Why are credit scores so important, and how can you improve them after bankruptcy?

Our clients who file for bankruptcy in Queens and throughout New York want to see the future as a place of possibility, and an opportunity to create a new chapter in their lives.  Life after bankruptcy is not a complete reset, but it can be an amazing time to make changes that will get you on the right path toward fiscal responsibility. One such change is understanding the importance of your credit score and knowing how to improve it. There are steps you can take, now and in the future, to ensure a safer financial future.

Keeping a close eye on your credit score is an important habit to have, both before and after filing for bankruptcy. A recent article by Quizzle published in October  2013 shows that 65% of adults never viewed their credit score last year. The same article shows a helpful infographic that illustrates how ignoring your credit score can cost you in the long run. It explains how a lower credit score can result in a higher mortgage rate, costing you tens of thousands of dollars over time. The article also speaks to the importance of checking for errors on your credit report, a topic we talked about in a previous post. Many consumers who filed disputes were able to have their report modified, resulting in a change on their credit score.

So many people think that their credit can’t be fixed, or that filing for bankruptcy will ruin their credit, and that’s simply not the case. The key to controlling your credit is to be diligent about checking your score and take the right steps toward rebuilding it after bankruptcy.

Credit repair companies are often scams that are not worth the time or the money, but getting a copy of your consolidated credit report is a good first step. A consolidates report includes the three major credit reporting agencies in one document, which you can then check for mistakes such as accounts that are not yours or negative information that should have been removed after a certain period of time. This report also show you if you have accounts that are past due, which you should pay as quickly as possible.

Many people tend to worry that if they check their scores they will lose points and negatively affect their score. This is a common misconception. In reality, there are several types of credit inquiries, and not all of them will affect your score. Hard inquiries will remove points from your credit score. These occur when an institution pulls your credit report when determining loan approval for something like a mortgage. Soft inquiries occur when an individual checks his or her own score. So rest assured that you check your score using credit report data from vetted sources that is free and easy to understand.

There are many other ways to improve your credit after Chapter 7 or Chapter 13 bankruptcy. The score is not a some secret number that you have no control over; you can know your credit score and take steps to improve it over time. Some tips include having a mix of credit types such as a secure credit card and a loan that you know you can pay on time and in full. Pair this with a budget that includes contributing to a savings account, which will give you a financial cushion in times of need and give you even more knowledge of your spending and saving habits.

In short, the more you know the better – and this could not be truer when it comes to your credit score. To get more information and tips about improving your credit score when filing for bankruptcy, Contact the Law Offices of Bruce Feinstein, Esq. today for a Free Consultation.

Can Errors on Your Credit Score Affect Your Financial Health?

When clients come to our office they are looking for debt relief. This may mean stopping a foreclosure, removing a lien, or going through a Chapter 7 or Chapter 11 bankruptcy. Our clients often want to improve their credit, but there may be more factors affecting their credit scores than missed loan payments.

In a recent study by the FTC (Federal Trade Commission) from December 2012, the findings state that one in four credit reports have errors. So along with the other best practices we share our clients to ensure fiscal health and responsibility, we also support keeping a close watch on the information used by credit agencies to make their scores about you.

Why keep a close watch on these agencies? Because the validity of credit scores has recently come under fire. A woman in Oregon was awarded over $18 million in punitive damages this year from Equifax, one of the three U.S. credit reporting agencies. The case, number 3:11-cv-01231 in the District Court for the District of Oregon, Portland Division, once again put the spotlight on credit agencies and their ability to cause serious harm with unintended errors and misinformation. The FTC study further supports this claim; one in four American consumers have errors on their credit reports, while around one out of 20 have mistakes serious enough to negatively affect their ability to get fair loans or insurance. This can cause permanent, perhaps severe damage to a person’s finances.

The implications of these errors are serious; people need to know to check not only their credit scores, but also the facts and figures used to create them. Mistakes on these reports are common, and unfortunately they are not so simple to fix. A New York Times article published August 2, 2013 explains that consumer reporting agencies (called CRAs) handle credit report disputes using automation and not on an individual basis. But errors are often a case of mistaken identity; for example, two people with the same name can end up having mixed files that affect their scores. But automation can exacerbate these errors instead of fix them, causing more stress and hassle to consumers.

