Impact of New Administration on Bankruptcy Outcomes

Business man cartoon saying, What do I need to know now?

In recent months, bankruptcy attorneys and people considering bankruptcy have wondered how the new presidential administration might influence bankruptcy laws and the outcomes of personal bankruptcy petitions. We did, too. To gain perspective, we took a look at America First: A Budget Blueprint to Make America Great Again—produced by President Donald J. Trump’s Office of Management and Budget.

The Blueprint revealed a proposed budget change for the Department of Justice, which oversees bankruptcy laws. Specifically, the Blueprint would increase “bankruptcy-filing fees to produce an additional $150 million over the 2017 …  level to ensure that those that use the bankruptcy court system pay for its oversight.”

According to the report, the proposed 2018 DOJ budget is projected to save taxpayer dollars overall by consolidating, reducing, streamlining, and making its programs and operations more efficient. The DOJ Budget also manages critical investments to confront terrorism, reduce violent crime, tackle the Nation’s opioid epidemic, and combat illegal immigration.

While there is no reason to believe the Trump administration seeks to revise the substance of bankruptcy laws, other administrations and political agendas have influenced the bankruptcy codes over the years. In 2006, the last major overhaul to the Bankruptcy Code included the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which added a “Means Test” for consumer (personal bankruptcy) cases. Before the Means Test, debtors were allowed to pay off at least some of their debt, and it codified a debtor’s choice to pay creditors through an extended repayment plan, which was largely voluntary. According to a report published by the United States Department of Justice Executive Office for United States Attorneys, since BAPCPA was enacted, repayment of consumer debt is done through a three- or five-year payment plan under chapter 13 of the Bankruptcy Code; and a discharge of consumer debt is accomplished by filing for relief under chapter 7.

Under the DOJ, debt discharge and repayment plans are overseen by a bankruptcy trustee; the trustee’s role is to determine the debtor’s ability to repay creditors and oversee the bankruptcy process. For example, a trustee may require a debtor to produce voluminous records to prove his/her financial circumstances and determine repayment capability; the effect could increase overall filing costs. Some believe this scenario is more likely under an administration seeking to reduce government liability for court costs; some believe the new administration could favor creditors over consumers. Time will tell.

Given the proposed changes to the DOJ budget, with anticipated increase in court costs, it may be important for those considering bankruptcy to file before higher court costs take effect.

Consult a bankruptcy attorney if you have questions. Solomita Law is available to help.

Budgeting Offers Control over Debt

photos of dollar bills

Bankruptcy provides relief to people weighed down by massive debt, however it is not a free pass. During a bankruptcy, debtors may be required to liquidate their assets to repay creditors. Also, they can expect to lose access to existing commercial credit because credit card companies typically close accounts when notified that a bankruptcy is filed. And a debtor’s bankruptcy record will appear on credit reports for years to come.

That said, bankruptcy may be the most viable solution for people struggling to pay off significant debt. After bankruptcy is approved and debts are discharged, most individuals feel a great sense of relief.

Before a bankruptcy is approved, petitioners are required to participate in Financial Credit Counseling that covers advantages and disadvantages of bankruptcy, as well as alternative options. Credit Counseling also may provide insight to a debtor’s budget issues and planning. When a bankruptcy is filed, debtors must complete a pre-discharge budget analysis. With credit counseling and education, debtors may be able to avoid excessive debt in the future.

As with all legal matters, outcomes are not guaranteed. Each case must be assessed and approved on its own merit. It is important to learn about options available and develop a plan that will work for you.

As Dave Ramsey says, “When you create a basic budget and stick to it, it often seems like you have more money.” I believe when you stick to a budget, you also feel a greater sense of control, and you have a tool for avoiding debt in the future.

