How Will Bankruptcy Affect Your Present or Future Employment?

Will a Bankruptcy Filing Have an Effect on Your Current or a Future Job?

Paying bills onlineIf you are experiencing financial difficulty, you may be considering a bankruptcy filing. If you are in financial services, or a similar field, you may fear that you will be terminated if your employer discovers that you filed. You may also worry that a bankruptcy filing, as a matter of public record, will disqualify you for certain jobs in the future.

Your Current Job

Under the federal bankruptcy laws, any employer is expressly prohibited from terminating an employee, or from engaging in any retaliatory actions based solely on the employee’s having filed for bankruptcy protection. You cannot be transferred, demoted or denied any work-related benefits because you have filed for bankruptcy protection. This is generally true even if you are required to have a security clearance for your job. Experts say that people who have financial problems are at greater risk of being blackmailed. If you have sought protection through a bankruptcy proceeding, you general lower that risk.

The situation is different, though, if you have already been notified of a termination or any other change in your position, and then file for bankruptcy protection. A Chapter 7 or Chapter 13 petition won’t stop or suspend any employer action that began before the bankruptcy was filed.

Future Jobs

Whether you get hired is a bit different. The impact of a previous bankruptcy filing on your eligibility for future employment depends on whether your employer is a public or private entity. The bankruptcy law prohibits federal, state and local government agencies from using bankruptcy to make hiring decisions. No such rule applies to private employers.

Some firms, such as in the securities industry, have policies refusing to hire people who have filed bankruptcy. However, we know clients even in those fields who have gone back to work in those fields.

Whatever the situation, the important thing is how you deal with your bankruptcy. You still have your skills and abilities. If anything, going through the bankruptcy taught you important lessons. If the bankruptcy was caused by circumstances outside your control, or if you attempted to pay debts before resorting to it, these are factors that should be emphasized. It is also a good idea to bring these matters up and deal with them before the employer finds out. Definitely do not hide or lie about the bankruptcy. Lots of people file bankruptcy for good reasons, and move on to successful lives. You should be able to do so as well.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at (856) 596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.
Representing Clients across South Jersey

NY Fed Study shows that for those drowning in debt, a bankruptcy results in a faster improvement in credit scores

A February 2015 study by the Federal Reserve Bank of New York looked at households in financial distress who are in or descending into insolvency,  and compared the results of their filing bankruptcy vs not doing so. Insolvency after the 2005 Bankruptcy Reform. Most of these households were facing lawsuits or collections, unpaid medical bills, and not enough money to pay these debts. Surprisingly, after a year to a year-and-a-half, those who filed bankruptcy had better credit scores and better access to credit!

Here is what the study found:

  • “both the balances in collection and the fraction of individuals with court judgments grow after insolvency for individuals who do not go bankrupt, whereas bankruptcy filing immediately stays collection efforts and court judgments”
  • individuals who filed bankruptcy had better access to new credit, opening “a larger number of new unsecured accounts.” NOTE: this does not account for how favorable or unfavorable the credit terms were. Most likely these are high interest credit card accounts. Because a bankruptcy discharge bars another bankruptcy discharge for 4-8 years, this makes sense,  as compared to those with unmanageable debt.
  • For those who were “newly insolvent… the individuals who do go bankrupt have lower credit scores than those who do not go bankrupt, which is consistent with them having a higher default risk”
  • BUT  by a year post-bankruptcy,  “the individuals who go bankrupt experience a sharp boost in their credit score after bankruptcy, whereas the recovery in credit score is much lower for individuals who do not go bankrupt. “

This coincides with what we have been saying for a long time. A bankruptcy may be a better option for those who are drowning in debt with no realistic prospect of turning things around. Either way, the goal is to get back to financial stability and financial health.

Too many people put off consideration of bankruptcy as an option, and end up making things worse for themselves and their families.

The starting point is a consultation with a qualified bankruptcy attorney who will take the time to help you review your budget and your options. Properly done, this easily takes an hour.

Whether or not bankruptcy is right for you, our firm is available to help.

 

Seniors in financial trouble recommended to consider using bankruptcy to help protect assets.

A recent New York Times article,  Bankruptcy Can Help Seniors Protect Assets, NY Times, June 30, 2015, makes a point that I have been making for years. Those in or near retirement need to be concerned about preserving their ability to support themselves as they age, and that means protecting the assets that make self-support possible.

