Karma in Bankruptcy, or the Lack Thereof

This week, I was working on a Reaffirmation Agreement. A Reaffirmation Agreement basically extends a contract through a bankruptcy. In Chapter 7, the bankruptcy discharge is very broad, and it will sever almost all obligations, include auto loans. In order to keep a car that one is making payments on in Chapter 7, a debtor has to Reaffirm the debt. By Reaffirming, the debtor is taking on all the obligations and risks of the contract, including liability if the vehicle is repossessed.

The Reaffirmation Agreement in question was with Chrysler Financial. The interest rate was a usury-level 23%, so I contacted the creditor to attempt to negotiate a lower rate. After all, if the debtor doesn't reaffirm, the creditor will just take the car back and notch a big fat loss in their ledger. The response: "Chrysler Financial does not negotiate on reaffirmation agreements."

F*ck you Chrysler. (I do realize that Chrysler Financial and Chrysler the auto company are different, but *vent rage*).

Bailout funds + Chapter 11 and you won't negotiate? I wish your bond holders had liquidated you. I wish they had said "We don't negotiate" and drove you to Chapter 7. Their stance only makes sense if they presume a debtor needs/wants the car. At 23% interest, my recommendation was to dump it; a Buy Here/Pay Here place would charge them the same, or perhaps even less in interest. Sadly, the debtor wants to keep it. Personally, I would have told Chrysler where to stick it.

I hate creditors, especially when they are simply patently unreasonable.

More Foreclosure Fun!

Today the Washington Post has an article that I find interesting. The article discusses th eMaking Home Affordable program, i.e., the "massive financial incentives to do loan modifications" program. In sum, it's working as well as a screen door on a submarine:

So far, more than 650,000 borrowers have been enrolled into the initial, or "trial," phase of the program and have seen their payments lowered by an average of $640 a month, or 40 percent. But a recent survey of large mortgage servicers published by the Treasury Department found that that more than 25 percent of borrowers in the program were not current on their trial payments.

The failure rate is no surprise. There's a very good reason why most of these mortgage borrowers are behind - they either cannot afford any payment, or they are so financially irresponsible that it doesn't matter what their budget it - they are going to screw it up.

As a bankruptcy attorney, I see new potential clients daily who are substantially behind on their mortgages; it is not uncommon for me to meet folks who are 6 to 10 months behind in their mortgages, with nothing to show for it. Where, oh where, did that $6,000 to $20,000 go? The answer, sadly, is that the money is up in smoke.

As a bankruptcy attorney, I enjoy my job - I can do a lot for people, saving homes and absolving folks of sometimes ludicrous amounts of debt - but at some point folks need to think for themselves.

While I am on an anti-debtor rant, I'll throw in two more for fun:

Defective Paperwork Strips Mortgage Holder of Foreclosure Rights!

Judge Cancel's $525,000 mortgage as sanctions!

At least there may be some relief in foreclosure defense.

Foreclosures and Bankruptcy

Lately (and I will not support that statement with links or evidence), there seems to be much ado about homeowners, foreclosures, and what we can do to prevent these two things from coming together. From Obama's loan modification plan to Chapter 13 bankruptcies, there seems to be a glut of people trying to save their homes.

From my position, I can't help but wonder why. During the last ten years or so, with the real estate and lending markets going completely bonkers, there have been literally millions of bad loans written - loans were there was insufficient equity in the property to secure the loan, where the debtors had insufficient income to support the loan, and loans were every bit of information on the loan was false, fraudulent, or misrepresented. The real estate agents, brokers, lenders, and everyone in between was complacent if not fully complicit in writing and securing these "toxic" mortgages. (Update: 1 in 4 mortgages are underwater!)

And now those seeds have come to bear fruit. Almost every mortgage and almost all the real property I see coming through my office is a negative equity situation. Basically, any property purchased in the last 5 years is going to be underwater - that is, the balanced owed is more than the sale value of the property today.

The issue is simple - people are chasing smoke, in situations where they will not have home equity for a decade or longer. A decade of interest payments, and of principal payments that aren't building equity.

The solution is even simpler - foreclosure. Oh, but what a bitter pill! Let it go to foreclosure, then on the oft and rare chance the bank decides to bring a deficiency action, obtain good legal counsel or file for bankruptcy. Dump the McMansion with the negative amortization loan and rent a nice apartment for half or two-thirds the cost. Save that money - the money that would go to rent for the twelve months or longer that it would take to foreclose, and the difference of your eventual rent cost against your previous mortgage - save that money, and in a few years, you'll have $25k to $50k for a nice, safe, traditional mortgage.

The plus side - and there is one - is that you'll get to stick it to the man. I'm a fan of capitalism; I find no evil in making money. However, our current hybrid capitalism/socialism system, where profits are privatized and losses are subsidized, serves to line the pockets of those who don't deserve it while penalizing everyone else. For capitalism to work, there needs to be consequences. You write a bad loan, you take the loss - the necessary corollary to the idea that if you write a good loan, you take the profits. Instead, our current state lets the government (i.e., the taxpayer) take the loss instead. Heads they win, tails we lose.

