Bankruptcy and Litigation

After a decade of litigation and related bankruptcy, Jacqueline Palank of the Wall Street Journal wrote on the question of who owns the song, “Whoomp! (There It Is)”.

This song is familiar to anyone who attended a sporting event in the ’90s. Released in 1993, “Whoomp! (There It Is)” was one of those ubiquitous pump-up-the-crowd songs played during sporting events, a status cemented by its inclusion on the first volume of “Jock Jams.” It was later declared the 65th worst-song-ever, surrounded by such other ’90s gems as “How Bizarre” by OMC, “Breakfast at Tiffany’s” by Deep Blue Something and “Supermodel (You Better Work)” by RuPaul.

To decide this matter, Judge Richard A. Schell of the U.S. District Court in Sherman, Texas, scheduled a hearing for Aug. 27. This is when a jury will be selected for a trial over which of two music companies is the true owner.

In 1993, Alvertis Isbell’s Bellmark Records released “Whoomp! (There It Is),” by one-hit wonder Tag Team. According to Isbell, the record label owned the sound recording of the song, while its affiliated publishing company, Alvert Music, owned the composition rights to the song’s written form.

However, DM Records licensed “Whoomp! (There It Is)” in 1997. Bellmark filed for bankruptcy protection the same year. In 1999, Bellmark sold most of its assets, including its sound recording rights, to DM Records. According to Isbell, the composition rights weren’t included in that sale because they are an asset of Alvert, which wasn’t in bankruptcy.

According to Isbell, DM has been wrongly claiming ownership of both the song’s sound and composition rights. Isbell is seeking a ruling that Alvert Music still owns the composition rights, and also wants damages for DM’s alleged infringement on his ownership rights.

DM Records, however, says written agreements do not mention him or Alvert Music by name, and therefore don’t distinguish between the two types of song rights. As a result, both were assets of Bellmark and therefore included among the assets DM Records bought from Bellmark’s bankruptcy.

After a decade of litigation, the parties asked Schell to rule on the dispute without a trial. The judge denied the request Friday stating, “Because there are genuine issues of material fact surrounding ownership of the subject composition copyrights, the court denies both DM and Isbell’s motions for summary judgment.”

Many experts believe that we may be headed for another recession. Don’t enter a second recession with mountains of debt. I can help you to understand the options available to you for dealing with your debts. I am sure that I can be of assistance to you, to a family member, or to a friend as we all know people experiencing trouble these days even if we are not experiencing our own financial troubles. Please do not hesitate to make contact with me. I emphasize courteous and discrete consultations that fill your time with useful information. The impact to your life after an in-person consultation with me may be substantial, and life-long. You will enjoy a new peace of mind and a fresh hope for the future with a new roadmap for financial success that we develop together. You can contact my scheduler through our website for your free 30 minute consultation. If you wish, you may schedule your free 30 minute consultation by phone by calling us at 253-383-1001 Monday through Thursday from 9:00 AM until 5:45 PM, and on Friday from 9:00 AM until 12 noon.

If the best interest rates are from banks, credit unions, or savings and loans with low Bankrate.com Safe & Sound Ratings, does it make sense to go for high yields when the bank is potentially at risk?

An article I found on Bankrate.com discussed the truth about risky banks and their interest rates on certificates of deposit. When looking for the best CD rates, every tenth of a percentage point of yield makes a difference. This is especially true right now, when interest rates are at a historic low.

The answer is that it depends. “Technically, consumers have nothing to worry about as long as they stay under FDIC (Federal Deposit Insurance Corp.) limits, which are $250,000 through 2013,” says Robert Laura, a financial adviser and president of Financial IQ in Farmington, Michigan. According to the FDIC website, a CD that matures after Dec. 31, 2013, would have its insured limit reverted back to $100,000, except for certain types of retirement accounts.

The FDIC website states that if you have more than the current limits to invest, it may be better to break up your CD purchases by buying CDs from different institutions to stay under deposit insurance amounts. That being said, should you invest in a CD and the institution fails, the FDIC is required to make good on your investment as soon as possible. This can involve transferring your CD to the institution that acquired the failed bank or sending you a check for the balance due on your CD.

