Kentucky Bankruptcy Lawyers Blog

Filing for a Chapter 7 bankruptcy in Kentucky is going to mean that your credit score will take a hit.

There is no way around it. But fortunately, the overall outcome is almost always better than if the filer had taken no action to address the debt. In fact, many of our clients find their biggest regret is that they did not file sooner.

Still, some hit some bumps in the road to their financial recovery, which included a delay in accurate data from credit bureaus regarding discharged debt that is no longer owed.

But now, that's changing, following the resolution of a class action lawsuit against the three major credit bureaus - Equifax, Transunion and Experian. The case started as a number of different lawsuits that were filed even before the economic downturn, back in 2005 and 2006. They were later consolidated into one action.

The plaintiffs in the case, Radcliff v. Experian, alleged that the credit bureaus had issued credit reports that showed they were delinquent on payments for debts that had already been discharged through bankruptcy. The plaintiffs further alleged that when they informed the credit bureaus of the errors, the bureaus did little to investigate or resolve the problem.

Credit is important no matter what your financial situation, but it's something that is painstakingly managed by those who are emerging from bankruptcy. So for them, errors like this are especially tough.

The two sides reached a $45 million settlement deal that was rubber-stamped by the trial court, but later thrown out on a technicality by the U.S. Court of Appeals for the Ninth Circuit. (Basically the court found there was an improper conflict, as some plaintiffs stood to collect more than others.)

However, the credit bureaus had clearly heard the message, as a 2008 lawsuit ended in a settlement that required the bureaus to enact systems to ensure that debt racked up prior to a bankruptcy is accurately included in the bankruptcy filing - assuming the debts were eligible. (Some debts, such as student loans, child support payments and a few others usually can't be discharged.)

At the time of the case, some wondered whether the ruling mattered all that much, considering that people who file for bankruptcy are already going to have lower credit scores. What's a few more points?

Yes, the first year or two might be rough. However, if you keep up on your payments and maintain a handle on your debts, chances are good that your score will improve greatly. Ensuring that the credit bureaus are accurately reporting your old debts as discharged is important to ensuring that score is moving in the right direction. That's ultimately going to have a positive effect on not only your ability to do things like rent or buy a home or purchase a vehicle, but also the interest rate you'll have to pay on those big-ticket items, as well as on your credit cards.

This increased vigilance on the part of the credit bureaus, however, should not cause you to relax your own. Make it a point to periodically check your credit score for potential errors, and be sure to report any problems you find.

Continue reading "Good News for Kentucky Bankruptcy Filers: Credit Bureaus Improve Accuracy" »

There's no getting around it: A bankruptcy is going to cost you.

Our Louisville Chapter 7 bankruptcy lawyers know that at the outset, it seems to make little sense. You are contemplating filing for bankruptcy because you have no money and are deeply in debt. Yet getting out of debt may mean accruing more debt and spending more money.

Sometimes people just don't have it.

We have been asked on more than one occasion about the possibility of taking out a loan in order to file for bankruptcy.

Technically, you can do this. But there are moral and potentially legal implications for why you should not.

Let's start by explaining that a Chapter 7 bankruptcy is a liquidation of your debts. For the most part, all of your debts - save for student loans, child support, alimony, etc. - are going to be included. It doesn't matter whether those debts are five days old or five years old; they will be discharged upon approval of your claim.

The courts expect that you aren't borrowing money that you have absolutely no intention of paying back.

In fact, it is for this reason that bankruptcy code holds that any charges you incur three months before you file your case are going to be considered nondischargeable. Same thing for cash advances that are taken out 70 days before you file.

So the first thing to understand is that while you will be obligated to include that creditor in your Chapter 7 filing, there is a very good chance that the company will be able to successfully come after you to pay under this clause.

It is presumed that if you took out additional debt during the time frames mentioned above that you had no intention of repaying it. In these cases, the burden of proof is on you to prove that you did have a good faith intention to pay it back. That might be tough.

But even beyond this provision, let's say you took out the loan four months before you filed, there are ways that creditors could still come after you. They may look very closely at the patterns on your account that may seem uncharacteristic or unreasonable, as a means to challenge the charges.

So for example, let's say you kept a credit card with a $15,000 limit. However, you never used it. Then, over the course of a a couple months, you ran up some $10,000 in charges - to a lawyer, to a financial planner, etc. The creditor can challenge those charges even if they happened outside of that 90-day window. In fact, they can even go back years, although the further back you go, the less chance the creditor has of being successful.

If you are going to go to the trouble of filing for a Chapter 7 bankruptcy, you want to make sure that when you walk away from it, you can truly walk away - without fear that old debts will continue to haunt you.

So before you consider taking out a loan, or offering preferential treatment to a creditor, such as a family member, mull these possible alternatives:

• Talk with your bankruptcy attorney about the possibility of making monthly payments for a time before you file. You may be able to defer creditor calls to the attorney in the meantime, and you'll be working toward the ultimate goal of being able to walk away from the debt with no concerns that it will affect you later.


