OC Chapter 7 Bankruptcy filings, November 2009

December 9, 2009 · Posted by admin

As we get closer to the end of this year, Chapter 7 bankruptcy filings for the month of November 2009 have not decreased.

Research done by a leading bankruptcy law firm concluded that Anaheim, Costa Mesa, Fullerton, Garden Grove, Huntington Beach, Irvine, Mission Viejo,  Newport Beach, Orange, and Santa Ana are reported as the cities with the most cases filed.

Chapter 7 bankruptcy attorneys have also seen a high number of bankruptcies filed in Westminster, Tustin, Lake Forest, Buena Park and Aliso Viejo.

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One Reason Why Debt Reduction Plans Aren’t As Good As They Sound

June 13, 2009 · Posted by Alex

Like most people, when I drive to work in Irvine every morning I surf the various local radio stations. I’ve noticed a lot more advertisers for debt reduction plans, sometimes called debt elimination or debt negotiation, lately. The fact that they advertise on the radio tells me that the current financial stress is impacting everyone – whether living in Rancho Santa Margarita, Santa Ana or Newport Beach.

But debt reduction plans are not always as helpful as they might sound. Why? Debt forgiveness doesn’t eliminate as much debt as you might think. The reason: Borrowers must often pay high fees and pay income tax on the forgiveness of debt.

You see, debt forgiveness is usually considered to be a taxable event, because a taxpayer is deemed to have gained something (income) by not having to pay back the debt. So, our U.S. and California tax laws impose a tax on forgiveness of debt “income.”

The taxes are often waived if the forgiveness of debt occurs while the borrower is insolvent or bankrupt (filing a bankruptcy is not required), so it doesn’t always impact every debtor, but here’s an example of how it might affect a typical borrower:

Net Benefit of Debt Reduction Plan

$100,000 Total Debt
$40,000 Reduced Debt (expected payoff)
$15,000 Debt Reduction Fees (attorney/debt consultant fees)
$16,200 Forgiveness of Indebtedness Tax (see below)
$71,200 Total Payments After Debt Reduction

$28,800 Net Benefit After Debt Reduction

Forgiveness of Indebtedness Tax Calculation

$45,000 Taxable Forgiveness of Indebtedness (forgiveness of debt less fees)
$12,600 Federal Tax for Forgiveness of Indebtedness (assumes 28% tax bracket)
$3,600 State Tax for Forgiveness of Indebtedness (assumes CA 8% tax bracket)

In this greatly simplified example, a borrower paying a 15% fee on a $100,000 debt reduction plan and who must pay typical income tax rates on the anticipated 60% forgiveness of indebtedness “income” would only benefit by approximately $28,800. Although it is a benefit, it’s far less than the “60%” reduction amount that most people expect when they hear a radio add promising a reduction of “up to 60%.”

Something to think about before deciding to sign up for a debt reduction plan…

For more info on debt elimination, debt negotiation, or debt consolidation services, or to find out about how these services compare to bankruptcy, visit Curtis Law Group

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New Audit Report Designed for Bankruptcy Judges & Trustees

March 20, 2009 · Posted by Alex

It seems that allowing bankruptcy judges to modify mortgages is leading to entrepreneurial ventures by firms seeing the new change as an opportunity.

A California company has designed a new audit report to help bankruptcy judges and trustees.

From Yahoo news:

“A specialist in providing forensic loan audits for attorneys and financial institutions has developed a new product designed for bankruptcy attorneys, judges and trustees, who will soon be operating under a law allowing judges to restructure residential mortgages in bankruptcy proceedings.

Industry analysts predict that the pending legislation, which has passed the House and is expected to win Senate approval, will produce a surge in bankruptcy filings, as financially-pressed borrowers seek bankruptcy protection in an effort to avoid foreclosure…

Audit reports can consist of approximately 100+ pages of information. In order to expedite the review process, a concise, two-page summary of the audit will highlight all relevant information about the transaction and the parties involved in it.”

For More Information, click here

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When Bankruptcy Makes Sense

January 5, 2009 · Posted by Alex

From Newsweek online:

“In January, we’re supposed to sit down and organize our personal finances. This year I’ll risk my good-girl reputation with a subversive idea: go bankrupt in 2009. If you’re reaching the end of your rope, don’t try to hold on. Save what you can.

It’s painful and humiliating even to consider bankruptcy, let alone join that crowd in the courthouse corridor, waiting for your name to be called. Normally I’d say suck it up, cut spending and repay your consumer debt. But that’s not always possible, especially with an economic tsunami rolling over your home, job and health insurance.

Most families, honorable to the end, struggle longer than they should, says Katie Porter a law professor at the University of Iowa. By the time they give in, they’ve lost assets they could have used to start over again. That defeats the point of bankruptcy—to stop the self-blame and hopelessness that goes with bad luck and bad bills, and give yourself a second chance.

The right time to go bankrupt is when you’re financially stuck but still have assets to protect. You can use Chapter 7, the most popular type, only once in eight years, so draw upa ‘no kidding’ plan for living on your income when you’re finally clear. ‘If you’re out of work, try not to go bankrupt until you have a new job and can see what’s ahead of you,’ says Harvard Law School professor Elizabeth Warren.

It’s a mistake to tap your retirement accounts to make minimum payments on monstrous bills. IRAs and 401(k)s are largely protected in bankruptcy, as is most of your child’s 529 college-savings account. This money is your future. Leave it alone and use credit cards for your necessities. Card issuers know that some of their customers will fail. That’s why they charge elephant fees.

Your health is your future, too. You’re doing your family no favors by forgoing medical treatment because you can’t pay. Bankruptcy eliminates medical as well as consumer debt…”

The article goes on to cite a California bankruptcy attorney, stating that “you can file for Chapter 7 bankruptcy, wipe out your consumer debts and still keep your home, provided that your mortgage payments are up to date.” For the above reasons, along with many other related reasons, Orange County residents should be aware of the advantage of filing for bankruptcy for those struggling with their finances. This is especially true for those who wish to keep their homes or other assets, as the article points out. Orange County is especially well suited to receive this advice, as residents from Irvine to Santa Ana to Laguna Woods find themselves with assets to protect but too many bills to pay.

For More Information, click here

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California Cities Included in Bankruptcy Prediction For 2009

December 29, 2008 · Posted by Dr. Grey

Four cities in California and six other cities nationwide will be seeking for bankruptcy lawyers soon, according to a prediction by John Moorlach.

Moorlach, the accountant who predicted Orange County’s bankruptcy in 1994, said as many as 10 cities will look for court protection from creditors next year under Chapter 9 of the bankruptcy code, as public finances get worse.

Although he estimated these numbers based on general economic conditions, Moorlach, now chairman of the Orange County Board of Supervisors, didn’t mention the California cities that may file for bankruptcy. Will Irvine be one of those municipalities? Is Santa Ana next? Let’s hope that this time around, Orange County cities escape the pain of bankruptcy, so that we can all have a happy new year!

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