Instead, I have seen too many people deplete IRA’s or retirement accounts to pay creditors. These accounts are protected from creditors and in bankruptcy (special rules protect all IRA’s in New Jersey. In other states the protection is there but more limited). Social Security income is also protected. Using up retirement funds means there will be less income or resources to meet our personal or health needs as we age.

While paying debts is laudable, it is a fools errand if the result is to make one destitute, or to leave debts for our estate to clean up after we die. A concern over one’s credit score should be less of a concern: with a fixed income, seniors should not be borrowing money that may not be paid back.

The starting point, as always, is a clear headed look at the available income and necessary living expenses. If one can afford to pay the debts one has while having a reasonable cushion for the inevitable unexpected expenses, a debt management plan may be best.

Even here, be leery of firms that promise to settle all your debts for a fee. Non profit organizations should be preferred.

Whatever the situation, a careful review with a qualified bankruptcy attorney is always in order. Knowing the options available is a wise first move. Whether or not bankruptcy makes sense for you, knowing what is available provides a good baseline to evaluate other options, and the relative short-term and long term costs they involve.

Credit Reporting Agencies promise to make it easier to correct credit report errors.

Our credit reports are our financial reputations, and are for that reason very important. Unfortunately, mistakes and errors are far too common. Even though there is a well established process for people to correct errors in their credit reports, the Big Three credit reporting agencies have made the process frustrating and overly-bureaucratic for those who could not afford a lawyer. This was the subject of an investigation by the New York Attorney General that has now led to a settlement. http://www.nytimes.com/2015/03/10/business/big-credit-reporting-agencies-to-overhaul-error-fixing-process.html?_r=0. 

As detailed in the March 10, 2015 report in the New York Times, Equifax, Trans Union and Experian will replace their largely automated (and frustrating) dispute resolution process with a staff of specially trained individuals. Most importantly, they have agreed to put a 6 month hold on adverse reports concerning medical bills. This is a recognition that these are more commonly the subject of a billing dispute rather than non-payment.

The AG investigation found that the existing process was often ineffective in correcting legitimate errors. Creditors reporting a bad debt were given deference in the investigative process, resulting in improper automatic rejection of claimed errors.

We hope these changes will make it easier for people to correct their credit reports. However, we still recommend that any inquiries and disputes be followed with a letter detailing the problem. If a proper correction does not occur within 30 days, a lawyer should be consulted.

We suspect that where an attorney gets involved, the response from the credit reporting agencies will be escalated to a higher level.

Annual monitoring of your individual credit report is always a good idea. (For New Jersey residents, a free credit report is available once a year through www.annualcreditreport.com) While no one can eliminate a truthful adverse credit record (at least until 7 years after it goes to “charge off” or collections), what is there should still be accurate.  In fact, we recommend that our bankruptcy clients check their credit reports after a bankruptcy discharge to make sure that none of the discharged debts show anything other than a zero balance due.

Stay tuned…

Resurrection of the subprime mortgage mess-this time in car loans

In the run up to the 2008 financial crisis, investment bankers were telling us they were flush with cash. In a real estate boom fueled by easy availability of credit, even buyers with poor credit histories could get mortgage loans, often with exotic terms and overstated income or values put onto credit applications by less than scrupulous mortgage brokers. The whole thing was fueled by securitization, in which large bundles of questionable loans were created for investors, with the risks hidden by overstated appraisal values and credit rating agencies that for one reason or another did not expose the risk.

The result was the crash in real estate and the crisis in financial markets that started in late 2008. The real estate market is only now starting to recover.

But subprime credit targeting the most vulnerable borrowers has come back. In a  July 21, 2014 report in the New York Times, In a Subprime Bubble for Used Cars, Borrowers Pay Sky-High Rates  we learn that in the past 5 years, auto loans to borrows with tarnished credit have gone up 130 percent, and that these loans are 25% of the total of auto loans being made. The Times investigation found loan rates as high as 24%, with the amounts borrowed typically about double the value of the car being purchased. The borrowers frequently default and the cars are repossessed. Many of the borrowers have a previous bankruptcy that prevents them from discharging the resulting deficiency debt.

