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The 3 Largest Bankruptcies in U.S. History

Many people were affected by the recession.  People lost their house, car, life savings, and more which led to bankruptcy.  However, bankruptcy was not limited to individuals and families.  Some of largest bankruptcies in history were actually filed by companies.

 

3 – WorldCom

Fueled by a hungry CEO, Bernie Ebbers, WorldCom managed acquisition after acquisition in the 1990’s.  The worlds # 2 long distance phone company and # 1 internet network had to keep its stock price up to pay for many of these acquisitions.  In one of the largest corporate frauds in history, this company took “cooking the books” to a whole new level.  To elevate the value of the company, they recorded over $9 billion in fraudulent transactions.

Before declaring bankruptcy under chapter 11, WorldCom had assets worth $103.9 billion.

2 – Washington Mutual

Everyone knows the housing market in California is well…challenging.  No one knows that better than Washington Mutual.  When housing values dropped more than 9 percent (equal to the drop during the great depression) in 2007, Washington Mutual found itself holding mortgages (mostly in California) worth far more than the asset they financed.  They couldn’t sell the mortgages to other companies which led to a net loss of $67 billion in 2007.  The final dagger for Washington Mutual was the loss of customer deposits.  When Lehman Brothers went down, people everywhere started pulling all of their money out of investments and banks.

Prior to declaring bankruptcy, Washington Mutual had $329.7 billion in assets.

1 – Lehman Brothers

You may be familiar with the term “subprime mortgage”.  These are mortgages that were given to unqualified people without the necessary documentation.  If this sounds like a bad idea, that is because it is.  Just ask Lehman Brothers.  This firm acquired 5 companies that were underwriting subprime mortgages during the housing boom in 2004 and 2005.  By 2006, they controlled $146 billion in mortgages which is wonderful when everyone is paying on-time.  Unfortunately, as we all know, that became a difficult proposition around 2008.

With a portfolio massively leveraged in mortgage loans and the stock market beginning to faulter, Lehman Brothers looked abroad for investors.  They were close to a deal with Korea Development bank.  When that deal fell through, stock holder confidence fell to an all-time low which marked the end.

Lehman Brothers filed for bankruptcy with $639 billion in assets and $619 billion in debt.

The Moral of the Story

No matter how much money you have, things can happen that leave you upside down in debt.  Regardless of fault, you can protect yourself.  If you are defaulting on loans and getting phone calls from debt collectors, you need help.  Elias Dsouza of Dsouza and Strachan Lawgroup Group has the skills and experience to give you that help.  Contact Elias to get started on the right path today.

How to Close Your Small Business in 5 Easy Steps

When you started your business, you did not do it with this day in mind.  That day is here nonetheless.  The business is no longer viable and you have made the decision to close it.  Do not fret, you will be back in the game soon enough!  However, you must first deal with this steaming pile of failed business.  Doing it the right way makes all the difference if you intend to start over at some point.

 

Step 1 – What is the Steaming Pile of Failed Business Worth?

Take stock of every asset your business still owns.  Everything is worth something.  If you are closing the business, it is probably because the plan is not working and you may have accrued some debt while trying to save it.  The remaining assets will help offset any liabilities you still have.

Step 2 – Make the Announcement

While this step is very difficult, it is better than firing everyone one day as they walk in the door.  Notify employees of the date their employment will end, contact your customers directly, inform your utility companies, landlord, and anyone else that will be affected by the loss of your business.  While you do not HAVE to necessarily do some of these things, it could benefit you to leave bridges un-scorched so when you raise from the ashes one day you will have friends.

Step 3 – Haggle and Settle

Liquidate your assets.  This money will be used to settle up with your creditors and anyone else you still owe.  You may be able to negotiate to reduce the value of liabilities you still have.  If you have creditors to worry about, they may be thrilled to talk to you about ways you can pay a lesser amount as opposed to filing for bankruptcy which leaves them with empty-handed.