Bankruptcies of the Rich and Famous

Even before the advent of the credit card industry, pioneers, patriots and presidents alike found themselves in tough financial straits. According to Roland Gary Jones, Esq., author of Bankruptcies and Money Disasters of the Rich and Famous, Abraham Lincoln went bust running a grocery store before falling back on politics. Even as he ran for state Legislature, he was battling creditors for non-payment of the store’s debts, Jones said. And even after winning election, Mr. Lincoln’s horse, saddle, and all other possessions were confiscated for auction by the local sheriff. Other notable heroes with money problems include Elliot Ness, the 1920’s FBI hero, as well as Samuel Adams, President Thomas Jefferson, and James Wilson, the first U.S. Supreme Court Justice, among many others. More recently, before his election to the nation’s highest office, President Donald J. Trump had used the bankruptcy law to relieve own business debts.

If you’re feeling alone in your financial troubles, remember that people don’t plan to go bankrupt. Many life and business events can result in unexpected cash flow problems and major debt. The bankruptcy chapters were put into effect to help not only the “rich and famous,” but also to assist everyday people who need to get back on sound footing. After qualifying for debt relief under the bankruptcy chapters, people have an opportunity to move forward and build a new financial base for the future.

For people struggling with debt, it helps to explore options available under the law. Individual circumstances vary; a qualified attorney can help determine whether bankruptcy is a viable option.

Interview on Talk Network Radio

I joined Bold Talk Business Radio talk show host Donna Anselmo for a live stream on  TalkNetworkRadio.com Tuesday, February 15. We discussed issues on the minds of people dealing with debt, especially questions relating to bankruptcy.  The interview will stream again today and Friday in the 1 PM EST time slot on TalkNetworkRadio.com, or you can listen to our discussion right here at SolomitaLawBlog.com.

If you are mired in debt, don’t feel alone. According to a  2015 Pew Research study, only 20 percent of Americans are free from any form of debt. The most common variety is mortgage debt (44 percent), followed by unpaid credit card balances (39 percent), car loans (37 percent), and student loans (21 percent). 

According to a USA Today report (10.12.2016), “Using data from the U.S. Census Bureau and the Federal Reserve, ValuePenguin found that the average credit card debt for households that carry a balance is a shocking $16,048 — a figure that has risen by 10% over the past three years. At the average variable credit card interest rate of 16.1%, this translates to nearly $2,600 in credit card interest alone. And many credit cards have interest rates much higher than the average.”

With “an average interest rate and a minimum payment of 1.5% of the balance, it would take nearly 14 years for the typical indebted household to pay off its existing credit card debt, at a staggering cost of more than $40,200. Keep in mind that this assumes no additional credit card debt is added to the tab along the way,” the report stated.

For more information on debt relief and bankruptcy, feel free to contact me with your questions or concerns: 

Email:  asolomita@solomitalaw.com
Office Phone: 407-545-3625
Address: 12001 Research Pkwy, Ste 236, Orlando, FL, 32826
www.SolomitaLaw.com

Protecting Assets Under Bankruptcy

Protect Your Assets

When filing for bankruptcy on behalf of a client, an attorney must consider how to best protect the client’s assets. During bankruptcy proceedings, the court reviews the petitioner’s assets to determine the debtor’s ability to repay creditors. The court then may require sale of the debtor’s property to reimburse creditors and/or cover court costs. The degree to which property is liquidated depends on the circumstances of each case.

Luckily for debtors, the bankruptcy codes include exemptions that may allow debtors to keep essential items, such as money contributed to retirement and pension plans, primary residences (to a certain value), vehicles (depending on their value),  household goods and home furniture.

If you are considering bankruptcy, a qualified bankruptcy attorney can help you understand your options. While it is not necessary to hire an attorney to file for bankruptcy, an attorney can help ensure that your bankruptcy is properly filed and determine which assets you can protect from liquidation.

When clients first consult me about bankruptcy, most feel worried and concerned about their future. The part I most enjoy about representing people in bankruptcy court is watching the smile emerge on their faces when their debts are discharged, and we’ve been able to protect property and assets important to their future.