• Discuss with your attorney the possibility of borrowing money from your retirement or 401(k) account. This is something you'd only want to do in an extreme situation when there is no other alternative and only with the intention of fully paying it back in short order once your other debts are discharged. Your retirement accounts are going to be untouchable in the bankruptcy process, so you want to try to keep them as intact as possible. However, if this is your only option to help you free yourself of the other debt that is holding you back from truly living, it may be something to consider.


• Humbling though it may be, consider asking your friends or family to help. Maybe you ask for a little bit from several different people. Be mindful that you may have to list these individuals as creditors - like anyone else in your filing - which means you technically would not have to pay them back if the filing is granted.


• If none of these is appealing or an option for you, consider picking up another job, temporarily and part time, that might help you earn the few extra hundred dollars you are going to need to get the filing underway.

Continue reading "Louisville Bankruptcy Lawyers - Borrowing Money Before Filing " »

A new rule passed recently by the Consumer Financial Protection Bureau that will make it easier for stay-at-home spouses to get credit cards.

Our Louisville bankruptcy lawyers understand that the ruling allows credit card companies to consider the assets and income of the working spouse when considering the nonworking spouse for a line of credit or a credit limit increase, so long as applicants are over the age of 21.

The rule is an update to the previous reading of the Credit Card Accountability, Responsibility and Disclosure Act of 2009. The original intention of the clause that was later altered was to prevent college students from using their parents' income to rack up debt prior to graduation. However, it had the unintended effect of making it extremely difficult for spouses who stayed at home to secure a credit card without the permission of their spouse.

It's estimated that this involved a third of all married couples, or about 16 million people.

While providing autonomy to spouses who contribute to the household in ways other than income is a positive thing, it also opens the door to questions regarding individual bankruptcy filings involving married couples.

Couples who marry pledge to stay together for better or worse. But sometimes, when the financial waters get choppy, it can be best to go it alone.

Many couples share joint bank accounts, joint credit cards and joint savings. So when they begin to consider filing for bankruptcy, it's often unquestionably the right decision to file a joint bankruptcy.

This is where both parties can wipe out all dischargeable debts that you both owe.

On the other hand, if only one spouse files for bankruptcy, the remaining spouse will still have to pay any of his or her own debts, as well - as well as any joint debts that were incurred.

So the decision of whether to file for joint or single bankruptcy is going to depend on the kind of debts you both owe and in whose name each debt is held.

It may be, for example, that one spouse has the majority of the significant debt in his or her name alone. In that case, it could be beneficial for the family to decide that only one spouse will file for bankruptcy.

This could be good for a number of reasons, not the least of which is that you will have at least one spouse whose credit is still in good standing. That can be a major help when it comes time to getting approved for a new loan for a car or a home or any of the other various things that require a credit check. This can also help the spouse who filed more quickly rebuild their credit.

On the other hand, non-filing spouses may not be completely out of the woods, particularly if they have significant assets. So just as creditors will now consider a non-working spouse's access to the working spouse's income as a factor in deciding whether to offer a credit card, so too might those assets and income be listed in the bankruptcy filing.

This might be one reason that a non-working spouse might have to file for a Chapter 13 reorganization bankruptcy, as opposed to a Chapter 7 liquidation, which has had strict income and assets requirements as of a 2005 law.

But you won't know for sure regarding your specific situation until you sit down with a bankruptcy lawyer and discuss all your options.

Continue reading "Filing a Louisville Bankruptcy Without Your Spouse" »

Today more than ever, our doctors are on the brink of bankruptcy.

Our Louisville bankruptcy attorneys know that having a great education and a solid career will not insulate one entirely from financial hardships.

The plight of doctors in recent years highlights just how bad the situation has gotten for everyone. Unfortunately, it's a trend that has grown more common in recent years. In the past, we would typically see lower-income Americans as the primary Chapter 7 bankruptcy filers. Others might include the recently-divorced, laid off, ill, etc.

No more is this the norm. A 2011 report by the Institute of Financial Literacy found that in 2010, people holding bachelor's degrees comprised 14 percent of bankruptcy filers. That was a nearly 4 percent increase from the year before.

Additionally, nearly 65 percent of bankruptcy filers were married, a number that increased by about four percentage points as well, from 56 percent in 2006 up to about 60 percent in 2010. That outpaces 51 percent of U.S. adults who are married, according to Census figures.

Even a solid income isn't enough. The number of bankruptcy filers who made $60,000 or more was more than 9 percent in 2010. Compare that to the 5 percent of filings we saw from this group in 2006, and we're talking a 70 percent increase.

In many cases involving doctors, assistance with planning from an experienced bankruptcy attorney can allow a physician to continue to maintain the practice, or at least continue practicing medicine following the discharge of a bankruptcy.

Doctors are experiencing a spike in both personal Chapter 7 filings, as well as Chapter 11 business reorganization bankruptcy filings.

A Louisville Chapter 11 filing is similar to a Chapter 13 filing in that it involves a creditor repayment plan. The main difference is that it involves a business, rather than an individual.

The American Bankruptcy Institute reports that Chapter 11 filings among doctors are on the rise. And these are not bad doctors or physicians who have landed on hard times because they were sued.

