November 25, 2014

Know Your Rights: Stop Retail Credit Card Bullying

We’ve all been there before—approaching the check-out line with purchases and the clerk’s aggressive prompts, “Would you like to save 15 percent by applying for our in-store credit card?”

Even if you refuse, they will invariably press on, “It will only take five minutes,” or, “Are you sure, you don’t want to miss this opportunity?”

Whether you simply don’t have time, don’t want to rack up more credit card debt or you don’t want to mess around with another credit card, it is important to know your rights when standing up to retail credit card bullying.

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With the Christmas shopping season underway, consumers are already feeling cash-strapped and stressed, especially those burdening debt.

On second thought, you think, “Maybe an extra credit card would be nice?” You can move some of the debts around, free up space on another credit card and save that 15 percent.

Don’t let retail bullies sucker you into a card you likely don’t need or really want. Over time, more credit cards and debt can lower your credit score and make it even more difficult to get out of debt.

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November 20, 2014

Alabama’s Student Debt Among Nation's Highest

Student loan debt is one of the greatest financial crises facing American youth. Throughout Alabama and nationwide, students are taking on debts to enter and graduate from college—though many graduates are not finding gainful employment with their new degrees.

In other cases, students drop out with debt and no gains from their educational loans. As debt continues to grow, recent studies have shown not all states are equal in the accumulation of student loan debt—and Alabama ranks among the highest. According to a personal finance website, state-by-state loan ranks Alabama as the 12th-worst for the accumulation of unpaid student loans.

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Researchers analyzed the average amount of debt per student, by state, finding Alabama loan holders have an average of $28,895 in student loans and a 14.2 percent rate of default.

Critics largely blame secondary education to blame for the high rate of debt in the U.S. Alabama’s educational system notoriously graduates high school students who are unprepared for college. According to reports, at least 30 percent of Alabama college students have to take remedial classes. Based on this evidence, it is no surprise there are more Alabama students in default—with more time spent on classes that do not count towards a degree, the more students will take out to finance their education, and the more they will accrue in debt.

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November 14, 2014

Legal Shifts: Students Seek Bankruptcy Help

Unmanageable and overwhelming debt plagues millions of individuals and families throughout the U.S. This problem is compounded by high unemployment rates and other factors that impact a family’s financial security—including divorce, illness or death.

Many debts, including medical expenses and credit cards are dischargeable through bankruptcy, one of the significant source of debt—student loans—is not.

Now representatives of the Center for American Progress are urging Congress to change the law to give those strapped by student loans a way out.

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Student loans can give hope and opportunity. However, they can become a nightmare in the event of an illness or death. Parents who have co-signed student loans have not been released from private student loans, even when their child dies unexpectedly.

For students themselves who have not been able to secure gainful employment, or in the event of illness, the debts can be insurmountable. Unlike car loans, credit cards or other unsecured debts, student loans are not dischargeable through bankruptcy.

Bankruptcy has a long history of providing debtors a fresh start. It is not so with student loans, according to current laws. Congress has continued to stand behind the student loan exception to the longstanding bankruptcy rules.

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November 4, 2014

Credit Card Debt and Peer-to-Peer Lending

Americans are strapped with all forms of debt—medical bills, utilities, student loans and tax debt. The most overwhelming form of debt involves credit cards. With high interest, fees and surcharges, debtors may get deep into debt, without being able to see a way out.

In some cases, borrowers can renegotiate debt settlement with credit card companies, but this tends to be an uphill battle. After all, the companies set out to make a profit by keeping consumers in debt as long as possible.

If you are only making minimum monthly payments or you struggling to make those, there may be a new option. Peer-to-peer lending is a growing industry that allows you to take out a personal loan and pay off cards at a lower interest rate.

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According to a recent report in the Huffington Post, peer-to-peer lending is a multi-billion-dollar industry helping thousands of consumers tackle their credit card debt.

Unlike ordinary financing or bank lending, it gives borrows and investors a “win-win” situation. Borrowers get low-cost financing and get to replace costly debts.

Investors get a low interest but significant turnaround earning back interest as borrowers continue to pay over time. This gives investors a “fixed income” investment strategy. Despite the many benefits of peer-to-peer lending, it may not work for everyone.