One options is to contact the Consumer Financial Protection Bureau (CFPB) with issues involving credit report errors. The CFPB oversees the nation’s CRAs and can provide new guidelines and rules that they must follow in order to protect the safety of consumers. Reporting issues to the CFPB increases the voice of consumers and the collective power they can have when it comes to governing these large agencies.

Credit scores are just one part of the bankruptcy process in Queens, and our team believes that consumers should keep their fingers on the pulse of their three major scores just like they would other parts of their financial profile. Consider your credit score to be just another number to stay on top of, like your blood pressure numbers or your income tax bracket.

What Does Detroit’s Bankruptcy Filing Mean for City Workers and Residents?

When it comes to municipal bankruptcy, our office are asked to answer questions about how it can impact communities and public workers. On Wednesday, a federal judge permitted the city of Detroit’s bankruptcy case to go forward after it was challenged by union and pension fund lawyers –  so the challenges facing the city have been front and center on the headlines and people’s minds.

The best way to address this issue is to review the most recent  updates in the case. Federal Judge Steven Rhodes handed down his decision to halt litigation against Detroit’s recent bankruptcy filing, which is the largest municipal bankruptcy filing in U.S. history. So in the case of this crumbling city and Kevyn Orr, its appointed emergency manager, the federal bankruptcy court has jurisdiction over the case and its findings.

The issue over the bankruptcy filing began when a Circuit Court judge ruled that it was in violation of Michigan’s state constitution and the rights of public employee pensions, which could be on the chopping block. Part of Orr’s bankruptcy plan, which has the governor’s blessings,  is likely to reduce pensions in order to reduce the city’s staggering $18 billion of debt. These actions could affect working and retired city workers such as police, firefighters, and sanitation workers. / An article in USA Today this week quoted Edward McNeil with the American Federation of State, County, and Municipal Employees, who said, “We are going to fight this all the way…we don’t believe the city should even be in bankruptcy court.”

McNeil and his proponents believe that that Orr and the city did not negotiate deals on the city’s debts that could have prevented the bankruptcy filing from occurring in the first place. They plan to argue that Detroit is not eligible to file for bankruptcy, even now that the case is going forward.

But Orr and his team argue that the city is too financially devastated and has no choice but to go through Chapter 9 bankruptcy. They also want to take advantage of the  automatic stay , a benefit that goes into effect when a bankruptcy petition is filed. Judge Rhodes sounded determined to see this case through, saying, “My orders enhance the likelihood of Chapter 9 reorganization, speeds the bankruptcy case and cuts costs to taxpayers.”

This does not mean, however, that Detroit’s bankruptcy is secure and sure to happen. The judge’s actions do not determine whether the filing was in violation of the state’s Constitution. Nor does it state whether pensions should be protected under the constitution or slashed.

All these important details will be addressed in the upcoming weeks and months as hearings continue. We plan to keep a close watch on the developments since they deal with issues of unions, state pension plans,  bondholder responsibility, and the power – or lack thereof – of a state’s Constitution in federal court proceedings. These could all be affected, and they should have a lasting impression on future municipalities and cities that decide to file for bankruptcy, and how they deal with their finances. What if New York City were to file for bankruptcy? What would happen to its workers’ pensions? We need to watch how this unfolds in the event that something like it occurs in our home cities.

Cities, businesses, and residents all have unique questions when filing for bankruptcy in Queens. To get the information and answers you need, Contact the Law Offices of Bruce Feinstein, Esq. today for a Free Consultation.

Why is it so Hard to discharge Student Loan Debt in Bankruptcy?

There has been much debate over the issue of student loans in America in the past few months, and lawmakers and legal professionals are weighing in on the issue. The National Association of Consumer Bankruptcy Attorneys (NACBA) has several strong articles that support making student loans dischargeable in a bankruptcy. I am in agreement with NACBA –   student loans should be dischargeable in order to provide much needed relief for recent graduates, their families, and their communities. 