Instead, physicians are coping with this toxic combination of smaller insurance reimbursements, rising prices of malpractice insurance, overhead costs and tightening health care regulations.

Plus, they haven't been immune to the weakened economy. Patients who are barely making enough money to put food on the table are going to hold off on elective medical procedures.

It doesn't help that many physicians, while very good medical doctors, may not be skilled at running a business. Their practice may be their first foray into it. Caring for patients AND the books often proves a difficult task for a great number of doctors.

One case chronicled by CNN involved an oncology doctor who cared for hundreds of patients in an under-served area of Connecticut. Reimbursement rates for drugs and treatments for cancer began to dip. Expenses grew. Debt grew. Eventually, distributors of critical cancer drugs and supplies simply cut him off.

Filing for bankruptcy allowed him to hang on long enough to ensure each patient found other sources of care. As an aging physician, he made the choice to retire rather than start all over again.

But that is what a bankruptcy is all about: New beginnings. For doctors with many more years left of their careers, bankruptcy is a life raft that can get a medical practice and a physician's personal finances turned around and once again pointed in the right direction.

Continue reading "Education, Solid Career Won't Shield You From Financial Woes" »

Talk of lay-offs for some 1,100 plant workers in Paducah, KY has had the entire region on edge.

Now, it appears those jobs may be safe, at least for the next two months, according to company officials.

Our Louisville Chapter 7 bankruptcy lawyers know the entire ordeal has caused many Kentuckians to take a critical look at their finances. The one good thing about this scenario is that the workers may at least have a few months to prepare a cushion of savings and possibly to search for a more stable source of employment.

However, we are fully aware that, many times, circumstances don't allow for adequate preparation of a financial blow. Following an unexpected lay-off or sudden illness, a Chapter 7 bankruptcy can offer a path to financial recovery. Our experienced bankruptcy lawyers know how trying the ordeal of a job loss can be, and we want to help you make the move that will put you on the best possible financial footing moving forward.

In examining whether you are eligible for a Chapter 7 liquidation bankruptcy, the court will conduct what is called a means test, whereby they will look at a myriad of factors, including your income for the last six months. If your income has been relatively high, you may instead have to file for a Chapter 13 repayment plan.

In cases of a layoff, however, a person usually need only wait a couple of months or so in order to be eligible for a Chapter 7 filing.

We understand that even after the loss of your job, your bills aren't going to stop coming in. This is why these situations can so quickly spiral into a dire situation, especially if you have little or no savings. People end up putting necessary expenses like gas and groceries on credit cards, and soon, that debt has grown out-of-control.

We recommend prioritize expenses. For example, pare it down to the bare essentials. Cover food and medical expenses first, followed by your mortgage or rent, your utilities, car payments, insurance and keeping up with child support payments.

In doing this, you may realize you are going to have another significant expense coming up, such as a major medical procedure. If this is the case, you may want to hold off on filing until after those debts are incurred, as you want to make sure they too will be eligible for discharge.

You do have to be careful with this, and it's advisable that you meet with a lawyer before making this call. You could actually be denied protection or discharge of these debts if it's not done correctly. Bankruptcy law holds that anything over $550 in luxury goods made within three months of filing will be considered fraud, which means you could still be liable for that debt.

In the meantime, we are happy to help you hold off your creditors until you can file.

So while a job loss may initially seem like bad fortune, it can also be an opportunity for you to improve your long-term financial security.

Continue reading "Considering a Louisville Chapter 7 Bankruptcy After Lay-Off" »

Financial infidelity occurs in just about every relationship, though the degree to which it happens varies significantly.

Sometimes, our Louisville and Indiana bankruptcy lawyers know it's not necessarily intentional or even conscious. It often stems from two individuals who have different perspectives about money.

A 2012 survey of some 24,000 people found that almost half of all married couples admit to keeping some kind of financial secrets. In the poll, 56 percent of women admitted to lying about money, while about 40 percent of men did the same. When it came to purchases, 32 percent of women admitting to fudging the facts, while men copped to it about 17 percent of the time.

Women were more likely to conceal beauty purchases, while men were more likely to conceal purchases for entertainment.

Aside from the fact that such concealment can erode the trust of a relationship and ultimately lead to divorce - a financial struggle in and of itself - when the purchases snowball into serious debts, it becomes an issue for both individuals. Often, the purchases are made with credit cards in both names or from accounts where both parties would be liable for the debt.

The one bit of good news for those in Indiana and Kentucky is that they are both equitable distribution state, as opposed to community property. That means instead of both parties being equally responsible for debts regardless, a judge will decide who owes what. But that's only in cases of a divorce, and even then, the innocent spouse might still technically be on the hook with creditors for the outstanding debt. If it wasn't paid, he or she would have to take his or her ex back to court to enforce the divorce decree.

Couples who choose to stay together, though, may decide that facing it down together means they will need to file for joint bankruptcy, which will free them both of an obligation to pay those outstanding debts.

This is important because unless you seek this protection, not only will your spouse be held liable, any joint accounts you may have held will be subject to garnishment as well.

