She owes money to several people including her father, the water department, DirecTV, a private school and also is behind $30,000 in rent to her landlord. Chapter 7 will require that all of her non-exempt assets are liquidated to pay off everyone she owes before her debts are able to be discharged. Suleman, unfortunately, is no stranger to financial troubles.
]]> When she had only the six children, she lived in a home with her mother and used Social Security disability payments and food stamps to help support her children, benefits she is still using today. After the birth of her other eight children, Suleman attempted to make deals with media outlets in an attempt to support herself and all of her children. Some of those fell through and the others that worked out do not appear to have been enough to keep her from filing bankruptcy. Nevertheless, it is undoubtedly a monumental struggle to provide for such a large family.Chapter 7 bankruptcy is never an easy decision to make, but for Connecticut residents struggling with overwhelming debt, it may be the right one. Bankruptcy can allow people the opportunity to start over and have a clean financial slate. Several organizations exist that can offer people guidance and counseling to decide whether or not filing for bankruptcy is the right decision.
Source: CBS 4, "'Octomom' files for bankruptcy, owes $30K in rent," Associated Press, May 1, 2012
]]>Mortgage servicers largely took the blame during the housing chaos. When the housing crisis began, servicers were overwhelmed by the sheer number of defaulting mortgages, but when the federal government stepped in, the situation finally began to improve. The housing industry collapse led to a virtual halt in foreclosures across the nation that banks are only now catching up on. The settlement has caused the major servicers to improve quality across several areas, including communication with borrowers and execution of foreclosure documents.
]]> While the settlement and the new standards are steps in the right direction, homeowners are still wary. Connecticut residents facing foreclosure may be relieved to know that with the new standards, the numbers of loan modifications and principal reductions have increased, allowing homeowners a better chance at keeping their homes. While there is still much progress to be made, things are looking up for the mortgage industry and for consumers who may have difficulty paying their mortgages.Nevertheless, for some individuals and families, the reforms are simply too little too late. Those who are underwater on their home mortgages, facing foreclosure or otherwise drowning in debt may be unsure of which way to turn for help. For some, the answer may be bankruptcy protection.
Source: Chicago Tribune, "Mortgage industry has long way to go to clean up its act," Tony Pugh, May 3, 2012
]]>Although it varies from state to state, a retirement plan such as a 401(k) or company pension is typically fully protected in bankruptcy. This means that no matter how much money is in the plan, no creditor can touch it. Additionally, a 2005 federal law extends those protections to an IRA or Roth account. The protection is limited, though, to $1.17 million.
]]> The protection afforded to retirement plans is meant to ensure that even if one enters bankruptcy, he or she is not left struggling when it comes time to retire. However, the protection only extends so far. That is, while the funds are protected as long as they stay inside the account, they are not necessarily protected if withdrawn from the account. Many times, though, debtors think that the best thing to do when faced with unmanageable debt is to withdraw from their IRA, but that subjects those funds to a possible creditor action while putting their retirement funds in jeopardy.In the end, if you find yourself at the point of deciding whether to withdraw funds for a retirement account, you may want to think twice and consider bankruptcy. By knowing your legal rights, you may be able to enter bankruptcy with minimal hassle and minimal stress.
Source: Seeking Alpha, "IRA Bankruptcy Protections," Ryan Glover, April 17, 2012
]]>It can take years to pay off a $1,000 credit card debt if you only make the minimum payments each month. The minimum payment mostly goes toward paying off only the accumulated interest, meaning that the debt burden remains essentially the same. It is therefore important to make larger payments on the debt, and if you have multiple cards, start with the one that has the highest interest rates. The size of your payments can grow as you begin to gain control over your finances.
]]> To help with making larger payments, and to keep the debt from rising further, a monthly budget can also prove to be of tremendous help. A budget should obviously be in line with your income, but it should also take into account that an unexpected event can happen at any time. Thus, money should be left over each month for emergencies. The budget should also include an amount that will be designated to paying off the credit card debt.Of course, sometimes credit card debt is not the only thing burdening a debtor. Other obligations, such as child support or a mortgage, may also be causing financial distress. Moreover, the cause behind the credit card debt could be something like costly medical expenses that may not be easily remedied. In some instances, then, Connecticut residents facing a mountain of debt may wish to consider the possibility of bankruptcy if there is no foreseeable way out.
