Peter Francis Geraci A Bankruptcy Blog - Chapter 7 & 13

Baseball is America’s past time.  Teams like all Americans are struggling during the economic downturn.  Players by contract are making millions, but revenue has dropped and has forced many teams into bankruptcy.

Most recently, the Los Angeles Dodgers filed for bankruptcy protection.  The reason cited is a significant drop in attendance and mismanagement by owner Frank McCourt. Unsecured creditors include players and the Chicago White Sox (both teams share a spring training facility).  The filing comes after attempts at refinancing a loan against the stadium’s parking lot and applications for additional loans.

Ultimately McCourt and the Dodgers were out of options.  McCourt rejected a multi-billion TV deal last week and is hoping a federal judge will approve $150 million in financing for a better media contract. Whether or not a media contract will improve the standings for the Dodgers is hard to predict.  The Dodgers are currently 9 games back and playoff potential looks grim.

Last year, the Texas Rangers filed for Chapter 11 protection.  Hall of Fame pitcher Nolan Ryan purchased the team at auction.  After bankruptcy filing, the Rangers reached the World Series for the first time.  Hockey franchise Pittsburgh Penguins filed for bankruptcy protection twice and have gone on to win 3 Stanley Cups.

Now a bankruptcy filing will not guarantee you a championship. The Chicago Cubs filed for protection in 2009 and the curse was not discharged.  But whether you own a professional sports franchise or if you are a common lay person, post-bankruptcy is about rebuilding. The Texas Rangers created a plan and stuck to it. You cannot expect as an individual to maintain the same lifestyle post-bankruptcy.

You make payments on time; you save money and who knows you could be drinking champagne from the Stanley Cup?

A recent blog entry from Stephen J. Dunn for Forbes entitled, “Consumer Bankruptcies Do More Harm than Good” sparked controversy from bankruptcy attorneys and people in debt. I wanted to address the problems with Mr. Dunn’s narrow-minded entry.

“Most consumer bankruptcies are pointless”

Dunn’s argument is creditors rarely sue or call people who owe.  He cites the Fair Debt Collection Practices Act stating, “[A] creditor must, at the request of a consumer, stop contacting the consumer about a debt.” Clearly Mr. Dunn has never spoken to someone in debt. Creditors frequently contact debtors from dawn until dusk. When the debtor fails to reply, the creditor will sue the person. 

If it was as easy as asking a creditor to stop calling, why would anyone pay bills? If lawsuits happen rarely, then why not charge up debt? It’s shortsighted to believe it is that easy. In this economy, loss of income makes it increasingly difficult to stay current with payments.  Single moms with kids struggle to put food on the table and instead of providing them with debt relief (through bankruptcy), Mr. Dunne would rather these people do what?

There is an entire study dedicated to the stress caused by debt. Dr. Paul Lavrakas of Ohio State University found debt can cause stress leading to severe anxiety, ulcers, digestive tract problems and eventually heard problems.

If creditors “rarely sued” debtors, garnishments would not be an issue. The county circuit courts would be empty of creditors’ attorneys.  Mr. Dunn is so misinformed it’s frightening.

“The debtor is subject to criminal prosecution for willfully false statements made therin”

Yes, Mr. Dunn if someone commits fraud (outside of bankruptcy also) they will be subject to criminal prosecution. 

“A creditor can challenge the dischargeableability of a debt.”

Creditors have rights just like consumers. This shows the importance of hiring a skilled bankruptcy attorney.  Peter Francis Geraci, Geraci Law attorneys are able to win adversary proceedings on behalf of clients. Bankruptcy is not a simple process but neither is ignoring ringing phones and lawsuit summons.

I, like Mr. Dunne, am not an attorney. I cannot provide legal advice. But, I am fortunate enough to understand that millions of Americans with debt have found relief with a bankruptcy discharge.  I also understand not to believe everything you read on Wikipedia – my corrections to the author:

-A chapter 13 plan can go for three – five years, NOT three-four.

-Chapter 7 and Chapter 13 are BOTH consumer bankruptcies.

To read the atrocity, please click here.

Presidential hopeful, Mitt Romney, said bankruptcy saved Detroit – not the bailouts given by the Bush and Obama administrations. Chrysler and General Motors both filed Chapter 11 protection and now are showing a profit and adding jobs. Both companies took the bailout and ultimately filed bankruptcy.

On the CBS Early Show, Romney said, "[W]e could have saved billions of dollars had we moved to bankruptcy from the very beginning." General Motors received a bailout of $43 billion. Since the loan, GM has paid $6.7 billion back and the balance will be converted to stakes in the company. It will take years for taxpayers to receive the money back. GM was able to pay back the $6.7 billion through the bankruptcy filing.

