Articles Posted in Chapter 7

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As the nation enters Phase 2 of the Coronavirus Lockdown, millions of Americans are still behind on their monthly bills. Many lenders have implemented programs to help people manage debt payments during this economic uncertainty.  However, while people with student loans, mortgages and automobile loans were offered helpful alternatives to survive the Corona-induced downturn, people with credit card debts often were not. Debtors with medical debt have not fared well either.

A recent article in the California Law Review Online declared that, “The coronavirus pandemic is set to metastasize into a debt collection pandemic. This is because while evictions, foreclosures and student loan payments have been stayed by various government  orders and federal regulations, there is no blanket moratorium or order stopping debt collection lawsuits. Many debt collection law firms have ramped up credit card collections lawsuits since they have not been able to bring or finish foreclosure lawsuits. Many credit card collection lawsuits end up with the consumer getting a default judgment entered against them, since they believe there is nothing that they can do to stop these lawsuits. Debt collection law firms nationwide kept filing new cases during the shutdown, consumers be damned. For example, in Maryland, two major debt collectors alone filed over 2,000 suits in April.  These law firms must keep their gravy train rolling, even if many Americans have lost their jobs or part of their income, through no fault of their own.

After a homeowner gets a judgment against him or her, the law firm will usually attempt to get paid–voluntarily at first, and then by using court process to take the homeowner’s income and assets. There are several ways in Florida that a judgment creditor can collect on a judgment.

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With COVID-19 destroying the economy, scores of retailers have filed bankruptcy in order to get relief from their creditors. Last last year, Congress  enacted a new subchapter of the bankruptcy code to help smaller businesses get relief at a lower cost and more quickly. Corporations of all sizes have used bankruptcy as a survival tool for generations. They did not give it a second thought. There is not stigma when a company does this in order to survive. (Local grocer Winn-Dixie, and many major airlines,  are still around because of their bankruptcy filings.)

However, for individuals, the “stigma” of having gone bankrupt has stuck around a little longer. This seems to be changing now that people realize that bankruptcy is a tool to survive economic downturns.  I just got off the phone with a potential client who called to say that a credit union had sued her. She called asking what she could do about it. She started her call by saying, “I do not want to file bankruptcy.” I asked her why not. She said that she would lose all of her property, ruin her credit, ruin her reputation and lose her job if she filed bankruptcy. I spent 45 minutes with her on the phone. She retained me to handled her Chapter 7 bankruptcy case. I dispelled the myths of bankruptcy and I made her laugh–a lot–which she said took away some of her stress from the collection calls, letters and lawsuit.

MYTH NO. 1:  I WILL LOSE MY PROPERTY IF I GO BANKRUPT

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With the effects of Coronavirus still impacting the economy, many people are facing loss of income. This reduction in  income makes it harder for working people to pay their bills.  Things might not get better. One economist estimates 42 percent of recent layoffs will result in permanent job loss.

Whether their  lay offs are permanent or temporary,  people are looking for ways to save money on goods and services that they need. With the advent of the Internet, people have become used to finding information and deals on items they need. The Internet Age has made  people used to getting things fast and cheap, or even free. It has also made people believe in do-it-yourself. Just watch a video and you can do anything yourself.  The recent lockdowns have had people searching for Youtube videos on how to cut their own hair, since most salons and barber shops have been closed.

Some people who are facing overwhelming debt also look for do-it-yourself solutions to deal with their debt. They often file for bankruptcy without an attorney. There are signs in Jacksonville along I-95 exits saying “Bankruptcy $150.” These signs are placed along the interstate by non-lawyers or “petition preparers” who will take $150 from you to type the documents necessary to file a bankruptcy case. The thought is that bankruptcy is just filing out some forms and filing them with a court.  (This author once had a boss, who is a lawyer. This lawyer  declared, “Bankruptcy isn’t rocket science; it is just filling out a bunch of forms about your finances.”  When this person filed for bankruptcy a few years later, she hired a competent lawyer.)