When it comes to student loans,  it is very difficult to have them erased in a bankruptcy. Individuals need to prove to a bankruptcy court that paying off the loans and interest would create “undue hardship,” or unsustainable conditions. Achieving this is not easy; even with skilled legal action it is not a guarantee.

Putting such strict limitations on student loans is only adding to the already staggering amount of loan debt in the U.S. that cannot be paid. The cost of education is already enormous, and the cost of limiting students’ ability to discharge this debt is creating an even bigger financial issue for our country as a whole.

Student loan debt is rising at an disturbing rate. In November  2012, the Federal Reserve Bank of New York calculated outstanding student loan debt at $956 billion, nearly one trillion dollars. The percentage of Americans who are delinquent in their student loan payments is also higher than any other type of consumer loan.

This staggering amount keeps graduates from investing back in their communities – they cannot buy homes or cars, start businesses, or save money to support a new family.

And the current political situation is only adding to the stress of this  situation. It’s not just graduates who are worried, but also new students who are faced with uncertainty regarding student loan interest rates. On July 1, 2013, Stafford subsidized loan rates doubled from 3.4 percent to 6.8 percent (Stafford is one of the most used loans in the country). A Senate deal to revoke this increase in favor of linking the interest rate to market fluctuation is still awaiting approval and faces opposition from both Democrats and Republicans.

While Congress struggles to resolve this problem by August, the long term issue of student loan debt still needs to be addressed and resolved. Allowing private student loan debt to be discharged in a bankruptcy, much like other types of debt like credit card debt, would provide much needed relief for people drowning under the high cost of loan payments. I believe that overhauling these policies will help families and graduates get a fresh start.

Many people have questions about student loan debt and whether or not they should try to discharge it when filing for bankruptcy. For more information, Contact the Law Offices of Bruce Feinstein, Esq. today for a Free Consultation.

What does the Repeal of DOMA mean for New Yorkers?

In June the Supreme Court reached a landmark decision to repeal a portion of the Defense of Marriage Act (DOMA). This news affects married same sex couples and their approach to financial endeavors such as filing for bankruptcy.

DOMA is a federal law, created in 1996, prohibited the government from recognizing same sex marriages, even if they were performed in states that allowed gay marriage. DOMA had serious effects on same sex couples’ personal and financial lives, and now that part of the Act has been repealed, they are able to use hundreds of federal benefits to which legally married couples in America are entitled, including pensions and social security benefits.

Another benefit is a married couple’s right to file jointly for a bankruptcy petition. While this Supreme Court ruling does not give same sex marriage complete constitutional recognition, it does have important implications for these couples nationwide. It is important to understand the effect this ruling has on gay couples who are filing for bankruptcy in New York and elsewhere.

Same sex marriage in the U.S. is a hot button issue, but it’s important to set the emotional factors aside and look at the legal implications of the Supreme Court’s decision. Section 3 of DOMA defined marriage as “a legal union between one man and one woman as husband and wife” and a spouse as “a person of the opposite sex who is a husband or a wife.” So for gay couples who were married in New York, a state that does legally recognize gay marriage, their union was not actually seen as a “marriage” under federal law.

Now these same couples will soon receive the same rights and benefits awarded heterosexual couples. This includes filing jointly for bankruptcy. Filing jointly means that a couple can file together for a bankruptcy petition in lieu of creating two separate petitions and two separate cases, which can save both time and money. Joint bankruptcy filings cover the debts married couples have together, and it doubles their bankruptcy exemptions, which include property, pensions, and insurance. It also gives both spouses the benefits of an automatic stay once they file. This protects them from stressful creditor calls, frozen bank accounts, and foreclosure.

Married couples can now reap the legal benefits of a joint bankruptcy filing regardless of sexual orientation. And this recent ruling clears up confusion or fear of opposition for gay couples who may have gotten married in one state but filed bankruptcy in another state that did not recognize that marriage. This decision will provide clarity and clear the red tape for same sex couples filing for bankruptcy in New York and elsewhere.