Step 4 – Pay the Man

Meet with your accountant and file any and all tax returns.  This includes federal and state returns.  While this can be stressful, you should not put it off because you can incur fees and interest on unfiled returns.

Step 5 – Closing Time

  • Bank accounts – At this point, your bank accounts are most likely bruised and limping. It can be expensive to keep them open because most business checking accounts incur fees if the minimum balance is not maintained.
  • Your business – This is the end of the road. Time to move on and come up with the next great idea!

Closing a business can be very complex and overwhelming.  Do yourself a favor and obtain the services of an experienced business attorney in Broward County, Florida.  Elias Dsouza has been working with business owners for over a decade and has the skills needed to steer you safely onto your next venture.

A Quick Guide to Asset Redemption in Chapter 7 Bankruptcy

Did you know that you do not have to liquify all of your assets when you file for Chapter 7 bankruptcy in Florida?  You can file for asset redemption if you have “secured debts”.  Secured debt is debt that has collateral that can be used to pay off the debt.  For example, if you own a car, but still owe a lender money for the car, you can file for redemption on the car during Chapter 7 bankruptcy.

 

So, Why Would You Want to File for Redemption on Your Secured Debts?

Simply, you can save a ton of money.  When you file for redemption on a secured debt, you are asking the court to allow you to pay the lender fair market value for the collateral of the debt in one payment.  Say you owe $8,000 on the car we talked about earlier, but the car’s fair market value is $6,000.  You can ask the court to allow you to pay the lender one payment of $6,000 to eliminate the debt.  This option saves you from having to pay a ton in interest and you no longer have a car payment to worry about.

 

What If You Cannot Afford to Pay the Lump Sum for Your Secured Debt? 

It is reasonable to assume many people cannot afford to pay a lump sum to eliminate a secured debt.  After all, we are in the middle of bankruptcy here.  If you cannot afford to pay a lump sum, you can apply to participate in a redemption program.  A redemption program will:

  • Allow you to keep your asset.
  • Pay the creditor fair market value for the asset.
  • Allow you to pay back the “loan” in installments.
  • Usually, allow you to make fewer payments over the life of the loan.
  • Lower the amount of each monthly payment.

These programs sometimes incorporate a one-time attorney fee that is much smaller than the interest you would pay on the original loan and you can usually apply online.  An experienced debt attorney can easily help you through this process.  For over 15 years, Elias Dsouza has been helping people manage and retain their assets through bankruptcy in Plantation, Florida.

Chapter 7 Bankruptcy: The Tax Considerations

Believe it or not, filing for bankruptcy under Chapter 7, liquidating most of your assets, and starting over is not the end of the story.  Chapter 7 is unique because a separate estate is created using your non-exempt assets (see Chapter 7 posts for more information).  The assets within this separate estate can derive their own income, create their own costs, and they are taxable.

Who Prepares Taxes for a Bankruptcy Estate?

Your non-exempt assets are placed in the care of a trustee.  This trustee is court-appointed and is responsible for preparing the Federal and State taxes of the bankruptcy estate and calculating tax due.  If the trustee does this incorrectly or misses any deadlines, the bankruptcy estate is responsible for paying any fees or interest incurred.  In addition, any tax return owed to the debtor that was not received before filing for bankruptcy can be intercepted by the trustee to fund the estate.

 

Who Prepares Taxes for You During the Bankruptcy Process? 

After filing for Chapter 7 bankruptcy, you are still responsible for filing your personal tax return.  However, there is an election afforded to you as the debtor which allows you to create two “short tax years”.  The first taxable “short year” closes the day before the bankruptcy case starts.  The second taxable “short year” starts on the day the bankruptcy case begins and ends on the last day of the normal taxable year.  If you do not elect to separate the year, the bankruptcy will not affect your tax filing which means you will not receive the tax benefits of filing for bankruptcy.