Source: ABC Action News, "How to pay down your credit card debt," April 23, 2012
]]>Although it may strike some Connecticut residents as surprising, it does cost money to file for bankruptcy. As a result of the increase, which put filing costs at about $1,477 as of 2007, more and more people have been using their tax returns to get started. As the average tax refund was $2,913 last year, the refund may more than cover the filing costs. What that also means, though, is that there is often a spike in filings around this time of year.
]]> As many people in Connecticut and across the country prepare to file for bankruptcy, it's important to know that, while bankruptcy can seem scary, for many it is a good way to reorganize finances and get back on track. Depending on your income level and what you can afford, you will likely file for either Chapter 13 or Chapter 7.Chapter 13 includes a repayment plan while discharging some debts, and Chapter 7 involves discharging most debts and includes liquidating some assets. Aside from those benefits, bankruptcy can halt a foreclosure and put an immediate end to harassing phone calls from creditors, allowing you to focus on your getting your finances back on track.
Source: CNBC, "Tax Refunds Being Used to Pay for Bankruptcy Filings," Christine Dugas, April 13, 2012
]]>The first quarter decrease in consumer bankruptcy filings -- between 8 and 10 percent below the levels for the same time period in 2011 -- is credited to the nation's overall economic improvement. The current year is also projected to have fewer consumer bankruptcies because of continued economic growth.
]]> Consumer bankruptcy filings are expected to fall 4 to 5 percent beyond the 12 percent decline recorded for 2011. However, they are expected to moderate as banks increase their lending customer base and give more customers larger loans and credit lines. The decline in personal bankruptcy filings is also credited to the pickup in the real estate market and the improvement in the job market, along with consumers lowering their debt level and the tightening of loan guidelines initiated by the banks.For some residents nationwide and in Connecticut, the improving economy has given them a chance to improve their financial situations. This has thus reduced the number of consumer bankruptcy filings. However, consumer bankruptcy remains a viable alternative to those who have been victimized by spiraling debt due to circumstances they can no longer control. In such instances, filing for bankruptcy protection may offer debt relief while also laying the ground work for a return to financial stability.
Source: MarketWatch, "U.S. personal bankruptcies to fall further: Fitch," Mia Lamar, April 3, 2012
]]>When that happens, the creditor is most likely acting illegally under the provisions of the Fair Debt Collection Practices Act. After a discharge is filed, there is a legally-binding injunction in place that prevents the creditor from continuing or commencing a collection action. Breaching that injunction may make them civilly liable to the debtor.
]]> In a recent, well-documented case, Bank of America called one person 38 times after he filed for bankruptcy protection. By doing so, though, the bank was found to have acted wrongfully and was ordered to compensate the debtor for the harm they caused. The U.S. bankruptcy judge who was presiding over the matter ordered the bank to pay the debtor's attorney's fees of $12,500, along with damages for emotional distress.Bank of America has found itself in hot water before over similar matters. In some cases, the bank sent information about the debtor to collection agencies even after a debtor's discharge had been filed. In another case, Bank of America even sold the rights to one debtor's account even though the debt had been settled.
A debtor's discharge is one of the cornerstones of bankruptcy: It is part of the process of allowing a person to have a fresh start in life without being overwhelmed a flood of calls from creditors. Those who are working through bankruptcy should be allowed to focus on returning to financial health, rather than dealing with unwarranted harassment from their creditors. After filing for bankruptcy, Connecticut residents should take the time to review their legal rights lest their creditors engage in unscrupulous practices.
Source: The Huffington Post, "BofA Allegedly Called Debtor 38 Times After He Filed For Bankruptcy," Alexander Eichler, March 30, 2012
]]>When a lender reduces the principal on a mortgage, that can create issues for people who have two or more mortgages on their home. That is, if a lender reduces the amount owed on the first mortgage to at or below the home's market value, then the homeowner may find him or herself on the hook for the second mortgage even if they declare bankruptcy. This is because in a bankruptcy, when the first mortgage is reduced, it may no longer be possible to wipe out the second mortgage.