As the Times reports, the money to make these loans is fueled by same process of loan securitization and investors looking for high rates of return in a difficult investing environment. Indeed, in some respects, auto loans are less risky that mortgage loans. A car can repossessed and sold in many states in a small fraction of the time to foreclose on a mortgage and sell the home at Sheriff Sale.

The victims of this process are the most vulnerable of borrowers. Most need reliable transportation in order to get to work and to feed themselves and their families. Without access to a ready chunk of cash, they have to borrow the money to buy a car.

We constantly counsel our bankruptcy clients to start with and keep a budget, and to accumulate cash for important needs such as auto repairs. But even the most diligent often find themselves backed into a financial corner, where getting an auto loan is the only option.

So availability of credit for this purpose is not necessarily bad. What is deplorable is the way that used car sellers and lenders are pawning off overpriced vehicles of questionable value on those who seek credit.

For the regulators, some controls on the credit industry and its used car seller partners is called for. For those who need to borrow money for basic transportation, the lesson is that “buyer beware”, and to borrow money for these purposes carefully and with full knowledge of the traps that unscrupulous dealers and lenders have lying in wait for them.

 

Protecting or rebuilding your credit- tips from CARE

Every now and then something crosses my inbox that is so worthwhile I feel compelled to pass it on. Here is one from the ABI’s CARE program [CARE stands for Credit Abuse Resistance Education. Here is their website: www.care4yourfuture.org
Anyway, so much of what they have to say is “spot on” and what I have been suggesting for years:
Proper CARE and Feeding: Your Credit Score
It pays to keep your credit score in good health. Follow these easy steps to keep your credit score in top condition.
Get an annual checkup. It’s free, and it doesn’t hurt a bit. Contact one or more of the three major credit bureaus to obtain your credit report and credit score. Contest any inaccurate information so that it can be corrected as soon as possible.
Equifax: 800-685-1111; P.O. Box 740241, Atlanta, GA 30374; www.equifax.com Experian: 888-397-3742; PO Box 2002, Allen, TX 75013; www.experian.com. TransUnion: 800-888-4213; P.O. Box 2000, Chester, PA 19022; www.transunion.com.
Pay your bills on time. Delinquent payments and collections can have a major negative impact on your credit score.
Keep balances low on credit cards and other “revolving credit.” High outstanding debt can affect your credit score.
Don’t open new accounts just to have a better “credit mix”. It probably won’t improve your credit score. Applications for credit show up as inquiries on your credit report, indicating to lenders that you may be taking on new debt. It may be to your advantage to use the credit you already have to prove your ongoing ability to manage credit responsibly.
Pay off debt rather than move it around. Also, don’t close unused cards as a short-term strategy to improve your credit score. Owing the same amount but having fewer open accounts may actually lower your credit score.
Protect your credit information from fraud and identity theft.
Avoid overextending yourself. Don’t need it? Can’t afford it? Don’t buy it.
Change is not always good. You need to understand how very specific actions will affect a credit score. For example, will closing two of your revolving accounts improve your credit score? While this question may appear to be easy to answer, there are many factors to consider.
Credit scores are based entirely on the information found on an individual’s credit report. Any change to your credit report could affect your credit score. Simply closing the two accounts not only lowers the number of open revolving accounts (which generally will improve credit scores), but it also decreases the total amount of available credit. That results in a higher utilization rate, also called the balance-to-limit ratio (which generally lowers scores).
One change may actually affect several items on your credit report. It is impossible to provide a completely accurate assessment of how one specific action will impact your credit score. This is why the “credit risk factors” provided with your score are important. They identify what elements from your credit history are having the greatest impact so that you can take appropriate action.
Time is on your side. It takes time to improve credit scores. If you have negative information on your credit report, such as late payments, a public record item (e.g., bankruptcy) or too many inquiries, you may want to pay your bills and wait. Time is your ally in improving your credit scores. There is no quick fix for bad credit scores.
How long does it take to rebuild a credit score? Actually, you don’t rebuild the credit score. You rebuild your credit history, which then is reflected by your credit score. The length of time to rebuild your credit history after a negative change depends on the reasons behind the change, and these new elements will continue to affect your credit scores until they reach a certain age. Delinquencies remain on your credit report for seven years. Most public-record items also remain on your credit report for seven years, although some bankruptcies remain for 10 years, and unpaid tax liens remain for 15 years. Inquiries remain on your credit report for two years. CARE_ICON_COLOR.1
Of course, for many people the first step is to get relief from overwhelmining debt so that they can take back control of their lives and start this process. If this is you or someone you know, we can help!