While we do believe in honesty among spouses, it's quite possible that a disclosure of a significant financial infidelity could result in a divorce filing. As such, your best move would be to first meet with an experienced bankruptcy lawyer. You'll want to do this soon because it's almost always the case that such actions come bubbling to the surface sooner or later, usually at an inopportune time. It's preferable that the news come from you, and that you have at least a generally outlined list of options. We can help you get started.

Likewise, anyone who believes his or her spouse may have secretly racked up a significant amount of debt should also meet with an experienced bankruptcy lawyer - possibly before even meeting with a divorce lawyer, if that's your plan - as we can help you determine what kinds of financial choices you might have both as an individual and as part of a couple.

Keep in mind there are some benefits to filing a joint bankruptcy, as opposed to a single one. For starters, your overall bankruptcy costs are going to be lower than if you each individually file. Secondly, it eliminates all dischargeable debts, so both of you are off the hook. Lastly, it tends to be more efficient.

Even in cases where a couple chooses to split due to financial infidelity, a joint bankruptcy filing can often still make sense from a financial perspective.

Continue reading "Financial Infidelity Can Lead to a Joint Bankruptcy Filing" »

When someone is facing the possibility of filing for bankruptcy, they need all the good news they can get.

Our Louisville Chapter 7 bankruptcy attorneys are happy to offer some here. A new credit scoring model is going to boost the scores of millions of people who had no credit history, little history or some spots of poor history.

It's the newest version of VantageScore, the scoring model that is used by the three major credit bureaus - Equifax, TransUnion and Experian.

The really good news for those who have found themselves deep in debt and hounded by creditors is this: Right now, all your debts that are forwarded to collections are a factor in your credit score for as long as seven years. That is the case regardless of whether the debt was ultimately settled.

VantageScore 3.0 will not be factoring those issues into the score if the debt was settled or paid in full. The main thing the agency will be looking for is whether the balance is zero.

The new system also takes into special account victims of natural disasters. In Kentucky, these would primarily be tornadoes, flash floods and severe winter storms. A major example recently involved victims of Hurricane Sandy, who saw their scores take a huge hit in trying to keep up with payments as a result of the hardship.

Under the new model, natural disaster victims will get a credit boost when they make their payments on time - in spite of the difficulties - but they won't suffer the negative impacts when they need some time to get back on their feet.

Of course, a bankruptcy is going to inevitably impact your credit score, regardless. But the chances are, if you were behind on payments as it was, your score wasn't great to begin with. The new scoring model means that if you have zero-dollar balances on your collection accounts - which is ultimately the result of a Chapter 7 bankruptcy - you should begin to see some improvement to your score.

Keep in mind, this will matter mostly for lenders that use VantageScore. Most still use FICO, but VantageScore is quickly gaining in popularity, with six of the top 10 credit card issuers and four of the top mortgage and auto lenders using the latter.

Another advantage of VantageScore is that it weights payments for rent and utilities - something for which other scoring models don't give you positive credit - but will dock you if you fall behind. This gives someone emerging from a bankruptcy more chances to boost his or score without necessarily taking on a high-interest credit card or trying to buy another home - mainly, some of what may have gotten you into trouble in the first place.

There is word that FICO and other scoring models could begin following suit in this regard as VantageScore gains popularity. In fact, FICO recently issued a statement saying it was beginning to explore ways to factor in these so-called "alternative" records for people with limited credit profiles.

All of this is encouraging news for individuals who are debating whether to file bankruptcy because it provides more opportunity for you to bounce back from a lower credit score.

Continue reading "Prospective Louisville Bankruptcy Filers Offered Good News" »

The youth of America did not escape the recession unscathed by any means.

However, our Louisville Chapter 7 bankruptcy lawyers understand that the psychological impact of the experience has prompted those under the age of 35 to take on less credit card debt, purchase fewer cars and delay plans to buy a home.

That's according to a recent study, titled "Young Adults After the Recession," by the Pew Research Center. Between 2007 and 2010, the median debt of Americans headed by a person 35 or younger dropped by nearly 30 percent, from $22,000 to about $15,500. That was a far more dramatic dip than what we saw with regard to older Americans with debt, whose overall debt dipped by 8 percent.

The important thing to note about this, though, is that a big reason for that decrease has less to do with tighter budgets and more to do with the housing crisis that started the recession in the first place. Ownership of residential property accounts for approximately three-fourths of the average person's debt in the U.S. When the bottom of the housing market was ripped out from underneath us all, millions of people were underwater on their payments and many, many homes were foreclosed upon. More continue to struggle to keep up with the payments while the government tries to sort out how it's going to handle the wrongdoing by the banks.

The Pew researchers found that the number of people in the U.S. under the age of 35 who own a home fell to 34 percent as of 2011. That same cohort was at 40 percent in 2007. Compare that to over-35 borrowers, whose overall home ownership rates fell by just 2 percent.

Some of this is directly related to the housing crisis, while the rest has to do with the fact that it's harder to get a job. No job (or not having an ideal job) has caused many younger folks to hold off on buying a home, where they would have if the economy was better. Plus, banks are tighter than ever about handing out home loans, which is a deterrent for a lot of folks who don't have a lump sum of money for a down payment.

