HAVEN ACT: Military Disability Proposed to be Excluded from Means Test in Bankruptcy

In March of 2019, a new Bill was introduced in the United States Senate to exclude military disability benefits from the means test in Chapter 7 and Chapter 13 Bankruptcy cases. A summary of the proposal is at the link below:

https://www.baldwin.senate.gov/press-releases/haven-act

The proposed bill would treat military disability the same as Social Security Disability. Social Security Disability is currently treated as a “non income event” for the purposes of the means test in filing bankruptcy. The income from Social Security Disability will not disqualify an individual from qualifying for bankruptcy relief based strictly on that individual’s disability income.

After years of seeing local veterans struggle with the effects of mental and physical injuries, this change in income calculation is welcome. Currently, the only way to avoid a means test review for military disability income is to show that the debts sought to be discharged were incurred solely during the time of service. While that is an appropriate exclusion, it misses the cause of the vast majority of service members’ debt. Most service members incur their debt after their service has ended while they fight to obtain disability or to reintegrate into society after service. The current system offers those veterans no relief from the means test exclusion from bankruptcy relief.

The HAVEN act is not a part of the Bankruptcy Code yet, but our office is closely monitoring the progress of this bill to ensure that our veteran clients are fully advised of all options regarding filing for bankruptcy. Our office plans to immediately begin to use the new exclusion for military disability once the change has been enacted in the Bankruptcy Code.

Please feel free to contact us with your questions regarding any bankruptcy related veteran issue. We will be happy to provide a free consultation to advise you of your rights and benefits under the Bankruptcy Code.

Bryan Mickler

bkmickler@planlaw.com or 904-725-0822

CHAPTER 11 FOR SMALL BUSINESS LOANS EXPLAINED – USING CHAPTER 11 TO RESTRUCTURE BUSINESS LOANS AND CONTINUE YOUR OPERATIONS

Running a small business is tough. You have a constant balance of obtaining new business and serving the current customers that you have at the level that both parties expect. Often, a small business will need additional capital. This can be to weather a downturn or to expand if business is going well. A quick Google search for “small business loans” yields an overwhelming choice of lenders, advisers, governmental agencies and the like offering the “perfect” solution for your small business.

Non bank lenders such as Kabbage and On Deck have quickly become the go to lenders for most small businesses. These non-bank lenders offer a streamlined web based application process, quick approval and access to capital in smaller amounts. In contrast, bank based lending generally does not offer any of those benefits. Bank lending requires a branch application, lengthy underwriting and a reluctance for small loans that may not be seen as profitable.

Our office is seeing the effects of the non-bank lending on small businesses. Compared to bank lending, the current trends produce loans that seem to have the following factors:

  • High up front fees –

SBA and other bank based lending is typically in the range of 7-10% interest rate. There are traditional lending charges such as origination fees and title search charges that are set costs. Non bank fees can range from 1 – 13.5% of the loan amount for the first two months, and then 1% of the total amount for months 3-6. These fees can be dramatically higher than typical bank terms and increase rapidly with the amount borrowed;

  • Higher interest rates –

On Deck currently charges between 20-50% interest, plus origination fees and other maintenance charges. Other companies are similar or even higher;

  • Loss of control of your bank account –

The most immediate consequence of using a non-bank lender may be the loss of control over your business finances. Such loans are becoming more aggressive in asserting control of your business bank accounts. Withdrawals are typically done on a daily basis through a linked bank account and are done daily without the control of the business owner. A recent client was paying over $15,000 per day in high interest daily loan payments;

  • Aggressive collection tactics –

Most business owners are familiar with the consequences of a default with a traditional lender. There are a series of demand letters with the chance to cure the default. Then maybe a letter from an attorney. Finally, a lawsuit in the place you run your business and the chance to explain the default to a Judge prior to judgment being entered.