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Because of the historic economic impact  of COVID-19, economists are predicting a “tsunami” of personal bankruptcy filings.  Well-known businesses like J. Crew, Beall’s, Goody’s, Gold’s Gym and Neiman Marcus recently filed for bankruptcy protection. Most major airlines could face bankruptcy without a government bailout.

Americans who have become used to using credit cards as a stop-gap measure to survive pay-cuts might not be able to rely  on this method since nearly 50 million Americans just had their credit card limits cut.

For centuries, companies have used bankruptcy as a tool to survive, reorganize or to shut-down. Several airlines have filed bankruptcy over the past three decades, primarily to break contracts and modify pensions.

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Nearly two months after Coronavirus exploded on the scene, some states are starting to relax stay-at-home orders, and people are slowly returning to work. It will take a lon time for the economy to recover, and  some White House advisers  are still predicting a 20% unemployment rate.

People are wondering if  the jobs they held prior to the COVID-19 crisis will still be there after things settle down. Economists argue about how many jobs will come back after the pandemic ends.

Prior to the outbreak of COVID-19, the financial press was praising the benefits of the “gig” economy. Uber drivers, Instacart shoppers and other freelancers could set their own hours and get paid in cash daily. Now, gig workers are among those hardest hit by the Coronavirus pandemic. 

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Last  Friday approximately 140 million American households started  receiving Economic Impact Payments, or Stimulus “checks.” Most Americans will be receiving these payments, of at least $1,200 or more, this week. (The amount of your payment depends on your gross income and whether you have dependents.)  The Treasury Department will be directly depositing the funds into the same bank accounts where it directly deposited your 2019 tax refund. (The Stimulus payments are also being sent to people who don’t usually  file or pay federal income taxes, for example, most people who receive monthly payments from the Social Security Administration.) You can track the status of your payment at this IRS site starting today.

The reason for these payments is that the federal government wants to try to “stimulate” the economy, which COVID-1, or the coronavirus, has wrecked.  Millions of Americans have lost their jobs or seen their pay reduced since March. It has been estimated that nearly 1 out of 5 Americans has lost a job or wages because of the virus.  When consumers don’t have money to spend, the ripple effect causes most businesses to struggle. People are not buying goods and services from brick and mortar businesses, which in turn have to lay off employees who can no longer buy goods and services from other merchants. Goldman analysts see the U.S. economy contracting 24% in second quarter, a rate nearly five times as large as bank’s previous forecast

While the government wants us to spend this money to keep the wheels of commerce rolling, some banks want to seize this money to recover money owed to them by their customers. When Congress passed the CARES Act authorizing these payments, it did not characterize the funds as federal benefits, but as tax credits. This means that private debt collectors may take the money once they are in a bank account.

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Every January 1st, people make resolutions about changes they want to see in the new year; things like hitting the gym, saving money, finishing college or just vowing to be a better person make many lists.  At the beginning of this new decade, no one had any idea that within weeks, something that we cannot even see would change the world—and change it drastically. Just 3 months into 2020, COVID-19, or the Coronavirus,   has already infected over one million people and killed over 50,000, according to Johns Hopkins University.

Americans are now bracing for the worst week since COVID-19 came on the scene. President Trump warned that the upcoming two-week period will be “painful.” However, Dr. Fauci, a key member of President Donald Trump’s Coronavirus Task Force, added: “We should hope that within a week, maybe a little bit more, we’ll start to see a flattening out of the curve and coming down.”

People who still have jobs are worried about how long the virus will stick around and keep businesses shuttered. Tourism is dead in the Sunshine state and the governor finally issued a stay-at-home order. When people are at home, they do not support the local economy.  This lessened demand for products and services has a ripple effect, which impacts all sectors of the economy. People are not only learning how interdependent the economy is, but also that some jobs are more “essential” than others.