The FDIC website also has information on what happens if your CD is worth more than deposit insurance limits, and your bank fails. If this happens, you may receive some or none of that balance at a later date, depending on whether the FDIC is able to sell the failed bank’s assets and at what price. The FDIC provides frequently asked questions on federal deposit insurance.

Bryan Hopkins, CPA, CFP and president of Hopkins Wealth Management in Anaheim Hills, California states, while the FDIC generally makes good on insured deposits quickly, it’s wise to have other liquid funds in an insured checking or savings account elsewhere. “It could take as long as 90 days to get your money, so it’s a good idea to have funds elsewhere to cover day-to-day expenses,” he says.

Though deposits are currently insured up to $250,000, it does make sense to pay attention to safety and soundness criteria, such as Bankrate’s Safe & Sound ratings. These ratings evaluate a bank based on an individual institution’s capital adequacy, asset quality, profitability and liquidity.

“Psychologically, a bank’s ratings are important and consumers should use them,” says Bryan Hopkins. “Most consumers, especially older ones, remember the Great Depression. While bank failures are handled very differently now than they were then, nobody wants it to be the case where things don’t go smoothly, and have their money be in limbo for months.”

CD rates for banks with lower Bankrate Safe & Sound Ratings may be higher than those with higher ratings because those banks may be trying to build up their deposit base by offering higher yields through brokers to consumers. In early December, one-year CD rates varied from 0.5 percent from a bank with a four-star Safe & Sound Rating, to 2.08 percent from a bank with a one-star Safe & Sound Rating. However, there were several banks with one, two, three, and four star safety and soundness ratings offering CD rates from 1.7 percent to 1.99 percent.

Lower-rated banks don’t always offer higher rates than banks with higher ratings, so it is always a good idea to “shop around”. Some higher-yielding CDs may come with higher minimum deposit requirements, and some banks may be seeking deposits with a particular maturity. These banks may offer better terms on some CDs than others.

In many cases, the difference between higher yielding CD rates and lower yielding rates isn’t much. For example, if you buy a $10,000, one-year CD with a 1.9 percent interest rate, compounded daily, you’ll earn $191.81 in interest. If you buy the same CD at a lower rate, 1.6 percent, you’ll earn $161.28—a $30.63 difference.

Do credit reporting bureaus ever make mistakes?

A recent article posted on KOMO News online site, discussed a 2009 California class action lawsuit that challenged credit-reporting bureaus TransUnion, Equifax, and Experian with improperly reporting debts that had been discharged in bankruptcy. The defendants (the credit-reporting bureaus) eventually came to a settlement with the plaintiffs to the tune of $45 million.

The court approved the settlement by issuing an Order Granting Final Approval, but on August 12, 2011, the defendants filed a brief challenging that order. Their challenge is in regards to attorney fees and costs of the case. The reason for the article was to remind readers of the case, because the result of this appeal won’t be known until sometime later this year. The deadline for Appellants to file relevant briefs with the court is January 23, 2012, and Appellees have until February 24, 2012.

The lawsuit was brought on because Equifax, Experian, and TransUnion improperly reported debts that had been discharged in bankruptcy on consumers’ credit reports. Rather than accurately noting that these debts were “discharged through bankruptcy”, the credit bureaus noted that they were “120 days late” or that they had been charged off by the credit issuer.

Incorrectly reporting the status of a debt is illegal, but it also caused a lot of grief for the people affected. This mistake consequently made these debts appear to still be active. When a debt is still reported as active, debt collectors may try to collect on that debt.

The result was that people who had filed for bankruptcy precisely to eliminate their debts and stop getting harassed by debt collectors, had to deal with them anyway.

There are a group of petitioners that are eligible to collect on the settlement that are being represented by this case. To be a member of that group, petitioners had to have received a Chapter 7 bankruptcy discharge AND a credit report issued by one or more of the defendants between March 15, 2002 and May 11, 2009 with incorrectly reported debts. They also must have submitted a claim form with relevant information by November 30, 2009.

