Monthly Archives: January 2012

It’s true. Debt collector’s schemes seem to change from time to time. When the public begins to realize what they are doing, they fold up shop and begin with some new scam. The current scam?  Offering credit cards!

How does it work? Well, suppose that the statute of limitations has expired on a bad debt, legally speaking you have no obligation to pay back the debt. But many things can “restart the clock”, so to speak, and extend the statute of limitations. So the debt collector offers you a new credit card. Sounds good. After all, you need to rebuild your credit, and these days everyone needs a credit card just to survive. But, oops! Guess what, they add the balance of your old credit card to the new card. And unless you have read the entire small print you were not aware of this until you get your first statement. Behold…old debt is new debt again.  They can be crafty can’t they?

Debt collectors use all kind of “tools” to get you to send a payment on an old debt. They may threaten you with garnishment, jail time and on some occasions, physical harm!  They sometimes attempt to make you feel guilty and attempt to put some sort of moral twist on it. Oh yes…..morality being explained to me by a debt collector? Talk about the pot calling the kettle black!

After 20 years of working in bankruptcy I have heard many horror stories from debtors of debt collectors and their “moral attempts” to collect debts. On one occasion a debt collector actually told a 5 year child, that his parents were getting a divorce because they could no longer afford him anymore.  Shocking? Absolutely. But consider the story of the debt collectors that built a fake courtroom and held fake trials in front of a fake judge to attempt to scare money out of the unsuspecting debtor! Sound too incredible? It’s true. Erie, Pennsylvania 2010.  Fake sheriffs would show up at the door of a debtor with fake subpoenas and “ordered” them to appear at a fake courtroom! See the story here 

Okay, go ahead and pick your jaw up off the floor. The tactics used by debt collectors appears to know no boundaries. Nothing is off limits. If they get caught, or if the public gets wise to their shenanigans, then they simply pack up and move on.  If you look at it in this light, it almost sounds like grifting, doesn’t it? Scam… then move on.  Unfortunately, this sort of scam on most occasions seems to go on without much notice or government intervention. Why? Well after all, the money is owed isn’t it? And who could blame the debt collectors for attempting to get paid? But understand,  most people that are not paying their debts don’t really want to be in that situation. Most people would love to be in a financial situation where they could pay their debts. But alas, medical emergencies, unemployment and divorce do happen. And in a vast majority of cases, the debtor is simply unable to pay the debt back, not unwilling.

So beware! Watch what you do carefully.  If a debt collector contacts you and offers you a credit card. Politely turn him down. (Do not mention the old debt as that could possibly reset the statute of limitations). If you need a credit card, consider a secured card. Most banks offer this. There a many ways to get a new credit card, but getting one from a debt collector may not be such a wise choice. And remember, if a debt collector calls you, do not just assume that he is shootin’ ya straight. 

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Category: Bankruptcy

Noooooo! Not my twinkies! Say it isn’t so. How can this be? My monthly allowance for cupcakes and twinkies alone should be able to financially prop up any major corporation! But alas, Hostess Brands, Inc. has fallen over $860 million in debt and now, for the second time, finds itself in need for protection under Chapter 11 of the Bankruptcy Code.

Second time? Yes, you heard right, Hostess Brands, came out of bankruptcy only two years ago! How did this happen? Well, high labor expenses and rising ingredient costs for one. But isn’t that the case with every food manufacture? In a recent blog I talked about the rising food costs that were being passed on to the consumer due to increases in labor and costs. So then, why Hostess? Why now?

The reason for the first bankruptcy filing in 2004 was blamed on low sales and high fixed costs. (at least according to Hostess). But I think a more plausible explantion for the recent bankruptcy filing may be the on the recent failure to reach an agreement with the almighty unions regarding pensions and health care.

Good grief. Unions! I understand the basic principle of what they are and why they are here. But over and over again I see companies going bankrupt and closing their doors thanks to the Unions. Shouldn’t they be helping to create jobs rather than destroying them? Most of us don’t have the luxury of employers paying into a pension plan. Many employers, in fact have cut health care benefits entirely just to be able to meet payrolls. It is tough on employees but at least they have a job. In this economy, with it’s high unemployment rate, I am not sure forcing a company to pay more money into pensions and health care is the right thing to do.

Of course, there is an argument on both sides of this issue, but the fact remains, my beloved twinkies are now wrapped in bankruptcy paperwork.

Okay, with my political opinion out of the way, here are some Hostess facts.

–         Hostess, formerly known as Interstate Bakeries, was founded in 1930

–         It currently operates 36 bakeries and employees over 19,000 people

–         It operates in 49 States.

–         Annual sales are approximately $2 billion.

–         Total assets of $981.6 million

–         Total liabilities of $1.4 billion (as of December 10, 2011)

Recently, Hostess has attempted to sell it’s business to companies such as Smuckers and Kraft Foods, but has not had any success. Hostess will continue to operate and produce it’s product’s while in the Chapter 11.

Regardless of the reason for filing the bankruptcy, whether it is political or financial, whether or not the Union’s are to blame or just simple economics, as long as I get to continue satisfying my twinkie urges, then all is well with the world.

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Category: Uncategorized

For generations, bankruptcy has been considered to be a big bad monster, forbidden and taboo… However, with an average of over 1.5 million bankrupcty cases filed per year, the stigma of filing for bankruptcy has considerably lessened. Chances are, someone close to you has recently filed for bankruptcy protection. And with the current economy, who can blame them.

