Two recent articles highlight both the good and bad of the recent auto sales explosion.

http://www.bloomberg.com/news/articles/2016-03-14/subprime-auto-bond-delinquencies-highest-in-20-years-says-fitch

http://mishtalk.com/2016/03/13/60-day-delinquency-rate-in-packaged-subprime-auto-loans-highest-in-nearly-two-decades/

        Both articles speak to the easy credit access that has allowed new car sales to top 17 million vehicles annually. However, that easy access to credit has come at a price. As a result of the flood of “less than perfect” credit approvals, the default rate on so called subprime auto loans has crept up to over 12% in some of the bond packages. Sound familiar? Maybe just like the subprime housing boom?

            The good news is that car loans are a much smaller part of the economy than housing and most likely will not have the financial impact of a housing crash if the default rate continues to stay high.

         However, most people need a car to have employment and for other daily life needs. So what is a person to do with a car that was purchased in the past couple of years which is hopelessly underwater and maybe not suitable for their needs any longer? Until a few years ago, Chapter 13 used to be the option most people would chose. That would allow you to value the vehicle over a 60 month period at the current value of the vehicle and at a reduced interest rate. The 2005 amendments to the Bankruptcy Code made this a much less attractive option. Now, the car has to be over 910 days from the date of the purchase in order to strip down a purchase money lender to a reduced value. That is nearly 2 ½ years from purchase – an eternity in constantly changing families. The auto lenders successfully pushed that portion of the legislation through with that time period since they knew that 910 days was the average length of a family keeping a vehicle after purchase. The end result has been many families stuck with high car payments on cars no longer suitable for them for years due to the inability to change value in a Chapter 13 or trade in a vehicle due to negative equity.

        Several new programs in Chapter 7 may serve to help families obtain the vehicles that they need. Chapter 7 allows a vehicle to be surrendered, along with all of the past due payments, negative equity and other issues, back to the lender. A new program available from a national lender to Chapter 7 debtors allows them to obtain a new vehicle the day after they file a Chapter 7. If a person qualifies for the program, this would allow a new vehicle to be obtained with no need to roll negative equity from a previous vehicle into the purchase. Payments could be lowered and the value of the vehicle would more closely match the loan amount. Similar programs are available in Chapter 13 after confirmation of the Plan. If this sounds like a program that may interest you, then give us a call for more details.

At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 or bkmickler@planlaw.com.

Bryan K. Mickler

REFILING CHAPTER 13 BANKRUPTCY

When I started practicing bankruptcy law 20 years ago, Chapter 13 was a revolving door of refiling. A case would be dismissed and we would immediately have the client in our office to re-file and start a new 60 month plan. Sometimes it seemed that the 5 year Chapter 13 Plan was really morphing into a 10-15 year process.

A couple of things changed to stop the revolving door. First, the Bankruptcy Code amendments of 2005 made it much more difficult to immediately refile after a dismissal. You now have to have Court approval to extend the stay/protection past the initial 30 days after filing. If you have to re-file twice within a year after the initial dismissal, then you receive no stay/protection unless the Judge imposes the stay within 30 days of the filing. At each type of hearing, you are required to prove that the dismissal was caused by unforeseen circumstances and that the new case was filed in good faith due a change in those previous circumstances.

The second big change was the introduction of mortgage modification to Chapter 13 in Jacksonville. Now, we don’t have to cure the entire mortgage arrears during the 5 year plan. Instead, a mortgage modification may allow for a re-amortization of the outstanding balance on the mortgage over a new 30-40 year term at a reduced interest rate. This has significantly increased the success rate of our Chapter 13 cases and cut down on the refiling rate.

If you do need to re-file your Chapter 13 case, we routinely have clients refile and receive the protection of the Court due to a change in circumstances. If you are considering changing attorneys or have experienced some issues in your current 13 and need another start, contact us and we will be happy to discuss your re-file options.

At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 orbkmickler@planlaw.com.

