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.