High Profile Judgment against Gawker Media Group Illuminates the Bankruptcy Process

When The Wall Street Journal (WSJ) reported that Univision Communications, Inc. won a court-administered auction of assets belonging to Gawker Media Group (08.16.16), I thought this case perfectly illustrated how the Chapter 11 bankruptcy process works. For example …

A Single or Series of Disastrous Financial Incidents Disrupts a Company
In this case, a court order to pay a $140 million court award to Hulk Hogan—following his invasion-of-privacy suit against the media outlet—led to a very costly legal battle and outcome. This judgment followed a series of prior legal claims that also weakened the company.

The Debtor Files for Financial Relief
Gawker Media Group filed for Chapter 11 bankruptcy relief. When a Chapter 11 bankruptcy petition is filed, the court appoints a bankruptcy case trustee to oversee the process. The bankruptcy trustee works with the debtor and/or debtor’s attorney to review company assets, assess liabilities, review creditor claims and decide whether and how assets will be liquefied (sold and distributed) to repay creditors. The bankruptcy plan typically relieves the debtor of a portion of financial obligations while also structuring options to repay creditors.

Before the trial, Gawker founder Nick Denton estimated the company’s value at $250 million, but during the proceedings, the jury was told the company was worth $83 million. The bankruptcy trustee’s job was to review all financial data provided to the court and assess all submitted documentation to determine the accuracy of claims about debtor assets.

The trustee typically works with the debtor’s attorney to ensure that secured creditors are repaid and non-secured debt is appropriately resolved according to the debtor’s ability to pay.

In this case, Gawker listed 20 unsecured creditors, including Mr. Hogan.

The Court Sets a Date for Auction of the Debtor’s Assets

After assets are established, the bankruptcy trustee schedules an auction to transform liquifiable assets into funds to repay creditors. In this case, publisher Ziff Davis offered $90 million for Gawker, “but withdrew its offer based on the price and terms set by the court.” In the end, Univision bid $135 million, according to the WSJ report, and will not be responsible for payment of the Hogan lawsuit.

The Bankruptcy Trustee Reviews the Auction Results and Decides Whether to Approve the Bid(s)

At the time of the WSJ report, the trustee still had to approve the sale. After the terms of a bankruptcy sale are made public, and before the judge issues a final decree, the creditors (secured and unsecured) are given an opportunity to review and object to details of the sale. The bankruptcy trustee gathers all creditor responses, then makes recommendations to the court. Finally, the bankruptcy court judge makes the decision to approve the bankruptcy and liquidation.

In the above case, “proceeds from the sale will be used to pay Gawker’s creditors, finance further litigation costs, and cover whatever damages may ultimately be leveled following appeals,” wrote Lukas I. Alpert in WSJ.

Resolution of this Case

Final details would be determined by the courts. In prior court action (before the Chapter 11 corporate bankruptcy filing), “Mr. Denton (Gawker founder) was found personally liable for $10 million of the Hogan judgment and jointly liable, along with former Gawker editor A.J. Daulerio, for $115 million of the verdict levied against the company.” Mr. Denton then sought personal bankruptcy protection earlier this month to freeze collection actions from Hulk Hogan.

For more information on this case, read the WSJ article in full. If you are contemplating a personal bankruptcy (Chapter 7 or Chapter 13) and would like information to determine whether bankruptcy is the right option for you, feel free to Solomita Law for a free consultation.

High Profile Judgment against Gawker Media Group Illuminates the Bankruptcy Process

When The Wall Street Journal (WSJ) reported (08.16.16) that Univision Communications, Inc. won a court-administered auction of assets belonging to Gawker Media Group , I thought this case perfectly illustrated how the Chapter 11 bankruptcy process works. For example …

A Single or Series of Disastrous Financial Incidents Disrupts a Company
In this case, a court order to pay a $140 million court award to Hulk Hogan—following his invasion-of-privacy suit against Gawker Media Group—led to a very costly legal battle and outcome. This judgment followed a series of prior financial claims that also weakened the media company.

