Blog Topic

MEDICAL BANKRUPTCY
Posted by: Darrell Castle
November 30, 2009

"There is a general sense among bankruptcy lawyers and court officials... that the share of personal bankruptcies caused by illness is growing." This quote is from the New York Times November 25, 2009 and the article is entitled From the Hospital to Bankruptcy Court. This is not new information for anyone who practices bankruptcy law. The number of people with overwhelming medical debt is growing and has been for several years. In fact, it is rather unusual these days to see a bankruptcy client without any medical debt. Sometimes the medical debt is the cause of the bankruptcy and sometimes it is only part of the overall picture.

These are the problems that bankruptcy lawyers who represent people in debt tried to convince congress of before it passed the Bankruptcy Reform Act of 2005. I mean by that statement that we tried to convince Congress that bankrupt debtors are not people who are trying to beat the system but instead they are primarily people who because of some tragedy are no longer able to pay their debts. Medical debts are perhaps the most devastating because the people are sick and sometimes the illness remains after the bankruptcy. When people are sick for an extended period of time they often lose their jobs and the problems are compounded. It is a very difficult and emotional time in the lives of people who see their lives out of control for the first time. It has been my experience that in most cases the medical debts are the final straw that breaks the camel's back. People struggle with hardship sometimes for years and an illness or accident pushes them over the edge.

Bankruptcy relief provides a useful safety net for our society. Without the possibility of relief from debts which have become unpayable, catastrophic problems would develop in our nation. I know what you are thinking: we already have catastrophic problems in our nation and you are right but they would be even worse without the bankruptcy system. Fortunately we do have the bankruptcy system and it is there to provide relief when people need it.

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MORTGAGE DELINQUENCIES REACH RECORD HIGH
Posted by: Darrell Castle
November 20, 2009

The Mortgage Bankers Association released its survey of home mortgages yesterday and the resulting numbers indicate that the problems of foreclosure and mortgage default are increasing instead of getting better. Nearly one in ten homeowners with mortgages was at least one payment behind in the third quarter which translates to about five million homes. This is an indication of millions of foreclosed homes backed up and about to enter the market which will continue to put downward pressure on housing prices for years to come.

The delinquency rate is the highest since the Association started keeping records in 1972. The figure of 10% percent of mortgages in default is shocking and significantly up from the 2008 number of one in fourteen in delinquency. The combined percentage of those in foreclosure as well as delinquent on payments is 14.41 percent or about one in seven mortgage holders. The hardest hit states are California, Florida, Arizona, and Nevada. One in four mortgages in Florida is delinquent. When the housing collapse started it was fueled by subprime mortgages meaning those with a low introductory interest rate which then accelerated beyond the borrower's ability to pay. The subprime problems have now begun to recede and the prime mortgages with fixed rates are in trouble. Usually, with prime mortgages people can pay as long as they keep their jobs so this new round of defaults is obviously driven by the rising rate of unemployment.

People are especially vulnerable and without remedy in this economy. Previously, if someone lost his job or had mortgage problems he could sell his home and move somewhere cheaper or take a job in another city but now homes are impossible to sell because the mortgage is higher than the value. This trend will make recovery for the nation's economy impossible without flushing unpayable debt from the system. Debt must be dealt with before a consumer economy can recover. Consumers cannot be expected to incur more debt to buy things they don't have cash to pay for when their debt loads are as high as they are now.

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THE PHILADELPHIA PLAN
Posted by: Darrell Castle
November 19, 2009

"Philadelphia Gives Homeowners a Way to Stay Put" is the title of a New York Times article appearing Wednesday, November 18, 2009 which reports a new plan put forward by the city of Philadelphia. The plan proposes to help homeowners keep their homes even though they may be behind on payments. When homeowners in Philadelphia receive legal default notices from their mortgage companies, the court system schedules a conciliation hearing. The Philadelphia program attempts to force an outcome to the foreclosure process that prevents foreclosure by bringing all the participants together in one room for mediated discussions as to how the homeowner might keep the home.

If the mortgage company will not lower payments to an acceptable level and insists on going forward with foreclosure, the homeowner has the right to request mediation in front of a volunteer lawyer serving as a provisional judge who makes recommendations to the program's supervising judge. If the judge finds that the mortgage company is not acting in good faith, he can deny permission for a sheriff's sale thus leaving the house in limbo.

