Tag Archives: chapter 7

After your bankruptcy filing, get discovered (and rich!) with Kickstarter.com

David Pogue, personal-tech columnist for The New York Times, states that 2013 is the year of the “smart watch” in his “State of the Art” column entitled “Dick Tracy, Your Watch Is Ready, Almost”, published February 27th.

The apparent market leader in “smart watches” will be the Pebble Watch. The next products to challenge for the lead will have names like the Cookoo, I’m Watch, Meta Watch, Casio G-Shock GB-6900 and Martian.

Come on! What does a discussion of new “smart watches” have to do with a bankruptcy blog? It has lots to do with bankruptcy!

First, every single one of the “smart watch” products have something on common, says Mr. Pogue. The concept behind each prototype was first floated on Kickstarter.com, a website where people with an idea seek donors who would contribute to their prototype.

Second, if you have an idea for something like the smart watch and you file for bankruptcy, what happens to your idea? Can your idea be taken away from you as intellectual property to be sold with the proceeds distributed to your creditors? If you have an idea, when should you post it on Kickstarter.com for funding requests?

The answer is “yes”, you can lose rights to your great ideas in bankruptcy. Your idea can be taken away by the bankruptcy court trustee and sold to the highest bidder. So if you are on to something big like the “smart watch” at the same time you are struggling with debts, you might want to file for bankruptcy before you do any significant marketing or development work on your invention, and you should certainly file for bankruptcy before you ever post your idea or invention on Kickstarter.com.

Could an idea of yours find funding on Kickstarter.com and even lead to post-bankruptcy riches if you are “discovered” by the right people? Very possibly yes, as Kickstarter.com does not limit participation to technology and physical inventions, but welcomes performance artists, musicians, authors, and fashion designers. Kickstarter.com wasn’t established just to help inventors to make money by finding a financial backer to buy your idea. Kickstarter.com may enable you to develop something of benefit to humankind that you otherwise would not have the resources to pursue. It is a platform for sharing ideas and for connecting ideas with crowd sourced funding.

Don’t discount your ideas. Even seemingly weird ideas might find funding on Kickstarter.com. Venture capitalists and Fortune 500 companies now regularly scan Kickstarter.com to find promising ideas and concepts that they might fund and develop. This is how the “smart watch” idea was discovered, says Mr. Pogue.

Check back soon for part two of this blog post that will include actual success stories from Kickstarter.com and more great ideas!

Can you reach the max?

Retirement is coming, if it is not already here for you.  If you have income for which to fund a 401k or to contribute to an IRA, I would like you to think about these three questions I answered in this article, and the list of tips I also present in this article.

If you already have a 401k or IRA for retirement savings, you should read carefully, because a “game plan” concerning how you are going to use your retirement savings- or not use your retirement savings- is a very important foundational building block when it comes to retirement savings.  Decisions about your 401k and decisions about bankruptcy are intertwined for many people.

  • Question 1: Should I file for chapter 7 bankruptcy to wipe out debts? Or in the alternative should I not file for bankruptcy but instead cash out my 401k to pay off debts?
  • Answer:  With only a few exceptions, I strongly recommend a bankruptcy filing over 401k withdrawals.
  • Question 2:  Should I file for Chapter 13 bankruptcy reorganization over cashing out a 401k account with the purpose of staving off a foreclosure or preventing vehicle repossession?
  • Answer:  With few exceptions, I strongly recommend a Chapter 13 bankruptcy reorganization over cashing out a 401k account with the purpose of staving off a foreclosure or preventing vehicle repossession.
  • Question 3: Should I take out a loan or cash out a 401k or IRA in order to pay Federal Income Tax debt?
  • Answer: You can almost always pay back the federal income tax debt interest and penalty free through a Chapter 13 bankruptcy reorganization, or alternatively you often can enter into a very reasonable tax repayment plan with the IRS.  Sometimes, very old Federal Income Tax debt is even erased by bankruptcy.  Thus, for many people tax repayment though chapter 13 plan can make more sense than a 401k loan or IRA cash out.  There is an additional benefit: although most people don’t realize it, if your income is not super-high, you still can often wipe out credit card debts, eliminate second mortgage obligation and write off medical bills without any repayment of these debts by filing a chapter 13 case, so in many regards, a chapter 13 case can wipe out debt much like a chapter 7 case, with the added benefit of an easy cheesy Federal Income Tax repayment plan- and state tax can be repaid easily though chapter 13 too!