Post petition payments and the “New Value” defense to preference suits-Third Circuit Court of Appeals holds they do not affect the outcome

One of the simplest ways for a defendant to defeat a preference lawsuit in bankruptcy is to show that after the defendant received the payments that the suit is trying to recover, it gave “new value” to the debtor which remained unpaid (or was paid by another avoidable payment). The defense, codified at 11 USC 547(c)(4), is intended to avoid penalizing creditors who continue to deliver value to a struggling debtor in the months leading up to bankruptcy. In essence, a creditor who, though paid, delivers new goods or value for which it remained unpaid can offset that “new” value against the amount it otherwise would have to pay back. The beauty of this defense is that the proofs are simple and the result has a mathematical certainty.

In a December 2013 ruling, the Third Circuit Court of Appeals in In re Friedmans’s Inc. held that whether “new value” was given is determined as of the Petition date, and that payments the creditor/defendant received after that date which reduced its unpaid balance are not a factor in applying the defense. The creditor, Roth Staffing, had supplied staffing services to the debtor. In the 90 days pre-bankruptcy, it had been paid $81,997 but had thereafter supplied over $100,000 in new services that were unpaid on the Petition filing date. By itself, this would be a complete defense to a preference action, since Roth had added more value than it had been paid for and as a result was worse off on the Petition date then before receiving payments. What made the case unusual is that post-petition, the debtor obtained a “Critical Vendor” order that authorized it to pay down Roth’s debt, in order to encourage Roth to keep the flow of critical staffing continuing. Under this order, Roth received another $72,413.00.

The debtor’s successor in interest filed a preference action against Roth. The issue was whether Roth had a complete defense based on the unpaid $100,000 when the bankruptcy was filed, or whether this was reduced by the $72,413 in additional payments it had received after the bankruptcy filing. The Third Circuit, affirming the District Court, held that Roth had no liability since as of the Petition date its payments received were less than the new value it had provided. In a matter of first impression on this issue, it held that the $72,413 paid post-petition was properly disregarded for purposes of the “new value” defense.

The Court supports its holding in a lengthy and interesting analysis of the preference statute and the policies behind it. For anyone facing a preference action and intending to use the “new value” defense, the case is a “must-read”.

Student Loan debt? Here are some resources and ideas

Student loans are one of the largest categories of consumer debt today. Many people are worried or struggling to pay these loans. Worse, any student loan under a government sponsored program or with government guarantees, AND private student loans that meet tax qualifications under section 221(d)(1) of the Internal Revenue Code are not dischargeable in bankruptcy.

However, there are programs that provide assistance with repayment or partial or full discharge of certain types of loans.

Federal loans have a variety of payment plans and options for those who qualify, including partial forgiveness of the loan, income contingent repayment plans, or extended payment terms, up to 25 years. These options are, at present, limited or non-existent for ParentPlus loans

Certain types of public service can qualify you for a partial discharge.

Loan consolidation is available, but has to be approached carefully. Done wrong it could result in loss of available repayment plan benefits.

Loan foregiveness may be available, especially if the loan was given to fund a trade school education where the school failed to pay a refund, falsified certain representations as to student benefit or made other false statements.

The first thing to do in these situations is to find or obtain the loan documents. A financial aid department may be a good resource. Better yet, when you take out the loans, be sure to keep all the paperwork and applications!

This area is complex and the results are very much a product of the particular type of loan and the facts. It never hurts to ask the government agency administering the loan program for advice and information. However, you should do your own research.

Here are some on-line resources we have heard about:

http://ibrinfo.org/

http://paybacksmarter.com/

For some people who are drowning in debt, a personal bankruptcy may be what is needed to eliminate other debt so more income can be devoted to repaying student loans.

 

Rebuilding Credit after Filing for Bankruptcy

Fox Business highlighted the important steps that one must take to restore a credit rating after filing for bankruptcy. There are limited ways to get out of the financial hole that many Americans are being trapped in. The most important first step is the one most people find hardest. Develop a household budget and stick to it. Know how much money is coming in and where it has to be spent. Identify and close off the “money leaks”, those little expenses that add up (e.g Buying lunch at $5/day equals $100 a month; buying coffee out at $3 a pop; cigarettes, liquor).