This is another reason why younger people are also waiting longer before starting a family. Children, as any parent knows, cost money and can drive up your debt-to-income ratio.

So it's not so much that people are suddenly becoming so much better at managing money. Rather, they aren't being given the opportunity to get the loans.

And yet another factor in all of this, one that wasn't widely discussed by the media, is that many Americans sought relief through a bankruptcy. The American Bankruptcy Institute reports that non-business bankruptcy filings in Kentucky totaled nearly 17,000 in 2007, 21,000 in 2008, 25,000 in 2009, another 25,000 in 2010 and then tapering off somewhat with 21,000 in 2011, the latest year for which figures are available. The vast majority of these filings are Chapter 7 cases, which allow individuals to completely erase most of existing debt (save for things like student loans, taxes and child support).

Certainly, we don't want to minimize the effect that the recession has had on our collective psyches, but it's worth being transparent about the causes of this massive debt reduction among younger people.

As nearly 110,000 Kentuckians have learned in those five years, bankruptcy can provide a fresh start to the rest of your life.

Continue reading "Debt Burdens on Younger Borrowers Lessen, Economy a Factor" »

The last thing anyone should have to worry about when they are facing a serious, potentially life-altering health issue is whether they will be able to afford the care.

But as our Louisville bankruptcy attorneys know well, most people can't afford the astronomical bills that pile up each month. Some make a valiant effort and try to pay for a medical procedure with a credit card - if their credit will even cover their hospitalizations, treatments, therapies and medications. However, this often leaves an ailing person and their family even deeper in debt and struggling with sky-high interest rates.

This situation replays itself daily across this country. Although the federal health care reform bill aims to curb some of the worst abuses, it certainly won't eliminate the financial struggles faced by families dealing with serious medical issues.

Chapter 7 bankruptcy is a saving grace for these families -- and a lifeline that should be reached for before tapping retirement savings or making other ruinous financial decisions.

Unfortunately, too many people have a perception of bankruptcy help as a last resort. But the fact is, chapter 7 bankruptcy gives you a chance to immediately stop the creditor harassment, be absolved of all that medical debt, hang onto your retirement funds (and disability checks too, if you are receiving them) and start again with a clean slate.

Many people worry what such an action will ruin a credit score. It's true that you will be impacted, though probably not for as long or as deeply as you might think. As it stands, if you are already in a position where you can't pay your bills, your credit has taken a pretty significant hit.

Sometimes we tend to think of these scenarios as only playing out with older folks. This is simply not so.

A 30-year-old woman was recently profiled in an article published by MSN. In the first-person account, a mother of two years awoke one day with a cold. Then suddenly, one side of her face went numb.

That numbness lasted weeks. When she went to see her primary care physician, he sent her straight to the hospital emergency room. There, she underwent a CAT scan that indicated inclusive results. She then underwent an MRI, at which time a neurologist informed her she had multiple sclerosis. This autoimmune disorder affects the spinal cord and brain, and causes sufferers to experience symptoms of vertigo, loss of balance and muscle weakness.

While she and her husband were determined that the diagnosis would not define her or her life - it did define her bank account.

At the very outset, that first emergency room visit cost $2,500. Her monthly medications cost $2,800 monthly - $500 of which she was responsible for out-of-pocket. As the years go on and the disease worsens, the medication costs will only increase. Without insurance, this would cost her nearly $45,000 annually.

These were not individuals who were irresponsible with their money - they were by all accounts smart with their savings. They had maxed out their IRAs. They were saving for a house. They had no debt. They had a good chunk of change in case of emergencies.

Cases like this reveal that medical debt can truly strike anyone at any time.

When it does, we are here to help.

Continue reading "Louisville Bankruptcies Often Spurred By Sky-High Medical Debts" »

An increasing number of Americans are tapping into their retirement savings long before they're retired - a move our Louisville bankruptcy attorneys recognize is undermining retirement security for a huge swatch of our population.

Financial advisory firm HelloWallet reports that a quarter of working Americans are taking out huge withdrawals from their 401Kk) and retirement savings. Of the $293 billion that is deposited into these accounts each year, about $74 billion is being withdrawn by those who have yet to reach retirement age.

A big part of the reason people are making this move has to do with paying down debt or covering basic, monthly expenses. The problem with this is not only are you paying huge penalties on those withdrawals, you risk becoming indigent in old age, when you're unable to work.

What many people may not realize is that there are alternatives, and a Chapter 7 bankruptcy is one of them. Most people think of it as a last resort. The truth of the matter is that waiting to file until you've drained your retirement savings puts you in a more precarious situation. Such accounts are protected in a bankruptcy, so that's money you could have otherwise kept.

If you are using retirement money to help make ends meet, a bankruptcy can help by eliminating debt.

A huge part of the concern is that many of these individuals aren't going to be able to rely as heavily on benefits such as Social Security and Medicare like past generations. Federal agencies are looking to make significant cuts to these programs in an effort to reduce the federal deficit.