These are some more very important tips about how to handle your 401k, IRA, VIP, TSP or other tax deferred retirement savings, courtesy of a great article from Forbes.com which you can find here:

http://www.forbes.com/pictures/lmf45ekmg/can-you-reach-the-max/

Can You Reach The Max Part 2

Should I file for chapter 13 bankruptcy to save my house from foreclosure or my car from repossession or should I cash out my 401k to get the money to pay the mortgage or car payment? People ask me this question all the time.  Here is my answer: With few exceptions, I strongly recommend a chapter 13 bankruptcy reorganization over cashing out a 401k account with the purpose of staving off a foreclosure or preventing a vehicle repossession.

Here are the next five Forbes.com steps to help you boost your 401k:

  • 5.  Taking loans out of you 401k is hard because many times you have to pay the money back.  But hardship withdrawals can be allowed.  If you are behind on payments such as your mortgage that would be a loan you would have to pay back but if your house was foreclosing you could be able to take out a hardship withdrawal.  Not everything is a hardship though so just make sure you know the rules.
  • 4.  Many times if you make a lot of money you can only contribute a certain amount to your 401k as to prevent discrimination.  If your spouse has access to a 401k, they should be saving as much as they can as well.  If you or your spouse have access to saving for a 401k, take advantage of that especially if one of you has limitations on your savings part.
  • 3.  If you have an old 401k account, you should combine the two in most cases.  Add the old account to the new; it is much easier to keep track of one account.
  • 2. When you first sign up for a 401k you pick investments and many times don’t get around to changing, or revising it to make the best choice for your savings.  For example don’t just choose company stock because it’s there, don’t forget to revise your 401k and choose your best options.
  • 1.Don’t cash out your 401k as soon as it is available to you.  Leave it as long as it is still invested in good options.  Just because it reaches the penalty free mark or you retire, doesn’t mean that’s the best time to cash out for you.

I might also add that under most circumstances you should not take a 401k loan or cash out a 401k or IRA to pay off federal income tax debt because you can almost always pay back the federal income tax debt interest and penalty fee though Chapter 13 bankruptcy reorganization, or often enter into a very reasonable tax repayment plan with the IRS.

If you have already taken out a big 401k loan or cashed out an IRA (or taken a large withdrawal or fully or partially cashed out a 401k) you really need to begin to rebuild.

 

Credit Report Nuts and Bolts, Part 6 of 6: Who can see your credit report?

Creditors – can look at your report whenever you apply for credit, such as a mortgage, car loan, or credit cards.

Employers – can look at your report, but only under certain circumstances and only if you give them written authorization. Employers are allowed to look at your report to evaluate you for hiring, promotions, and other employment purposes – but I understand that it is done only with your permission in most states. A few states, such as Washington and Hawaii, have banned employers from using credit reports unless a good credit record is related to a job’s qualifications. (I will try to blog on this Washington state law in a later post)

Government agencies – some can look, but only if searching for hidden income or assets – usually only certain agencies can do this such as those trying to collect child support.

Insurance companies – home and auto insurers now use specialized credit scores to decide whether to issue you a policy and how much to charge for it.

Landlords – when deciding whether to rent you an apartment or home.

Utility companies – when deciding how much of a utility deposit (if any) to seek – but not in deciding whether to extend utility services.

Student loans – Usually, I am told by the NCLC’s Guide to Surviving Debt, that a credit score is irrelevant to obtaining government student loans, but it could be a factor in obtaining private (not government guaranteed) student loans. There may be an exception though, for Parent PLUS loans wherein parents–or professional students such as dental, law school, and medical school students–are seeking student loans in order to finance a child’s education.

Divorce, child custody, immigration, citizenship applications, registering to vote and other legal proceedings – your credit report should not be used against you, subject to a few limitations and circumstances.

A man with a future? Ohio Attorney General Richard Cordray avenges foreclosures with populist tradition.

A grandstanding, self-serving and undisciplined avenger seeking local political status or a national law enforcer seeking to hold the rich and powerful to account? Ohio’s next Senator or Congressman? Opinions differ widely on Ohio Attorney General Richard Cordray.

See the NY Times October 12, 2010, article of Michael Powell: "The States vs. Wall Street – Crusaders for the Public’s Purse, in Ohio and Elsewhere".

http://www.nytimes.com/2010/10/12/business/12avenge.html?scp=1&sq=The+states+vs.+Wall+Street&st=nyt

Richard Cordray AG for Ohio, joins with Martha Coakly (AG for Mass.) Lisa Madigan (AG for Illinois) Roy Cooper (AG for North Carolina) and Tom Miller (AG for Iowa) – they are "cut from a mold like that of Eliot Spitzer, and give full throat to popular outrage." – Michael Powell, NY Times.