The reality of this situation is that, if you are going through foreclosure, you cannot afford your home. Your $2,000 mortgage payment on your $3,000 monthly take-home income is unfeasible and unsustainable, and will continue to be for the foreseeable future. It is time to stop subsidizing these bad loans and losses, and let these folks reap what they have sown.

Bankrupt means having insufficient funds to pay your creditors - being insolvent. The number of people who file bankruptcy is but a small portion of the people who are actually bankruptcy. What we, as a society and as an economic system, need is more bankruptcies. More bankruptcies equal more losses and a greater deterrent to writing bad loans. Nobody - and I don't care if you're Bill Gates - needs a $50,000 credit limit.

The credit system - from mortgages to car loans to credit cards - is fundamentally flawed; the foundation is rotten. Financially, the system needs to be leveled to the bedrock and rebuilt, into a system that rewards those who manage their money wisely and punishes those who wield it recklessly.

The Hard Way . . .

I caught this article the other day, and I'm still amazed at how hard-headed and, well, dumb these people are.

Quick summary: four person household, $106,000 in GUC (general unsecured debt), no major assets. They spent five years funneling $2,000 a month through CCCS to pay off their debt.

Several family friends recommended that they file for bankruptcy. That was out
of the question, Russell says. "We were committed to paying off our debts."
They also resolved to continue to tithe and home-school their daughters.

Now, without knowing the exact details, I can't be sure of where they would fall on the bankruptcy continuum, but I image it would either be (a) a Chapter 7, or (b) a low-payment Chapter 13. Under federal law, they would be able to continue their tithing, and the extra educational expenses from home-schooling can be included, to a limited extent, under the Form 22 means test.

So, this couple spends five years scrimping and saving, working two jobs, the husband rarely seeing his family, just so they can get out of debt. While admirable, it is also silly and ignores the point and policy of bankruptcy law. It would be the equivalent of cutting down a redwood with a handsaw, or tunneling through a mountain with claw hammer. Sure, it is possible, and it is one hell of an achivement, but why would you do it?

I get really tired of people who look down on bankruptcy. It isn't theft and it isn't a moral failing. In life, things happen that you can't control. For that family, medical bills and indiscretions killed them financially. So, Congress, in its infinite wisdom, has provided a way out of debt, for a fresh financial start. They then chose to ignore that start and go the hard way.

There's a term for that: pride. Also, masochism.

Now, as a bankruptcy attorney, I have a somewhat cavalier attitude toward the entire process. However, I can't help but wonder what the family could have accomplished had they filed bankruptcy, then put for that same effort toward rebuilding their credit and for the health and welfare of their family.

For starts, the could have likely paid off at least half their mortgage. Or, the could have greatly improved the quality of life for their friends and family.

Bankruptcy is designed to help people. It really bothers me when people look down on the helping hand and benefits of bankruptcy. In my own experience, I've done more good for more people in bankruptcy than I ever did volunteering in college or working in family law in the Domestic Violence clinic in law school.

Nonsense and Bankruptcy Exemptions

I've come to realize that my posts are lacking a certain amount of polish and coherence, so I have decided to make an effort to post more often and to make my posts more pithy and generally more intelligent. After all, I can write very well when I put for the effort.

Now, some more on bankruptcy exemptions.

The Illinois Homestead Exemption, or . . .
punishing those who actually try to pay for their homes.

I touched on this topic with my last post. Bankruptcy clients in the current real estate market (read: down the drain and minced in the garbage disposal) either have (a) zero equity or negative equity, or (b) a ton of equity.

Rarely is there a situation, in my experience, were a debtor has, say, $50k in equity. Most often, in those situations, the debtor would have already tapped that with a HELOC or other form of second mortgage. While practical in theory, these "debt consolidation" 2nd mortgages are just a way to eat into home equity while preserving the unsecured lines of credit that debtors horribly mismanaged in the first place and will quickly resume to horribly mismanage.

In Illinois, the homestead exemption is $15,000 for an individual, and $30,000 for a married couple. Federal exemptions are worth $20,200 , and the rest very by state. Some are as high as $100k or even unlimited (Arizona and Texas, respectively).

So, in general, Illinois has dinky exemptions.

As a policy standpoint, these exemptions do not encourage people to build equity in property, since it it easy to lose your home in the event of misfortune. I had a client who had over $100k in equity, but minimal income sufficient only to pay the small mortgage on the property. The debt level was median, between $40k and $75k, with a judicial lien.

If she had been mortgaged to the hilt, we could have filed ch. 7, avoided the judicial lien, and made her life easy as pie. Instead, she's looking at a 100% repayment ch. 13 at over a $1,000 a month (unfeasible and unaffordable). Or she can sell the house and loose that which she struggled long and hard for.

The results are simply not fair and, more importantly, do not serve the purpose of bankruptcy. One's home is one's castle, and, unfortunately in Illinois, your gate is down if you have equity.

