OLDER AMERICANS GREATLY INCREASING BANKRUPTCY FILINGS

A recent New York Times article highlighted an area of concern in bankruptcy that our office has been seeing for many years – older individuals filing bankruptcy at a greatly increased rate:

https://www.nytimes.com/2018/08/05/business/bankruptcy-older-americans.html?rref=collection%2Ftimestopic%2FBankruptcies&action=click&contentCollection=timestopics&region=stream&module=stream_unit&version=latest&contentPlacement=1&pgtype=collection

As in the article, our office has been seeing an increasing number of older bankruptcy filers. The general implication of the article is that the loss of a social safety net has disproportionately impacted older Americans through increased medical, housing and associated costs.

What our office sees is that older Americans are much more likely to have substantially lower income than a younger household with two employed individuals both contributing to expenses. While medical expenses may be higher for an older household, the remaining expenses are the generally the same for households of all ages. However, retirement incomes from a pension or SSI are generally much lower than a working wage paid to younger workers.

When incomes drop you begin to see the accumulation of consumer debt to maintain normal living expenses. The groceries start to go on credit cards, the car repair goes on a credit card and on and on. Eventually, the debt level is not sustainable with the limited income available. The same phenomenon is present in divorced households – same expenses, but only one income where there used to be two.
If you or a family member is experiencing financial issues related to loss of income, contact our office for a confidential assessment of whether a bankruptcy filing would be a benefit.

At Mickler & Mickler, we personally attend court hearings on an almost daily basis. We keep up with the latest developments in bankruptcy law and related areas. We can provide you the type of bankruptcy advice which will allow you to make the best financial decision for your situation. Please feel free to contact our office with any bankruptcy related questions at 904-725-0822 or bkmickler@planlaw.com

Bryan K. Mickler

CAUSES OF FILING BANKRUPTCY – THE BIG THREE

The reason most people file bankruptcy is really very simple – too much debt and not enough money. But that overly simplistic explanation is not the entire story. Based on my past research in this area, bankruptcy filings are tied closely to the level of consumer debt. When that level becomes too high, payments for households become unsustainable and defaults begin to occur. But what leads to this situation? After years of speaking to people regarding their financial problems, I have come to the opinion that three main areas of financial hardship lead to bankruptcy filing: Divorce, Medical bills and job loss.

DIVORCE

Probably 75% of the single clients that we see are within 5 years of a divorce. The financial toll of divorce extends far beyond the simple fact of child support, replacement of assets and two households to support. A recent article showed that the divorcing spouse actually suffered a dramatic decline in productivity during and after the divorce period.
According to the report, divorce lowers the productivity of the employee going through it by an estimated 40 percent, and one-year post-divorce, productivity is down an additional 20 percent, with the co-workers losing 2 percent and the manager losing 1 percent. The numbers gradually go down as the years pass, but productivity still is being lost overall.

https://mensdivorce.com/work-productivity-divorce/

Divorce also led to increased job loss and lower job satisfaction. All of the above results in increased financial strain and a turn to credit to make up for lost income. If consumers are increasing revolving debt to make monthly expenses due to a lack of income, then a bankruptcy quickly follows. See below Federal Reserve chart showing dramatic 11% increase in credit card revolving debt in May of 2018.

https://www.federalreserve.gov/releases/g19/current/

MEDICAL COSTS

The correlation between medical costs and bankruptcy has long been known. This article breaks down the different studies that have looked at the medical bill impact on filing bankruptcy:

https://www.thebalance.com/medical-bankruptcy-statistics-4154729

While it is not clear what the correct statistic is for a “medical bankruptcy”, the correlation between high medical bills and filing bankruptcy is not in debate. High medical bills are generally an indication of a chronic condition, loss of income for a lengthy period or an acute episode with little to no insurance coverage. Even insurance coverage does not prevent the medical bankruptcy from happening. One statistic in the article showed that insured individuals declared bankruptcy 3% of the time and uninsured filed only 1% of any given period.