Michael Powell reports: "[Mr. Cordray] is no Wiliam Jennings Bryan inveighing against the evils of monopoly capital…he is, however, tapping a populist tradition in Ohio. THis is where politicians mounted challenges to the Standard Oil monopoly of John Rockefeller and where Senator John Sherman led a late 19th-century campaign to pass the Sherman Antitrust Act, which was the first law to require the federal government to investigate companies suspected of running cartels and monopolies…’the notion that banks will just get things right over time is perhaps true..but over that time period, and at what terrible cost to the individual American?’" Mr. Powell quotes Mr. Cordray.

Mr. Cordray has recently sued Bank of America in a "first of its kind" lawsuit in October 2009, accusing B of A oficials of concealing critical facts in the acquisition of Merrill Lynch, even as that firm careened towards insolvency. Top bankers, he said, had not come remotely clean about the extent of the losses at Merrill and its bonuses.

in the first week of October 2010, Mr. Cordray sued GMAC Mortgage over the "foreclosuregate" practices of allegedly filing thousands of false affidavits in Ohio foreclosures.

Mr. Cordray has wrung money out of lawsuits before (critics recite that the wealth banks just pay the settlements and then move on- calling it a "cost of doing business" – thus rarely amending their ways0 hitting Merrill Lynch for $475 million, $400 million from Marsh & McLennan and $725 from American International Group.

Is Richard Cordray out to help…or is he just out to grandstand for his own political gain? Keep an eye on Ohio Attorney General Richard Cordray – he may burst upon the national political scene – for better or for worse.

Attacks on foreclosure attorneys – a newer industry gathers steam with “robosigners” and “foreclosuregate” despite forecast of 2 million foreclosures per year.

"Foreclosuregate" and "robo-signers" seem to be words fading from the public lexicon, although in September and October 2010, such words dominated business media.

"Robosigners" were individuals who signed vast numbers of foreclosure related documents (usually, affidavits for those states requiring bank affidavits in the processing of a foreclosure). The vast number of documents signed per month by such individuals begged the question of whether such individuals were truly signing and reviewing the foreclosure related documents and affidavits.

"Foreclosuregate" was the general name given to foreclosures that may have been flawed – either because the foreclosure was done with "robosigner" documents or was subject of some other technical mis-procedure.

Banks, their employees and their outsourced employees rushing "robosigned" documents through a foreclosure court (in those few states requiring a judge’s signature or judicial proceeding to foreclose – Washington state is not one of these states) may be undesirable, but perhaps understandable. Over 2.25 million foreclosures are expected in 2010, and 2 million more expected in each of 2011 and 2012. Many of these homes are abandoned – and many more involve owners who could not afford any mortgage payment whatsoever, so for that subgroup, even a modification is not plausible.

Perhaps three questions should be considered before the cheers grow to burn the foreclosure lawyers and the banks at the stake: First, did or did not the homeowner borrow funds to purchase a home? Second, did or did not the homeowner fail to make the payments? Third, what is to be gained by giving someone a "free house" by alleging technical procedural problems in a foreclosure?

Perhaps the most widley recognized consumer advocate attorney pursuing banks is O. Max Gardner, III, a Shelby, N.C. attorney. Mr. Gardner offers a "bootcamp" to lawyers to teach bankruptcy litigation techniques. Mr. Gardner is referenced the the October 16, 2010, NY Times article of Barry Meier – see link below:

http://www.nytimes.com/2010/10/16/business/16legal.html?_r=1&scp=1&sq=foreclosure%20mess%20draws%20in%20the%20filing%20lawyers,%20too&st=cse

Round Two: Countrywide/Bank of America now attacks those from whom it purchased loans. See my earlier post: “Round One: Bank of America under attack for selling lousy mortgages to investors Pimco Bonds and Black Rock”

First off, many kudos to Joe Nocera of the NY Times, the source of much of the info and inspiration in this post in his 11/27/2010 article:

"Liar Loans" a/k/a "stated income" loans were the forte of Countrywide, which may come to represent the dirtiest of all the subrime lenders. However, other companies also made stated income loans, in all fairness, and stated income loans have been around in one form or another since the 1980s.

However, Countrywide went around looking to purchase the "stated income" loans made by other companies, banks and lenders.

To help you understand this "behind the scense" squabbling between the banks and government, I quote from Stephanie Strom’s November 27, 2010, NY Times article:

"Take, for instance, that litigation between Countrywide and the Mortgage Guaranty Insurance Corporation (Ginnie Mae). For some time now, the mortgage insurer has refused to pay claims on thousands of stated-income loans it insured, on the unsuprising grounds that the loans were fraudulent at their inception and thus violated the terms under which the company insured them. In December, Bank of America (Countrywide) filed suit on behalf of its Countrywide unit, arguing, in effect that it doesn’t matter whether the loans were fraudulent. Since the insurer never asked for income verification – and accepted the fact they were stated income loans – it has to pay up. (Nearly a year later the litigation is just getting started.)