The rising number of foreclosures across the country, the increasingly vacant neighborhoods and the desperate plight of families as they are unable to stay in their family homes has moved a few people in the "City of Brotherly Love" to act. The action, of course, is using the legal process or the legal force of government power to rewrite mortgage contracts in an effort to prevent the natural destruction of the leverage built into the economy over many years.

What would cause the system to suddenly change its attitude about the plight of families in America? I would argue that the change in attitude is motivated by guilt and revenge. The government has transferred trillions into the hands of Wall Street, including mortgage bankers, in an effort to infuse credit into the economy. Unfortunately, the spending of all that taxpayer money has had very little effect on credit or the ability of American families to pay their mortgage payments each month. Unemployment continues to rise forcing more and more people out of their homes and into the street. Compassionate people who work in the system and know and understand it see what is happening and feel guilty and ashamed at the raw hypocrisy and so they act on their guilt by taking revenge on the mortgage companies.

It's nice to finally see some effort to help families instead of pouring the resources of the combined labor of all Americans down an economic rat hole. However, it is not good to set a precedent of interfering in the sanctity of contract outside the normal bankruptcy system. The bankruptcy courts have intervened to help people countless times and in my opinion that is how it should be done. The bankruptcy system can provide permanent relief for people if they will let it, while the Philadelphia plan just postpones the inevitable and helps people to feel good about a few more weeks. The Philadelphia plan is being looked at by other cities and time will tell if it becomesa national trend or if the bankruptcy courts are left to run it.

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JOB LOSS AND FAMILY LIFE
Posted by: Darrell Castle
November 12, 2009

Today we examine an article from today's New York Times entitled "Job Woes Exacting a Toll on Family Life". It should come as no surprise to anyone that the loss of a person's livelihood often causes problems in that person's family life but the NYT usually has an interesting way of personalizing its stories. The article examines a family from an affluent suburb near one of the large cities in Texas. The husband and father of two daughters lost his job over a year ago and at first he didn't think they were terribly affected but now he knows better.

The subject family, and I remind you that this is a real American family made of flesh and blood people, have been consumed by their year long job search and the stress of it all. They survive on unemployment benefits, savings, and a part time job that the mother has but their children are starting to manifest physical and mental symptoms characteristic of stress induced problems. Children often absorb more of the stress from financial problems and their resulting loss of position and self esteem than their parents realize.

A recent study at the University of California, Davis found that children in families where the head of the household lost a job were 15% more likely to repeat a grade. Children whose parents were laid off have been found to have lower annual earnings as adults than those whose parents remained employed. The Director of The White House Office of Management and Budget, mentioned this study in a speech last week at New York University

The studies seem to indicate that the extent to which the job losers are stressed and emotionally disengaged is the extent to which the children will be affected in their emotional lives and especially their school work. Children wonder what's out there for them. We've known for many years that uncertainty and insecurity has a negative effect especially on children. When children see their parents, who seem so smart and hard working, struggle to find work they wonder if they will be able to find a job when they grow up. We have traditionally told our children to "be all you can be" or "live your dreams", but now they see that the chickens are home and roosting, and there are more problems ahead.

Should you lose your job, or feel that your job is threatened, it might help if you did not have debt you can't pay or at least you can't pay when it's due. I invite you to call The Law Offices of Darrell L. Castle and Associates for a free appointment with an experienced attorney.

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MONEY PROBLEMS CAN TEST YOUR MARRIAGE
Posted by: Darrell Castle
November 10, 2009

From the New York Times of Saturday November 7, 2009 we find an article about how the issues of dealing with money can put a strain on marriage. The author of the article interviews a marriage therapist who gives her five money issues that can test a marriage. Her five issues with a brief description are as follows:

1. Reduced Circumstances. If your income isn't what it once was it can strain your marriage. One marriage partner may decide to leave but if you stay together it means readjusting expectations. My comment is that I don't know what marriage vows say today but 31 years ago when I said mine I vowed that I took my wife for richer or for poorer.

2. Your Mistakes. When one person is the chief financial officer there is only one place to point the finger for mistakes. Comment. Both marriage partners should be involved in financial decisions unless one is simply incapable but even then they should be transparent and open with the finances of the marriage while allowing each other some privacy.