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October 31, 2014

Predatory Lending in the Auto Industry

Since the 2008 mortgage crisis, legislators, consumer watch groups, and other advocates for low-income borrowers have been paying closer attention to predatory lending techniques. While most attention has been paid to lending in the housing industry, car lenders have also been known to target and exploit low-income earners. The federal government is taking action with the auto lending industry where unscrupulous practices have left low-income earners unable to recover from loan debt.
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For most debtors, filing bankruptcy comes after years of hardship, trying to pay off debt and make ends meet. Our Birmingham bankruptcy attorneys understand the severe hardship faced by our clients. We know that making the decision to file bankruptcy is often a last resort for individuals who have gone through divorce, unemployment, or an illness or injury. Rather than let your debt continue to mount, you can eliminate or reorganize debt to get back on a path to financial freedom. Our attorneys will review your assets, debts, and income to determine the best solution for you and your family.

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October 20, 2014

Can Unemployment Benefits Stop Foreclosure?

The threat of foreclosure usually occurs after months, years, even decades of slipping behind on finances. For some families, foreclosure is the result of an immediate and unforeseeable event such as an accident, medical condition, job loss, or the death of a breadwinner. According to reports, 6.5 million homeowners have already lost their homes to foreclosure since the housing bubble burst in 2008. For most of these homeowners, the most identifiable cause of foreclosure was unemployment. Losing a job doesn’t just mean a temporary lack of income, it can mean the inability to pay a mortgage. While homeownership was supposed to be a security blanket, homeowners also weren’t able to tap into equity because of depressed housing values.

Facing foreclosure can be overwhelming, especially when there are children involved. According to a study conducted by the Federal Reserve Board of Governors in a partnership with Northwestern University, many homeowners were able to protect their homes against foreclosure with their unemployment insurance benefits. The reports indicated that between July of 2008 and December 2012, an estimated $250 billion in federally funded unemployment was used to pay mortgages to prevent foreclosure. This means that there were more homes saved through unemployment benefits than through the Home Affordable Modification Program (HAMP).

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October 10, 2014

Slipping into Unmanageable Credit Card Debt

Credit card debt is one of the most troubling financial woes for Americans, young and old, rich and poor. It doesn’t often matter how much money you are bringing in to your household, keeping up with bills, mortgages, and other financial responsibilities compounded by credit card debt is a recipe for disaster. In a recent Business Insider report, a family explains how the family racked up over $100,000 in credit card debt even with a six-figure income. Though the family was eventually able to pay back their debts, getting out of the credit card hole was not easy.

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The couple was planning for a family vacation when they realized that all five of their credit cards were maxed out. After reviewing their income, debts, and credit card situation, they realized how underwater they were with debt, living paycheck to paycheck, and using credit cards to cover everyday expenses, from lunches to groceries to clothes, hair appointments, and personal items. This is the trap faced by many American families who struggle to make ends meet. Using the credit card for that “one time” emergency can easily lead to regular spending and a habit of racking up debt. Overtime, this means that families are not only paying more for their expenses because of fees and interest, but it is making it more difficult to climb out of debt.

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October 2, 2014

Best-Selling Author and Producer Files Bankruptcy

Fame and fortune are no roadblock to bankruptcy. Athletes, celebrities, and politicians—despite notoriously high incomes, power, and financial freedom—are often seeking relief through bankruptcy. According to recent reports, a best-selling author who sold millions of books and the executive producer of the new film, “Addicted,” has filed for bankruptcy. The author, known as “Zane” wrote erotica whose work was often compared to the “Fifty Shades of Grey” series. She filed for Chapter 7 bankruptcy in a U.S. bankruptcy court. According to reports, her total assets topped more than $1.4 million including a $950,000 primary residence. She also listed a $530,000 investment property.
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Bankruptcy courts require filers to list their assets, debts, and income. Before filing, it is important to consult with an experienced advocate. Do not try to file on your own because you could risk waiving certain exemptions, including personal property, such as a family home. In this case, the author had liabilities over $3.4 million, including an estimated $337,000 in back taxes. According to court records, the author owes more than $1.4 million to creditors and additional amounts in state and federal taxes. Though taxes are usually not dischargeable in bankruptcy, many filers who have unpaid taxes will pursue bankruptcy options to help them get on a manageable repayment plan. In this case, the IRS reports that the author owes more than $540,000. The Treasury Department placed a lien on her investment property in 2010. The property was purchased for over $1 million in 2004.

