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The “Do It Yourself Bailout” – Part One of Jonathan’s Interview with Kenny Golde

By Jonathan on January 30, 2010

Have you ever wondered what it takes to settle your debts for pennies on the dollar? Recently I interviewed someone who started with $250,000 of credit card debt and with tenacity and focus, has managed to eliminate more than half of this debt through negotiation. Here is part one of my conversation with author and filmmaker Kenny Golde, who discusses with me his remarkable story about how he ended up with hundreds of thousands of dollars of debt and how he came to realize that debt negotiation is a business strategy and that the guilt and emotional efforts of debt collectors are merely tactics. This first segment lasts about 8 minutes. Parts 2 will appear tomorrow on this blog, with subsequent installments appearing every day through the February 4th post.
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Link to Kenny Golde’s book “The Do It Yourself Bailout.”

Link to Kenny Golde’s web site.

Hiring Has Not Picked Up: A Look at Unemployment Claims Stats

By Jonathan on January 25, 2010

The number of newly laid-off workers seeking unemployment benefits unexpectedly rose last week, further evidence that the job market recovers at a very slow and bumpy pace. California, Texas, Florida, Pennsylvania, and even Georgia have experienced the highest recent increases in unemployment claims.

Wall Street economists had expected a small drop, but according to the Labor Department, initial claims for unemployment insurance actually rose by 36,000. An analyst from the Labor Department said that much of the increase is due to the administrative backlogs left over from the holiday season in the state agencies that process the claims.

Regardless of the ups and downs shown week to week, the economy is not consistently generating net increases in jobs. After adding only 4,000 jobs in November, which was the first increase in nearly two years, in December employers cut 85,000 jobs. Many economists say the four-week average of claims will need to fall to below 425,000 to signal that the economy is close to generating net job gains. Unfortunately, the four-week average rose for the first time since August to 448,250.

The number of people continuing to claim regular benefits dropped slightly to just under 4.6 million. However, this data does not include millions of people who have used up the regular 26 weeks of benefits customarily provided by states and are now receiving extended benefits for up to 73 additional weeks, which is paid for by the federal government. Over 5.9 million are receiving extended benefits in the week ended Jan. 2, which is an increase of more than 600,000 from the previous week.

These numbers demonstrate that even as layoffs are declining, hiring has not picked up, leaving people out of work for extended periods of time.

California has had the largest increase in claims, with 16,160. Texas, Florida, Pennsylvania and Georgia have the next largest increase. Oregon has had the biggest drop in claims, of 5,784, followed by Iowa, Kentucky, Michigan and Massachusetts.

There are positive forecasts out there as well. Because unemployment claims have been on a steady drop since last fall as companies cut fewer jobs, some economists hope that hiring will soon increase. Another report suggests that economic growth could pick up this spring.

Other economists, however, have been worrying that growth in the economy will stagnate this year as government support programs wind down and unemployment remains high.

Georgia Personal Bankruptcy Filings Continue to Increase

By Jonathan on January 22, 2010

According to a recent article regarding Georgia bankruptcy published in the Atlanta Journal Constitution, it is nothing new that Georgia has one of the highest bankruptcy rates in the nation. What is new, suggests the AJC article, is who is filing: large numbers of people who have not previously had problems with financial instability.

With unemployment exceeding 10 percent, a real estate market in shambles, and many laws in place which support creditors, Georgia has had one of the highest bankruptcy rates for years. In 2009, and even here in early 2010, the numbers of people in Georgia filing personal bankruptcy continue to increase. These increasing numbers are partially the result of the large numbers of filers who are experiencing financial instability for the first time.

Richard Thomson, a partner at the Atlanta-based bankruptcy law firm Clark & Washington, said his firm is taking on an increasing number of higher-income professionals as clients. These higher-income filers simply can’t pay for all of their assets and possessions – boats, expensive cars, etc. As a result, they are filing bankruptcy as a means to start over, and their possessions are often given up as part of the process. According to Thomson, “They’re just saying ‘Take it. It’s not worth the effort anymore. I can’t keep up with it.”

Susan Blum and I are seeing the same trends here at Ginsberg Law Offices. While our firm has regularly handled cases for formerly high earners and individuals with substantial assets, we are seeing more and more people who start our meetings by saying “I never in a million years thought I would ever end up talking to a bankruptcy lawyer….” In many cases, clients who had previously enjoyed a comfortable lifestyle wait until disaster is about to strike before calling our office, perhaps in the expectation that their situations will improve. And more and more of these clients are turning to a Chapter 7 liquidation rather than a Chapter 13 reorganization.

More Chapter 7 Cases Being Filed

According to the National Bankruptcy Research Center, over half of Georgians filing between January and November 2009 filed Chapter 7 Bankruptcy. In a Chapter 7, most debts are wiped out, but so are assets that aren’t protected by exemptions – second cars or vacation homes, for example. 47 percent filed Chapter 13 Bankruptcy, which allows consumers to hold on to a house and car but requires that they repay a portion of their debts generally over a five year period. A Chapter 13 is more or less a reorganization of debt.

These percentages are new for Georgia, which traditionally has been dominated by Chapter 13 filings, as debtors were most concerned about holding onto a house and accumulated equity. Currently, many homeowners have little equity or owe more than their houses are worth, which may be one reason for the spike in Chapter 7 filings.

