Bankruptcy Reader

Debt and its associated problems can make you begin to feel that life shouldn’t be so tough. You are forced to deal with all kinds of entities that range from the company (or companies) to which you owe money, to debt counselors. And if you are too deep in debt then you probably will have to consider bankruptcy as a serious option. And if you do, then there are innumerable problems associated with that as well. Now especially, before and after you file, you need to go in for credit counseling and may have to pay fees you can ill afford now. All this does leave you a bit discomfited. So, is there a way to avoid these problems?

The only way is to keep a look out for those warning signals. It is never a simple slide down into debtsville. You will sight numerous red flags on the way, which scream at you to stop and turn back. You just have to heed this advice and turn back before it’s too late.

So if your spending capacity is higher than your earning capacity, then the first thing you need to do is ground your credit card. Lock it in the deepest drawer and throw those keys away. Agreed it is a difficult proposition, but who ever said that getting out of debt was an easy task. But if you can curb those desires, you will be encouraged to spend only what you have and no more. So, if you have $20 in hand, you will not be tempted to buy something that costs $25.

Another simple trick is to enforce the saving habit. Every month, set aside a fixed amount of money for paying off your debts. Once the month is through and you still have the money, you can begin paying off your creditors, one at a time.

It’s been a year since federal bankruptcy law was made tougher, and the effects are showing. Filings in Greater Cincinnati and Northern Kentucky are down more than two-thirds. The drop mirrors the national trend. Enquirer.com reports:

Last year, a record 2.1 million bankruptcies were filed nationwide. The tidal wave of filings happened mostly before implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act took effect on Oct. 17, 2005 designed to prevent marginal filers from using the court system to walk away from their debts.

Read more:Bankruptcy filings way down

It’s been a year now, or almost, and well I guess it is a good time to take stock and see how things have worked. The debt situation in the country is pretty bad and yes, something drastic was required to stem the tide of bankruptcies. But was the new law the solution? Well, even now, a year after it was introduced, the jury is still out.

Last year, I still remember reading and writing about the long queues of people who were beating down lawyers’ offices in a desperate bid to beat the deadline. They were rushing to get their bankruptcy cases filed before the new law would make it tougher. In the months since, consumer debt soared to a record $2.3 trillion, loan delinquency rates rose, and foreclosure lawsuits jumped dramatically. And interestingly, bankruptcy filings fell off a cliff and have not yet come back. Theledger.com reports:

As bankruptcy reform heads toward its first anniversary next week, supporters and critics still argue whether it’s a boon or a bomb. For bankruptcy filers themselves, the impact of the changes has been considerably less dramatic than many hoped or feared. "For people who file, the results are not terribly different than they were before, except it’s more bureaucratic and cumbersome," said Henry Sommer, editor of LexisNexis Collier on Bankruptcy and president of the National Association of Consumer Bankruptcy Attorneys.

Read more: Experts Split on Merits of Bankruptcy Reform

The bankruptcy filing of Kara Homes, one of the biggest home builders in Monmouth and Ocean counties, has left scores of customers and creditors worried. They are not too sure about whether the troubled builder will complete the developments it has under construction and make good on its debts. App.com reports:

The company said it had $350.2 million in assets and $296.8 million in liabilities. Under Chapter 11, Kara will be allowed to remain in business, and creditors’ claims will be frozen while it comes up with a reorganization plan and tries to regain its footing. David Bruck, the company’s bankruptcy lawyer, said the company laid off 100 workers this week, leaving it with 70, but it would take steps to continue operating.

Read more: Bankruptcy is met with uncertainty

A federal bankruptcy judge has finally approved the sale of California-based Tower Records to Great American Group, which plans to liquidate the music retailer. This indeed is the end of a tower of music. According to attorneys, there were almost 30 hours of vigorous bidding. At the end of this, Great American won with a bid of $134.3 million, beating Trans World Entertainment. Trans World had hoped to continue operating at least some Tower stores, by a single bid increment of $500,000.

The company will be sold for an aggregate of $150 million. This inculdes the sale of various leases and properties. Great American plans to begin the liquidation process and going out of business sales immediately. This means around 3,000 Tower employees are going to find themselves jobless pretty soon. Registerguard.com reports:

”This is not an easy decision,” said bankruptcy Judge Brendan Shannon, who nevertheless noted that the Tower debtors and other parties had agreed the bidding process was conducted fairly and in good faith.