There are many factors to consider if you are thinking about filing jointly for Chapter 7 or Chapter 13 bankruptcy. Looking at the benefits and drawbacks will help determine whether it is the best fiscal decision for you and your spouse. Contact the Law Offices of Bruce Feinstein, Esq. today for a Free Consultation.

In a historic bankruptcy case, Alabama’s financially distressed Jefferson County says it has finally reached an agreement to refinance the majority of its debt.

The county will save hundreds of millions by refinancing and set it up to break free from bankruptcy in months to come.  Before the county can rid itself of bankruptcy, it must overcome several obstacles and be looked over by a federal bankruptcy judge.  This is scheduled to commence this Wednesday.

According to those involved in the negotiations, the deal includes around $2.4 billion dollars of Jefferson County’s total $3.078 billion dollar sewer debt, which was incurred to help pay for essential repairs necessary to comply with new federal clean water standards.

During the financial debacle of 2008, the accumulated sewer debt interest went up dramatically. The county experienced great difficulty in repaying their debts when the monthly repayment increments accelerated.  This left the county not able to pay and the repairs were not completed.

When the county declared bankruptcy, there was also other debt totaling $4.2 billion dollars, which made this the largest municipal bankruptcy in the history of the United States.

Large counties with tons of debt are usually not known to be involved in a governmental bankruptcy.  The mostly involve small districts and towns. Public financial officials have been studying Jefferson county to see what type of legal agreement with be reached. Chapter 9 bankruptcy rules could hinder the municipal bond market, which will leave some concerned if manifested.

Residents have been worried that they would pay for the county’s state of bankruptcy leaving them with the burden of high taxes and devaluing of their property.

JP Morgan Chase is one of the creditors that holds the $1.22 billion dollars in sewer debt,  which will be covered by the refinancing agreement. Other creditors include, three bond insurers and seven hedge funds.  $1.84 billion dollars out of the $2.4 billion dollar will be received by these creditors.  It is said that JPMorgan will take most of the burden to help boost a speedy recovery for sewer creditors.

JP Morgan will be covering about 70% of the debt which is about $842 million dollars.  Right before the county declared bankruptcy in 2011, Jefferson county, without hesitation, completely denied an agreement of about $750 million dollars from JPMorgan.

JPMorgan, without argument, will make a big efforts on this bankruptcy agreement, because  of the banks failure in refinancing debt in 2002 and 2003.

Currently in state court, the county lawsuit that is against JPMorgan, will soon come to a settlement. Back in 2009, The agreement was to pay all debts the county has owed on interest rate swaps.

The Jefferson County residents are still not satisfied because the county officials had to serve time in prison and the bank walked away untouched. Thomas B. Bennett who is a judge of federal bankruptcy, will be overseeing the lawsuit on Wednesday.  This could lead to the debts not being repaid, in that it was in direct violation of the Constitution.

Since 1997, the sewer systems have gone under little or no repairs.  The Bank of New York Mellon requested that Judge Bennett look over the Jefferson County sewer system budget and finances.

The residents of Jefferson County could see a rise in fees for the repairs of the sewer systems of as much as 7.41 % each year during the first few years of refinancing.  As much as 3.49% is expected to rise each year of the first few years.

The agreement reached is said to be much better than what would have been expected if Jefferson County had not filed for Bankruptcy. The county commission approved this with a 4 to 1 vote.

The public creditiors of the county on sewer debts will be presented either 65 cents/dollar with the ability to pursue their own claims, against bond insurers or the county or 80 cents/dollar if the manage to rid of their other claims, if the refinancing  goes forward.

[Source: NY Times]

If you have questions about bankruptcy filings and want to find out the best solution for your current financial situation, call the Law Offices of Bruce Feinstein, Esq. today for a Free Consultation.

With a single-charge range of only 90-125 miles, it may not come as a complete surprise that the green auto-maker, Coda Holdings, only sold 100 of it’s sedans and filed for Chapter 11 bankruptcy protection.