 

Do Not Forget to File Your Personal Taxes After Filing for Bankruptcy

According to Publication 908 on irs.gov, if you do not file your personal return after filing for bankruptcy, your case might be dismissed by the bankruptcy court.  If you did not file and you were notified that you must file, you have 90 days to do so or your bankruptcy case will be dismissed.

 

The tax implications of filing for bankruptcy are enormously complex and it is often important to retain the services of an attorney who understands these issues.  Dsouza and Strachan Lawgroup Group of Plantation, Florida has the experts you need.  Elias Dsouza has been helping people through the bankruptcy process for over 15 years.

A Guide to Personal Bankruptcy Under Chapter 7 (Part Two)

At this point, we know that not everyone is eligible to file for bankruptcy under Chapter 7, we know you must complete credit counselling before you file, you must take the means test, and you must have less than $100 of income after the calculation (generally).  There are exempt assets (things that do not have to be liquified by law) and non-exempt assets (things that are usually liquified during the Chapter 7 process).   Did you know that exempt assets vary from state to state?

Assets considered exempt under Florida law:

  • Annuity contract proceeds excluding lottery winnings.
  • Death benefits paid to a certain person and not an estate.
  • Damages paid to an employee for working in a hazardous environment.
  • Property of a business partnership.
  • Pensions for most first responders, state employees, and teachers.

This list is not comprehensive and these assets are considered exempt in addition to the assets protected under federal law (see previous post).


Does Filing Under Chapter 7 Have Tax Implications?

In short, yes.  The IRS does offer a comprehensive guide on this subject and we will be covering this topic later this week.

 

Do You Need an Attorney to File Chapter 7 Bankruptcy?

It is legal to file for personal bankruptcy without an attorney in the state of Florida.  Instructions can be found here.  However, it is a complex process and it could be very beneficial to retain the services of an attorney because they have an understanding of the law, they can explain what debts can be discharged and what assets can be exempt, and they can explain the tax consequences of filing for bankruptcy under Chapter 7.

If you are considering filing for bankruptcy under Chapter 7, consider Dsouza and Strachan Lawgroup Group.  With more than 15 years navigating this incredibly complex topic, Elias Dsouza is ready to help you get a fresh start.

A Guide to Personal Bankruptcy Under Chapter 7 (Part One)

There are any number of reasons you can end up considering bankruptcy under Chapter 7.  Now, you need to understand what it really is.  First, you should understand that bankruptcy can mean a new beginning.  The stress of dodging phone calls from creditors and the anxiety of checking the mail can come to an end.  Second, you should understand what Chapter 7 bankruptcy in Florida is and what it is not.

Are You Eligible for Chapter 7 Bankruptcy?

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 makes pre-bankruptcy credit counseling mandatory within the 180 days preceding the filing of bankruptcy.  This can usually be accomplished in 60 to 90 minutes with an accredited debt councilor.  It is usually around $50, but it can be free of cost if you tell the councilor you cannot afford to pay.

This Act also implemented the means test.   If you use the calculation and your remaining income is less than $100, you are generally eligible to file for bankruptcy under Chapter 7.

 

What is Chapter 7 Personal Bankruptcy?

The defining characteristic of Chapter 7 bankruptcy is the liquidation of assets.  A trustee will be assigned to collect all non-exempt assets and sell them.  The proceeds of the sales will be distributed to creditors.  Non-exempt assets (can be taken and sold) include (but are not limited to):

  • Collectibles such as sports memorabilia, stamps, coins, etc.
  • Family heirlooms.
  • Any cash or investments you may have.
  • A second car.
  • A second home.

Assets considered exempt (generally not taken and sold) are:

  • Motor vehicles.
  • Necessary clothing, household items, furnishings and appliances.
  • Jewelry (up to a defined value).
  • Public benefits such as welfare, social security, unemployment, etc.
  • Pensions
  • Damages awarded for injury.