When the recession started, thousands of autoworkers were offered early retirement or laid off entirely from jobs. Many workers were in the same position as their previous employer – without demand for employment and an overwhelming amount of debt.

Bankruptcy is not usually a debtor’s first choice for getting out of debt. Instead, many debtors will ask family or friends for loans before calling a bankruptcy attorney. These loans often do more harm then good.

Family members or friends will want repayment on the loan and if you are out of work you may not be able to pay it back. Or because of the economy, your peers may have financial troubles and could not loan you the amount to pay back all of your debt. If you are the person lending the money – are you going to be ok with not receiving repayment?

If you receive a loan for $10,000 and you have $30,000 in debt – at best you will have $30,000 in debt because you still have to pay the loan back. If you file for bankruptcy, you eliminate the need for the $10,000 loan and the $30,000 in debt and keep you relationship with the family member or friend you were going to borrow from.

Bankruptcy helped the previous auto giants and helped provided jobs back to the autoworkers of Detroit. If you have debt, do not borrow more money to pay back debt. Take Romney’s advice – look into a bankruptcy and save billions of dollars. You can see the Romney interview here.

Whether it was the Teenage Mutant Ninja Turtles or the 30 minute delivery or free ads, pizza became and has stayed the country’s favorite food. Everyone loves a good slice – whether it’s during a football game, business meeting, or your child’s fifth birthday party.  America’s favorite dish however seems to be struggling.  There have been multiple popular pizza places filing or finishing bankruptcies over the last year.

Pizzeria UNO emerged from bankruptcy last year; Chicago-based Giordano’s entered bankruptcy in February and just earlier this week shopping mall food court favorite Sbarro Pizza filed a Chapter 11. America’s favorite food providers are succumbing to higher food costs and competition from frozen pizza (it’s not delivery it’s Digiorno – for example).  With multiple locations closing and other fast food alternatives – what is going to happen to family pizza Friday?

Pizza lovers fear not – a Chapter 11 bankruptcy allows the company to continue operations and according to the Pizza Today (yes it is an actual news source), the pizza industry is still earns approximately $38 billion each year.  These pizza professionals filed for bankruptcy protection to continue to provide the pizza pies. Without bankruptcy law, where would you snack after visiting the mall? Where would Chicagoans get their deep-dish?  Bankruptcy helped your dinner provider and could help you with your own debt.

Addressing the alleged failures of other Illinois bankruptcy attorneys was not the original purpose of this blog but the weekly indictments are making it difficult not to tackle the importance of finding a good (and honest) attorney. The newest debacle involves an Illinois attorney in the Western suburbs.

This is not the first disciplinary rodeo for this attorney. In 2010, this attorney was suspended on an interim basis because she, “overreached an attorney-client relationship, exerted undue influence on clients, charged in excessive fees without authorization from the bankruptcy court, and in some cases, without her clients knowledge or consent, engaged in dishonest conduct.” In this article by the “Illinois Lawyer,” there are 26 other attorneys who were suspended and 12 attorneys who were disbarred.

In this attorney’s current indictment, she has been accused of bankruptcy fraud and is facing felony charges. Some of the indicted attorneys have been practicing bankruptcy for years and others appear as if from no where when the economy takes a dive. While this attorney defends her allegations, clients are trying to figure out who is representing them and their financial interests.

Attorney Peter Francis Geraci and his firm Geraci Law, LLC have been around for the last 35 years. We are here to help the people who want to help themselves. This is not a fly-by-the night, waiting for an inevitable indictment kind of law firm. We’re here to help the good people with bad luck get out of debt.

To read the article in the Illinois Lawyer about the 2010 disciplinary actions, please click here.

For years, Michael Scott and his office clan have entertained millions of Americans on the hit NBC mockumentary series, “The Office.” Its popularity is due, in large part, to the old comedy trick that the audience knows something that the characters don’t. In the case of “The Office,” the television audience is aware that the events on the show are fictitious, and can therefore find humor through satire. However, in the fourth season episode “Money,” the show completely misleads its viewers about the life-saving system of bankruptcy, and actually leads them to believe that it’s a procedure to be avoided. So, where’s the comedy when it’s the audience that’s been tricked?

“I…DECLARE…BANKRUPTCY!” Haha, very funny, Michael Scott. We all know that that’s not how it works. The audience does realize that Michael’s excessive spending and poor budgeting has led him to reevaluate his lifestyle (like, not buying magic kits or bass fishing equipment), but in our real world, the audience probably understands just about as much about bankruptcy as he does. Michael believes and even states, “In Monopoly, you go bankrupt, you lose.” Well, that is true, but Monopoly is also a 1930s-era board game and this is real life: in this world, you go bankrupt, you get another chance at financial freedom.