]]> However, there is an additional problem that could affect any homeowner: taxes. Under tax regulations, when a lender forgives part or even all of a loan amounting to $600 or more, then that amount must be reported as "income" to the IRS. Although there are exclusions that one may be able to qualify for, that is not always the case. Thus, a homeowner may have to pay taxes for the amount of the loan that the lender forgave.On the other hand, debt wiped out in a Chapter 13 bankruptcy does not count as income, meaning that no taxes need to be paid on it. So in some cases, Connecticut homeowners who are eligible for mortgage relief from their lender may find that filing for bankruptcy is cheaper and more financially sound than accepting a mortgage modification. Nonetheless, the multi-state settlement reached with the nation's largest lenders should certainly prove to be of help because it is always good to have options.
Source: ABC News, "Mortgage Modifications: When to Say Yes or No," Gerri Detweiler, March 11, 2012
]]>Of course, a personal bankruptcy does not necessarily permit someone to totally escape his or her debt. Rather, it allows them to gain control over it, putting them back on the path toward financial independence under the protection of a court. Yet, one form of debt is notoriously difficult to discharge, and more families than ever are suffering from it: student debt.
]]> A decade ago, the total amount of Parent PLUS loans, which are low-interest education loans guaranteed by the federal government and taken out by parents, was $3.7 billion. However, that number has almost tripled since then to $10.4 billion. Overall, the amount of student loan disbursements in 2011 was $102 billion, and the debt burden may well be increasing. That is because tuition and fees at state colleges for in-state students have increased by an average of 5.6 percent each year after subtracting for inflation. This year, the average increase was 8.3 percent.Even in the best of times, student loan debt may be difficult to manage for many Connecticut families. But in these tough economic times, many families have found themselves facing financial hardship after being saddled with student loans in addition to unemployment or a mortgage that is underwater. Yet, filing for bankruptcy does not necessarily allow debtors to discharge their student debt, which is treated rather uniquely in the Bankruptcy Code. Nevertheless, those debtors able to file for bankruptcy may be able to discharge or reduce their other debt burdens, making it easier to gain control over the student debt.
Source: The Arizona Republic, "College debt especially costly for parents," Anne Ryman, March 17, 2012
]]>About 200,000 homeowners would be affected by the separate deal with Bank of America. Under the terms of the deal, these homeowners could see substantial reductions in the principal amount owed on their mortgage. In fact, the reductions could total more than $100,000, which would be a sigh of relief for many.
]]> However, there are certain conditions that apply. First, Bank of America must either own or be the servicer for the mortgage. Second, though, the borrower must be 60 days or more overdue on a mortgage, and the remaining balance on the mortgage must exceed the home's value. There may also be other requirements that a borrower must fulfill to be eligible for the deal.This deal will certainly be welcomed by many Connecticut residents, especially those who are worried about foreclosure. It's important to note, however, that neither the separate deal made by Bank of America nor the overall settlement affects those whose mortgages are owned by Fannie Mae and Freddie Mac. Nonetheless, for homeowners in this situation, there may be legal options available that could reduce the principal or otherwise provide debt relief.
Source: The New York Times, "Bank of America Reaches Deal on Housing," Nelson D. Schwartz, March 8, 2012
]]>Although the filing was made on Dec. 29, news of the bankruptcy only became known recently. In its court papers, the U.S. unit of Maclaren, which is also known as American Baby Products, listed assets of just $45,413 against liabilities of $15.9 million. The staggering difference may be at least partially explained by a 2009 product recall in which about a million of its single and double umbrella strollers were found to have a hinge mechanism that could prove hazardous to children.
]]> Many Connecticut businesses are no stranger to unexpected developments that can lead to financial distress. Indeed, even though the national economy is beginning to recover, a number of companies continue to feel the pinch of the recession that hit the nation and prompted many consumers to hold back on spending. When this happens and the company is unable to pay its debts, it may benefit from filing for bankruptcy.In this case, the U.S. unit of Maclaren has filed a Chapter 7 bankruptcy petition. This means that it plans on winding down the business, which will also allow it to resolve any remaining debts. For other companies in Connecticut that are struggling to meet their financial obligations, Chapter 7 may be beneficial in resolving any debts and allowing the owners to move on.
Source: New York Times, "For Stroller Maker, Bankruptcy Is Latest Setback," Peter Lattman and Andrew Martin, March 2, 2012
]]>In the Bridgeport-Stamford-Norwalk area, residents managed to cut their consumer debt by 10.5 percent. In other parts of the state, consumers cut their debt by up to 15.6 percent. The numbers represent a change from the fourth quarter of 2010 to the fourth quarter of 2011.