3. Your Parents. When you have to choose between a spouse and another loved one such as an aging parent it can stress your marriage. Comment. This is simply an example of human selfishness that has been fostered by government control of and interference with the human family and how its cared for. We should be willing to care for our elders as we would expect from our children. Set the example you want your children to follow.

4. Your Children. The desire to do right by children often keeps marriages together but sometimes the financial challenges can be daunting. Comment. No doubt about it raising children is expensive but it is worth it and it is perhaps the greatest accomplishment one can achieve in life. After all, what is money except a tool to be used for the benefit of others especially those we love? How much of what we earn or accumulate can we take with us?

5.Your Uncertainty. These are uncertain times and long term insecurity can gradually wear down a marriage. Comment. Yes this is very true. We live in uncertain times but love should be certain and if you think things would be more certain if you were single you are probably wrong and statistics regarding poverty especially regarding divorced women agree with me.

You don't have to let the problems of money and especially debt, ruin your life. Debt is a destroyer of marriage and family but it doesn't have to be. Call The Law Offices of Darrell L. Castle and Associates for a free appointment with an experienced attorney.

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10% OF THE NATION UNEMPLOYED
Posted by: Darrell Castle
November 06, 2009

The unemployment rate has surpassed 10% for the first time since 1983. The 10% figure is an insult to 1983 because accurate numbers were reported then compared to now. Changes in the way unemployment is calculated and reported have eliminated from the roles about one half of those who are not working. According to an article on Yahoo Finance this morning "nearly 16 million people can't find jobs even though the worst recession since the Great Depression has apparently ended. Many economists worry that persistently high unemployment could undermine the recovery by restraining consumer spending which accounts for 70 percent of the economy." Yes, I suppose economists do worry about it but I can tell you without a doubt that the 16 million unemployed are also worried about it.

How can the recession have "apparently ended" when the unemployment roles continue to grow each month? This talk about recovery and the recession has ended is nothing but Orwellian double speak which is apparently intended to bolster confidence in the public and especially in employers. No amount of false confidence is going to convince an employer whose sales are declining to start hiring until sales start to increase. Sales numbers will not improve until people are back at work. Its hard to imagine this debt ridden society, burdened with high mortgages and declining home values going back to the Malls to buy Chinese products on their credit cards again. This seems rather silly to talk about and yet that is what the government says is happening.

Unemployment damages the economy and restricts the chances of recovery in many ways. The 16 million unemployed are not paying taxes, but they are collecting unemployment insurance and are therefore a dead drain on the economy. This dead drain causes the deficit to rise because the government has less tax revenue each month and higher expenses each month. The higher the numbers go the more pessimistic workers and employers become and the less likely recovery becomes. Employers who are not confident of the future are not going to hire especially with escalating unemployment insurance rates.

Should you find yourself one of the 16 million unemployed, or if you are concerned about the future of your job, or if you simply have bills you can't pay, or a mortgage that is behind call the experienced attorneys at the Law Offices of Darrell L. Castle for a free appointment.

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DEBT IS DANGEROUS
Posted by: Darrell Castle
November 04, 2009

Yes, debt is dangerous and the more of it you have the more likely you will be destroyed by it. This is true whether the holder of debt is an individual or the federal government. If I were counseling an individual who was deeply in debt and spending in deficit each month, i.e. he was spending more each month than he earned, I would advise him to first get his spending under control. It is not possible to spend more than you make each month without disaster happening eventually.

There are only two ways for an individual to avoid debt default and control debts by paying them down. He can increase income or he can decrease spending. Most people have a very difficult time increasing income because the source of their income is controlled by someone else, but almost everyone can decrease spending to some degree. Individuals should stop all discretionary spending and spend only for necessities such as food, transportation, mortgage, utilities, etc. Spending for luxuries should be eliminated and the items classified as luxuries should be carefully examined for ways to expand the list. The goal of all this is to bring spending below income in order to pay down debt and eventually save for emergencies and for future needs. When spending can't be brought far enough below income to give the individual a meaningful chance to pay down debt he should consider controlling or eliminating debt through either a chapter 13 or chapter 7 bankruptcy. The more debt a person is able to pay off or eliminate through bankruptcy, the more money he can devote to saving for the future in order to prevent a repeat of his troubles.