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Americans can’t go online, turn on the TV or go shopping without being bombarded with news about coronavirus. Our Facebook feeds are rife with posts about the virus and how much impact it will have on our every day lives.  Just a few months ago, we were gearing up for March Madness, spring break at Disneyworld, PGA Golf Tournaments and Lucero at the  Ryman Auditorium.    Now those events have been postponed or canceled, and even Orlando theme parks are closed for the rest of the month.  Just today, IRS  postponed the deadline on which income taxes are due to July 15.

Our lives have changed in a flash.  The Associated Press warns that Americans must brace for new life of no school and growing dread.  We now spend more time in line at Walmart buying toilet paper than we do lining up for Black Friday sales. Parents worry about their jobs while they wonder who’ll watch their children while they are at work since schools have extended spring break or shut down for weeks.

The world has changed.  We are told to practice “social distancing” and not come within so many feet of our fellow human beings. People are wearing medical masks and gloves when they go out. Some people walk around with Lysol bottles.

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With tax season upon us, many Americans are looking forward to getting big tax refunds. Many of us use these refunds to  replace aging appliances, catch up on car payments or put into a vacation fund for when warmer weather finally comes back.   However, many people are also worried about how to deal with debt that they racked up during the holiday season. In order to get relief from this debt, and with holiday ornaments finally put away, many consumers contemplate filing bankruptcy after the New Year begins.  Filing bankruptcy gives consumers a fresh start in their financial life. However, there is a trade-off involved: while filing bankruptcy will wipe out most of your debt, you might have to give up or buy back property that is not “exempt.” Filing for bankruptcy could require you to pay for an asset (usually a car) for which you already paid.

The filing of a bankruptcy case creates an estate similar an estate that is created after someone dies. This estate is made up of one’s assets that are not exempt under the law. The United States government appoints a trustee in a Chapter 7 bankruptcy case to liquidate (or sell) any non-exempt assets and use the proceeds to pay unsecured creditors like credit cards. In order to be able to protect property and keep the trustee from taking from you when you file bankruptcy, the Debtor must claim the property is exempt under Florida or federal law. (Florida has “opted-out” of federal Bankruptcy exemptions, so Debtors may only use exemptions under Florida law or non-bankruptcy federal laws.)

The only part of tax refunds that is specifically exempt under Florida law is the part of the refund from the Earned Income Tax Credit. (Although Judge Jennemann in Orlando recently held that Child Tax Credit is exempt in Chapter 7 cases.)  The rest of your tax refund falls under the personal property exemptions under Florida law, which are among the stingiest in the nation. There are no specific exemptions under  Florida law to project the Child Tax Credit; the American Opportunity Tax Credit (which helps families pay for postsecondary exaction); the Lifetime Learning Credit (which helps people who go to college later in life or have to change jobs due to down-sizing or loss of jobs because of technology or free trade agreements); or the Child and Dependent Care Credit (which helps pay daycare costs for working parents). Many of these tax refunds are refundable and therefore give taxpayers a much larger refund than they otherwise would have received. If these refunds cannot be exempt under the law, you could lose them to the Chapter 7 trustee and not be able to spend them  the way in which you intended.

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Bankruptcy Filings for Older Floridians Increase


Florida has seen bankruptcy filings for older Floridians increase in recent years. A bankruptcy filing is the term used when an individual or company cannot repay their debts and asks a Court for relief. A Jacksonville Bankruptcy Petition filed with the Court begins the bankruptcy filing. Older Floridians refer to individuals who are 65 or older and primarily live in Florida.

Bankruptcy filings for older Floridians have tripled over the last 25 years. This is a trend seen across the entire U.S. In 1991, only 1.2 out of every 1,000 Americans between ages 65 and 74 filed bankruptcy. By 2016, that increased to 3.6 out of every 1,000 Americans. Interestingly, while bankruptcy filings have increased for older Americans, bankruptcy filings have decreased among young Americans.

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