Coda’s plan is to re-focus their business on energy storage, which has far fewer research and development costs. Coda will be able to use the same energy storage mechanisms they put in their failed sedans into systems for buildings and utilities.

Many consumers have been slow to adopt new, all-electric vehicles. Coda’s $37k car failed because of it’s lackluster design and low range. The company also suffered because of a recall due to faulty airbags.

Along with Fisker Automotive and Tesla Motors, Coda was seen as an up-and-coming star in electric-vehicle market just three years ago. Coda’s investors backed them with $300 million dollars from the likes of Aeris Capital, former Treasury Secretary Henry Paulson, and others.

As interest in the start-up dwindled, Coda raised just $22 million dollars of funding last year. Their goal was $150 million dollars.

As news of the Coda bankruptcy spread, Tesla’s stock has soared. However, their competitor Fisker is rumored to be considering a bankruptcy filing as well. Fisker’s lithium-ion battery supplier A123 Systems filed for bankruptcy in late 2012.

[Source: NY Times]

If you have questions about Chapter 11 bankruptcy filings and want to find out the best solution for your current financial situation, call the Law Offices of Bruce Feinstein, Esq. today for a Free Consultation.

A federal judge was asked to ban Joe Francis, the founder of the soft-core Girls Gone Wild franchise, from the company offices. The trustee running the company alleges he is a violent man who has threatened company employees.

According to papers filed by the bankruptcy trustee R. Todd Neilson, Francis threatened GGW Brands LLC employees with “violent acts”. Girls Gone Wild filed bankruptcy after a lawsuit involving Wynn Las Vegas LLC and others last February.

In the court papers, Neilson said that Joe Francis claims he doesn’t have ownership or control of Girls Gone Wild despite having an office at the company’s Los Angeles HQ. In April 23rd’s complaint filed in Los Angeles U.S. Bankruptcy Court, Neilson also alleges that Francis is trying to maintain control of the company despite a court order that appointed a trustee.

According to the filing, Francis “made violent threats to the debtors’ employees and attempted to fire them based on his belief that they were not being sufficiently obsequious to him and were not obeying his commands” just days after the trustee’s appointment.

In their Chapter 11 bankruptcy filing Girls Gone Wild listed debts totally $16.3 million and assets of only $50,000. The lion’s share of the debt comes from court judgments against Joe Francis.

Francis has not yet responded to requests for comment on the Neilson’s allegations.

In re: GGW Brands, LLC 13-15130, U.S. Bankruptcy Court, Central District of California (Los Angeles)

[Source: Bloomberg]

If you have questions about Chapter 11 bankruptcy filings and want to find out the best solution for your current financial situation, call the Law Offices of Bruce Feinstein, Esq. today for a Free Consultation.

Can you discharge back taxes in bankruptcy?

Many Americans are very aware of April 15^th – the day income tax returns are due to the federal government. This day has come and gone, so why are we still talking about taxes? Because many people are still worrying about back taxes owed to the IRS that they cannot pay.

For those left with questions about their unpaid taxes and how to handle them, you are not alone. An estimated 17% of taxes go unpaid each year in the United States. Our office works with people in similar situations to provide answers about this topic, and to help explain taxes’ role in the bankruptcy process.

There are many reasons people find themselves unable to pay taxes. Sometimes they did not file a tax return, or they didn’t have enough money on hand to pay federal and state taxes. When these debts go unpaid, the IRS take measures to get their money, similar to a creditor collecting debts. But there are several options for those facing the dilemma of unpaid taxes.

One solution is to create a payment plan with the IRS. Your taxes don’t have to be paid in one lump sum – it’s possible to set up payment in monthly installments, just as you would pay off something like credit card debt. But, like a credit card payment, tax payments are subject to extra fees, and they often take more than several months to pay off. Another resolution is an offer in compromise, or an IOC. This process will forgive some of your tax debt in order to make it possible for you to repay the rest of your taxes owed. The government is willing to take a loss in order to get some of their money back. This option is similar to a Chapter 13 personal bankruptcy. However, the IOC application and negotiation process is time consuming, and interest does accrue on unpaid taxes during this period. It is important to keep these factors in mind before filing for an offer in compromise or creating a payment plan.