Most people have some vague concept of what bankruptcy is and what is does. They have heard rumors or read information on the internet that is just plain wrong or at best misleading. So to help, the following is a list of common misconceptions regarding bankruptcy.

1.      All my debts will be discharged in a Chapter 7 Bankruptcy. – Unfortunately, this is false. There are certain types of debts that will not simply go away after filing a Chapter 7 bankruptcy. Student Loans, back child support or alimony, court fines and some taxes do not discharge by virtue of filing a Chapter 7. In those cases, a Chapter 13 consolidation bankrutpcy may be a better option.

2.      If I am married, both me and my spouse must file bankrutpcy together. Not true. In this day and age, it is not uncommon for married couples to keep their debts and assets seperated. However, if the unfiling spouse co-signed on a debt, the creditor may simply start pursuing them. And to convolute the issue further, if you reside in a community property State, such as California, the creditor can pursue the unfiling spouse for the community debt, even if they never signed for it. This is however, very unlikely. It gets a bit confusing and is best to consult an attorney regarding the specifics. But, the bottom line, you do not have to file a bankruptcy together.

3.      Everybody will know that I filed bankruptcy. – Not necessarily. Unless you are famous, a prominent business person, or a major corporation, the chances of someone you know hearing about your bankruptcy is slim to none. While it is true that bankruptcy is public record, the media typically doesn’t bother publishing it unless it would be interesting to the general public. However, if you reside in a small town, the local newspaper could possibly print the names of people in that town that filed. But… it is still unlikely.

4.      I will lose everything I own.  Fortunately, this also is not true. This is a very big concern for people considering filing a bankruptcy, and unfortunately it prevents a lot of people that desperately need bankruptcy from filing. The truth is, the vast majority of people that file for bankruptcy keep all of their assets. The bankruptcy court allows certain “exemptions” for property. These exemptions vary from state to state, but most allow for equity in a house, vehicles and retirement plans.

5.      It is extremely difficult to file for bankruptcy. Yes and No. It really depends on the case. In fact it is possible to file a bankrutpcy on your own without an attorney. But, understand, this is a legal proceeding and as the saying goes “He who represents himself, has a fool for a client.” There are many intricisies to bankruptcy law, and even a small error could have devastating results. Attempting to save a couple of hundred dollars may end up costing you considerably more in the long run. Going through a bankruptcy proceeding, without an atorney, is not recommended.

6.      You can get rid of back taxes through a Chapter 7 Bankruptcy. Yes and No. Taxes that meet the criteria can actually discharge in a Chapter 7. But the list of criteria, as you can imagine, is very lengthy. The three biggest things that must be met are that the taxes must be at least three years old, filed timely or over three years ago and not assessed with the last 240 days. As before it is best to consult with an attorney regarding this issue.

 7.    You can only file bankruptcy once. False. You can file Chapter 7 bankruptcy once every eight years, and Chapter 13 Bankruptcy can be filed even more often. However, just because you can doesn’t mean you should. Bankruptcy is a negative on your credit report, and as you can imagine, having two bankruptcies on your credit report would be much worse. Bankruptcy is not designed to be a lifestyle, and should be considered only when absolutely necessary.

8.       My Credit life is over. Not so. In fact, once the bankruptcy case is filed, you immediately start to “repair” your credit. You would be surprised at the amount of credit card offers you will get after a bankruptcy case is discharged. While is is true that the bankruptcy will show on your credit report for 10 years, it is possible to regain a good credit score after 2 years if you do things correctly. It is very possible to finance a vehicle almost immediately after a bankruptcy, and is sometimes possible to finance a home two years after a bankruptcy. Maintaining no credit after you file a bankruptcy is  a bad thing and can actually keep your credit score low. A rule of thumb is to maintain a balance of around 20% on your new credit cards. But be careful, you don’t want to get yourself into a situation where you need to file a bankrutpcy again.

9.      I want to keep one of my credit cards and not include it in my bankruptcy case.  Unfortunately you must, by law, list all of your debts regardless of how small the balance is at the time of filing your bankrupcy. If the credit card you wish to keep does not have a balance, you do not need to list it in your bankruptcy. However, the likelihood is, the creditor will eventually find out about your bankruptcy case and close the account. A better idea would be to open a new credit card account after the bankruptcy is discharged. This will also help reestablish your credit and improve your credit score.

10.   I can max out all my credit cards and/or take cash advances on the credit cards just before I file a bankruptcy and not have to pay it back. Yikes! If you are considering this….STOP!!! Nothing could be further from the truth. This would be considered fraud and and would possibly not discharge through a bankruptcy case. Creditors have a right to fight the bankruptcy if they feel the debt was incurred fraudently. This could even include denial of the entire bankruptcy case! 

 Bankruptcy is there to help. But should be considered careully. And, as with any legal issues you should consult an attorney. And do not get a discount attorney, even if you think you have a simple case. Many attorneys popped up during the recent economy thinking they could make a quick buck in bankruptcy. Ask how long they have been practicing bankruptcy law. Go to court and watch them in action if you can. Do your research before commiting to an attorney. As stated before, saving a couple bucks on a cheaper attorney could cost you considerably more in the long run.

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Category: Bankruptcy