But everyone who contemplates filing a bankruptcy case is entitled to consider what impact the case will have on their lives going forward.

When it comes to credit scores, there are a lot of myths out there. Part of that is due to the general secrecy that surrounds the exact formula for computing these numbers, and part of it is the general human tendency to spread information regardless of whether it’s true or not.

So here, as a sort of public service, is an article by Mark Greene, the CEO of Fair & Isaac, which is the company that owns the formula for generating the scores in the first place: FICO Questions Answered.

As you can see from the article, a bankruptcy case will typically result in a 150 point “hit” to your score. This isn’t always the case: since the scale bottoms out at 300, debtor’s with truly awful scores to start with should have little fear about filing.

Greene also says in this article that it might take as long as seven years to rehabilitate one’s score after filing a bankruptcy case. While this may be true, debtor’s should realize that they may not need to fully rehabilitate the score in order to get credit.

A better guide is to think about what will the score be one year after a bankruptcy case is filed. Often the FICO score has risen enough by then for a debtor to get some credit offers. Maybe not a $300K mortgage, but debtors who stay on the narrow path and pay their bills after the case is filed should be OK generally.

Another factor to consider is that all of this can change at any time. Here in the Lawrence – Methuen, and Haverhill areas, though, my bankruptcy clients have generally started receiving new credit offers in about six months to one year after the filing of their Chapter 7 bankruptcy case.

In his heyday, Steinberg was known as the agent for NFL stars Troy Aikman, Warren Moon, Steve Young and Ben Roethlisberger.

Prior to filing for bankruptcy, Steinberg was sued for $1.4 million in back rent on his offices.

Steinberg pulled no punches, and blamed his stint in an alcohol rehabilitation clinic for letting his debts get out of control. “I just lost track while I was in rehab,” Steinberg told The Associated Press. He said he struggled with alcohol for years but has been sober since 2010.

The super agent also cited a 2003 dispute with an unnamed NFL player, which caused him to lose his agent’s certification with the football player’s union.

One of Steinberg’s quotes is especially poignant, because it echoes almost exactly what just about every one of my bankruptcy clients here in Massachusetts says at one point before filing a case:

Steinberg said he delayed filing for bankruptcy for several years “because of my moral and legal obligation to people who advanced me funds or performed services in good faith. But the constant and aggressive collection efforts and press initiatives undertaken by creditors have harassed my family and prevented me from working to be able to pay these debts.”

An creditor who has just had an account file for bankruptcy might be tempted to snarl that the purpose is to “torture” small businesses. A hyper-aggressive attorney prowling for cases (that’s not us now, mind you) might say it is the elimination of every debt, large or small, for any reason whatsoever, and with no cost to anyone. Ha!

The fact is that bankruptcy is legal and sanctioned by the government. It is a way to give people and companies a way to reorganize their finances and to re-enter the stream of commerce.

The U.S. Supreme Court has said in cases going all the way back to 1934 that the central purpose of the bankruptcy law is to “provide a procedure by which certain insolvent debtors can reorder their affairs, make peace with their creditors, and enjoy ‘a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.’”

And that my friends, is the true purpose of bankruptcy in the United States.

(Merrimack Valley residents who need specific bankruptcy advice can give me a call at 978-975-2608 and set up a free consultation at my office on Route 114.)

The couple wrote to Graham’s newspaper advice column saying they had gotten into a financial bind when they moved, couldn’t sell their old house, and got drained paying off two mortgages.

His answer? It’s not immoral, but he recommended that the couple involved seek God’s guidance before making the final decision.

This has caused a bit of a firestorm in the legal blogosphere, as some commentators have indicated that in their view bankruptcy is a green eyeshade financial consideration, and God need not enter the equation. Others draw a distinction between those people who have incurred debts with every intention to pay and then something occurs in life, and those people who rack up the credit card debt with no intention of ever paying the debt.

For the record, Graham himself wrote that ” I find nothing in the Bible that explicitly forbids bankruptcy, as it is provided for in our legal system (unless the motive is to cheat someone who has lent money to us). The Old Testament actually provided for the cancellation of debts every seven years among the ancient Israelites (see Deuteronomy 15:3). At the same time, let me urge you to explore every alternative you can. For example, have you considered renting your first house?