A credit score is compiled from several factors, including payment history, length of credit history, and amount of debt relative to income. Whatever debt you still have (eg car loans or leases, or mortgage payments if current) needs to be paid on time without fail. Many of our clients will eventually get a new credit card. One early option here is to apply for a secured credit card. By having a secured credit card, you are only able to charge items on your card as you put money on the card account. Most secured credit card companies will report the activity of your card to the credit bureaus, which increases your credit score with time. There are a number of other ways to start to buy and pay off items in order to keep raising your score.

But having credit is not nearly as important as how you use it. We recommend that clients have a credit card, and use it only for limited purposes, such as buying gas, then pay it off in full each month.

For those who have not already done so, filing for bankruptcy may be a positive step in tightening your financial belt, and taking back control of your life. We insist that our clients put together a personal budget and make getting back to financial stability as their all-important long term goal. In this regard, one bankruptcy requirement (we call it the “ticket out”) can be quite helpful if taken seriously. I refer to the “debtor education” financial management course that is required to receive a bankruptcy discharge. This course, from a credit counseling agency approved by the United States Trustee, can be done on-line, usually in about an hour. It typically covers the basics of budgeting and avoiding the traps that put debtors back in trouble.

Completing the financial management course after filing bankruptcy, and filing of the certificate form is essential. If not done, the case will be closed without a discharge of debts. Since the discharge is the whole point of a banrkuptcy filing, all the benefit can be lost unless the case is reopened. This will require a new filing fee and additional work by a lawyer.is usually taken during bankruptcy, although it can be completed before filing.

The point is that the damage to ones credit from a bankruptcy is not permanent. Indeed, we believe that for those who are drowning in debt, a bankruptcy is the best step back onto the road to financial stability, and an ability to pay debt that in turn will result in a return to a better credit rating.

Nuener & Ventura are experienced attorneys who are federally recognized as a debt relief agency. Our attorneys can help you take back control of your lives. We know how to point you in the financially responsible direction that you need to head after filing for bankruptcy. Please contact Nuener & Ventura at (856) 596-2828 for a consultation to start a new financially responsible life.

Federal Trade Commission reveals the truth about debt buyers- debtors be savvy and demand proof

A large portion of past due debts are bought by professional “debt buyers” who then attempt to collect the bad debt. The Federal Trade Commission just issued a 162 page report after studying this practice for over 3 years. The report is eye-opening.

The FTC notes that it “receives more consumer complaints about debt collectors, including debt buyers, than about any other single industry. Many of these complaints appear to have their origins in the quantity and quality of information that collectors have about debts.”

The FTC found that debt buyers pay an average of 4 percent of face value, and for older debts, the cost is “significantly lower”. The debt is still fully due, but the buyer’s have a large profit percentage. This reflects, we believe, the inherent riskiness of what is being purchased.

Debt buyers will commonly buy these debts in bulk on an “AS IS” basis. Buyers typically received the basic information required for notices required under federal law, such as the amount of the debt. They also commonly had other information which has to be requested by the debtor by disputing the debt in writing.  This information, the FTC found ” included the name of the original creditor, the original creditor’s account number, the debtor’s social security number, the date of last payment, and the date of charge-off.”

What is revealing is what Debt Buyers did not receive upon buying the debt. This includes the history of previous disputes on the account  or information that would allow them to break down the outstanding balance into principal, interest, and fees.  Most of the time, the FTC found, Debt Buyers received “few underlying documents about debts” such as account statements, loan agreements or other documents showing the terms and conditions of credit. Yet these are the very kinds of proof that a court of law is likely to require if suit is filed.

The FTC found that some debt that was purchased was beyond the statute of limitations, meaning that a suit on the claim could be readily dismissed as time barred, IF the defendant asked.

These findings square with our experience. It usually pays if there is a basis for question to demand the underlying documents and proof of the debt. The results may not be immediate. We have found the same disputed debt being passed from collection agency to collection agency. But many times, the original signed agreements or purchase or charge records simply do not exist.

Of course, no one should ignore collection efforts. It just pays to be savvy and demand proof when appropriate.

 

Recognized Quality & Experience