Large corporations and governments are only different from individuals in scale and in the sources of income. The advice is the same for them as for the individual but disaster comes more slowly for governments which have the power through the central banking system to create money on their computers. This money represents debt to the nation's people however and ensures that they will be less prosperous in the future rather than more prosperous. Nations can only borrow their way to wealth until the combined income extracted from their taxpaying citizens is not enough to pay the interest on the borrowed money.

In summary, drastically reduce spending to bare necessities, use excess money to pay down debt and if there is none, consider bankruptcy to eliminate or control the stress and burden of debt. Call for a free appointment at The Law Offices of Darrell L. Castle and Associates to discuss your financial problems with one of our experienced attorneys.

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CITIES DO NOT SEE STIMULUS
Posted by: Darrell Castle
November 03, 2009

Cities don't see stimulus as factory jobs vanish was the page one headline of the Memphis Commercial Appeal Monday November 2, 2009. The article goes on to highlight the struggles of Lamar, a small town in southwest Missouri. Lamar's primary provider of jobs in manufacturing, furniture maker O'Sullivan Industries, closed in mid 2007. The closure cost 700 employees their jobs and in a small town that is a significant number. That closure began a "slow death" for the town of Lamar as every other business eventually felt its effects.

The stimulus plan which has cost American taxpayers $787 billion so far was widely reported to have created or saved 640,000 jobs nationwide but it seems that none of them have been in Lamar, Missouri. Nationwide only 2,500 of the jobs have been in manufacturing and many of those appear to have been mislabeled. Teachers were the biggest beneficiaries as states used the federal money to balance their budgets, then reported the money as avoiding layoffs.

The problem is that jobs lost in manufacturing are good jobs with benefits and retirement plans. Manufacturing jobs lift generations of people into the middle class and provide for them and their families steady income and a decent standard of living. Many small towns across America, such as Lamar Missouri, are one factory towns and when that factory closes or relocates overseas, that community is very fortunate to survive. This process of destruction of American manufacturing and closure of factories from the rust belt states of Michigan, Ohio, and Pennsylvania, to the small towns of the south and mid west is destroying the middle class and driving people into poverty from which they may never escape. The hopes and dreams of America's youth are also being destroyed. The Commercial Appeal also pointed out that "O"Sullivan Industries was the kind of company that hired kids right out of high school, where workers could pull down $16 an hour and work overtime when the plant was six days a week."

Federal stimulus will not replace those jobs and a few temporary make work jobs on road repair or in the service sector are poor substitutes. Wouldn't it be better to rebuild our manufacturing base by making quality products at competitive market wages that people want to buy. This could be done in conjunction with an all out 100% commitment to energy independence for America. This makes so much sense that it is hard to imagine it being done in the near future.

In the mean time if you have bills you can't pay whether from loss of job, sudden medical expenses, or something else, call or contact the Law Offices of Darrell L. Castle and Associates for a free appointment to discuss what can be done to help you.

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CIT GROUP FILES 5TH LARGEST BANKRUPTCY IN US HISTORY
Posted by: Darrell Castle
November 02, 2009

Cit Group Inc. which bills itself as one of the leading funders of small and medium sized businesses in the United States filed for bankruptcy protection on Sunday November 1, 2009 in the Southern district of New York. The company said that its plan of reorganization will allow it to continue to provide funding to its small and middle market business customers and also continue to pay its employees.

The bankruptcy filing reported $71 billion in assets and $64.9 billion in liabilities. Cit provides a vital service to the consumer driven economy by providing the day to day financing of the retail industry. $4.5 billion of additional credit obtained prior to the filing will allow the company to continue its operations while the case is proceeding. Motions have been filed in bankruptcy court to allow the company to pay employee, vendors, and some other creditors in full.

Common shareholders of Cit stock will not fare so well, however. Existing common and preferred stock will be cancelled upon Cit's emergence from bankruptcy protection. This cancellation would most likely include the $2.3 billion in funding from the US Government under the Troubled Asset Relief Program (TARP). In July, 2009 Cit sought a second Federal bailout in a last ditch effort to stay afloat but the request was rejected.

It appears that Cit is confident it can survive this bankruptcy filing and continue to operate and if that proves correct it will avoid a tremendous blow to the already suffering US economy. The destruction of financing for retail business could prove fatal to an economy driven at least 70% by consumer spending.

Please call or email The Law Offices of Darrell L. Castle should you have further questions

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