 

Check back for Part Two as we cover what assets may be considered exempt specifically in Florida and more topics related to bankruptcy under Chapter 7.

If you have read enough and you are considering filing for bankruptcy under Chapter 7, consider Dsouza and Strachan Lawgroup Group.  With more than 15 years guiding people through some of the most difficult times in their lives, Dsouza and Strachan Lawgroup group is prepared to get you the fresh start you deserve.

Are You a Victim of Predatory Debt Collection Practices?

Most people who have unresolved debt have received mail, phone calls or even at-home visits from debt collectors.  While it always feels intrusive, did you know that these debt collections practices may actually be illegal?  The Fair Debt Collection Practices Act (FDCPA) was enacted in 1978 to protect consumers from abusive and/or deceptive actions taken by debt collectors.  According to the National Association of Consumer Advocates some of these practices include:

  • Calling you before 8:00 am or after 9:00 pm.
  • Giving other parties such as employers or family members information regarding your debt.
  • Calling you at work without your permission.
  • Cursing at you or threatening to garnish your social security payments.

In 2018, the average amount of credit card debt per person in Florida is $8,444.  Some of this money lands in collections.  It is important to understand that it is legal for a debt collector to try to collect a debt and often times they are perfectly reasonable, but they cannot attempt collection by any means they deem necessary.  If a debt collector is threatening to have you arrested, calling you repeatedly in an attempt to annoy you into paying the debt, threatening physical harm, or if they have notified you in writing that they are suing you, know that you have options.


What are your options?

If you believe a debt collector is using illegal methods to collect your debt, you can:

  • Contact the Federal Trade Commission and file a complaint.
  • File a lawsuit against the debt collector.

If you are considering filing a lawsuit against the debt collector, you may want to consider legal representation that specializes in debt negotiation and abusive debt collection practices.  Dsouza and Strachan Lawgroup Group of Plantation, Florida does just that.  Guiding citizens of Broward County through credit card debt negotiation, bankruptcy, foreclosure (and more) is what they have been doing for over 15 years.

Three Thing To Know About Chapter 13 Bankruptcy Cases

Chapter 13 bankruptcy is a form of bankruptcy that requires the debtor to enter into a plan of debt repayment. It is similar to debt consolidation, but has the backing of Court approval, so your lenders do not have a choice about whether to participate in your proposal. When a Chapter 13 case is filed, a repayment plan is proposed and eventually approved by the Court. The debtor then makes a monthly payment to the bankruptcy trustee and the trustee disburses payments to the lenders.

In order to better prepare yourself for what lies ahead when you file a Chapter 13 bankruptcy it is a good idea to go into it with some background about how Chapter 13 cases work. Three things to know about Chapter 13 bankruptcy cases that will help you understand your case more include:

  • A percentage of your unsecured debt will be repaid over the life of your Chapter 13 Plan. The percent you have to repay will depend on how much disposable income you have after paying monthly secured debts.
  • You are permitted to pay the value of some pieces of collateral instead of the balance due, most notably your car. You can also pay your car note at a lower interest rate than what the purchase contract provides. This combination results in a lower overall car payment, paid through your bankruptcy.
  • A Chapter 13 Plan takes between three and five years to complete, meaning you making monthly payments to the trustee for that time period, and once all plan payments are made you receive a discharge of debts.

It might sound undesirable to remain in a bankruptcy for a few years, but during that time your lenders are not allowed to call you. This gives you the freedom you need to get back to your life and takes the stress of not being able to pay monthly bills off of you. The relief that comes with being able to pay bills without fielding collection calls is enormous. When Chapter 7 is not an option, you can get this relief by filing a Chapter 13. The same rules regarding the automatic stay and discharge of debts apply, so you still get all the benefits of the bankruptcy laws.

For help with your questions about Chapter 13 bankruptcy cases, contact us at www.DsouzaLegalGroup.com. We will help by coming up with solutions that help get you back on your feet.