“The most important advice I can give you, however, is to seek God’s wisdom, and to trust this whole matter into His hands. He knows what is best, and He can be trusted.”

My own personal take on this is I see nothing controversial in this advice at all. If any given person is in the habit of praying for help on decisions large or small, why wouldn’t they also do so on an important decision like filing for bankruptcy?

On the other hand there is no religious or moral test for filing a bankruptcy case — the procedure is not only legal, but specifically put in place to deal with situations like the one that prompted the letter to Rev. Graham.

If you need help with your debt problems, give me a call at (978) 975-2608 or email me at info@douglasbeaton.com.

David Mullins is one of the unlucky ones. For Mullins, a 57-year-old from the Baltimore area who lays cable for Comcast, the nightmare began when the financing arm of General Electric mistakenly hit him with $1,300 in charges on a carpet purchase he and his wife made in 2004. Mullins has a letter from the carpet company saying he had been wrongly charged. He has a second letter from the Maryland attorney general’s office saying the same. Yet that hasn’t made any difference to the various collectors who have harassed him for the money a spreadsheet shows he owes them. “They call our home incessantly,” he says. “They call my cell constantly, they call my wife’s cell constantly.” Mullins is hard to reach at work but no matter: “They call my wife at work all the time.

“They’re like a schoolyard bully,” Mullins says. “They try to break you down so eventually you send them something just to make them go away.”

Making matters worse for consumers: the growth of a new breed of collector called the debt buyer. These days, only a small fraction of debt collectors actually work on behalf of the original business that’s owed money. Eventually, the hospital or cellphone company you stiffed grows tired of sending letters insisting you pay your bill; a bank can hound you for only so long about delinquent credit-card charges before, by law, it must write off the debt as a loss (typically at six months). Sooner or later, the creditor will sell off its bad debt to a debt buyer for 2 cents on the dollar, or 5 cents or 10 cents, depending on the age of the debt and other factors.

Even some within the industry believe abuse is endemic. One collector says she’s seen the inside of enough operations to know that what she experienced in Sacramento was hardly an anomaly. “The kind of stuff I saw first-hand goes on everywhere all the time,” she says. “You’ve got criminals working in these places … You’ve got drug and alcohol abusers. Basically, if you have a Social Security number and can sign your name, you’ve got a job.”

If you live in the Merrimack Valley and are being preyed upon by firms like these, I can help. A bankruptcy filing will stop the nonsense once and for all — and if it doesn’t, at my firm, you have hired a lawyer who will see to it that they will stop torturing you. I’m located on Route 114 in North Andover, not far from Lawrence and Methuen, and I’ve been using the bankruptcy code to get people out of this kind of mess for more than 18 years. Just give me a call at 978-975-2608, and you can set up a free consultation with no obligation today!

(Newsweek image by Josh Cochran)

Here is a short video by three Wall Street Journal commentators:

I was amazed that the expected drop in film sales (by industry analysts) was 10%; the secret internal expected drop at Kodak’s top management was 20%; and the actual recent drop in film sales has been a whopping 40%.

Also, pay attention to the comment that Kodak was “angry” about it’s trip to bankruptcy court. Sounds like litigation — over alleged patent infringement — against Apple and others is in the offing!

Overall, though, there is a feeling of sadness, put into words by Toronto photography professor Robert Burley: “One of the interesting parts of this bankruptcy story is everyone’s saddened by it. There’s a kind of emotional connection to Kodak for many people. You could find that name inside every American household and, in the last five years, it’s disappeared. At the very least, digital technology will transform Kodak from a very big company to a smaller one. I think we all hope it won’t mean the end of Kodak because it still has a lot to offer.”

(The photo at top is Kodak founder George Eastman with Thomas Edison behind one of his cameras.)

Twinkies are still being sold — the company is in Chapter 11, not liquidation — and there are still a lot of people around who could use a little weight loss (including myself).
So it’s not quite the panic implied here.

Wicked Local is a good source of all kinds of news from around here — not just financial or bankruptcy stuff, and I wish all the towns in the Merrimack Valley had one.

Why are mortgage modifications so hard to get, in Massachusetts and elsewhere? Because your mortgage servicer really doesn’t want you to succeed!

Amazing, but true. And that proposition now has some academic backing, as Diane Thompson has published an article about it called “Foreclosing Modifications: How Servicer Incentives Discourage Loan Modifications” in the University of Washington Law Review.