The Debtor Files for Financial Relief
Gawker Media Group filed for Chapter 11 bankruptcy relief. When a Chapter 11 bankruptcy petition is filed, the court appoints a bankruptcy case trustee to oversee the process. The bankruptcy trustee works with the debtor and/or debtor’s attorney to review company assets, assess liabilities, review creditor claims and decide whether and how assets will be liquefied (sold and distributed) to repay creditors. The bankruptcy plan typically relieves the debtor of a portion of financial obligations while also structuring options to repay creditors.

Before the trial, Gawker founder Nick Denton estimated the company’s value at $250 million, but during the proceedings, the jury was told the company was worth $83 million. The bankruptcy trustee’s job was to review all financial data provided to the court and assess all submitted documentation to determine the accuracy of claims about debtor assets.

A trustee typically works with the debtor’s attorney to ensure that secured creditors are repaid and non-secured debt is appropriately resolved according to the debtor’s ability to pay.

In this case, Gawker listed 20 unsecured creditors, including Mr. Hogan.

The Court Sets a Date for Auction of the Debtor’s Assets

After assets are established, the bankruptcy trustee schedules an auction to transform liquifiable assets into funds to repay creditors. In this case, publisher Ziff Davis offered $90 million for Gawker, “but withdrew its offer based on the price and terms set by the court.” In the end, Univision bid $135 million, according to the WSJ report, and will not be responsible for payment of the Hogan lawsuit.

The Bankruptcy Trustee Reviews the Auction Results and Decides Whether to Approve the Bid(s)

At the time of the WSJ report, the trustee still had to approve the sale. After the terms of a bankruptcy sale are made public, and before the judge issues a final decree, the creditors (secured and unsecured) are given an opportunity to review and object to details of the sale. The bankruptcy trustee gathers all creditor responses, then makes recommendations to the court. Finally, the bankruptcy court judge makes the decision to approve the bankruptcy and liquidation.

In the above case, “proceeds from the sale will be used to pay Gawker’s creditors, finance further litigation costs, and cover whatever damages may ultimately be leveled following appeals,” wrote Lukas I. Alpert in WSJ.

Resolution of this Case

Final details would be determined by the courts. In prior court action (before the Chapter 11 corporate bankruptcy filing), “Mr. Denton (Gawker founder) was found personally liable for $10 million of the Hogan judgment and jointly liable, along with former Gawker editor A.J. Daulerio, for $115 million of the verdict levied against the company.” Mr. Denton then sought personal bankruptcy protection earlier this month to freeze collection actions from Hulk Hogan.

For more information on this case, read the WSJ article in full. If you are contemplating a personal bankruptcy (Chapter 7 or Chapter 13) and would like information to determine whether bankruptcy is the right option for you, feel free to contact Solomita Law for a complimentary consultation.

Florida’s Homestead Exemption Protects Home Against Creditors

Beautiful Home photo © Colleen Coombe | Dreamstime Stock Photos

PHOTO CREDIT: Beautiful Home | © Colleen Coombe | Dreamstime Stock Photos

In addition to tax savings on a primary residence, Florida’s homestead exemption can offer protection in times of severe financial distress, such as bankruptcy.

Florida homeowners typically apply for a homestead exemption on their primary residence to reduce their tax burden. However, this exemption also can protect one’s home from being forcibly sold by a creditor—unless the creditor is the actual lien holder (e.g., mortgage lender) on the property.

During bankruptcy, Florida’s homestead exemption offers crucial protection. Residents in states not offering this special exemption can lose their homes in bankruptcy if they are unable to pay the additional money required to keep their homes. However, In the State of Florida, any homeowner who has been a resident for at least two consecutive years may claim the homestead exemption to protect their home from becoming part of the bankruptcy estate, and thereby subject to creditor claims.