If you default on a non-bank lender loan by stopping the daily interest payments or moving your bank accounts, then the lender will normally have a judgment within days against your company and any personal guarantor (typically the owner). Our office has seen several recent cases where the loan amount was typed into a “Confession of Judgment Affidavit” with credit to be given for any payments made. This document was signed at loan origination and then taken to a court in New York after default. Within days, a judgment had been entered for the entire amount owed on the principal, accrued interest, attorney’s fees and costs. There is no chance to dispute the suit or any amounts claimed due to the Confession of Judgment Affidavit being signed and admitting that the debt is owed.

Finally, defending a suit in New York is not possible for most small Florida businesses. Once the judgment has been entered, the creditor sends it to a lawyer in Miami, FL and files for a domestication of the judgment and immediate receivership for the business. Again, the debt and business were all based in Duval County, FL in each case that we have seen, but the business owner has had no chance to defend any actions in the Duval County Courts. Within days, the receivership has been granted and the business owner is ordered by the Miami Court to turn over the business and all records to the receiver.

Solutions for Your Business

The above scenarios are examples that we have seen in our actual day to day working relationship with small business owners. Chapter 11 bankruptcy offers these owners the chance to remove the receiver that had been ordered by the State Court and take control of their business again. The daily interest lenders are then restructured through the Bankruptcy Court reorganization process in a financially affordable way to allow the business to continue to operate and repay debts through a reorganization plan.

The reorganization plan for the business is generally based upon the business income and expenses, not dictated by the non-bank lenders. Our office works closely with the business owners to determine the appropriate payment terms, length and other plan terms to ensure that your reorganization plan is as successful as possible. Each case is as unique as the business that is being saved. Contact our office for a personal review of your business and potential restructuring benefits.

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.   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

904-725-0822

WHY CAN’T PEOPLE AFFORD SUMMER VACATIONS

WHY CAN’T PEOPLE AFFORD SUMMER VACATIONS?

It is almost Summer vacation time for most people. However, it seems that the traditional Summer vacation is becoming increasingly rare. The below article found that 39 million people in the United States won’t be able to afford a Summer vacation in 2019.

https://www.usatoday.com/story/money/2019/04/30/millions-of-americans-wont-take-a-summer-vacation/39400659/

According the article, the reason behind this shocking figure is financial. “This year, however, 39 million U.S. adults won’t be taking summer trips because money is just too tight. That figure is based on the results of a recent survey from Bankrate.com in which 60% of respondents who said they aren’t planning summer vacations said the reason is that they can’t afford one.”

“Day to Day bills” and “paying down debt” were both cited as the main reasons why a Summer vacation was unaffordable for most people. These reasons mirror the growing problem that our office sees in consultations with potential bankruptcy filers – they have a job and income, but debt and normal living expenses keep them in a cycle of living paycheck to paycheck. When those considerations are taken into account, the average Summer vacation cost of $2000 becomes unaffordable.

There are numerous strategies to try to reduce both day to day bills and overall debt that could benefit may people caught in a debt cycle of living paycheck to paycheck. Reducing debt (together with increasing income) are the only two ways to break the cycle. If you do not have the ability to increase income through a job change or second job, then reduction of debt is the only alternative.

Our office counsels potential clients regarding ways to reduce day to day bills and overall debt level. A good example is the filing of a Chapter 7 case. In that case, overall debt is reduced with the elimination of unsecured credit card and medical debt. However, the filing of a Chapter 7 may have the potential to reduce day to day bills by allowing the substitution of a cheaper car payment, rent expense or other fixed expenses that would normally not be flexible. We would be happy to discuss some solutions with you if you feel that your Summer vacation will not ever be possible based on your current debt situation.

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

MEDICAL DEBTS AND TAX REFUND SEIZURE

MEDICAL DEBTS AND TAX REFUND SEIZURES

About 4 years ago I wrote a blog about the impending ability of debt collectors to seize federal tax refunds as a form of debt collection. It seems that the State legislatures have been moving rapidly to make that form of debt collection a reality. Here is my article from 2015:

https://planlaw.com/tax-refunds-and-debt-collectors-is-it-about-to-get-easier-to-take-your-money/

Now it seems that South Carolina has become one of the States to allow debt collectors to seize tax refunds in order to pay outstanding medical bills. The summary of the new law can be found here:

https://www.usnews.com/news/best-states/south-carolina/articles/2019-04-24/s-carolina-law-allows-tax-refund-seizure-over-medical-debt

The medical debt collected from tax refunds totaled more than $92.9 million in more than 172,000 seizures in 2017. Additionally, approximately $50 per seizure was added to each garnishment to pay the State and County responsible for collection. That equates to $540.00 average taken from each refund plus the additional $50 fees for a total of nearly $600 lost per seizure.