Bryan K. Mickler

FRAUDULENT STUDENT LOAN CANCELLATION AND DISCHARGEABILITY IN BANKRUPTCY

           I had written previously on the issue of potential changes to the student loan crisis and the potential for change in relaxing the strict rules to discharge student loans in bankruptcy. Both Public and Private student loans are currently nearly impossible to discharge in bankruptcy, due to a bankruptcy reform package pushed through by Republicans in 2005. Essentially, a consumer must be disabled to the point of never being able to rise above the poverty line standard of living in order to attempt to discharge any portion of a student loan debt, whether publicly or privately backed.

            The Supreme Court recently refused to hear a student loan appeal which had the potential to relax the bankruptcy requirements for forgiveness of student loans. So, for now, the strict requirements remain in place.

           However, it appears that many students have taken another approach to the problem. In this article:

http://www.wsj.com/articles/thousands-apply-to-u-s-to-forgive-their-student-loans-saying-schools-defrauded-them-1453285800

 students have begun to challenge student loans with a 1994 Federal Law which allows for forgiveness of the loans based on fraudulent conduct by a school. The examples cited for fraud in the article include over promising on job prospects, earning potential and other problems which lead to high student loan debt with no reasonable job prospects to repay such loans.

           Our office has seen first hand the growing problem of student loan debt. Student loan debt has been growing tremendously over the past few years. The total outstanding student loan balance is $1.08 trillion, and a whopping 11.5% of it is 90+ days delinquent or in default. That’s the highest delinquency rate among all forms of debt and the only one that’s been on the rise consistently since 2003. (see http://www.forbes.com/sites/halahtouryalai/2014/02/21/1-trillion-student-loan-problem-keeps-getting-worse/ for chart and other statistics). The delinquency rate on student loans is higher than credit cards, mortgages and auto loans which have all seen a decline in late payments.

            Our office has started a new program to apply for such forgiveness if the potential client can show that the school over-promised earnings, job prospects, education standards or other conduct which would make the loans fraudulent. Let us speak to you about applying for such a program and any other financial issue that you may have.

At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 or bkmickler@planlaw.com.

Bryan K. Mickler

BANKRUPTCY PREDICTIONS FOR 2016

            In my 2014 Blog on the state of bankruptcy filings, I discussed the causes of bankruptcy filings and how it was related to the availability and amount of consumer credit. That article is here: https://www.planlaw.com/bankruptcy-predictions-2014-beyond/

            Now with 2015 behind us, it appears that the expansion of short term credit has still continued to push bankruptcy filing numbers down. Consumer credit has continued to expand at approximately a 6% annual rate through 2015. As expected, the 2015 numbers show a nearly 12% decline in bankruptcy filings compared to 2014. That is on top of the 11% decline in 2014. http://www.creditslips.org/creditslips/2015/08/yep-800000-bankruptcy-filings-this-year.html#more

            The filings in the Middle District of Florida show an even larger decline of nearly 18% compared to 2014 filings through the latest October, 2015 statistics. http://www.flmb.uscourts.gov/statistics/2015/October.pdf

            As expected, after the short term credit bulge, delinquencies are starting to rise. In the Third Quarter of 2015, credit card delinquency rates started to creep just a little higher. Car loan delinquency rates bottomed out in July of 2015 and have started to rise slowly through the Third Quarter of 2015.

            So based on the slight rising in default rates throughout the last half of the year, what can we expect for 2016? It appears that the bankruptcy filing rate should start to pick up during 2016 and accelerate in 2017. This would coincide with a greater amount of consumer debt levels and the gradual tightening of the credit markets as delinquencies start to increase. Of course, this being an election year, most of the activity in the economy and major life decisions will most likely take place in the last part of the year and into 2017.

            At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 orbkmickler@planlaw.com.

Bryan K. Mickler

SERIAL BANKRUPTCY FILERS AND THE NEED FOR EXPERIENCED BANKRUPTCY ATTORNEYS

            I was reading an article recently regarding the problem of serial bankruptcy filings in Tampa, Florida. You can find the article here:

http://www.tampabay.com/news/business/realestate/tampa-bay-judges-crack-down-on-serial-bankruptcy-filers/2234543

            The article serves to warn people to consult experienced bankruptcy counsel prior to filing a Chapter 13 Petition. In Tampa, a new system will flag your case if you have filed three (3) times for Chapter 13 relief. If you are caught as an “abusive filer” then you can be banned for up to two (2) years from re-filing to save the home.

