August Bankruptcy Filings Increase Slightly

Total U.S. bankruptcy filings in August increased 7% from July according to Epiq Systems, Inc.'s data.  There were 104,336 bankruptcy filings in August, up from 97,104 in July.  Non-commercial bankruptcy filings also increased 7% from 92,562 in July to 99,417 in August.

August commercial filings totaled 4,919, which was an 8% increase from the 4,542 commercial filings in July.  Commercial Chapter 11 filings also increased 8% from 600 in July to 648 in August.

Even with the August increase, we are still on pace for the lowest total new bankruptcies in a year since the 2008 financial crisis.  The total August bankruptcy filings are a 14% decrease from the 120,905 filings in August of 2011.  Commercial filings this August represented a 24% decrease from the 6,434 commercial filings during August of 2011.

The August commercial Chapter 11 filings were a 9% decrease from the 710 filed during the same period last year.  Finally, the total non-commercial filings for this August were a 13% drop from the August 2011 total of 114,471 non-commercial filings.

The average nationwide per capita bankruptcy filing rate was 4.04 (total filings per 1,000 people) for January 1 through August 31 of this year.  This was unchanged from the first seven months of this year.  In August 2012 the average total filings per day was 3,366, which is a 14% decrease from the 3,900 total daily filings last August.

In 2011 1.46 million individuals and 36,000 businesses filed for bankruptcy, according to the American Bankruptcy Institute.  These levels are historically high, but individual bankruptcy filings have declined 8-10% over the last year.

If you are considering filing bankruptcy or are interested in more information about bankruptcy please contact me.  I offer a free initial consultation and I can help you file bankruptcy in Kansas or Missouri.  Please leave any questions or comments below.

Forgiven Mortgage Debt May Soon Be Subject To Taxes

Homeowners who reduce their mortgage debt may be taxed for that relief beginning the first of the year.  Since 2007 a special exemption has been in place to exempt as much as $2 million per household in principal reduction and other aid from banks.  This exemption is set to expire at the end of 2012.

This special exemption is set to expire along with many similar tax provisions, including President Bush's tax cuts, and the automatic government spending reductions.  The special exemption could disappear just as many homeowners are receiving large amounts of mortgage relief from the U.S.'s five largest banks as part of the national settlement of foreclosure abuse investigations.

Lawmakers are expected to push for an extension of the special tax exemption as Congress returns from summer break this week.  However, even though it has support from both parties, it is unlikely to be voted on before the Presidential election.  It will also be difficult to get it passed after the election because lawmakers will have many other issues to deal with, including the government spending restrictions set to expire at the end of the year.

Mortgage debt that is forgiven by a bank as part of a principal reduction, short sale or foreclosure, which is known as shadow income, must be reported as income by the homeowner and is subject to taxation.  The mortgage lender reports the forgiven amount on an Internal Revenue Service (IRS) form.

However, in 2007 Congress enacted the Mortgage Forgiveness Debt Relief Act to help struggling homeowners.  If the debt is forgiven because of a drop in a home's value or a decline in the owner's financial condition, up to $2 million of the relief for couples filing joint tax returns is exempted from federal taxes.

The exemption provides relief on tens or hundreds of thousands of dollars.  It was originally set to expire at the end of 2010.  However, with the housing market and overall economy crash in 2008, Congress extended the relief through the end of 2012.  The housing market is finally showing signs of recovery but this relief is still needed.

If you are struggling with your mortgage payments you may want to consider filing bankruptcy.  I can help you file bankruptcy in Kansas or Missouri.  Please contact me for a free initial consultation.  Any questions or comments are welcome below.

Everyone Should Have A Living Will And A Healthcare Power of Attorey

I recently published a blog post on the importance of having a will. On a related note, I feel that it is just as important to remind everyone that you should also have a healthcare power of attorney and a living will. Below I will explain in basic terms what the two documents are and why you should have them in place.