Medical bills are one of the leading causes of filing bankruptcy for middle and working class individuals. Between the lack of health insurance or the out of pocket expenses for any medical treatment even with insurance, it becomes impossible to pay off the medical bills if you have a health emergency.

Medical bills are fully dischargeable in any type of bankruptcy filing. However, if the medical bill is paid through the seizure of a tax refund, it is a double penalty to the consumer. First, the consumer is paying a debt that would have been dischargeable in a bankruptcy filing. Second, the consumer loses the ability to put the tax refund to future needs for their family, such as food, clothing, school costs, etc.

If you have medical bills that are outstanding, you should carefully consider whether it may be beneficial to file a bankruptcy to deal with those debts. While the tax seizure issue may only be occurring in South Carolina at this time, it is just a question of when it is going to come to the other States.

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

SMALL BUSINESS CHAPTER 11 FOR 2019

SMALL BUSINESS CHAPTER 11 FOR 2019

A recent Bloomberg article revealed a potential dramatic change for small business chapter 11 cases starting in 2019. The complete article is below with the link to the story.

Currently, Chapter 11 is a time consuming, needlessly expensive proposition for small businesses. The additional administrative costs and burdens of the current system have resulted in loss of family businesses through liquidation instead of the business being reorganized. Additionally, the current law requires a 100% repayment of unsecured debt unless the creditors accept a lower amount with an affirmative vote. This burden has also resulted in family businesses being liquidated instead of reorganized.

The new bill, as described below, would allow a “cramdown” of unsecured debt similar to Chapter 13 cases for individuals. This would allow the current family ownership structure to survive a reorganization effort in bankruptcy. It also appears that the current administrative burdens of reports, fees and the like will be reduced by the changes for small business cases. These changes should allow a much better chance to save a small business and preserve a family’s financial stability through reorganization.

At Mickler & Mickler we fight every day to save family businesses. Our office has the experience and the dedication that you deserve when your business is attempting to reorganize. Please contact us at 904-725-0822 or bkmickler@planlaw.com for any additional questions regarding a small business chapter 11.

Bryan Mickler

 

https://news.bloomberglaw.com/bankruptcy-law/bankruptcy-bill-aims-to-keep-more-small-businesses-open

Small businesses with less than $2.5 million in debt would be able to file bankruptcy more quickly and cheaply under bipartisan legislation teed up for consideration in 2019.

The bill (S. 3689, H.R. 7190) would add to the Bankruptcy Code a separate subchapter for small businesses. Small businesses, which account for 80 to 90 percent of business bankruptcy filings, would be treated more like individuals than corporate filers under the bill.

Small business owners would find it easier to keep their ownership interests because a standing trustee would oversee every case, a procedural protection preferred by creditors.

Advocates say the current Bankruptcy Code makes it difficult for small businesses to reorganize and forces them to use alternatives that often result in liquidation.

“It’s a well-balanced bill that streamlines the process for small businesses that need it and increases recovery for creditors where it is used,” Professor Edward Janger, Brooklyn Law School, Brooklyn, N.Y., told Bloomberg Law. Janger teaches and writes in the areas of bankruptcy law, commercial law, consumer credit and data privacy.

The bill’s sponsors include Sen. Chuck Grassley (R-Iowa), the departing chairman of the Senate Judiciary Committee, and Rep. Doug Collins (R-Ga.), who is expected to be the top Republican on the House Judiciary Committee next Congress.

They were joined by Sheldon Whitehouse (D-R.I.) and David Cicilline (D-R.I.), who serve on the Senate and House Judiciary Committees respectively.

