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

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

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

CURRENT BANKRUPTCY NEWS – JANUARY 2018

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

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

HURRICANES AND BANKRUPTCY: HOMEOWNERS BEWARE OF HIGH DEDUCTIBLES

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

BANKRUPTCY PREDICTIONS FOR 2017: TIPPING POINT FOR CONSUMER CREDIT COMING SOON?

IMG_1477[1]

BANKRUPTCY PREDICTIONS FOR 2017: TIPPING POINT FOR CONSUMER CREDIT COMING SOON?

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. Recently, our office and some of the latest National figures show a modest increase in filings for the end of 2016 and start of 2017.

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.

For 2017 some of the same trends appear to be back as in 2007. According to the article below:

https://www.bloomberg.com/news/articles/2017-02-07/consumer-borrowing-in-u-s-posts-smallest-annual-gain-since-2013

consumer revolving debt (think credit cards) increased at the fastest rate since 2007. The rate was up over 6% from the year prior. This follows a 5% increase in 2015 and 4% in 2014. So, 15% in the last three years. Secured loans for vehicles and student loan levels also continued to increase, although slower than prior years.

Based on the above, for 2017 it appears that we will continue to see moderate increases in bankruptcy filing numbers compared to the steep drops that have happened in the last few years. If debt levels continue to rise then expect to see sharper increases in bankruptcy filings over the next couple of years.

As an aside, to see some of the causes of rising debt levels check out this article and the cost of being an American consumer as compared to income growth:

https://www.nerdwallet.com/blog/average-credit-card-debt-household/

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

SUBPRIME AUTO LENDING BUBBLE ABOUT TO POP?

IMG_1302[1]SUBPRIME AUTO LENDING BUBBLE ABOUT TO POP?

            A recent New York Times article looked at the rising percentage of auto loan delinquencies in the “sub-prime” auto lending marketplace. The article can be found here:

http://www.nytimes.com/2016/11/30/business/dealbook/as-auto-lending-rises-so-do-delinquencies.html?_r=0

 

This article combined with a recent USA Today story regarding subprime delinquencies in auto loans paints a grim picture of what may happen with any slow down in the economy or change in expenses for the average subprime consumer.

 

http://www.usatoday.com/story/money/cars/2016/08/26/delinquencies-rise-risker-auto-loans/89389096/

Some interesting statistics from both articles:

  • 60 day delinquencies reached 4.59% in July on Subprime auto loans;
  • 90 day delinquencies reached 2% in September;
  • That is near the historical high of 2.4% from 2009 in the middle of a recession;

What remains to be seen, is whether the economy will continue to remain strong and the job market stable heading into 2017. If the job market falters or 22 million people lose access to health coverage, with the exposure to crushing medical costs, then the subprime default rate may rise over the historical high from 2009.

Bankruptcy can offer many solutions to subprime auto defaults. Chapter 13 allows for a retention of your vehicle with a lowering of the interest rate over a five (5) year repayment period in most cases. Your car may even qualify for a reduction in principal in certain circumstances. Chapter 7 allows for a surrender of the vehicle with no deficiency after the surrender – goodbye underwater car. We work with local dealers to qualify you for a new vehicle loan, either immediately after filing or after discharge.

If your family is still experiencing financial trouble even after the recovery, give our office a call. We have affordable bankruptcy programs designed to help your debt problems. We will counsel you on the potential long term credit benefits of filing bankruptcy in order to help you make wise choices.

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