A Step By Step Guide To Chapter 7 Bankruptcy

Bankruptcy comes in two forms for most debtors, Chapter 7 and Chapter 13. Chapter 7 is the preferred type of case to file because it allows a debtor to get rid of all of their unsecured debt. And, in most cases, it is having too much unsecured debt that puts people in the position to need the relief bankruptcy can provide. But before you decide to file a case and count on being able to file a Chapter 7, there are some points of interest to learn.

In order to qualify for a Chapter 7 bankruptcy you have to submit your income and debt information for review. The amount of secured debts you have will be compared to the amount of income you bring in, and if your income shows no ability to repay any of your unsecured debts after making secured debt payments each month, you will be allowed to file a Chapter 7. Here are some of the key components of Chapter 7 cases:

  • All unsecured debt is eliminated, in full. That means you no longer have to pay credit cards, signature loans, and medical bills.
  • Debts for things you want to keep, like your house and car, have to be repaid if you do not want the lender to ask for permission to repossess the item. In most instances the continued payments are made pursuant to a reaffirmation agreement, and that means the debt will still be due after your case is over. If you miss a payment, you can be sued for the debt.
  • The timeline to complete a Chapter 7 bankruptcy is around 3 to 6 months. This relatively short timeframe is an incentive for most people, as they prefer not to be involved in a bankruptcy proceeding for too long.

Getting out of debt, at least unsecured debt, by filing a Chapter 7 helps thousands of people each year. If you have more debts than you have income, come in and talk to us about your bankruptcy options. We will take a look at the numbers and let you know what type of case you can file and how it will help you become more financially secure.

For answers to your questions about debt, contact us at  www.DsouzaLegalGroup.com.

Understanding Bankruptcy In Four Simple Steps

The first step to understanding the benefits of taking certain actions is to understand the action itself. When you are looking for ways to cut down on expenses and get out of debt it is beneficial to have a grasp of how different debt repayment plans can eliminate your debt load. There are several schools of thought on how to get out of debt, from the snowball method to the APR and quick elimination methods; there is bound to be a strategy that works for you. The snowball method of debt elimination provides for focusing on one debt at a time and once it is paid off using the monthly payment for that debt to add to the monthly payment for the next debt. In this way, the payment snowballs and gains momentum as debts are paid. The APR method dictates repayment of the highest rate debt first, and then moving to the next highest rate loan. With the quick elimination method, debtors pay off what they can quickly and then concentrate on the next fastest debt. This gives people a sense of accomplishment and helps them stay on track.

Another popular way to get out of debt is to file for bankruptcy. But the idea scares a lot of people off and too many people are failing to take advantage of all bankruptcy has to offer. To help combat this problem, it is helpful to understand how bankruptcy works before dismissing it as a debt relief option. Here are four simple steps to understanding bankruptcy:

  • Filing a case: filing a case starts with getting your debts gathered and talking to an attorney about what you owe, and what you make. An attorney will go over the numbers with you and prepare your case for filing. All you have to do is provide the data and review the case for accuracy before it is filed.
  • The automatic stay: the automatic stay is in place the instant you file, and it prohibits lenders from contacting you about their debt. This is the single biggest benefit reported by most people who file for bankruptcy, because it gets creditors off their back and relieves the stress that goes along with being harassed by lenders.
  • The 341 hearing: this is the only hearing most people have to go to when they file a bankruptcy case and it is very informal. There is no judge present, and your attorney will be there to make sure you understand any questions you are asked.
  • The discharge: this is the goal of every case, and it is the official entry by the Court that your debts are no longer due. A discharged debt cannot be collected on later, and you will not be asked to make payments on debts that have been discharged.

Bankruptcy also provides a chance to start over, without overwhelming debt.  Let us help you today.

For more information about how bankruptcy can help you, contact us today at www.DsouzaLegalGroup.com. We will go over the facts of your case and let you you’re your next step.