More and more, retirees are going to be on their own, which is why this trend is especially troubling.

The newly-released report indicates that people in their 40s are the ones most often dipping into these accounts, with one in three seeking at least a measure of debt relief in such fashion.

Another new report, this one by one of the country's biggest 401(k) managers, Vanguard, shows that since 2008, when the economic crisis hit, there has been a 12 percent increase in the number of people who took out loans against their retirement. The loans are reportedly the top way people are taking this money out. It does require that the money be repaid, but it's done at the cost of steep penalties and interest. For families that are already cash-strapped, this often does more financial harm than good.

This trend is also prompting employers to question whether these plans are even worth it, since they are paying top dollar for management firms to handle them and employees aren't truly benefiting in the long run. In an increasing number of cases, the only entity reaping the rewards is the management firm.

To offer a little background, the 401(k) program was first established by the federal government in the late 1970s, as there was a heightened concern regarding the the increase of retirement costs and dwindling federal resources. It used to be that pensions were the retirement security upon which most people relied. Now, only about a fifth of workers have a pension, meaning 401(k)s have become the savings plan on which people are counting.

Those who study the programs say that when people tap their retirement savings on anything but retirement, except in the most extreme cases of desperation, it's a mistake.

But people don't seem to be looking at the bigger picture. What they see is this: stagnant wages, higher costs for goods, children who want to attend college, homes that need repairs, credit card debt that's higher than ever - and they view this as a way out.

Our Louisville bankruptcy attorneys want to stress that it's not the best way out - and it's certainly not the only one.

If you are struggling with debt, don't dip into your savings. Contact us today to learn more about your options.

Continue reading "Report: Millions Draining Retirement Accounts to Pay Debt" »

Fiscal cliff fears were at a fever pitch just a few weeks ago, amid a growing chorus of concerns regarding numerous tax hikes.

One aspect of all that which was seldom discussed was the expiration of the Mortgage Forgiveness Debt Relief Act. Kentucky foreclosure lawyers know that for those who are underwater right now on their homes, this is a critical piece of legislation, and expiration of debt forgiveness would have almost certainly meant bankruptcy if their home went into a foreclosure or short sale.

The most basic explanation of this act is that it got homeowners off the hook for the remainder of money they owed to the bank following a foreclosure or short sale. So let's say, for example, you bought your home for $150,000 and now it was only worth $115,000. You were able to sell it in a short sale for $110,00. Most banks know that they weren't likely to receive the remaining $40,000, and so often, they would simply "forgive" that amount.

But prior to the mortgage forgiveness act, you would be liable to pay income taxes on that money - as if it had actually been cash in your pocket. So while you wouldn't have had to pay $40,000, it would very likely have bumped you up into the next income bracket. In this instance, you would have been on the hook for an additional $8,000 in taxes.

For someone whose home had sold for $100,000 less than what they owed on the mortgage, they would have been responsible for roughly $20,000 in taxes.

The tax break has been extended through the end of this year. What this means is that if you are underwater on your home and concerned about potentially falling into foreclosure or being forced to conduct a short sale, you really don't want to wait until the end of the year, as it could end up costing you quite a bit more.

We are dedicated to ensuring the best outcome for your individual circumstances. It helps to have as much information as possible when making financial decisions. Sometimes a short sale makes the most sense. Sometimes a Chapter 7 or Chapter 13 bankruptcy filing will better serve your needs. We are committed to finding the solutions that work for you.

Most people who are in this situation probably already realize it, and may just be putting off the inevitable because they aren't eager to deal with it. This should give you some incentive to do so.

Being underwater on your home doesn't necessarily mean you'll be forced to foreclose or complete a short sale, particularly given the recent foreclosure abuse settlements reached by a number of banks. Some of these agreements require banks to work with homeowners who are underwater under more generous terms. But having a legal advocate on your side to barter about those terms can be extremely helpful.

Some signs that you need to seek help right away include:

• You've endured an unexpected life change - lost your job, went through a divorce or suffered a serious illness. These incidents put you at increased risk of defaulting on your mortgage.


• You're grappling with serious financial struggles. If you have maxed out on your credit cards or are having trouble paying your everyday expenses - particularly keeping up on your mortgage - you're going to need help. The good thing about choosing our firm is that we have experience in handling both foreclosure defense and bankruptcy filings, so we have the experience you require.


• You have missed three or more mortgage payments. This is a huge red flag, and you should not delay getting help any longer. The sooner you get help, the better your chances of securing a deal.

Continue reading "Kentucky Foreclosure Lawyers Report Extension of Mortgage Forgiveness Debt Relief Act" »

One of the great things about a Chapter 7 bankruptcy is that it allows you to walk away from debts you would otherwise have no hope of paying.

It's very freeing.

But you should anticipate the possibility that your creditors may fight to be paid, using an adversary complaint. Having a skilled Louisville bankruptcy attorney on your side will mean you will be well-prepared for this scenario.

One couple had to endure just such an ordeal, though they did ultimately emerge victorious after their case was appealed to the U.S. Court of Appeals for the Eighth Circuit. In Unterrieiner v. The Samuel J. Temperato Revocable Trust, the appellate court affirmed the Bankruptcy Appellate Panel's reversal of an earlier verdict granting summary judgment to the creditor in an adversary complaint.