JOB LOSS

Job loss comes from many reasons. The above two causes of bankruptcy are also two big causes of job loss. Most Americans have less than two weeks of savings. Only 1/3 of Americans have more than $1000 in savings. That means that any interruption in income could potentially create a reliance on credit to get through a rough job patch. Once income starts to come into the household again, it may be too late to make up the increased debt that resulted from the interruption.
At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, what Chapter to file. When you contact our office, we can help you in your case with sound legal advice.

Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.

Bryan Mickler
bkmickler@planlaw.com

The new tax reform law passed by Congress in 2017 continues to offer new surprises in a variety of areas. For instance, mortgage interest is still deductible – Right? The answer is a qualified “probably for the first mortgage, but not a second”. As discussed in the below linked article, the new tax law suspends the deduction for home equity interest from 2018 to 2026 — unless the loan is used to “buy, build or substantially improve” the home that secures the loan.:

https://www.nytimes.com/2018/03/09/your-money/home-equity-loans-deductible.html

This has implications for individuals who find themselves considering filing for bankruptcy with a second mortgage on their home. In a Chapter 13 bankruptcy, wholly unsecured second mortgages can be stripped off and discharged upon completion of the Chapter 13 plan. Often, the consideration to filing a Chapter 13 or Chapter 7 depends upon whether a second mortgage can be stripped off in a 13.

With the loss of the tax deduction for home equity loans, that may sway some individuals to consider Chapter 13 instead of a Chapter 7. For instance, an individual with 2 mortgages and $50,000 in credit card debt would normally just file a Chapter 7 and discharge the credit card debt. That individual would have been able to continue to deduct both mortgage interest charges from their taxes in the past. Now, the second mortgage interest may no longer be tax deductible. If the loss of the tax deduction is enough to offset the cost of the 13, should the individual now make a financial decision to file a Chapter 13 instead of a Chapter 7?

An experienced bankruptcy attorney can help you make that type of decision based on your personal financial situation and goals. That attorney should be able to advise you on the bankruptcy and other implications of your financial decisions.

At Mickler & Mickler, we personally attend court hearings on an almost daily basis. We keep up with the latest developments in bankruptcy law and related areas. We can provide you the type of bankruptcy advice which will allow you to make the best financial decision for your situation. Please feel free to contact our office with any bankruptcy related questions at 904-725-0822 or bkmickler@planlaw.com

Bryan K. Mickler

TITLE PAWN AND BANKRUPTCY – NO REDEEMING QUALITIES

When I first started practicing bankruptcy law over 20 years ago, title pawns were a fast growing, very lucrative business in Florida. Then in the year 2000, the Florida Legislature adopted a title loan statute to get the industry under some type of regulatory structure. Gone were the days of title loans being treated as pawn transactions and allowing nearly unlimited interest charges. Instead of interest rates of over 300% as had been routine before, the new statutory scheme required a 30 day default prior to repossession and capped title loan rates as follows:
537.011 Title loan charges.—
(1) A title loan lender may charge a maximum interest rate of 30 percent per annum computed on the first $2,000 of the principal amount, 24 percent per annum on that part of the principal amount exceeding $2,000 and not exceeding $3,000, and 18 percent per annum on that part of the principal amount exceeding $3,000.

The response from the industry was predictable – move to a better (i.e., less regulated) region and continue to charge the exceedingly high rates that used to be available in Florida. Kingsland, GA, less than an hour North of Jacksonville, became the new epicenter of title loan lending in NorthEast Florida.
Why is that relevant to a Florida bankruptcy filing? In our practice we see many individuals who have made the short drive to the North to take advantage of a title loan based on the Georgia title loan provisions. If that is the case, then your Chapter 13 case to save that car just became much more difficult. In December of 2017 the Eleventh Circuit Court of Appeals issued a ruling related to Georgia title loans (or “title pawns” as called in the case). The case can be found here:
http://media.ca11.uscourts.gov/opinions/pub/files/201617467.pdf
The basic holding in the case is that if the Debtor has a title pawn under Georgia Law, then that title pawn must be paid off within 60 days of the filing of the case or the title to the vehicle is automatically transferred to the title lender. You read that right – automatically transferred. That means no further ability to cure the default through the plan, modify the loan terms or redeem the property through the Chapter 13.
Obviously, the best course of action would be to never enter into such a loan agreement. However, if you do find yourself facing a Georgia title loan repossession, then you should have counsel for your 13 who understands what you are facing and can properly advise you on what your rights are in Chapter 13.
Please feel free to contact our office with any bankruptcy related questions at 904-725-0822 or bkmickler@planlaw.com