According to Consumer Credit Counseling Service of Greater Atlanta, one in five consumers receiving recent pre-bankruptcy counseling said avoiding foreclosure was the primary reason for seeking bankruptcy protection. Georgia’s foreclosure process is the fastest in the nation, as it occurs without court or government supervision and takes only a week. A bankruptcy filing is the only realistic option for most Georgians seeking to delay a public auction of their homes.

I (Jonathan) have been representing individuals in Chapter 7 and Chapter 13 cases for over 20 years and I can only remember two or three times when the demand for our services was so high. The Congressional Budget Office says that the recession is over but I am not seeing any indication that this is true.

Giant Debt Collector Law Firm Mann, Bracken Out of Business

By Jonathan on January 17, 2010

A number of stories have recently appeared in bankruptcy and consumer rights blogs suggesting that the Atlanta based collection firm Mann, Bracken, LLC has gone out of business. On his Caveat Emptor blog, Minnesota bankruptcy attorney Sam Glover has written several posts about the Mann, Bracken firm including one on December 22, 2009 stating that the calls to the firm’s phone number instructs callers to communicate directly with their creditors. I called several numbers listed for Mann, Bracken but the calls were answered by a message that “all circuits are busy, try your call again later.”

Although based in Atlanta, Mann, Bracken has a national practice and it has apparently been growing by merging with other law firms. I found a web site called paymbw.com which purports to be a payment gateway for debtors to make electronic check or credit card payments on debts being handled by Mann, Bracken. This site notes that Mann, Bracken is the successor by merger to Wolpoff & Abramson L.L.P., and Eskanos & Adler P.C., two collection law firms well known to debtor’s lawyers.

The domain mbllc.com has a “coming soon” page and the registration information for that domain is private. I looked up the contact information for the partners. Douglas Mann’s shows him as an inactive lawyer affiliated with Mann, Bracken. Chris Bracken’s registration shows a gmail.com email address, a business address at Mann, Bracken’s location, but the space for the law firm information is blank. Two other partners – Bill Layng and Steve Knezo – are now affiliated with other law firms. [Read more…] about Giant Debt Collector Law Firm Mann, Bracken Out of Business

Free Tool to Calculate Your Median Income for Bankruptcy Purposes

By Jonathan on January 9, 2010

As you probably know, your eligibility for bankruptcy protection is determined in part by your household income. The Bankruptcy Code requires us to calculate your median income by looking at gross income earned by you, your spouse and any other working member of your household during the 6 months preceding the current month. We add up all the income and divide by 6 to arrive at a number. We then compare than number to a median income table provided to us by the Census Bureau and the United States Trustee’s office. This calculation is called the “median income test.”

If you are over median, then a presumption of abuse arises as to your eligibility for Chapter 7 and we must proceed to perform additional calculations (these additional calculations are called the “means test.”).

At Ginsberg Law, we use a bankruptcy preparation program called Bestcase. Bestcase has a free online median income calculator that you can use. If you are not sure how this tool works or if you have questions about the results you see, please call or email us for further explanation.

The addition of the median income and the means test to the consumer bankruptcy process has made bankruptcy a lot more complicated both for lawyers and for individuals. I know several lawyers here in the Atlanta area who used to handle bankruptcy cases, but no longer do so because of the complexity of the median income/means test process. I personally think it is absurd that bankruptcy has become so complicated that a reasonably intelligent person would have almost no chance at figuring out the calculations. If there was ever a reason to avoid non-lawyer “petition preparers” this would be it.

Click on the link to see the current median income table for Georgia.

Bankruptcy Filings Increase Among Middle Class

By Jonathan on January 4, 2010

This weekend’s AJC Business story entitled “Bankruptcies hit State Hard” confirmed what I have been seeing on a weekly basis in my Atlanta area bankruptcy practice – more people who were solidly “middle class” are finding themselves facing huge debt loads and the prospect of a Chapter 7 or Chapter 13 filing.

The newspaper story quoted a spokesperson from Consumer Credit Counseling who offered the following observation about the “typical” bankruptcy filer in the Northern District of Georgia:

a homeowner
Caucasian
annual income of $43,000
credit card debt of $39,000
mortgage and car payment totaling $1,600 per month
average credit score of 529
negative net worth of $73,000 (up from negative $57,000 in 2008)

I think that the most telling aspect of these statistics is the amount of credit card debt vs. annual income. If you are trying to service credit card debt that is equal to your annual before tax income, you will never dig out of that hole.

In my practice I often see men and women earning $80,000, $90,000, even $100,000 or more – and often their credit card debt will be double or even triple the household income. With interest rates anywhere between 14% to 28%, it is mathematically impossible to pay off credit cards without some large lump sum payments or remedial action by the credit card companies.

It would be interesting to know what percentage of bankruptcy filers in Atlanta have tapped into their 401(k) or other retirement plans (usually a big pre-bankruptcy mistake, by the way). It would also be interesting to know how long these bankruptcy filers waited between the time they first thought about bankruptcy and the time of actual filing.

If you have filed for bankruptcy or if you are thinking about filing, I would be interested to have you post a comment answering the above questions.