Read more: Tower Records bankruptcy includes sale

Bankruptcy of a group aiding gay Latinos has wide reverberations The recent financial collapse of te National Latina/o Lesbian, Gay, Bisexual and Transgender Organization, a prominent organization that aids gay Latinos has left federal officials stunned. They are now scrambling to reclaim hundreds of thousands of dollars in allegedly misspent government money. Mercurynews.com reports:

LLEGO once touted itself as the only national organization of its kind. But five months after it got the 2004 federal grant, LLEGO shut down. When auditors began probing, they found that the organization had incurred $703,181 in "unallowable costs" instead of the promised HIV/AIDS education efforts.

Read more: Bankruptcy of a group aiding gay Latinos has wide reverberations

Bankruptcy has become a sort of national problem. Initially we were only concerned about bankruptcy and the immediate problems associated with it. But now as time passes, we are being introduced to newer aspects of bankruptcy.

For instance, I own a home so bankruptcy for me would mean other things but wouldn’t have much to do with losing the roof over my head. But what do you do if you are a tenant? Do you have to pay your rent once you’ve declared bankruptcy? This and other such issues pertaining tenant bankruptcy need to be examined now. For this purpose, a formal seminar will be held at the upcoming Inside Self-Storage Las Vegas Expo, Feb. 20-23, at the Mandalay Bay Resort & Casino. Insideselfstorage.com reports:

On Wednesday, Feb. 21, industry legal expert Jeffrey Greenberger will coach attendees on what to do when a customer files bankruptcy, including the immediate actions to take and methods of recourse. He’ll also cover recent changes in bankruptcy law and answer important questions such as whether a tenant is supposed to pay rent during his bankruptcy and if an operator is allowed to continue with lien proceedings. For more information, visit the selfstorage website.

Read more: Tenant Bankruptcy to Be Addressed at ISS Vegas Expo

A federal bankruptcy judge recently indicated that she approved of Owens Corning’s plan for emerging from bankruptcy. Over five years ago, the building materials maker sought protection from creditors over health claims related to its asbestos products. The judge also overruled objections from alleged asbestos victims and a lawyer for one bondholder. Msn.com reports:

The plan shifts Owens Corning’s $7 billion in asbestos liabilities off company books and into a trust that will be established for the plaintiffs. As part of the plan, the Toledo, Ohio-based building-products company will pay more than $5 billion to asbestos claimants and as much as $2.27 billion to holders of bank debt.

Read more:Judge OKs Owens Bankruptcy Exit Plan

Now, how bad can it get? Just because a few big corporates have filed for bankruptcy, most other big companies are suspect. If there is so much as a rumor about one of them having cash flow problems, it doesn’t take too long for the bankruptcy rumor to do the rounds. The latest rumor going around is that Air America was set to declare bankruptcy and that the network was cutting Jerry Springer loose.

While neither statement was true, it is true that Al Franken recently said on the air that his paychecks had stopped. He is reportedly paid $2 million. In a recent interview with Associated Press, Franken acknowledged the network has "a cash flow problem." Air America spokespersons were quite emphatic in their denial of the bankruptcy rumors. Nj.com reports:

According to Air America spokeswoman Jaime Horn, "If Air America had filed for bankruptcy every time someone rumored it to be doing so, we would have ceased to exist long ago; it may be frustrating to some that this hasn’t happened. No decision has been taken to make any filing of any kind, we are not sure of the source of these rumors and frankly can not respond to every rumor in the marketplace."

Read more: Air America refutes bankruptcy rumor

While there was a significant dip in the number of bankruptcy cases filed after the new Bankruptcy Act was passed last year, the trend seems to be changing now. Local and national statistics show filings may start to rise again as the second quarter of 2006 shows a a 53.5 percent increase in filings, from 55,671 in the first quarter to 85,449 in the second quarter. Bizjournals.com reports:

Bankruptcy attorney Jeffrey Freedman, senior partner at Jeffrey Freedman Attorneys at Law, said the perceived increase may be due to people’s changing believes that they couldn’t file Chapter 7… He said rising interest on adjustable-rate mortgages and high energy prices may prompt more people to file for bankruptcy if they are on the brink of a financial crisis.

Read more: Bankruptcy filings on rise in spite of new restrictions