After Michael literally declares the word bankruptcy, one of the office accountants decides to look over his budget and offer some professional advice. This is where experienced accountants, attorneys, and burned debtors know that “The Office” is doling out some pretty bad advice. Michael is advised to meet with a debt consolidator by Oscar Nuñez, the office accountant – red flag! Wrong! An educated accountant would know that debt consolidation is really a scam: first of all, it rarely works, and second, the program tricks clueless debtors into extending the terms of their repayment (which is why interest is lowered). I don’t know about anyone else, but I’d like to see what university gave Oscar Nuñez a degree in accounting!

So, who is responsible for giving millions of Americans bad advice? Is it the producers, the writers, maybe even the network? It looks like that adage “Don’t believe everything you see on T.V.” remains true to this day. It’s really up to the American people to make themselves aware of the subjects presented on television, especially regarding finance and debt. Don’t be like Michael Scott – consult real bankruptcy attorneys, like those at Geraci Law, LLC. They’ll give you the kind of advice NBC didn’t – good advice!

Earlier this week, there was an article on MSNBC’s Web site addressing how bankruptcy can save your home.  This is a national news service advertising the numerous benefits of a bankruptcy.  In the article, journalist John W. Schoen said, “Bankruptcy laws, after all, were established to provide an orderly process for people in financial trouble to reorganize their debts, start fresh and rebuild their lives.”

Schoen’s article focused how a Chapter 13 bankruptcy can save homes from foreclosure. Homeowners who were out of work for a couple of months and are getting back with a steady income can save their homes. If you can afford your home, you can keep your home. Let me repeat, if you can afford your home, you can keep your home. File a Chapter 13 bankruptcy and stop the foreclosure proceedings. 

If you every tried contacting your mortgage company about a missed payment or modifying a loan, you are well aware that stopping a foreclosure without a Chapter 13 is nearly impossible.  Most mortgage companies will not accept payments once a foreclosure has been filed – even if you have money to pay on the arrears. A chapter 13 is your solution! Your mortgage company cannot proceed with a foreclosure if you have a filed Chapter 13 bankruptcy.

I am not a statistician but I think you can link the increase of bankruptcy filings and the decrease in foreclosures. For example, in Illinois in February, there were 109,178 bankruptcy filings. This number can be attributed to using tax refunds to pay for bankruptcy filings and other numerous causes for the jump from January. However, the number of foreclosures in Illinois also declined. According to RealtyTrac, there were 9,592 foreclosure filings. This number is 45% lower than February of last year.  So more bankruptcies were filed and fewer foreclosures were filed – coincidence? I think not.

It’s hard to argue the numbers are not related. The negative stigma of bankruptcy is being replaced by the benefits to struggling consumers. Articles like Schoen’s can replace the negativity around bankruptcy. The ongoing joke is if you walk into a party and say you filed for a bankruptcy, half of the room would say they filed also. Everyone needs a little help especially when it comes to your home. Just a reminder, if you can afford your home, you can keep your home – examine your Chapter 13 options.

To read the article click here

Apparently everyone is having money trouble. Our elected officials are having as difficult of a time as you or I creating and maintaining a budget. The big difference is when the federal government can't create a budget, the government stops.  Federal employees do not go to work because there potentially is no money to pay them.  Despite a budget extension to March 18th, the federal government is hitting the bomb shelter and preparing for a shutdown, including the federal courts.

When there is a shutdown, the costs charged with almost every filed bankruptcy petition can actually fund the adminstration of the majority of courts - not just the bankruptcy court. However, the funds could simply run out. The money spent by bankruptcy petitioners is actually funding other courts...the irony.

If the court were to shutdown and if the pool of money from court costs were to dry up, it is possibly bankruptcy attorneys could be affected. If there is no money to fund PACER (an electronic filing system used by attorneys to process bankruptcy petitions - including Geraci Law, LLC), the system could be shut down.

What does this mean to you - potential bankruptcy filer? You want an attorney who can survive the shutdown! Peter Francis Geraci and Geraci Law, LLC have been in practice for the last 35 years.  When there were other government shutdowns in the mid-90s, the firm survived and ensured petitions were filed.  

When you are considering a bankruptcy, keep in mind our towns, our states, and our federal governments are in similar positions. There is simply no money left over at the end of the month to pay the bills.