Even though the settlement amount seems large, it will be spread out over so many individuals that it likely won’t result to more than a few dollars per person.

Is there anything I can do about a student loan that has defaulted?

College Graduates are Shackled to Student Loan Debt

Typically once your loan enters default status, the lender requires you to pay off the remaining loan balance in its entirety in one lump sum.

However, the U.S. Department of Education has a loan rehabilitation program to bring defaulted student loans current. There are several reasons as to why you should take advantage of this program. When you enter into the program, risk of wage garnishment ends, and the IRS will no longer be able to withhold your income tax refunds.

Additional advantages take place after you have completed the loan rehabilitation program. The loan will no longer be in default status and will be considered current. Furthermore, the negative credit reports to the three national credit bureaus associated with the loan will be deleted. You will now also regain eligibility for the benefits that were originally available on your loans before the loan defaulted. These benefits may include deferment, forbearance, and Title IV eligibility.

There are some differences to the program depending on the type of loan that you are trying to rehabilitate. In all cases, you are required to make nine full, on-time payments of an agreed amount within twenty days of their monthly due dates to the Department of Education.

The aforementioned differences have to do with the lender who services your loan after you complete the program. A Direct Loan will be returned to the Direct Loan Servicing Center, a FFEL Loan may be purchased by an eligible lending institution, and a Perkins Loan will be serviced by the Department of Education until the loan balance is paid off.

Some things to keep in mind:

Payments secured through involuntary means, such as wage garnishment or litigation, cannot be counted towards your nine payments.
You are only allowed to perform loan rehabilitation once per loan. That means if your loan falls back into default, you will have few if any options, and you will more than likely be responsible for the remaining balance in full.

Does the bankruptcy double standard play a role in personal bankruptcy?

A recent article from The New Yorker highlights a troubling disparity in the way we view bankruptcy and loan restructuring in general in this country. As was evidenced in the recent bankruptcy filing of American Airlines, bankruptcy for corporate entities is generally considered part of an overall savvy approach to managing debts and investments.

While American Airlines could have continued paying its debts (it filed bankruptcy with more than $4 billion in the bank), it opted to take the bankruptcy route, which will allow it to restructure its debts into ones that make more financial sense. After the company filed its Chapter 11 bankruptcy petition, most analysts praised its decision, citing the success other airlines have had with reorganization bankruptcies in recent years.

However, for consumers interested in filing personal bankruptcy, the attitude of the general public is vastly different.

The current turmoil in the housing market highlights exactly how differently the general public views personal bankruptcy:

The housing bubble falsely inflated housing prices. Arguably, the analysts and economists who were equipped to recognize this bubble for what it was an attempt to prevent its burst did not. Also arguably, consumers might have recognized the bubble, but were less likely to do so than those trained in economic fields.
Lenders and homebuyers took on risky debts, betting on rising home prices to pay them off. We now know that those debts were not so good.
Many banks lost millions or billions of dollars on bad home loans. Some of those banks benefitted from taxpayer-funded bailouts. Others have staunchly refused to refinance (on a significant scale) mortgage loans that have become untenable for their borrowers.
Many homeowners are underwater on their homes. Sources note that many Americans owe up to 50 percent more than their home’s value on their loan. The “smart move” financially for these people would be to walk away from their mortgage, to abandon their homes and stop paying their mortgages. Most don’t, though.

One of the major reasons more homeowners aren’t walking away from their unaffordable homes, even though such a move would be financially logical, is that nonpayment of loans has been morally stigmatized in the media.

Figures including the head of the Mortgage Bankers Association have reportedly noted that defaults on home loans “send the wrong messages” to community and family members. Others have hinted that we would do well to bring back debtors’ prisons. The total effect, in other words, is that personal bankruptcy and similar moves (even when they’re financially savvy) have been labeled as morally deleterious.