Now contrast that stance with Countrywide’s (B of A’s) effort to force smaller mortgage originators to buy back loans it had purchased. In these cases Countywide makes the exact opposite argument: because the loans were made fraudulently, the smaller companies have an obligation to buy them back. [ ]

Thus, when it serves Countrywide’s purposes (now owned by B of A) to argue that everyone knew the loans were fraudulent, it happily makes that case. But when it is better served by arguing that it is shocked – shocked! – to discover gambling in the casino, it makes that opposing argument wtih similar ease. Isn’t that the dictionary definition of hypocrisy?"

See "The Give and Take of Liar Loans", by Joe Nocera, NY Times Saturday, November 27, 2010.

http://www.nytimes.com/2010/11/27/business/27nocera.html

Many Kudos to Joe Nocera – a nicely written article!

Round One: Bank of America under attack for selling lousy mortgages to investors Pimco Bonds and Black Rock

Investors are mad, hopping mad, and Bank of America (and others) are in the crosshairs. Between 2004 and 2008 B of A assembled some $2 trillion in mortgage securities, and sold many of them off to investors, including Pimco and Black Rock, large money management companies.

These angry investors want to shove the cruddy mortgages down Bank of America’s throat.

This Nelson D. Schwartz October 20, 2010 NY Times Article is telling:

http://www.nytimes.com/2010/10/20/business/20bond.html

"But while the human toll of the foreclosure crisis has grabbed the headlines, the fight over how these loans were created in the first place could last much longer and ultimately cost the banks much, much more. And it is setting the stage for a huge battle between mortgage holders like the government (Fannie Mae, Freddie Mac and Ginnie Mae), hedge funds and other institutional investors on one side and teh big banks on the other. ‘It’s very serious said Glenn Schorr, an analyst with Nomura Securities. ‘The numbers are all over the map’ If the Fed and the investors succeed, it could cost Bank of America billions of dollars. On Wall STreet and in bank boardrooms,the question of whether investors can force banks to buy back, or "put back" bad mortgages to the banks that sold them is dominating the debate and worrying analysts, money managers and banking executives."

"The danger posed by angry – or opportunistic – investors ‘putting-back’ mortgages to the banks is hardly limited to Bank of America. Other giants like Citigroup and JPMorgan Chase face similar claims, and [on approximately October 14, 2010] JPMorgan set aside $1.3 billion just for the legal costs, including put-backs"

Countrywide magnate pays $67 million – Angelo R. Mozilo former CEO pays to settle civil fraud case brought by SEC

Gretchen Morgenson of the NY Times reports on October 16, 2010:

"…the settlement by Mr. Mozilo is the fist time that a prominent executive has been penalized personally for financial excesses linked to a mortgage boom that, when it went bust, threatened to topple the economy and led to an unprescedented wave of foreclosures."

"Earlier this year, Goldman Sachs paid a $550 million fine to setle securities fraud charges. Securities regulators are also investigating former senior executives at Merrill Lynch for possible securities fraud."

The SEC sued Mr. Mozilo alleging that he improperly generated profits on insider stock sales, and that he allowed "toxic" loan products to move forward, knowing them to be toxic.

Countrywide (acquired by Bank of America) is to pay $20 million of Mr. Mozilo’s settlement. Mr. Mozilo has also agreed to never again serve in a public company. (Note: Big fat deal – he is 71 years old and recorded gains on stock sales of over $140 million on Countrywide stock and for years was among the highest-paid executives in America – and was known as an audacious and flamboyant financier)

The settlement was reached four days before the scheduled beginning of a jury trial in Los Angeles.

Other Countrywide employees sued by the SEC (and whom settled) were David Sambol (former Countrywide president, paying 5.52 million) and Eric Sieracki (former Countrywide chief financial officer, paying $130,000).

http://www.nytimes.com/2010/10/16/business/16countrywide.html?scp=1&sq=Lending+Magnate+Settles+Charges+for+%2467+million&st=nyt

Dying man’s last wish: that you learn how to effectively invest – see “The Investment Answer” by Gordon Murray

Mr. Gordon has brain cancer. He is going to die, soon. Mr. Gordon used to sell expensive "actively managed" financial products that rarely, if ever, beat the market. Mr. Gordon feels poorly about this, and he wants you to learn how to avoid people like him who want to eat up all of your investment results through expensive actively managed mutual and bond funds.

Mr. Gordon wrote a book, it is called "The Investment Answer", co-written by Daniel C. Goldie.

If you are now earing more money, or have had your debts relieved, you should now have more funds to put away for your future.

Please consider reading Mr. Murray’s book.

You can get an overview of his book from the Saturday, November 27, 2010, NY Times article by Ron Lieber:

http://www.nytimes.com/2010/11/27/your-money/27money.html