Detroit Files for Bankruptcy

Although the economy seems to be improving, Detroit unfortunately has been under financial stress for decades and has lost tax revenue due to a dwindling population.  The Motor City filed for bankruptcy today in order to restructure its debts and obligations.  The goal for Detroit is to stabilize its finances in order to provide basic governmental services.  Municipalities file under Chapter 9 of the Bankruptcy Code.

Law School Graduate Granted Discharge of Student Loans

The 9th Circuit recently affirmed a Bankruptcy Court judge’s decision to allow former law school student Michael Hedlund discharge $53,000 in student loans through bankruptcy.  Will this set a precedence on future bankruptcy filings?  Student loan default rates are rising at an accelerated rate.

Cancer patients more likely to file for bankruptcy

Despite new changes in health care law, cancer patients are still much more likely to file for bankruptcy.  The cost of treating cancer easily tops six-figures and compounding the problem is the fact that many receiving treatment are physically unable to work.  Even if an individual has insurance, the insurance company may not cover all life-saving procedures or tests.  Bankruptcy is an option to completely discharge medical debts that are often unavoidable, despite a patient’s best intentions in paying off the bills.

Judicial Liens on Home – Can They be Discharged Through Bankruptcy?

For the most part, yes.  Many people who file for bankruptcy have credit card or other monetary judgments against them.  This can occur if lawsuits filed by creditors go ignored by the credit card holder.  Eventually, the credit card company or whoever owns the debt (collection agencies, for example) will try to use the judgment to place a judicial lien on your home.  

Getting rid of the lien at this point takes some work for your bankruptcy attorney.  If you file for bankruptcy after a judicial lien is placed on your home, the equity in your home must be exempt.  For most people who file for bankruptcy, this usually is not an issue because there is no equity in the home anyway.  

The bankruptcy attorney will then file a motion to avoid the judicial lien with the bankruptcy court.  Once the bankruptcy court judge signs off an order, the order can then be given to the clerk of the courts where the judicial liens on the home have taken place in order to lift them.

Tax Refunds and Bankruptcy

Tax season is right around the corner.  A common question is, “What will happen to my tax refund?”  The timing of your bankruptcy filing is important.  If you have NOT received your tax refund yet and file for bankruptcy, the tax refund can later be taken by the trustee appointed to the bankruptcy case.  

The best way to avoid having the trustee take your tax refund is by spending the tax refund first before filing for bankruptcy.  It is important that your tax refund is spent on normal expenditures – rent, mortgage, food, car payments, utilities, etc.  Do NOT spend it on luxury items such as jewelry or vacations.  The trustee can possibly ask for documentation on how the tax refund was appropriated.

Atari Files for Bankruptcy

It was a nostalgic hit when I heard news about Atari filing for bankruptcy.  Their goal, however, is to survive the bankruptcy and hopefully have their debts restructured.  This is similar to an individual’s Chapter 13 filing.  Atari also has the option of selling its assets, so perhaps the buyers may continue the Atari brand or its holdings.

Hostess to Liquidate

Hostess, maker of famed snacks such as Twinkies and Ho-Hos, has moved on to liquidate the company’s assets in order to pay back its creditors.  Much like a personal Chapter 7 bankruptcy, liquidation can involve the process of selling assets such as warehouses, factories and proprietary holdings, however it is still yet to be seen whether there will be a buyer.  Hostess had already attempted to reorganize its debts in prior bankruptcy filings, but was unable to recover.