Was remembering my Ben Franklin recently and some gems came to mind in these difficult times.  In his "Poor Richard's Almanac" as well as "The Way to Wealth" Ben has some wisdom to share that we all need to remember:

"Industry Pays Debts while Despair Increaseth Them"

"Diligence is the Mother of Good Luck and God Gives all things to Industry"

"One Today is Worth Two Tomorrows"

Great reminder from a great attorney and fellow NACBA member that how you look at your situation and the words you speak have power in your life. Let your words echo your attitude and have faith and hope and look at Bankruptcy as a new beginning.

http://www.legalquestion.com Attorney Richard Baker

http://www.bankruptcylawnetwork.com/2010/08/07/isaiah-5719-and-bankruptcy/?utm_source=twitterfeed&utm_medium=twitter

Hmmm. A Pause...well as long as the banks are doing okay...right? Give me a break!  When will we all stand to what the banks continue to get away with while I see so many families on the brink of financial ruin.

There is a saying going around right now:  If you have a job, it's a recession, if you are unemployed, it is a Depression...Rick Baker, Esq. www.legalquestion.com

Credit Card Companies Never Stop! New Junk Fees! Where there is a will, there is a way..right? Greed Never Sleeps!  Rick Baker, Esq. www.legalquestion.com

A Consumer's Guide to the Latest Credit-Card Traps - WSJ.com

online.wsj.com

Just months after historic legislation banned certain billing practices, card issuers have dreamed up new ones designed to trip up consumers.

When the Federal Trade Commission is finally focusing on these scam outfits, you know it's bad.

Beginning in October, 2010 companies that promise to reduce or eliminate credit-card balances and other debt for customers will no longer be allowed to charge an upfront fee as a crackdown on the debt- settlement industry.  This is only for "For-Profit" Companies and only those who use Television and Radio to initiate the first contact.  More hollow regulations...but better than nothing I guess. If they violate, it could be $16,000 per violation!

As a Consumer Bankruptcy Attorney of many years, I don't need the FTC or the Better Business Bureau to tell me that since the start of the recession, the Better Business Bureau has received thousands of complaints about debt-settlement companies. Customers typically complain that they ended up deeper in debt or were sued by creditors after failing to make payments. 

For years I have seen my clients attempt this, only to file for bankruptcy anyway and wish they had done so years earlier when they needed to.  And don't forget that forgiveness of debt is also a taxable event, i.e., income, meaning you will get a 1099 next January for whatever they got the creditor to forgive or reduce.

I firmly believe that if you have income to work with, you are much better off in a Chapter 13 because you will not pay interest on the debts and you will pay less based on your ability to pay AND get a Discharge at the end of the case which will clean up your credit...and no tax consequences!  Florida Consumer Bankruptcy Attorney Rick Baker, Esq. www.legalquestion.com 

In an opinion just issued by the Honorable Karen Jennemann, Orlando Division U.S. Bankruptcy Judge, stripping off second mortgages in Chapter 7 cases is not allowed.

This is unfortunate for people needing Chapter 7 relief who want to keep their home but are reluctant to do so because of a second mortgage in relation to the value of their home.

The case explains the 1992 U.S. Supreme Court case that many believed controlled; however, there has been a split of authority around the country and your truly informed local members of the Bankruptcy Bar about a case that went the other way in New York last fall.

The good news is that stripping off that unsecured (no equity) second mortgage in a Chapter 13 case is still the law of the 11th Circuit (Florida, Georgia and Alabama federal appeals circuit). 

Where the value of your home is less than the amount owed on the first mortgage, we can "strip" the lien, turning that mortgage into an unsecured debt, like a credit card.  In most cases, people will pay pennies on the dollar on this second "stripped off" mortgage and at the end of the case, the mortgage is gone forever!  A huge factor when deciding whether keeping the home is a wise move.  By lien stripping the second mortgage, the property will have more equity when the real estate market finally recovers.  A reason to not give up your home!

By: Consumer Bankruptcy Attorney Rick Baker www.legalquestion.com  

How much do I have to pay unsecured creditors in my Chapter 13?

A less experienced Bankruptcy Lawyer I know recently asked me about his Chapter 13 Bankruptcy client who owned a rental property that actually had some equity in it; very rare these days.

He wanted to know whether it would have to be liquidated (sold) to pay unsecured (usually credit card) debts in the case? 

The real question is not whether it has to be sold, as Chapter 7 is liquidation whereas Chapter 13 is an individual reorganization and no liquidation occurs.  The real question is if he keeps the rental property and it has non-exempt equity, what does that mean?

The answer is that the non-exempt equity in the rental house establishes the “floor” or minimum amount required to be paid pro rata to all allowed unsecured claims but no liquidation occurs.

My less experienced Bankruptcy Attorney friend forgot or did not realize that there are actually two (2) tests to determine how much gets paid to the unsecureds in a Chapter 13 bankruptcy case. 

The above example of non-exempt equity establishing the minimum payout to the unsecureds is called the liquidity test.  The other test is whether there is any excess disposable income left for the unsecureds after payment of priority and secured debts in the Plan.

A new third test may result soon based on the recent U.S. Supreme Court decision of Hamilton v. Lanning; more to come on that one.

This issue points out an advantage to filing Chapter 13 Bankruptcy.  The Debtor remains in control of assets and can keep them.  They may have to repay some portion of their debts but it could be pennies on the dollar relative to what they gain in keeping assets. I call these cases “Liquidity 13s.” 

The rule is that the unsecured creditors have to come out as well in Chapter 13 as they would in a Chapter 7 case where assets are liquidated to pay unsecureds.  The advantage of the 13 is control over the asset is not in the hands of a Chapter 7 Trustee.  By Consumer Bankruptcy Attorney Richard R. Baker at BAKER LAW, PLLC. www. LegalQuestion.com

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Offices in Winter Park, Florida.