The word bankruptcy has been in the news recently. However, the discussion is not directed toward consumers but state bankruptcies. With budgets spread so thin that the state budget seam is about to burst, a state bankruptcy is an interesting idea.

States are in fact, well bankrupt. With budget shortfalls and empty pension accounts, the inevitability of federal bailout request is obvious. It's an opportunity to lay out the current financial situation and plan for a better future. Walt Disney did it, Abe Lincoln did it, General Motors recently did it and their stock is making a comeback. Allowing states the option to file would address the problem and allow provide a solution.  Instead, governors are against the idea of state filing and have expressed some genuine concerns but have failed to come up with a better solution.  Illinois lawmakers decided it would be better to raise the income tax 66%.

This is the same state according to Governor Pat Quinn in a budget speech said, "Currently, Illinois pays its bills six to eight months behind schedule." If a consumer with a payment six to eight months behind did not address the problem, it's probable they would be sued, garnished and constantly harassed by creditors. Generally, the consumer may only have $10,000 in debt not the $8.7 billion of Illinois.

There are worries, concerns, and angst with any major financial situation. And while the majority of this entry is hypothetical because the legislation has not been passed - the idea of a state bankruptcy may not be as "havoc reeking" as some lawmakers have inferred.  Consumer bankruptcies have provided help for so many families why not extend the aid to the states. Be as brave as the constituents you represent lawmakers, give the option of state bankruptcy another look.

Continuing Attorney Curtis entry, "Selecting the Right Bankruptcy Attorney for You - Experience Counts," the right attorney is one who will file your case in a timely matter and correctly the first time. When the economy turned, attorneys who file bankruptcy are appearing like campaign ads in November. These attorneys are ones who quote $400 bankruptcy fee and disappear after the case is filed. You know the saying you get what you pay for.

Recently, two Illinois bankruptcy attorneys have been charged with several counts of bankruptcy fraud. Including lying under oath, filing false documents, and hiding case dismissals from clients. This attorney also allegeldy collected fees to file for Chapter 13 bankruptcy protection with the promise to put the money toward the mortgage. However, the court alleges they used the money for their own benefits. When it comes to your financial situation you want an attorney to file your case correctly - and legally - so you are not paying an attorney to get you further in the hole.

When considering an attorney, it is important to look ahead to the future. A Chapter 13 bankruptcy can range anywhere from three to five years meaning you want to know your attorney will be around for the next three to five years. Peter Francis Geraci and his firm have been practicing for 35+ years helping numerous people get out of debt. When a previous client calls needing a reprint of bankruptcy information, a person answers the phone instead of a dial tone for attorneys who have closed up shop.

You can read more about the indictment in today's Chicago Sun Times.  

According to an article by Julie Schmit of USA Today, the average forecloure time takes 17 months - this number is up from 11 months from two years ago. Job loss is the leading cause of foreclosure for homeowners and the common misconception is you will lose your home when you are only a few months behind. The best, easiest, and probably the cheapest way to save your home is by filing a Chapter 13 bankruptcy. A Chapter 13 repayment plan will STOP foreclosure proceedings and you will enter a repayment plan with the bankruptcy court for the arrears on your home and debt without the interest and penalties.

Think about it - you lose your job in March and fall behind on the mortgage, you have a new job starting in June and would be able to make the mortgage payment but not all the arrears at once. While on unemployment you can't afford to make your mortgage payment and the house goes into foreclosure before the new job starts.  Solution - file a Chapter 13 bankruptcy! Your income at the new job will be more than enough to cover your mortgage payment and you will pay a small additional amount to cover the arrears in a three to five year repayment. The foreclosure proceedings stop and you are able to stay in your home.

A chapter 13 can be filed the same day as a sheriff sale in order to stop the auction of your home. Do not wait that long, if you fall behind and can afford your home then get a case filed. Sooner is always better than later - especially if you are behind on your home.  If a foreclosure takes over a year to complete, it is more time for you to save your home but the quicker you file the faster you can become current on your mortgage payment.

The opposite side is if you want to walk away from your home. If you have unsecured debt that you know you won't be able to pay off and a mortgage that doubles your monthly income - filing a Chapter 7 bankruptcy is a good way to get a fresh start. A Chapter 7 bankruptcy will eliminate the credit card debt and your obligation to pay the mortgage deficiency. If foreclosure takes 17 months to complete, you can file a Chapter 7 and eliminate the credit card debt and stay in your home until the sheriff sale. It's rent free! Just keep the property insured and maintained and you can save money until the end of the foreclosure.

Read Julie Schmit's article in USA Today at http://www.usatoday.com/money/economy/housing/2011-02-21-unpaidmortgages21_ST_N.htm