Here's what happened:

A husband and wife were the sole shareholders of a management company that operated three fast-food franchise stores. One of those stores was owned by the the Samuel J. Temperato Trust.

In late 2005, the management company was doing very poorly. In fact, without a loan, it was going to have to shut down. The trustee for the Trust arranged to set up a $235,000 loan for the management company from Cass bank. In order to secure it, the married couple signed personal guarantees, as well as a Commercial Security Agreement. The franchise also guaranteed the loan.

The couple never spoke to the trustee or with anyone from the franchise or even anyone from Cass before signing the loan documents. In fact, until the Trust filed the complaint, the couple had no idea that the Trust actually owned the franchise - didn't even know the Trust existed.

The Security Agreement listed the management company as the borrower, and the couple as the guarantors. The agreement listed all business assets at two of the franchise locations as collateral. The Trust was never mentioned. Cass sent the loan directly to the franchise, which retained a portion of it to cover outstanding debt from the management company.

About a year after the loan was granted, the husband told the bank that, contrary to statements made in the security agreement, the management company didn't actually own most of the collateral, and there was a misrepresentation. He said he and his wife hadn't read it carefully before signing it.

Regardless, the management company defaulted on the loan in late 2007. The following spring, the bank released the couple of any further liability after they paid $20,000. The bank demanded that the Trust pay the rest.

Then the couple filed for Chapter 7 bankruptcy, after which the Trust filed an adversary complaint against them, claiming they owed the Trust as co-guarantors of the loan. The claim was that the debt to the trust was not dischargeable, according to the terms of 11 U.S.C. 523.

This statute outlines exceptions to discharge - meaning debts you can't shed in a Chapter 7 filing. These include things like child support obligations, student loan repayments, court-ordered restitution or back taxes. They also include over $500 worth of luxury goods bought within three months of the filing or cash advances of over $750 within 70 days prior to filing.

Section 523(a)(2)(B) also disallows discharge of debts that are made by use of a written statement that is false regarding the debtor's financial condition and on which the creditor reasonably relied. It was on this basis that the Bankruptcy Court granted a summary judgment in favor of the Trust.

However, the couple appealed and the Bankruptcy Appellate Panel reversed the earlier decision, saying that the Trust did not meet the strict statutory requirements. Essentially, the representation was made to Cass Bank - not the Trust, the court ruled.

This story had a happy ending for the debtors - but it certainly did not come without a fight. Particularly if you are a business owner or sense you may have a more complicated Chapter 7 filing, contact our attorneys as soon as possible for a consultation.

Continue reading "Creditors in a Louisville Bankruptcy Have to Prove 11 U.S.C. 523 Standing to Collect" »

We're way past Halloween, but as we head into the holidays, our bankruptcy lawyers in Louisville know that "zombie debts" have been known to haunt people all year around.

These are debts that essentially "come back from the dead" when a company buys them from the original creditor for pennies on the dollar. In fact, years may pass and you may have forgotten about it. So has the original creditor, who probably wrote it off as a loss. But that debt can be purchased many times over by numerous third-party buyers, meaning it will not go away.

What's important to understand is that you have to be careful how you proceed with these debts. In some cases, it's possible that you truly don't own it because court action must take place within a certain time frame of the debt being accrued. However, if you agree to make even a single, small payment on it, you could legally revive the debt and again become liable.

It's important to understand your rights. And if you have several of these older debts (and some newer ones too), it's time to reach out for some professional legal help.

If it seems that debt collectors are more aggressive than ever before, it's because they are. It used to be that large companies like credit card providers would try for a year or two to collect a debt. When they weren't successful, they would essentially give up. And then sometimes, debtors would pay a certain amount to have their credit cleared up.

But now, those old debts are being purchased in bulk by third-party buyers. It used to be that most of these debts were primarily credit card debt. They now come from a vast array of creditors, including hospitals, gyms, furniture stores, etc.

And they don't always fight fair.

The U.S. Department of Justice earlier this year took on Asset Acceptance, one of the largest debt-buying firms in the country, amid allegations that the company had run afoul of the Fair Debt Collection Practices Act and other laws. The company allegedly routinely lied to consumers and then gave false reports to credit reporting agencies, mucking up peoples' credit without cause. The company settled the suit out of court for $2.5 million.

Another part of the problem with these companies has to do with the way these companies purchase the debts. Often, they're only getting electronic records. So they might literally have your name, your Social Security number and what you owe. But they don't have any other paperwork. So first of all, you may not be receiving the notifications you are supposed to be getting before that information is reported to a credit bureau - as is required by federal law. And secondly, if you were to actually challenge that company in court, you my be successful in fighting that debt if they don't have any documentation of the original debt.

And finally, you should know that a number of debt buyers have been caught threatening to sue or actually suing someone long after the state's statute of limitations has run out on that debt. Third-party debt buyers do this at a much higher rate than original creditors, probably in large part due to the fact that they're getting the debt later in the process.