The New Yorker article summarizes the problem in its closing paragraphs, noting that the prevailing attitude in the U.S. runs that individuals ought to “do the right thing” by honoring their debts, but that large businesses, banks, and corporations—who usually have much more capital at their disposal—can do whatever earns them the greatest profits.

Many experts believe that we may be headed for another recession. Don’t enter a second recession with piles of debts. I can counsel you on your debts. I am sure that I can be of assistance to you, a family member or a friend as we all know someone experiencing trouble these days even if we are not experiencing our own financial troubles. Please do not hesitate to make contact with me. I emphasize courteous and discrete consultations packed with plenty of information. The life impact of meeting with me in person will be unforgettable. You will enjoy a new peace of mind and a fresh hope for the future with a new roadmap for financial success that we develop together. You can email my scheduler through our website for your free 30 minute consultation at www.washingtonbankruptcy.com or e-mail directly at [email protected]. To schedule immediately, we can be reached at 253-383-1001 M-Th 9am-5:45pm and Friday 9am – 12pm.

How can I avoid bankruptcy fraud allegations?

Every so often, there’s a local news story about someone who has been convicted of bankruptcy fraud. This week, the case belongs to one George Raynor, of Baileyville, Maine. While the case itself isn’t exceptional in any way, it highlights an important precaution for potential bankruptcy filers to note in order to avoid a fraud conviction.

Bankruptcy fraud is exactly what it sounds like: a bankruptcy filer’s provision of false information to the court that alters the outcome of his or her bankruptcy case. In some cases, bankruptcy fraud can be unintentional, but its penalties are steep: those convicted of bankruptcy fraud might face up to five years in jail and up to $250,000 in fines.

Common examples of bankruptcy fraud include an attempt to shield property from the court; a filer might attempt to transfer property from his or her name to the name of a friend or family member or might simply fail to report ownership of a piece of property or sum of money.

But bankruptcy fraud can also occur when a filer fails to mention income he or she is expected to receive in the future. Raynor’s case falls into this category.

According to the Bangor Daily News, Raynor and his wife filed a bankruptcy petition in 2006 but, in their list of assets, did not mention:

A savings account in a bank;
A deferred compensation retirement account valued at roughly $150,000;
A lump sum payment from his retirement account in the amount of $97,000; and
A payment from his former employer of $12,000 as compensation for unused sick and vacation days.

Now convicted of the charges, Raynor could see as much as five years behind bars and fines of up to a quarter of a million dollars. To date, Raynor’s sentencing has apparently not been scheduled. Often, the amount of the fine assessed on a bankruptcy fraud conviction roughly equals the amount of money or value of property that the filer attempted to withhold from the court.

One of the easiest ways to avoid bankruptcy fraud is to work with a bankruptcy lawyer. Working with someone who is familiar with state bankruptcy laws and the procedures of the bankruptcy court can go a long way toward avoiding mishaps that could delay or derail a case.

Lawyers can also advise filers about which of their assets they must list, whether gifts or property transfers will be considered legal by the court, and what outcomes they can expect from their bankruptcy case.

In cases where a filer may have future income due to him or her, a lawyer can help determine how to calculate the value of that income and how to report it on bankruptcy filing paperwork.

Is student loan debt a bigger problem than credit card debt?

USA Today recently reported that student loan debt in the United States, which totals $850 billion, now exceeds outstanding credit card debt in the U.S., which totals $828 billion.

USA Today gets its numbers from a web site publisher named Mark Kantrowitz, who publishes two scholarship matching services called FinAid.org and FastWeb.com.

A more interesting element of this issue has to do with the monthly repayment numbers facing borrowers. The USA Today article suggests that $30,000 of student loans, payable at 6.8% interest over ten years would amount to $350 per month. At this level of debt, the average person would need to earn at least $42,000 per year.