Bryan K. Mickler

CURRENT BANKRUPTCY NEWS – JANUARY 2018

Several articles recently highlighted the deepening sense of financial pain being felt by middle class and working class Americans. Below are some of the recent bankruptcy related news stories for January of 2018 and how these trends may affect bankruptcy filings in the future.

Hurricane mortgage woes continue to pile up

https://www.nationalmortgagenews.com/news/severe-delinquencies-associated-with-harvey-irma-keep-piling-up

This article focused on the continuing economic toll of the major hurricanes of 2017. There are currently 4% of all Florida mortgages that are at least 90 days late as of January, 2018 according to the article. In addition to the economic toll of the hurricane, it seems that my recent experience has been that most people who applied for mortgage held did not fully understand the terms of the help. Most people who I have spoken to regarding the forbearance programs thought that the loans would be easily modified or the payments were not due in 90 days. Instead, the January, 2018 end of the forbearance program meant that 4 mortgage payments are now due all at one time.

20% Jump in credit card delinquency rates

https://www.newsmax.com/finance/personal-finance/banks-credit-card-losses/2018/01/22/id/838551/?ns_mail_uid=19301467&ns_mail_job=1774900_01222018&s=al&dkt_nbr=01050299wswo

Banks and other card issuers suffered a 20% jump in credit card delinquencies in 2017 as compared to the year prior. The main point of the article focused on normal consumers using credit cards as day to day living income to supplement low or no wage growth.

Top 1% income earners earned 82% of all wealth created in 2017

https://www.bizjournals.com/phoenix/news/2018/01/22/top-1-percent-rake-in-82-of-economic-stock-gains.html

Worldwide, the top 1% of income earners kept 82% of all new wealth created in 2017. Only 18% went to the other 99%.

Please feel free to contact our office with any bankruptcy related questions at 904-725-0822 or bkmickler@planlaw.com

Bryan K. Mickler

BANKRUPTCY PREDICTIONS FOR 2018: CONSUMER CREDIT NEARLY BACK TO PRE-RECESSION LEVELS

Each year our office looks at the coming trends for consumer bankruptcy to figure out if bankruptcy filings are on the rise of will continue to fall.
Based on my past research in this area, bankruptcy filings are tied closely to the level of consumer debt. When that level become too high, payments for households become unsustainable and defaults begin to occur. That then leads to the rise in consumer filings. This is exactly what we saw in the 2007 time period. Revolving debt and house expense became more than families could afford and the housing market collapsed, taking jobs, banks and anything else connected to the housing market down.

In 2017 the amount of consumer credit has continued to rise. The below article found that revolving credit outstanding, mostly credit cards, increased at a 9.9% annual pace in October. Non-revolving credit outstanding, mainly student and auto loans, rose at a 5.3% annual pace.
In total, household debt totaled $12.955 trillion in the third quarter, up 0.9% from the spring, the Federal Reserve Bank of New York said last month. This level of consumer debt was the most on record, though the figure wasn’t adjusted for inflation.

http://news.morningstar.com/all/dow-jones/us-markets/201712077442/us-consumer-credit-increased-by-2052-billion-in-october.aspx

For a good breakdown of debt levels and areas of debt see below:

http://www.natlbankruptcy.com/household-debt-bankruptcy-trends/

More tellingly, the Federal Reserve number show that the pace of accumulating revolving consumer debt has picked up recently. This is mainly credit card debt used to mask over-spending when compared to available income. Growth in revolving debt which had been averaging between 4-6% between 2014-2016 now appears to be near 8%. See below for more detail on this trend.

https://www.federalreserve.gov/releases/g19/current/

If consumers are increasing revolving debt to make monthly expenses due to a lack of income, then the tipping point for consumer bankruptcy may be reached in 2018. There are also several unknown factors which may affect the 2018 filing numbers. Tax reform, loss of medical health insurance and other political changes may accelerate the trend towards a greater number of bankruptcy filings.