Still, these companies count on the fact that you won't show up to court. When that happens, you're likely to get a judgment against you, which can be very difficult to shake because at that point, the court can place liens on your property or garnish your paychecks in order to force you to pay.

Continue reading ""Zombie Debts" Can Haunt You Long After Halloween" »

You get a letter in the mail. It says you're being sued for non-payment of a debt. But you can't afford it anyway.

You can no longer ignore that you've got a debt problem.

Our Louisville Chapter 7 bankruptcy lawyers want to reassure you right now that you aren't going to jail for a debt you can't pay. And even if the collection agency wins its case - which typically assumes you don't respond to the proceedings - you probably still don't have to pay it if you file for a Chapter 7.

But delay can be costly. Foreclosure sales can't be reversed. And tax liens or other judgments may not be discharageable through bankruptcy once in place.

There are many things you can do to fight back against the legal action of a debt collector. But to have the best chance of being successful, you'll want to make sure you have an aggressive attorney representing your interests. Often, the simple notification that you have hired an attorney can cause these entities to back down.

If it's clear you do owe the debt, the collection agency has a right to collect on it and will press the matter. An experienced attorney can always help you negotiate a more reasonable settlement prior to any trial even in cases where it is not necessary to file for bankruptcy protection.

However, one of the worst things you can do is ignore that letter in the mail. Some people assume that because they can't afford to pay the debt, there is no point in really bothering anyway. But if you don't respond, what will likely happen is that the collection agency will get a default judgment. This means they can start putting liens on your property and garnishing your wages. You may be also stuck paying their hefty legal fees on top of the debt you already owe. This means your costs could triple. This is the key, though: these companies bank on the fact that you won't respond.

Usually, you have 20 to 30 days to respond. If you do respond without a lawyer, make sure you don't say you can't afford to pay it. By doing this, you're admitting liability, and that could lessen your chances of success.

Secondly - and this is where an attorney is critical - challenge the lawsuit. Often what happens in these cases is that the original company to whom the debt was owed writes it off. But they sell that debt to collection agencies for a small fraction of what is owed. This is why these companies can afford to hound you incessantly for a few hundred dollars.

Thirdly, another way to challenge debt lawsuits in Kentucky is to force the debt collector to prove exactly what you owe. This might seem simple enough, but it often requires that the company produce original documentation of that debt. Sometimes, even the original creditors don't have this. If they don't, there's a good chance you'll win the case.

And finally, if the debt is older, never simply assume that you are compelled to pay it. Most creditors have a limited time to attempt to collect. After that, they may not have any legal standing to collect.

Beware, though, that making a payment may reset that time limit.

Continue reading "Debt Collector Suing You? Call Our Louisville Bankruptcy Lawyers" »

Kentucky is increasingly comprised of single-person households, and a new study indicates that they are wrestling with a host of financial challenges that married couples are able to avoid.

Our Louisville bankruptcy attorneys understand that of those single heads of household surveyed, more than half said they worried about their ability to cover their living expenses and nearly half were concerned about their ability to pay medical expenses.

That's according to a study entitled, "The New American Family: The Metlife Study of Family Structure and Financial Well-Being."

For the first time since 1940, when data was first collected, married couples now represent less than half of all U.S. households. What's more, only 20 percent of all U.S. households are married individuals with children.

More likely, we have individuals who are either entirely single or single parents. The latest U.S. Census figures indicate that there were 31 million single person heads-of-households two years ago. That marks a 15 percent increase from just 10 years earlier and is four times what it was back in 1960.

MetLife researchers surveyed some 2,500 adults between the ages of 45 and 80 in an effort to identify financial concerns for those moving into retirement.

Essentially, it comes down to this: Couples, and married couples in particular, are overall better off financially. They are more prepared to weather financial challenges.

The problem for single people ultimately comes down to this: They only have one income on which to rely.

Single people have the lowest income levels (about $32,000 on average), asset levels (about $110,000) and homeownership rates (slightly more than 40 percent) compared to other types of family structures. Less than 20 percent of single heads of households said they were on the right track with regard to retirement savings. What's more one in five said they hadn't even started putting away money for retirement.

Additionally, there are multiple incentives offered to married couples and families, including: tax breaks, health insurance incentives, discount family plans, couples' discounts, etc.

What all of this ultimately adds up to is a greater financial strain on those who can least afford it. As a result, many singles, particularly in the midst of rough economic times with no one else to fall back on, may resort to using credit cards or taking out risky short-term loans to cover the basics.

The risk here is that even if you are able to slowly pay all this back, it leaves you with less ability to save for retirement, something that is even more critical if you're doing it all on your own.

This is where a Chapter 7 bankruptcy can be incredibly useful. Some people assume that you have to be completely broke in order to file for bankruptcy. You don't. But if your ability to save and prepare for your golden years is impeded by the fact that you have some large and looming debts that will take you many years to pay down, bankruptcy can be a smart choice to establish a fresh start, protect your 401(k), your pension and your savings, possibly even your home, all while working toward greater financial stability.

Continue reading "Report: Single People Face Unique Money and Debt Challenges " »