Bankruptcy filings soar in Massachusetts

By doug | Published: May 17, 2010

The news is in — bankruptcy filings in Massachusetts and in the nation as a whole are going up. Way, way up.

The federal court system counted a 30 percent increase in bankruptcy filings in Massachusetts for the 12 months ending on March 31st. Nationally, a 27 percent increase was recorded.

What should anyone make of these numbers? From the point of view of a potential filer, there is a definite aspect of “misery loves company,” as there is undeniable comfort in knowing that you are not alone in a desperate situation, that there are abundant fellow-travelers on the same rocky road.

But by the same token, all of us fellow travelers are anxious for a rebound to the general economy, and record levels of bankruptcies are obviously not a great sign of a healthy market. While bankruptcy is an effective legal tool for getting a fresh financial start, it does nothing to improve the “income” side of anyone’s ledger, which is really where any future prosperity is rooted.

Perhaps there is a little gleam of optimism in the fact that Massachusetts is only ranked 35th for bankruptcies when population size is taken in to account; our recovery may well precede other harder hit regions. For instance, Nevada, with a small population heavily dependant on tourism and real-estate speculation, has been the hardest hit state of them all.

 

By Doug Beaton

Posted in Bankruptcy News | Comments closed

Senate approves measure cutting debit card fees

By doug | Published: May 14, 2010

The United States Senate approved a bill this morning that would place new limits on what processing companies can charge for debit card transactions.

Illinois senator Richard Durbin’s plan forces the Federal Reserve to ensure the fees that credit card companies charge for debit card use are proportional to the costs of processing the transaction.

Durbin’s measure requires that once merchants can pay lower fees for debit card purchases, they then would be able to offer discounts to their customers based on their method of payment. Merchants would be prohibited from placing minimum purchase requirements for the use of a debit card.

In an effort to win more support and avoid community bank opposition, Durbin included an exception from the fee requirement for banks with assets of less than $10 billion. Durbin said even with that exception, his legislation would affect 65 percent of all card transactions in the United States.

The prices for stock in credit card processing companies like MasterCard and Visa dropped significantly on the news.

 

By Doug Beaton

Posted in Bankruptcy News, Credit cards | Comments closed

Debt advice for new graduates

By doug | Published: May 14, 2010

With graduation season in full swing, Dave Carpenter has put together a good article on how the newest members of the working world should go about avoiding debt problems.

His advice:

* Stick to a budget;
* Be very careful with credit. “If you can’t pay for it with cash, you don’t need it.’’ Debit and prepaid cards are preferable to credit cards (now unavailable to those under 21), which can lead to bad habits.
* Be aware of costs and fees.
* Start saving.
* Guard against identity theft. Young people are the biggest targets of identity scams. I didn’t know that.

Good luck to the class of 2010!

 

By Doug Beaton

Posted in Practical tips | Comments closed

Massachusetts residents swimming in debt

By doug | Published: May 14, 2010

People who live in the Boston, Massachusetts area have plenty of debt — on average, about $24,670 — but that pales in comparison to some other parts of America.

This news comes from the Experian credit rating agency, which reviewed relative debt levels in twenty large metropolitan areas. Seattle residents accumulated the most debts, averaging $26,646 per resident.

One thing about this study that struck me is the relative absence of the locations with the highest bankruptcy levels from the top of the list. Las Vegas, southern California, Florida and Arizona have been belted with waves of foreclosures and bankruptcies, but Seattle and number-two Dallas have not been hit quite so hard.

A possible disconnect between debt levels and bankruptcies could indicate that the high rate of personal bankrupcy we have seen lately is more a result of foreclosures and related real estate bust issues than just general overspending.

But rising debt levels not connected with foreclosure do take a toll as well:

“Rising debt levels do not surprise Alliea Groupp, a volunteer at the Greater Boston Interfaith Organization, which has campaigned for banks to limit how much credit card interest they charge. Groupp said she racked up $20,000 in debt because of a medical emergency that was not fully covered by insurance. She said she knows people who are struggling to pay off debt because many banks raised credit card interest rates steeply, without warning, this year.

“Unfortunately, this does not surprise me,’’ Groupp said of the Experian research. “If a person loses their job or gets their hours cut, they still have to put food on the table.’’

 

By Doug Beaton

Posted in Bankruptcy News | Comments closed

Wrestling with banks over credit card interest rates

By doug | Published: May 13, 2010

Massachusetts Treasurer Tim Cahill’s plan for pressuring large banks to respect the state’s law capping credit card interest rates at 18 percent is turning into a largely symbolic protest.

As I reported here last month, Cahill, who is also an independent candidate for governor in the upcoming November elections, decided to withdraw state funds from three banks — Bank of America, Citigroup, and Wells Fargo — that do not honor the Massachusetts usury statutes. These banks can get around the law because they are chartered or based in other states.

But the Boston Globe is reporting today that Cahill still has million of dollars in state and municipal funds in banks such as JP Morgan Chase and American Express that are also ignoring the law.

So far, Cahill’s threat has not spurred any bank to cap rates. But the treasurer said it could make a difference if enough government agencies and institutions follow suit.

“It’s like throwing a stone in the water,’’ Cahill said. “We don’t know how many waves it will create. It may not create any.’’

Meanwhile, interest rates as high as 30 percent may force the hand of many Massachusetts consumers, and force them to consider a bankruptcy case as the most practical way of dealing with this crushing debt. With the interest charges and fees eating into what little disposable income remains at the end of the month in a typical household, more and more of these Massachusetts debtors are calling to inquire about filing a Chapter 7 case; ultimately the banks choice to ignore the state law could prove counter-productive to their bottom line.