Based on the above, for 2018 it appears that we will continue to see increases in bankruptcy filing numbers as in the last few years, perhaps a little bit more of an uptick than past years in the number of filings. If debt levels continue to rise then expect to see sharper increases in bankruptcy filings over the next couple of years. Isolated events may also serve to increase filings locally. Hurricanes in Florida may increase filings once the FEMA hold on foreclosure sales and car payments expires at the end of 2017.

At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, what Chapter to file. When you contact our office, we can help you in your case with sound legal advice.

Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.

Bryan Mickler

FORBEARANCE ON MORTGAGE ISSUES AFTER HURRICANE

In September of 2017, Florida experienced it’s second major hurricane episode within the past year. Hurricane Irma caused extensive damage to major population centers in Florida, including Jacksonville. A federal disaster declaration was issued just prior to the storm making landfall in the Florida Keys. As a result of the federal disaster declaration, both Fannie Mae and Freddie Mac, two large federal mortgage holders, have temporarily suspended foreclosure sales in the State of Florida. See article below.

http://www.tcpalm.com/story/weather/hurricanes/2017/09/15/lenders-offering-mortgage-assistance-hurricane-irma/670047001/

As part of the federal disaster declaration, there are several mortgage companies that have offered what are termed forbearance plans. In reality, these plans are a trap for unsuspecting homeowners struggling with repair bills and missed work.
If you elect to take advantage of the mortgage assistance program through your lender, the lender will offer an immediate 90 day forbearance of the mortgage payments through the end of 2017. In January of 2018, if you made no payments during that previous 90 days, you will owe 4 months of payments. Again, the payments were only temporarily put on hold while the disaster effects have subsided. The payments were not forgiven and the loan was not modified in any way.
The servicer may attempt to offer a modification package to the homeowner in January of 2018. This will require the normal modification documentation be provided to the servicer by the homeowner. The modification is not guaranteed and will have no legal effect on foreclosure proceedings being commenced.
If you find yourself in such a predicament, our office can advise you on relief offered by Chapter 13 bankruptcy. Chapter 13 in Jacksonville, Florida offers the ability to stop foreclosure proceedings and submit modification documents through a court supervised process. Our office has a dedicated staff member who handles only the modification documents for your case and ensures that all of the appropriate documents are submitted through a dedicated website that is used by Chapter 13 filers. No more faxing or mailing multiple copies of the same documents to the mortgage company after they lost things for the third time!!! The Chapter 13 process also can allow for a cure of past due amounts over a period of up to 60 months if your loan was recently modified. Either way, the homeowner has the ability to save the home.
At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, what Chapter to file. When you contact our office, we can help you in your case with sound legal advice.
Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.

Bryan Mickler

FANNIE MAE AND FREDDIE MAC SUSPEND FORECLOSURE SALES IN FLORIDA

In September of 2017, Florida experienced it’s second major hurricane episode within the past year. Hurricane Irma caused extensive damage to major population centers in Florida, including Jacksonville. A federal disaster declaration was issued just prior to the storm making landfall in the Florida Keys. As a result of the federal disaster declaration, both Fannie Mae and Freddie Mac, two large federal mortgage holders, have temporarily suspended foreclosure sales in the State of Florida. See article below.

http://www.tcpalm.com/story/weather/hurricanes/2017/09/15/lenders-offering-mortgage-assistance-hurricane-irma/670047001/

The Sale Suspension and Forbearance Program

In Duval County, the foreclosure sales have been suspended until after January 1, 2018.  There are also additional options to temporarily suspend car and credit card payments as a result of the federal disaster declaration.

If you elect to take advantage of the mortgage assistance program through your lender, the lender will offer an immediate 90 day forbearance of the mortgage payments through the end of 2017. In January of 2018, if you made no payments during that previous 90 days, you will owe 4 months of payments. Again, the payments were only temporarily put on hold while the disaster effects have subsided. The payments were not forgiven and the loan was not modified in any way.