Another viable option for getting rid of tax debt is to file for Chapter 7 or Chapter 13 bankruptcy. Various types of taxes are eligible for discharge under the bankruptcy code. A Chapter 13 bankruptcy allows n individual to set up a payment plan to pay off debt over time. For those who qualify for Chapter 7 bankruptcy, they can sell off assets and put the profits towards paying off tax debt. There are also certain taxes that are eligible for discharge depending on the tax return and the tax year in question. For example, you can discharge income tax debt if it is at least three years old, and if you filed a tax return for the taxes in question more than two years before filing for bankruptcy. As you can see, the rules are very specific, so it’s best to work with a bankruptcy attorney to make sure you go through the proper steps to get the most taxes forgiven and acheive the best outcome.

All the rules and guidelines may sound intimidating, but the reality is that there are options available to people who find themselves swamped with tax debt. So don’t ignore it or sweep it under the rug, take action to see how you can free yourself from back taxes.

 If you have questions about tax debt and want to find out the best solution for your current financial situation, call the Law Offices of Bruce Feinstein, Esq. today for a Free Consultation.

Can a City go Through Bankruptcy?

 Speaking from behind a podium with a sign saying “Detroit Can’t Wait,” veteran lawyer Kevyn Orr spoke to reporters and citizens about his plan to bring the financially ailing city from the brink of bankruptcy. Orr is currently acting as an emergency manager of Michigan’s former capital, operating with many of the same powers as a bankruptcy judge in lieu of putting the city through an official bankruptcy process.

In his new role, Orr has the ability to reject contracts with unions, sell city assets, and enforce cutbacks to services that are too expensive for the city. This level of authority places Orr above Detroit’s elected officials and the mayor. However he cannot make changes to the city’s pension funds, which are incredibly underfunded. And while bankruptcy is not Orr’s goal, it’s not off limits either. If the city does go into bankruptcy, it would make it the largest municipal bankruptcy in the country. When asked about the chances of this happening, Orr responded, “Everything is on the table.”

Kevin Orr is a partner in the Washington-based firm Jones Day. He is known for his work restructuring Chrysler in 2009 after it filed for Chapter 11 bankruptcy protection. He will be leaving his job in order to avoid any potential conflicts of interest while trying to balance Detroit’s finances. He has 18 months to accomplish this under the law.

“It’s the Olympics of restructuring,” he said, and his analogy is not far from the truth. Orr already faces some backlash from Detroit’s city council, who opposed the appointment, not to mention angry city residents and unions who are angry about a state takeover. But he is backed by Detroit’s mayor, David Bing; both men are Democrats and Bing stood by Orr’s side during his appointment speech. “We must start to work together,” said Bing.  “I’m happy now I have teammates.”

Detroit is also home to the nation’s auto industry, which is making a comeback after several companies filed for bankruptcy and went through a controversial federal bailout. Big car names like GM and Ford are making money, repaying lenders, and offering a glimmer of hope to the country’s poorest city.

So how deep in the hole is Detroit? In February, a report stated that the city is veering toward a debt pit to the tune of $100 million by the end of June 2013. And its struggling pension faces a $14 billion liability. The city has been able to operate only by borrowing money and issuing debt. Even a remarkably successful auto industry could not dig Detroit out of its massive fiscal hole; Orr has a long road ahead.

Critics to this plan say it demotes elected officials and takes power away from the city’s voters. Supporters believe this is the only way to save the city from spiraling out of control. So now all eyes are on Kevyn Orr, Mayor Bing, and Orr’s ability negotiate contracts and services in a way that will benefit “Motor City”.

Cities can indeed go into bankruptcy protection, and so can businesses and individuals. If you have questions about Chapter 7, Chapter 11 or Chapter 13 bankruptcy  and how it can help you, call the Law Offices of Bruce Feinstein, Esq. today for a Free Consultation.