The bill is likely to be reintroduced next year with many of the same sponsors despite House and Senate leadership changes, said Samuel J. Gerdano, executive editor of the American Bankruptcy Institute, Alexandria, Va.

There’s a “good chance” that Collins will reintroduce the legislation, his communications director told Bloomberg Law via email Dec. 13.

Well-Balanced Compromise

Currently, instead of filing for Chapter 11 protection, a small business might negotiate with creditors or use remedies like state and federal receiverships and assignments for the benefit of creditors, Robert J. Keach, a bankruptcy lawyer with Bernstein Shur, Portland, Me., told Bloomberg Law. The end result will be a liquidation under state law, he said.

The bill is a good compromise among many stakeholders, Keach said. Keach is co-chair of the American Bankruptcy Institute’s Commission three-year study of how to reform Chapter 11.

There is some disagreement over what the right cap is for qualifying for the new subchapter, Craig Goldblatt, a partner at Wilmer Cutler Pickering Hale and Dorr LLP, Wash., D.C., specializing in bankruptcy law, told Bloomberg Law.

Keach, for example, said a $10 million cap would cover more companies than the lower cap that is in the bill.

New Subchapter V

Under the bill, small business owners could retain a stake in the company as long as the reorganization plan doesn’t discriminate unfairly, and is fair and equitable with respect to each class of claims or interests. A bankruptcy court couldn’t approve the plan unless all of the small business’s disposable income, excluding amounts necessary for the payment of ordinary operating expenses, is applied to the plan over a three-to-five year period.

The bill would eliminate the absolute priority rule in Chapter 11 where unsecured creditors must be satisfied in full before the debtor is allowed to retain any property under the plan.

“The measure relaxes the absolute priority rule as in Chapter 12,” which applies to family farmers, Gerdano said.

Business owners may be able to keep their ownership interests without having to pay senior creditors in full or provide new value through funding plan payments.

The change will “enhance a small business’s ability to get a plan confirmed over objections by creditors” if it has proven to have applied their disposable income over a three-to-five year plan, retired Judge A. Thomas Small of the U.S. Bankruptcy Court for the Eastern District of North Carolina told Bloomberg Law.

More Oversight and Quick Reorganizations

Creditors would benefit under the measure because of the standing trustee appointed in every case. The standing trustee would perform duties similar to those of a Chapters 12 or 13 trustee, Small said. Chapter 13 is for individuals with regular income who repay their debts over a three-to-five year period.

It’s hard to get a creditors’ committee to participate in a small business case because of the cost and the time involved, Small said. A standing trustee would make sure the reorganization stays on track, he said.

An official committee of unsecured creditors wouldn’t be appointed under the bill unless the bankruptcy court orders one. A disclosure statement won’t be required, which further reduces the burdens and costs on small businesses.

The bill also would speed up the reorganization process. Under the measure, a small business must file a plan within 90 days, rather than the 120 days in Chapter 11.

This is good for debtors and creditors, Small said. It ensures debtors move through the process quickly, lowering costs and attorneys’ fees, he said.

Chapter 12 uses the 90-day rule and it hasn’t been a problem, Small said.

Small business debtors with no chance of reorganizing won’t be able to “hang out and use the bankruptcy process to delay payment to creditors,” Janger said.

 

 

RENTAL THEFT – A GROWING ISSUE IN CONSUMER BANKRUPTCY

RENTAL THEFT – A GROWING ISSUE IN CONSUMER BANKRUTPCY

I recently have begun to notice a growing trend in consumer financing: leasing small personal property items such as beds, sofas, toys and other items normally financed as a sale. As the trend became more common, I began to wonder why such finance arrangements were suddenly showing up in almost all of our cases. The answer became frightfully clear with just a little research.