Often, after January of 2018, the servicer may attempt to offer a modification package to the homeowner. This will require the normal modification documentation be provided to the servicer by the homeowner and will have no legal effect on foreclosure proceedings being commenced.

If you find yourself in such a predicament, our office can advise you on relief offered by Chapter 13 bankruptcy. Chapter 13 in Jacksonville, Florida offers the ability to stop foreclosure proceedings and submit modification documents through a court supervised process. Our office has a dedicated staff member who handles only the modification documents for your case and ensures that all of the appropriate documents are submitted through a dedicated website that is used by Chapter 13 filers. No more faxing or mailing multiple copies of the same documents to the mortgage company after they lost things for the third time!!!

CONTACT US

At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, what Chapter to file.   When you contact our office, we can help you in your case with sound legal advice.

Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.

Bryan Mickler

HURRICANES AND BANKRUPTCY FILINGS: HOMEOWNERS BEWARE OF HIGH DEDUCTIBLES

In September of 2017, Florida experienced it’s second major hurricane episode within the past year. Hurricanes Matthew and Irma both caused extensive damage to major population centers in Florida. The damages ranged from falling trees to complete flooding of homes. In any situation, the homeowner may be in for a terrible financial consequence due to the effects of the storms.

Initially, most Americans are living paycheck to paycheck. Two-thirds of households don’t have more than $1,000.00 in savings. A recent article from the end of 2016 explained the dire financial situation of most households:

https://www.fool.com/retirement/2016/09/25/nearly-7-in-10-americans-have-less-than-1000-in-sa.aspx

That article found that “even though lower-income adults struggle with saving money more than middle- and upper-income folks, no income group did particularly well. Some 29% of adults earning more than $150,000 a year, and 44% making between $100,000 and $149,999, had less than $1,000 in savings. Comparatively, 73% of the lowest income adults (those earnings $24,999 or less annually) had less than $1,000 in their savings account.”

This situation has been largely characterized as people having less than 2 weeks of savings to handle an emergency such as a loss of job, medical episode or other work loss. The result of such an episode can lead to immediate financial pressure without adequate savings to make such basic payments as mortgage payments, rent, car payments, health insurance, etc. Unfortunately, our office sees such individuals on a daily basis.

But what about damage to your home from a Hurricane? How does that impact a homeowner with only two weeks of savings? The answer is based on the value of the home. In Florida, damage to a home from a hurricane is generally covered by insurance. However, the insurance coverage normally has a 2% deductible or higher. That percentage is based upon the value of home – not the estimated repair costs. See:

https://www.iii.org/issue-update/background-on-hurricane-and-windstorm-deductibles

This could mean that out of pocket deductible expenses will be in the tens of thousands of dollars for some homeowners. For example, a $250,000 home (about average sale value) would have a $5000 deductible. Obviously, the more the home is worth, the more that the deductible will be for the homeowner. Having to come out of pocket for $5000 is a financial impossibility for most families based on the less than $1000 in savings figures above. Other expenses may not even be covered by homeowner’s insurance, such as tree removal for trees which did not hit the structure, flooding costs and business losses for self-employed individuals. Most people will generally lose time from work due to the approach of a storm and the loss of power/internet for several days after the storm passess.

The result of a large out of pocket expense is usually that the homeowner is left without funds to pay car payments, credit card bill or other expenses which are not as critical as ensuring shelter for themselves and their family. In such a situation, financial pressure may start to mount once the emergency of the situation has worn off. Within a couple of months after a hurricane, collectors and creditors are generally not sympathetic to homeowner’s expenses related to the storm. Lawsuits and other collection activity will generally pick right back up and threaten wages, vehicles and other assets. If you find yourself in such a situation, then bankruptcy may provide the financial tools necessary to save your home, vehicles and income from collection.

At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, which Chapter to file. When you contact our office, we can help you in your case with sound legal advice.

Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.

Bryan Mickler