A healthcare power of attorney, also known as a durable power of attorney for health care decisions (or choices), allows you to appoint an individual to make healthcare decisions for you if you are unable to make or communicate your own wishes. It will also allow you to express your desire to be an organ and/or tissue donor if you choose to do so. You may also use this document to appoint a back-up individual(s) to make your healthcare decisions for you if the first individual cannot serve as your agent for any reason.

A living will declaration, also known as a healthcare choices directive, allows you to express your healthcare desires if you are unable to communicate them. This document is most commonly used to express your desire to not have your dying artificially prolonged. Specifically, it often states that if you have an incurable injury, disease, or illness certified to be a terminal condition by two (or one) physician(s) who have personally examined you, and the physicians have determined that your death will occur whether or not life-sustaining procedures are utilized and where the application of life-sustaining procedures would serve only to artificially prolong the dying process, you would direct that such procedures be withheld or withdrawn, and that you be permitted to die naturally with only the administration of medication or the performance of any medical procedure deemed necessary to provide you with comfort care. You may also direct that specifically listed treatments be withheld or withdrawn.

Everyone should have both a healthcare power of attorney and a living will in place. A healthcare power of attorney will allow you to appoint an individual or individuals to make your healthcare decisions for you if you are unable to do so and a living will allows you to express your wishes in written format.

I have significant experience in preparing both of these documents for individuals in Kansas and Missouri. I can prepare both of these documents for you at a low, flat fee and I offer a free initial consultation. Please leave any questions or comments below.

Everyone Needs A Will

I am aware that this blog is titled Kansas City Bankruptcy Attorney Blog, however there other legal topics of importance that I will discuss in this forum from time to time. I am always suprised to hear how many people have never had a will drafted, even if they have spouses and/or children. If you own a home, a car, or have a bank account you should have a will, especially if you have a spouse and/or children.

You may not know that if you do not have a will most of your assets will pass to your statutory heirs through a process known as "intestate succession". For example, in Kansas if you are married with children and do not have a will, half of your property will automatically pass to your spouse, while the other half will automatically be passed to your children. If you do not have a living spouse or living children, Kansas law would then pass the property to other more distant relatives.

If you do not have any heirs in Kansas, your property would revert to the state of Kansas. Additionally, if you live in Kansas and do not have a will, the Court will decide who administers your estate (also known as the executor or personal representative) and who would serve as the guardian of any minor children you may have at the time of your death. Even if you do have a will you will need to ensure that it provides for whom you desire to appoint as the guardian of your minor children if you were to pass away.

I have significant experience drafting wills and would be more than happy to meet with you for a free initial consultation. I can ensure that your assets go to who you want them to go to and that any minor children you may have are taken care of by your selected guardian(s). I am able to draft wills in both Kansas and Missouri. Even if you already have a will, I recommend it be reviewed if there have been changes in your family, finances, state of residence, or your intentions. Please leave any questions or comments below or on my contact form.

Can You Buy A Car Before Filing Bankruptcy?

Last week I posted about whether you can transfer a car title before filing bankruptcy. On a related note, many clients often inquire if they can purchase a new car before filing bankruptcy, thus incurring new debt right before filing bankruptcy. As a bankruptcy attorney I am prohibited from advising clients to incur new debt before filing bankruptcy. However, bankruptcy attorneys are allowed to help their clients with exemption planning to ensure that all potential bankruptcy exemptions are taken advantage of.

Specifically, Section 526(a)(4) of the bankruptcy code prohibits a debt relief agency (which includes bankruptcy attorneys) only from advising a debtor to incur more debt because the debtor is filing for bankruptcy, rather than for a valid purpose. In my opinion, I would say that whether you can purchase a new car on the eve of filing bankruptcy depends on whether a new car is a necessity.

If an individual filing bankruptcy is purchasing a new car just prior to bankruptcy in order to obtain better credit terms or to ensure financing, I would suggest against it as the case may be dismissed or a discharge may not be granted. On the same note, I would not advise a client to purchase a new car and assume car payments in order to satisfy the means test to qualify for Chapter 7 bankruptcy.