]]> Nationally, consumer debt reached a peak of $12.4 trillion in October 2008. That number includes mortgages, auto loans, credit card bills, and other forms of debt. However, Equifax has found that since then, overall debt has declined by 11 percent, or by more than $1 trillion.Yet, the total amount of outstanding credit card debt across the country still stands at more than $800 billion. It is also certainly true that many Connecticut residents continue to struggle with their debt burden. In some cases, when debt becomes too much to handle, debtors may wish to consider the possibility of declaring personal bankruptcy. Despite any stigma that may have been attached to filing for bankruptcy, it can serve as a valid option for certain consumers as it puts an end to creditor harassment and sets the petitioner back on the road toward financial independence.
Source: Hartford Business Journal, "CT consumers cut their credit-card debt," Feb. 21, 2012
]]>The robo-signing scandal, which came to light in 2010, led to an aggressive prosecution of the nation's largest mortgage servicers. However, many may be interested to know that the banks, state and federal authorities recently reached a $25 billion settlement. Under the terms of the settlement, Connecticut will receive nearly $200 million.
]]> The bulk of Connecticut's portion of the funds will go toward beleaguered borrowers in the state whose mortgage is serviced by any one of Citibank, Bank of America, JP Morgan Chase, Wells Fargo, or Ally Bank. These borrowers may be able to receive a mortgage modification, including even a reduction in the principal. In addition, those who have already lost their homes to foreclosure will qualify for a payment of around $1,500 to $2,000.It is important to note that this only applies to borrowers whose mortgage is serviced by any one of the five servicers listed above. Moreover, while $1,500 will certainly help those who are unable to meet their financial obligations, it is merely a small pittance compared to losing one's home to a foreclosure. For those who are currently facing foreclosure, though, options such as declaring bankruptcy may be available in order to prevent losing one's home.
Source: Hartford Courant, "Mortgage Abuse Settlement With Giant Banks Means Nearly $200M For Connecticut," Kenneth R. Gosselin, Feb. 9, 2012
]]>The report, released by The Warren Group on Feb. 9, showed that the number of personal bankruptcy filings decreased last year in Connecticut by 14 percent. These bankruptcy filings included both Chapter 7 and Chapter 13. Under a Chapter 7 bankruptcy, the law allows an individual to erase most of their debts, but they are forced to sell off many of their assets. By contrast, a Chapter 13 bankruptcy allows individuals to hold on to their assets, such as their home. However, they must put together a financial plan to pay off their debt in a three- to five- year period.
]]> Despite the recent decrease, the number of personal bankruptcies is still higher than it was just a few years ago. In 2008, there were 7,239 filings in Connecticut. That compares to 8,518 filings in 2011.The fact that there were fewer people filing for bankruptcy in 2011 than in 2010 may demonstrate that the economic picture is improving. However, it is certainly true that many continue to feel the pinch of recession, and many believe Connecticut residents are not out of the woods yet. In the meantime, those who are still struggling with their mortgage payments and other bills may consider the possibility of filing under either Chapter 7 or Chapter 13.
Source: Hartford Courant, "Connecticut bankruptcy filings down in 2011," Mara Lee, Feb. 9, 2012
]]>The current manager of Enfield moved to the town in 2006. Upon moving there, he bought a four-bedroom house for $293,500, for which he took out a $264,150 mortgage in September 2006. However, he fell behind on his mortgage payments. The house and surrounding land are currently appraised only at $211,800 according to a local news report.
]]> Unfortunately, he is now facing a foreclosure on the house. On Jan. 12, the New England Bank made a foreclosure filing with the Superior Court in Hartford. The bank is seeking the entirety of the outstanding mortgage, along with interest from Sept. 1, late charges, tax escrow and attorney's fees.As a town manager, the public expects the man to manage the finances of Enfield in a responsible manner. While some questions were raised about the apparent conflict between the foreclosure and his employment duties, the town council has nonetheless expressed every confidence in him.
Moreover, many responsible borrowers have certainly faced foreclosure in recent years, often through no fault of their own. It is also quite true that many foreclosures have been the result of paperwork problems at a bank or other lending institution. In this case, the man may choose to consider the possibility of declaring personal bankruptcy or of otherwise creating a debt reorganization plan that allows him the opportunity to start on a fresh financial footing.
Source: The Hartford Courant, "Bank files for foreclosure on Enfield town manager's house," Kim Velsey, Jan. 20, 2012
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