for by the Ohio Revised Code, most of which are contained in Section 2329.66. The practical effect of these exemptions is that the debtor gets to retain certain property he or she would otherwise have to surrender. The good news is that oftentimes debtors in Ohio may not have to surrender any of their tax refund to the bankruptcy trustee.  Some of the relevant exemptions are as follows:
  • Cash on Hand (ORC 2329.66(A)(3)) - Allows a total $400 exemption for cash on hand or tax refunds
  • Wildcard (ORC 2329.66(A)(18)) - Allows the debtor an exemption of $1,150 in any property
  • EIC and Child Tax Credit (ORC 2329.66(A)(9)(g)) - Allows an unlimited exemption for amounts attributable to Earned Income Credit or Child Tax Credit
For many people, these exemptions are enough to cover the entire refund. If not, you may have to turn some of the refund over to the trustee. This means that you're in the middle of your bankruptcy case and you have to write a check to the bankruptcy trustee. That's something nobody wants to do. Fortunately, you sometimes have the ability to time your bankruptcy to keep even the non-exempt portion of your refund from the trustee.


There are actually instances in which it may benefit a debtor to wait to file for bankruptcy. If a debtor has filed their tax return, but not received their refund, their attorney should analyze their refund to see how much is exempt. If the debtors stand to lose a significant portion of their refund to the trustee, I often advise them to wait until they receive their refund to file. If they receive their refund after they've filed, then the trustee will seize the entire non-exempt portion. If they get their refund first, then they will have a chance to spend it down before filing their case. If this is the case, I always advise debtors to keep track of what they've spent their refund on, as the trustee will want to know. And, of course, one great way to spend your refund . . . pay your bankruptcy attorney. However, there are often legitimate expenses that debtors can spend their refund on pre-petition. These may include groceries, utilities, insurance, clothing, car repairs or any necessities. It is NOT, however, a good idea to spend your refund on a big-ticket item or to re-pay friends or family members right before filing for bankruptcy.

Although the trustee is always seeking ways to get a portion of your tax refund, most debtors and their attorneys, using the proper exemptions and timing, can avoid having to turn over their tax refund and put it to use giving themselves a fresh start.

I'm an experienced Canton bankruptcy attorney who's filed or managed over 1,000 cases. For more information on Chapter 7 and Chapter 13, call me at 330-605-3508 or visit my website at