 

By Doug Beaton

Posted in Credit cards | Comments closed

Using bankruptcy to get rid of a second mortgage

By doug | Published: May 12, 2010

Since I recently took a look at the first opinion written by Melvin Hoffman, the new Massachusetts bankruptcy court judge, I thought it might be fair to even the score a bit and take a look at the last opinion issued by the judge Hoffman replaced, retiring Massachusetts bankruptcy judge Joel Rosenthal.

Turns out Judge Rosenthal’s last opinion (or at least the last one currently posted) is a good one for consumer debtors to know about — especially debtors who may have taken out home equity lines along the way.

Judge Rosenthal’s opinion in the Morales case is really just a short order allowing the Morales’, a married couple who filed a joint case, to get rid of (“strip away” in legalese) the second mortgage on their home.

And how might this be accomplished, you might ask? First, this type of relief is available to debtors who have filed a Chapter 13 bankruptcy case.

Next, the current value of the real estate must be low enough so that the second mortgage is completely unsecured. For instance, imagine a home purchased for $200,000, with a first mortgage that has a balance of $150,000. Later, the homeowners took out a $30,000 equity loan secured by the house.

Unfortunately, with the steep fall in Massachusetts housing prices, this home is now worth $130,000 in the market. This leaves the buyer’s first mortgage a little bit unsecured (to the tune of $20,000), but the second mortgage is entirely unsecured.

This is the situation that lets a homeowner strip away the second mortgage with a bankruptcy case. In the Morales case, Judge Rosenthal explains the mechanics of how it is done; first, the debtors must complete all their payments under their Chapter 13 plan, then they must receive the bankruptcy court’s discharge of their debts, and then they can request and receive a mortgage discharge on the second loan which can be recorded at the Registry of Deeds.

If you are in a similar situation, give me a call at (978) 975 – 2608 or send an email to info@douglasbeaton.com, and we can discuss if you are a good candidate for this sort of relief.

 

By Doug Beaton

Posted in Chapter 13, Real estate | Comments closed

Mortgage bailout looms as Massachusetts mortgage and bankruptcy crisis rolls on

By doug | Published: May 6, 2010

Today’s news includes the nugget that “Freddie Mac,” the quasi-private packager of home mortgage loans for resale to the financial markets, is begging Congress for another $10.6 billion dollar bailout. This would be on top of $50.7 billion the federal government has already pumped in to the troubled mortgage giant.

Meanwhile, the average consumer is probably wondering where his or her own bailout is. Loan modifications are still hard to come by, and bankruptcy cases under either chapter 7 or chapter 13 are becoming an increasingly common resort to saving homes in Massachusetts.

 

By Doug Beaton

Posted in Bankruptcy News, Foreclosure | Comments closed

A new assault on high credit card fees

By doug | Published: May 5, 2010

Two US Senators are sponsoring legislation that would allow merchants to get around the 2% commission that MasterCard and Visa charge them for credit card sales.

Under the proposal by Vermont senator Patrick Leahy and Illinois senator Dick Durbin, stores would be able to legally offer consumers discounts for using cash or an in-store credit account.

The proposal is an amendment to the financial overhaul legislation currently under debate on Capitol Hill.

While this particular bill, if approved would potentially help consumers get lower prices on future purchases, it doesn’t address problems with consumers who have high balances already. They are facing massive interest rate charges each month. Interest is charged by the bank issuing the credit card, rather than MasterCard or Visa directly.

Chapter 7 bankruptcy can eliminate past-due credit card balances in most instances; if you need this assistance and live in Massachusetts or New Hampshire, contact me here for more advice.

 

By Doug Beaton

Posted in Bankruptcy News | Comments closed

New Massachusetts bankruptcy judge says no to trustee-paid claims

By doug | Published: May 4, 2010

The first written opinion by the newest Massachusetts bankruptcy judge is of interest to Chapter 13 debtors and Massachusetts bankruptcy attorneys.

In the Pearson case, judge Melvin Hoffman struck down a provision in a debtor’s Chapter 13 plan that would have provided for administrative claims to be paid by the trustee out of the plan money set aside for reimbursing unsecured creditors.

Judge Hoffman reasoned that if unexpected administrative claims surfaced after the Chapter 13 plan was confirmed, it was possible they could suck up most or even all of the money that was supposed to be paid to creditors, and that therefor the plan did not meet the requirements of the bankruptcy code.

Administrative claims typically involve professional services such as legal or accounting fees.

 

By Doug Beaton

Posted in Bankruptcy News, Chapter 13 | Comments closed

“Am I eligible for bankruptcy?” — means test information for New Hampshire residents

By doug | Published: April 26, 2010

Since 2005, debtors considering Chapter 7 bankruptcy are required to qualify, or pass a “means test” in order to have their debts discharged under the favorable laws found in this section of the Bankruptcy Code.

Although debtors throughout the United States are required to submit the means test forms, the results may differ based on where a debtor lives, because the test looks at the median income for the particular state where they live, as well as the size of the debtor’s family.

To get a rough idea on whether you can pass the test, first figure out your family income for the past six months, then multiply it by two to get an annualized figure. Married debtors should count both the husband and wife’s, even if only one person is going to file for bankruptcy.

If you live in New Hampshire and are thinking about a chapter 7 bankruptcy, compare your income figure to these median income statistics:

One person family: $51,332
Two person family: $63,976
Three person family: $79,385
Four person family: $93,592
Five person family: $101,092
Six person family: $118,592

If your income is below the appropriate median income shown above, you can assume you pass the test, and will be cleared to file under Chapter 7. But if your income is slightly above the median, don’t despair, because you are still allowed to take various deductions against that income, so you still may qualify. However, consultation with a bankruptcy attorney is suggested at that point, because the rules concerning the deductions can get complicated fast!

 

By Doug Beaton

Posted in Chapter 7, Practical tips | Comments closed
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