            Now, most people don’t like to think about filing Chapter 13 once, much less three times. But it does happen. A common pattern that we see is a first filing dismissed after being prepared by a paralegal for failure to file proper documents or propose a Plan that complies with the Court requirements. Then a second filing is typically filed immediately by the same paralegal petition preparer in order to cover up the first mistake. That second case is generally dismissed for the same reasons as the first. By the time people reach our office, the third case needs to be filed in order to save the home. However, now the filing looks abusive and can be flagged. Losing your home to save a few dollars of attorney’s fees starts to look like a bad idea in such a situation.

            Chapter 13 has become increasingly complex in the past few years. The new mortgage modification procedures require a great deal of experience and organization to navigate. The new Chapter 13 form plan is now required and is much more complicated than the older plans. Finally, the requirements for self employed people, tax returns, tax refunds and other financial issues have recently changed to require much more documentation.

            When you consider saving your home through Chapter 13, we invite you to talk to our experienced and compassionate attorneys. We will walk you through the entire process and attempt to make the filing as financially affordable as possible. That way, you don’t end up being labeled as an abusive filer due to simple errors or missing documents.

            At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 orbkmickler@planlaw.com.

Bryan K. Mickler

STUDENT LOAN DISCHARGEABILITY CHANGES NOT COMING SOON

            There has been some hope that change from the Federal Government was coming soon to the growing issue of student loan debt. Both Public and Private student loans are currently nearly impossible to discharge in bankruptcy, due to a bankruptcy reform package pushed through by Republicans in 2005. Essentially, a consumer must be disabled to the point of never being able to rise above the poverty line standard of living in order to attempt to discharge any portion of a student loan debt, whether publicly or privately backed.

            Now the Obama administration has weighed in on the issue. And the results are not what many borrowers were hoping for from this administration. In this article:

http://www.bloomberg.com/news/articles/2015-10-14/obama-administration-hits-back-at-student-debtors-seeking-relief

 the administration argues in Court filings that the current standards for discharging student loans should not be relaxed. This case involved a parent taking out loans on behalf of his three children, but the standard for any student loan discharge would be covered by the filing. Essentially, the government argues that to allow a discharge in bankruptcy would endanger the entire federal student loan program due to the expected loss of repayments.

            Student loan debt has been growing tremendously over the past few years. The total outstanding student loan balance is $1.08 trillion, and a whopping 11.5% of it is 90+ days delinquent or in default. That’s the highest delinquency rate among all forms of debt and the only one that’s been on the rise consistently since 2003. (see http://www.forbes.com/sites/halahtouryalai/2014/02/21/1-trillion-student-loan-problem-keeps-getting-worse/ for chart and other statistics). The delinquency rate on student loans is higher than credit cards, mortgages and auto loans which have all seen a decline in late payments.

            Putting in some form of ability to discharge private student loans would be a good start to addressing the growing student loan problem that continues to plague today’s struggling consumers. Often, private student loans have been incurred at predatory type of institutions which provide minimal benefit to consumers or which have very low graduation rates compared to the level of lending. More than 70 percent of Americans matriculate at a four-year college — the seventh-highest rate among 23 developed nations. But less than two-thirds end up graduating. Including community colleges, the graduation rate drops to 53 percent. (http://www.nytimes.com/2013/06/26/business/economy/dropping-out-of-college-and-paying-the-price.html?pagewanted=all&_r=0). Allowing truly needy consumers the ability to discharge some private loans would allow those consumers the ability to enter the credit markets again in order to purchase homes, cars and other necessary items in order to contribute to the economy, without the burden of crushing student loan debt. The rate of home ownership is 36% less among those currently repaying student debt, according to research from ProgressNow.

At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 or bkmickler@planlaw.com.

Bryan K. Mickler