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September 29, 2014

McClendon v. Springfield: On Whether Civil Lawsuit Judgments are Dischargeable in Bankruptcy

McClendon v. Springfield, a case from the United States Court of Appeals for the Fifth Circuit, involves the president and only shareholder (“Debtor”) of an insurance company for which an employee (“Employee”) worked as the Chief Financial Officer (CFO) for four years.

gavel-5-140-m.jpgAt the end of 2007, Debtor accused Employee of stealing from the company and fired him. A month later, Debtor file a state court civil lawsuit against Employee on claims of theft and conversion. As your Birmingham Chapter 11 bankruptcy attorney can explain, conversion is a civil action that involves the taking of the property of another person or company.

The civil action proceeded to trial, and a jury awarded Employer (not Debtor) just over $340,000 on his counter-claim for defamation. Since Debtor could not pay the judgment against him, he filed a voluntary Chapter 11 petition with the bankruptcy court. The civil court entered civil judgment against Debtor in the amount awarded by the jury, and Employer was made a creditor to Debtor’s bankruptcy estate.

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September 20, 2014

In re: Vaughn, et al: On Bankruptcy Actions Where the IRS is a Creditor

Our Birmingham bankruptcy lawyers understand that a prior year's tax debt may be a major factor in one's decision to declare bankruptcy.

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In re: Vaughn, et al, an appeal argued before the United States Court of Appeals for the Tenth Circuit, involved an adversary bankruptcy proceeding started by Appellant. According to court records, Appellant was the Chief Executive Officer of a cable television company. Though Appellant had little, if any, education beyond a high school diploma, his substantial practical experience took him very far in the industry.

As the head of the cable company, Appellant turned the company from a small entity into billion-dollar organization. When the company was sold, Appellant received over $30 million in cash and stock.

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September 16, 2014

Galaz, et al v. Galaz: On a Bankruptcy Court’s Jurisdiction to Decide on Non-Core Issues

In Galaz, et al v. Galaz, et al, an appeal argued before the United States Court of Appeals for the Fifth Circuit, Debtor filed an adversary proceeding against her ex-husband in bankruptcy court. As your Chapter 13 bankruptcy attorney in Birmingham can explain, an adversary proceeding generally involves a petition filed by a potential creditor to challenge the discharge of an asset, or another aspect of another’s bankruptcy case.

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In Galaz, Debtor filed a petition that asserted her ex-husband had fraudulently transferred the assets of a company in which she had an interest to a LLC owned by his father. Her ex-husband and a music producer founded the company for the purpose of collecting royalties for a now disbanded funk group.

Even though the company was no longer generating a profit, as part of their divorce settlement, Debtor’s ex-husband transferred half of his 50 percent interest in the company to Debtor. Due to the fact that Debtor’s ex-husband did not receive written approval from his business partner, as per the operating agreement, Debtor received a 25 percent interest in the company with no right to participate or vote on company affairs.

After the divorce, and without the consent of either Debtor or his business partner, her ex-husband assigned all of the companies to a company that did not exist. After doing this, he assisted his father in filing the necessary documents to form a company of the same name, to which he transferred the royalty rights. At this point, the music from the old punk rock group became commercially successful and millions of dollars of royalties were paid to this newly created LLC. Neither Debtor nor her ex-husband’s business partner received any money from the sales of the band’s music.

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September 9, 2014

Peoples v. Radloff: On Standing to Appeal Bankruptcy Court Orders

Peoples v. Radloff, an appeal from the United States Court of Appeals for the Eighth Circuit, involved a debtor (“Debtor”) who filed a lawsuit in state court against her employer, the city government (“Employer”) on several counts of employment discrimination.

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Two years later, Debtor filed a voluntary petition under Chapter 7 of the bankruptcy code. As your Alabama bankruptcy attorneys can explain, Chapter 7 is often the best option for many debtors.

In Radloff, Debtor did not disclose her pending lawsuit against city government as an asset when filing her petition for Chapter 7 bankruptcy. The court granted Debtor’s petition and discharged her from bankruptcy. The petition was listed as a no-asset filing in court documents.

After this point, in her civil case, Employer filed a motion for summary judgment to dismiss Debtor’s action on grounds that Debtor failed to include the suit in her bankruptcy petition. Debtor then filed a petition to reopen her bankruptcy case, so that she could disclose the fact that she was involved in an ongoing civil lawsuit.
The bankruptcy court allowed to reopen the proceeding; however, the Chapter 7 trustee determined that Debtor’s interest in any proceeds from the litigation was an asset that should be given to creditors.

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