Protections Under the Homestead Exemption
The homestead exemption not only protects the home from unsecured creditors—such as credit card companies or medical bill collectors—but it also can provide protection from the mortgage company itself (for a limited amount of time, depending on the chapter filed and whether the debtor can catch up on outstanding balances during the time of the bankruptcy filing).

Additionally, the home remains exempt even for debtors who own the house outright or have equity in their home. Other assets with value, such as vehicles or collectible items, are not exempt from creditor claims and would probably end up being auctioned to raise funds to pay creditors.

It is good to be a homeowner in Florida, where the homestead exemption protects your home in the event you encounter tough times. While Florida bankruptcy exemptions may appear stingy on some issues, when it comes to primary home protection, they beat the majority of the exemptions available in other states.

Alec Solomita Informs Listeners on BOLD TALK Business Radio

Alec Solomita on AM 1060 WMEL

ALEC SOLOMITA, ESQ., appears on AM 1060 WMEL. Located in Cocoa, FL, The Talk to Me Station, broadcasts across Central Florida at 50,000 watts, and streams live worldwide.

Attorney Alec Solomita, founder of Solomita Law, appeared in a recent interview with Donna Anselmo, host of BOLD TALK Business Radio, which airs on AM 1060 WMEL, Tuesdays between 1:00 and 2:00 PM EST. The show broadcasts to more than 4 million residents in Central Florida.

Intrigued by Alex’s commitment to  helping individuals who are struggling with debt, Ms. Anselmo offered to facilitate subsequent teleseminars for people who want to learn more about their options for debt relief through Chapter 7 and Chapter 13 bankruptcy filings and other debt management programs.

During the April 7 teleseminar, Alec provided insight to the bankruptcy process by discussing common questions asked by clients who are considering bankruptcy. Wondering what was said? We’ve inserted a link to the recorded teleseminar so you may listen at your convenience. Please do listen, and let us know your thoughts.

To ask us your own questions, feel free to use the form below or follow this link to our website where we have a slightly different form waiting for you. We’ll do our best to answer all questions in an upcoming teleseminar, blog article, return phone call—or all three. We look forward to hearing from you and will respond as quickly as possible.

Solomita Law Offers Free Debt Relief Tele-seminar Thursday, April 7, 7 pm

Solomita Law Teleseminar on iphone screenWe know that it’s not always easy to discuss personal financial matters, particularly when they involve debt. Many people struggling with debt believe there is no way out, so they avoid seeking advice until monetary situations become even more dire. Often, they can’t pay off their debts without outside help. To answer frequently asked questions about debt relief and bankruptcy, Solomita Law will host an informational tele-seminar. Registration is free and easy.
Once registered, participants simply need to telephone our conference call line at 7 pm, Thursday, April 7, 2016.


Debt Relief Strategies and Bankruptcy Options Tele-Seminar
REGISTER NOW  SolomitaLaw.com/register-for-event
Participants may listen in and/or ask questions in the privacy and convenience of their own homes. During this 45-minute tele-briefing, participants will:
  • Get answers to questions about the bankruptcy process and how it works.
  • Find out who is a candidate for a bankruptcy petition.
  • Learn how Chapter 7 and Chapter 13 petitions enable debtors to get a fresh start.
  • Have the opportunity to ask questions.
  • Learn more about how the legal system works.
  • Find out how to set up a free private consultation to discuss their individual concerns.

This tele-session is designed to help people struggling with debt and/or asking questions such as:

  • How can I get out of debt?
  • Will I lose my home in a bankruptcy filing
  • Is there any way to protect my assets?
  • Should I use my retirement funds to pay off my debts?
  • How can I get creditors to stop calling me?
Note: The information presented in this tele-seminar will be provided for educational purposes regarding options available for dealing with debt. This seminar is not intended to provide legal advice related to individual situations. For specific legal advice, please contact a qualified attorney to discuss your individual needs and circumstances.