Thompson explains how the best possible result for a mortgage servicer (besides collecting all the payments on time), is to have the debtor refinance the loan and pay it off.

When that is not feasible, however, the next best result for them is NOT to give you any sort of a break through loan modification. It’s to have the property go to foreclosure.

As she explains, “a foreclosure is the next best option. The servicer’s expenses, other than the costs of financing advances, will be paid first out of the proceeds of a foreclosure. Thus, the servicer will recover all sunk expenditures upon completion of the foreclosure. The servicer’s costs of financing those advances will not be recovered—but all other costs, including those services provided by affiliated entities, like title and property inspection, will be recovered.”

Because of this dynamic, if you are putting off a bankruptcy case while you wait on news of a hoped-for modification approval, you may be wasting your time. It is likely that you send in loads of documents, spend a lot of time on hold, and get the big rubber “NO” stamped on your file in a few months anyway.

It’s simply not in the servicing company’s interest to say “yes.”

With a bankrutpcy case, however, you, the debtor make the call on whether to proceed. You control the timing. And you can still try to negotiate a modification after the case is finished, and sometimes even while its going on.

If you have a mortgage problem anywhere in the Merrimack Valley and are interested in a possible bankruptcy solution, you can give me a call at 978-975-2608, and schedule a free no-obligation discussion of your options.

Although debtor-trustee relationships are sometimes combative, they don’t have to be, and usually aren’t.

All in all, debtors fare better, and things go smoother, when the trustee is in a good mood concerning your case. In Chapter 13, where there are a lot of technicalities that have to be addressed, and trustees see a constant stream of debtors with no clue about how to get a Chapter 13 plan approved.

Over at the Bankruptcy Mastery web site, California bankruptcy attorney Cathy Moran asked one of her local Chapter 13 trustees how to make the process go smoother.

The trustee’s top tips:

* Make sure the debtor provides 60 days of pay stubs to the trustee well before the meeting of creditors. These should cover the 60 days PRIOR to the filing date.

* File your credit counseling certificates as soon as the class is finished.

* Send the trustee your most recent tax return as soon as the case is filed.

* Don’t file under Chapter 13 if the case exceeds the debt limits for that chapter. This is less of an issue for bankruptcy debtors in Massachusetts and New Hampshire, as our real estate values are a lot lower than in San Francisco.

* Make sure you make your first plan payment on time, and send it to the right address! Note that the first payment is often due before the meeting with the trustee, and the address is often a lock box in another state, so be careful!

* Be ready for the Chapter 13 meeting (your bankruptcy attorney can help with this).

That ideal is compromised, however, when debts don’t go away despite filing the case.

Sometimes this is a matter of public policy (e.g. the current law on student loans), or debtor fraud (e.g. running up credit cards right before filing).

But another type of debt is also allowed to remain after bankruptcy — secured debts. Technically, the debt goes away, but the secured lender has the right to reclaim its goods.

Most people are familiar with how this works for houses and cars — by far the largest type of secured debt among consumers.

But is it possible for a store chain to claim that the goods you buy on their store issued credit card are secured debts?

It is possible to make that claim, if a security interest clause is buried deep in the fine print of the agreement you sign when you get your card. It seems that one chain or another is trying it at any given time. Years ago, when I started as a lawyer, it was Sears. These days, increasingly, it is Best Buy.

The electronics retailer has for some years included such a security interest clause in their finance agreements; but it is not known for sure if they would actually be enforced by a bankruptcy court.

At the start of 2012, however, I am seeing a pronounced uptick in collection attempts by stores concerning allegedly secured sales of consumer merchandise against debtors who have already declared bankruptcy.

Many of these attempts are being sent out by a Texas law firm called Bass & Associates. They are really not interested, of course, in actually making bankrupt buyers fork over their beloved electronics and jewelry; they are more interested in cutting a “deal” that gets them some money.

For that reason, I usually advise people not to give in to these efforts easily. The ability of this firm and others to litigate a bankruptcy case in Massachusetts or New Hampshire from Texas is unproven. Unless they can show they will actually prevail in a court and convince a bankruptcy judge that the security interest is valid, I would tell consumer debtors to hold on to their goods — and their money!