In a bankruptcy context, student loan debt is not dischargeable except in cases of “undue hardship.” In most cases, “extreme hardship” has essentially been limited to student loan debtors who have a medical issue that prevents them from working. At this point in time, debtors have not been successful in arguing for hardship discharge on the grounds that they cannot find a job in this economy that pays enough to support their student loan obligations. There was a recent Supreme Court decision involving student loans and bankruptcy, but that case did not address the substantive issue of what constitutes “undue hardship.”

Why does it seem like everyone is filing for bankruptcy these days?

A growing number of baby boomers are going bust.

A newly released study found that 42% of all individuals filing for bankruptcy were between the ages of 45 and 64 in 2007 and that older Americas are filing for protection from creditors at a much faster rate than younger adults.

“The baby boomers are disproportionately represented in bankruptcy proceedings,” wrote John Golmant and James Woods, who compiled the study that appears in the September issue of the American Bankruptcy Institute’s ABI Journal. Golmant is a statistician and Woods is a social science analyst, both with the Administrative Office of the U.S. Courts in Washington.

Bankruptcy filings are increasing fastest among individuals between the ages of 55 and 64, the study found. From 2002 to 2007, the percentage of filers in that category grew 65%.

By comparison, the demographic group that experienced the largest percentage drop in bankruptcy filings was Americans 25 and younger, down 60% in 2007 from 2002.

“This significant demographic uptick in older bankruptcy filers has outstripped the aging of the general population as a whole,” Golmant and Woods wrote.

The authors said the recent housing crisis is at least partly to blame, as falling home prices left baby boomers with little or no home equity. The study noted that persons older than 50 were often targeted during the refinancing boom in the early part of last decade.

High levels of credit card debt and mounting health care bills also contributed to the higher number of filings among older Americans, the study found.

The recent study shows the continuation of trend stretching back to at least 1994. In that year, people between the ages of 55 to 64 accounted for 7% of all individual filings. In 2007, the same group accounted for 15.2% of consumer bankruptcies.

What if my income makes me ineligible for bankruptcy?

Bankruptcy is a very complex piece of legislation made more complex by the fact that some states have enacted their own versions of what is, essentially, a federal act. Despite having state bankruptcy laws in place, bankruptcy is still petitioned through the Federal Bankruptcy Court system. While it is fairly rare, it is technically possible to be ineligible for bankruptcy because of your income. As I stated, it is rare, however, the legal system is starting to see more people fitting this criteria every week.

So why would income make you ineligible for bankruptcy? To qualify for a Chapter 7 petition for bankruptcy, your income needs to be below the state median. The term ‘income’ in this situation is actually a figure that is determined by averaging your actual before tax income over the proceeding six months. If you had a high income job, and then found yourself out of work, that high income job may push you over the state median – this means your ineligible for a Chapter 7.

The bad news is that on November 1 2011, the median income in all states dropped. For one person households, the drop is only a few hundred dollars per year, but for a four person household, the drop could be as high as $4000 depending on the state you live in. Every state’s median income is derived from data collected by the Census Bureau and with unemployment high it was only natural that median income levels were going to drop. This means that more people are now ineligible to file a Chapter 7 petition than before.

On the other hand, if you are trying to file a Chapter 13 petition for bankruptcy, you may be ineligible due to too little income. In a Chapter 13 petition, you need submit a payment plan that will cover your secured and priority debts as a minimum. If you are not working or you have a very small income, you may not be in a position to submit a plan that adequately covers those debts. The trustee may then refuse to accept your payment plan. As you can see, there is the possibility for a catch 22 situation, technically ineligible for either forms of bankruptcy.

There are options available that an experienced bankruptcy attorney can consider. While you may not qualify for a Chapter 7 petition based on income, but if you are only slightly above median, there is an alternate route whereby your attorney can work through every expense. This route looks at allowable expenses such as car costs, rent, education and medical expenses, which may well modify your income enough to bring you below the state’s median. . You may also qualify for special circumstances, or totality of circumstances – the latter will look at your lost employment to determine if this is going to be a long term situation. After all, if you don’t qualify today, you may well in two or three months when your past employment has a reduced effect on your average income.