First, a little history. Leasing was traditionally reserved for small, niche retail outlets such as Rent-A-Center and Aarons. These establishments offered short term leases for electronics and furniture for temporary tenants who were looking to use an item for several weeks or months and then return the items with no future obligation. The leases were traditionally very expensive compared to the purchase of a similar personal property. A quick scan of any lease site will show that a 24 month lease (to own) of a 55” LG TV will be $59.99 per month for 24 months, or $1,439.76 total to own the TV. The same TV is $399.99 if you purchase it at your local Best Buy. The two deals are below:

https://www.aarons.com/55-class-54-6-diag-smart-4k-uhd-tv-7301LF1.html?cgid=tvs#start=3
v.
https://www.bestbuy.com/site/lg-55-class-led-uk6090pua-series-2160p-smart-4k-uhd-tv-with-hdr/6290171.p?skuId=6290171&ref=212&loc=1&extStoreId=429&ds_rl=1260573&ds_rl=1266837&ref=212&loc=1&ds_rl=1266837&gclid=EAIaIQobChMIxtH7loTh3gIV2FmGCh3OiwluEAQYBCABEgImufD_BwE&gclsrc=aw.ds

Leasing was set up as a way for short term, high cost tenants to obtain items on an as needed basis without a long term commitment and a need to dispose of purchased items at the end of the short term stay. However, times have changed with respect to leasing.

Our office is now seeing leasing for any number of small personal items that were normally financed. It seems that financing companies have decided to enlist the power of the criminal court and Sheriff in order to save on collection costs. This is because of the Florida Statute Sec. 812.155 which provides that the failure to return leased property within 5 days of a certified letter demand to return the items may result in criminal prosecution. Any item with a value over $300 may result in a felony charge.

So, instead of the creditor being responsible for lawsuit costs, attorney costs and related collection expenses, finance companies can now just call the Sheriff’s office and have the State pick up the expense of collection. This is similar to the private education student loan scam that was so prevalent in the past few years. Charge exorbitant rates for tuition and then have the government pay you that rate and take the risk of non-payment and collection. Pretty good deal. Throw in the threat of some criminal penalties and you really can reduce your risk of non-payment at no extra expense.

Monetary compensation and not the return of the equipment is the goal of this scheme by finance companies. They don’t really want the used couch back from the renter. Instead, the goal is to have the consumer feel threatened by criminal prosecution and offer to pay the account off.

These leases are typically just disguised sales that are subject to the same rules as financed items in a Chapter 7 or Chapter 13 case. Our office uses the Federal Bankruptcy Code to prevent the threat of criminal prosecution with the use of redemption in Chapter 7 and valuation in Chapter 13 cases. In either situation, we can usually allow the retention of the leased items for what is generally a greatly reduced sum. Give us a call to explore your options based on your individual situation. We will be happy to set you up a free consultation with an attorney to discuss your legal rights.

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

WHAT CAUSES DIVORCE AND BANKRUPTCY? – PART TWO

DIVORCE AND BANKRUPTCY – PART TWO

I recently wrote a blog examining the impact of divorce on productivity and the tendency of divorced individuals to file for bankruptcy. That blog link is here:
https://planlaw.com/causes-bankruptcy-big-three/

Now it’s time to examine the prior period of time – the time period prior to the divorce and see if the effect of debt in a relationship is the same as that of divorce for productivity. A recent article highlighted the effect of debt on relationships:

https://sg.finance.yahoo.com/news/till-death-us-part-depends-190000898.html

We all know that people fight about money, but the article has some fascinating claims about what causes the conflict. Namely, it appears that differences in credit scores, i.e. responsible spending and bill paying, can be a huge source of conflict.
“Across the board, the better your financial footing and the higher your credit score when a committed relationship starts, the less likely you are to break up after the first few years, according to research by the Federal Reserve Board” is a quote in the article. It also serves as a warning to make sure that when you think about entering into any relationship, make sure that person shares your same views of money and its appropriate use.

Maybe instead of exchanging rings, the parties exchange credit scores to see if they are compatible for the long term? Avoiding divorce and a spouse who may drag you down financially are two keys to not ending up in a bankruptcy situation or for helping you re-build your credit after filing for bankruptcy.

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

BANKRUPTCY AND OLDER AMERICANS

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 BANKRUPTCY – THE BIG THREE

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

HOME EQUITY SECOND MORTGAGES – TAX REFORM CHANGES AND BANKRUPTCY

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