However, if an individual filing bankruptcy does not have a car or their current car requires extensive repairs or is high-mileage, I would suggest that purchasing a new car shortly before filing bankruptcy would be acceptable if the car is a necessity for transportation to work and/or school, etc., which would be a "valid purpose" in my opinion.

Each individual's situation is unique. Therefore, I would suggest you consult with a bankruptcy attorney. I offer a free initial consultation and can help you file bankruptcy in Kansas or Missouri. Any questions or comments are welcome. Thanks for reading!

Can You Transfer A Car Title Before Filing Bankrupty?

As you may or may not know, each debtor is only entitled to exempt one vehicle when filing for bankruptcy. Therefore, many bankruptcy filers that own more than one vehicle per debtor inquire if they can transfer title to their vehicle to a non-debtor prior to filing bankruptcy. Is this a fradulent transfer of a non-exempt asset to a third party? Is this a fraudulent conversion of a non-exempt asset to an exempt asset? Or is this lawful pre-bankruptcy planning to maximize available exemptions?

The answer is, it depends where you are filing bankruptcy, who the bankruptcy trustee is, what the value of the vehicle is, and when the transfer is made. Bankruptcy law permits pre-bankruptcy planning to take advantage of exemptions. I would advise that in most situations, pre-bankruptcy planning to transfer the title of a car to another family member, especially if the primary driver of the vehicle is already a spouse or a child, is proper if fully disclosed prior to the 341 Meeting of Creditors.

However, every situation is different. I recommend that you consult with a bankruptcy attorney to discuss the details of your specific situation. I offer a free initial consultation and can help you file bankruptcy in Kansas or Missouri. Please leave any questions or comments below.

Some Student Loans Will Cost More Despite Deal

Despite the deal recently reached by Congress to contain the expense of higher education, college students are facing an approximately $20 billion increase in the cost of their federal student loans. Graduate students are now responsible for paying the interest on their federal student loans while they are in school and immediately after they graduate. Than means that they will pay an extra $18 billion out of pocket over the next decade.  Additionally, the government will no longer cover the interest on undergraduate loans during the six months after students graduate, which is expected to cost them more than $2 billion.

The above changes received little attention while lawmakers focused on preventing a spike in interest rates on federal student loans. They are the fallout of earlier political battles and compromises over broader issues such as the federal budget and the national debt ceiling. The recent debate about the nation's increasing student debt mostly focused on how to prevent the interest rate on new federally subsidized undergraduate loans from doubling to 6.8% on July 1st. Senate leaders did reach a comprise on how to pay the estimated $6 billion cost of freezing the rate for a year.

However, the above deal has been blunted by two changes that will saddle students with higher costs. Lawmakers ended a long-standing program that pays the interest on federally subsidized loans for six months after a student graduates from college. That change applies to new loans issued through July of 2014. Students who take out these loans over the next year will still receive the lower interest rate but that amount will be charged to their bill as soon as they graduate. Students who apply for federal loans next year will also see a higher interest rate beginning upon graduation.

Additionally, the goverment will no longer pay the interest on new graduate loans while students are in school and for six months after they finish. This change comes as government data shows that the average annual cost of a master's degree and professional programs in law and medicine has jumped by double digits as enrollment in graduate programs has risen by 33% since 2000 to 2.8 million students.

The graduate loan subsidy is a result of last summer's debate over the national debt ceiling. Lawmakers eliminated the program to cover a shortfall in funding loans for low-income students.

Student loans generally cannot be discharged in bankruptcy. However, if you are struggling to keep up with your student loan payments as a result of other debts then you may want to consider filing bankruptcy. Filing bankruptcy may discharge unsecured debts such as credit cards and medical bills, making your student loan payments more manageable. I can help you file bankruptcy in Kansas or Missouri and I offer a free initial consultation. I look forward to your questions or comments.