There’s a saying we hear a lot in law – “what a difference a day makes.” In law, this is very true. If you file for bankruptcy on a Thursday, you may be ineligible for a Chapter 7 – submit that same petition on the Friday, and you could be eligible. It all comes to the average of your income over the past six months. By waiting one day, you could move from one pay period to another, with the second being unemployment, and that can significantly drop your average income to below the state’s median.

That indeed may well become your final option – waiting. Of course, that is only an option if you have that time up your sleeve. This well depends on your circumstances and the amount of pressure coming from creditors. What is important to note is that bankruptcy law is always in flux. What is true today may not be true tomorrow, especially when judges enter new interpretations of the law. The smartest move anyone can make when considering bankruptcy is to engage the services of an experienced bankruptcy attorney. It is their job to keep up to date with all the latest changes in bankruptcy.

Many experts believe that we may be headed for another recession. Don’t enter a second recession with piles of debts. I can counsel you on your debts. I am sure that I can be of assistance to you, a family member or a friend as we all know someone experiencing trouble these days even if we are not experiencing our own financial troubles. Please do not hesitate to make contact with me. I emphasize courteous and discrete consultations packed with plenty of information. The life impact of meeting with me in person will be unforgettable. You will enjoy a new peace of mind and a fresh hope for the future with a new roadmap for financial success that we develop together. You can email my scheduler through our website for your free 30 minute consultation at www.washingtonbankruptcy.com or e-mail directly [email protected]. To schedule immediately, we can be reached at 253-383-1001 M-Th 9am-5:45pm and Friday 9am – 12pm.

What debts are dischargeable through filing a Chapter 7 Bankruptcy?

A Chapter 7 bankruptcy is not as generous as a Chapter 13 when it comes to the range of debts that can be discharged. However, there are still a wide range of unsecured debts that can be discharged. One of the most common
debts is that of credit cards, and they are typically the major component of any Chapter 7 bankruptcy petition.

Bankruptcy itself can only ever discharge unsecured debts, so secured loans such as mortgages and car loans will remain no matter which Chapter a debtor decides to file under.

Some of the more common debts that can be discharged include:

· Personal loans including loans from friends, family, and employers

· Credit cards including overdue fees

· Medical bills

· Debt judgments

· Repossession deficiencies

· Auto accident claims except those involving drunk driving

· Business debts

· Monies owed under lease arrangements

· Negligence claims

· Income taxes that aren’t priority taxes

· Tax penalties over 3 years old

When it comes to back taxes and penalties, there are provisions that relate to when you actually filed returns and whether or not fraud or tax avoidance is an issue. While these unsecured debts are discharged through a
Chapter 7 bankruptcy petition, the following debts cannot be:

· Debts not included in the schedules filed

· Recent taxes

· Child or family support

· Criminal fines and/or restitution

· Accident claims involving drunk driving

· Penalties payable to the government other than tax penalties

· Student loans

· Taxes for years where returns were not filed or filed for less than 2 years

A Chapter 13 petition for bankruptcy may discharge some of these debts. Where a Chapter 13 petition does benefit a debtor, is in its capacity to help debtors catch up on overdue debts that cannot be discharged. This may
assist in preventing further action such as jail time for unpaid fines. If you’re in doubt as to which Chapter to file for bankruptcy under, consult an experienced bankruptcy attorney.

Many experts believe that we may be headed for another recession. Don’t enter a second recession with piles of debts. I can counsel you on your debts. I am sure that I can be of assistance to you, a family member or a
friend as we all know someone experiencing trouble these days even if we are not experiencing our own financial troubles. Please do not hesitate to make contact with me. I emphasize courteous and discrete consultations
packed with plenty of information. The life impact of meeting with me in person will be unforgettable. You will enjoy a new peace of mind and a fresh hope for the future with a new roadmap for financial success that we
develop together. You can email my scheduler through our website for your free 30 minute consultation at www.washingtonbankruptcy.com or e-mail directly at [email protected]. To schedule immediately, we can be reached at 253-383-1001 M-Th 9am-5:45pm and Friday 9am – 12pm.