The Lameness of Exemptions in Illinois

In bankruptcy, certain property is exempt from a trustee's taking. Under the Illinois code, 735 ILCS 5/12, certain things of value are exempt. The most typical examples are as follows:

• Homestead Exemption, 735 ILCS 5/12-901: $15,000 of equity for your residence ($30,000 for married couples)
• Wearing apparel, school books, Bible, and family pictures. (735 ILCS 5/12-1001)
  
• Motor vehicle equity: $2,400 (735 ILCS 5/12-1001)
• Trade tools and implements: $1,500 (735 ILCS 5/12-1001)
• Personal Property (divisible): $4,000 (735 ILCS 5/12-1001)

It is time to revisit these exemptions. They have been revised in 2006 and 2008, but they are still too low from a policy standpoint.

For exampe, as a bankruptcy matter, the homestead exemption is either irrelevant or not nearly enough. Debtor generally can't manage their finances at all (i.e., underwater on their 12% adjustable 10 year balloon mortgage) or have some recent disaster (medical illness or job loss) that causes bankruptcy. So when the homestead exemption actually is useful, it isn't enough.

A good example is someone I met with a few weeks ago. Age 62, married, not eligible for medicare or medicaid, no health insurance, pre-existing medical conditions, etc. House is worth $200k (typical for the Chicago suburbs) and is paid off. He keeps food on his table and the lights on because his mortgage is paid off. His $60k in medical bills is either (a) a Chapter 13 payment that is way too high for him to afford at 100% repayment, or (b) requires him to sell his home to pay off, or (c) requires him to take out a HELOC, with payments he can't afford and a credit history that means most banks won't lend to him, despite a 100% security interest.

A chapter 7 would help him out tremendously - except the trustee would sell his house. The solution is simple: let's thriple the homestead. Going to $50k/$100k would help families protect hard-won equity and still give them major protections in bankruptcy.

Another good example of how the exemptions are terrible is blue-collor industry - truckers, landscapers, and the like. These folks are selling their skills, essentially. To use their skills though, they need certain expensive equipment. That equipment makes Ch. 7 generally a bad idea. If your truck is worth $40k, or your landscaper is worth $25k, then it is going to be vulnerable to seizure. Generally, these are the things that those in those industries pay off first, to save on expenses. Paid-off equipment is another $1,000 a month or more in the bank.

Their white-collar conterparts (real estate brokers, attorneys, computers, accountants) who are also in the business of selling their skills, can file ch. 7 much easier, then restart their businesses with even less of an issue.

The solution: make the trade tools exemption unlimited, or nearly so. If you need something to secure your livelihood, exempt it permanently. Don't take someone's fishing rod when they need it to eat.

Irony and Reality at Whole Foods

From John Mackey's Op-ed in the WSJ:

The combination of high-deductible health insurance and HSAs is one solution that could solve many of our health-care problems. For example, Whole Foods Market pays 100% of the premiums for all our team members who work 30 hours or more per week (about 89% of all team members) for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees' Personal Wellness Accounts to spend as they choose on their own health and wellness

And the fallout.

Reading both articles is rather poignant for me. One of my most recent cases is for a client employed, full-time, at, you guessed it, Whole Foods, for the past several years. Her primary reason for bankruptcy is medical bills. HSA sucks when the deductibles run in excess of $40,000. That "up to" $1,800 a year won't even put a significant dent in those debts.

Student Loan Changes

From: http://articles.moneycentral.msn.com/CollegeAndFamily/SavingForCollege/big-changes-ahead-for-student-loans.aspx

On July 21, the House Committee on Education and Labor began marking up a bill, introduced by Rep. George Miller, D-Calif., that seeks to eliminate government-subsidized private student lending and replace it with direct loans to students through the Department of Education.

"This is the biggest change in federal loans for higher education since 1965, when the original program was created," says Terry Hartle, senior vice president at the American Council on Education.

About damn time. Private-lender student loans are one of the worst deals one can get into when paying for education. I had to take out just one private loan - to cover BARBRI and summer school. The interest rate is 3% points higher than my federal loans. When I was unemployed for 6 months following graduation, all it took was a a short form and a signature to get my federal loans deferred. For my private loans, the best Sallie Mae could offer was a 3 month forebearance for a $50 fee.

I had better help from my credit card companies during my unemployment period. The private loan provides, like Sallie Mae and NelNet, use the student loan protections (non-dischargeability in bankruptcy, ease to obtain, and relatively low interest rates) to hook students, who in a lot of cases have the choice of an a private loan or no education, if they don't satisfy the FAFSA requirements. Then, they can use their own policies to fiddle with the interest rates, charge late fees, and have tough deferment/forbearance/forgiveness policies. They aren't even eligible for the Income Contingent Repayment options or the federal loan forgiveness programs for public service. And you can't consolidate them through the federal loan consolidation programs.

So, to recap - all the drawbacks for the borrower, and none of the risks for the creditor.

Letting the Fed handle student loans just makes sense - their Direct Loan program is great ($93,000 @ $370 a month @ 4.75% fixed, thanks to consolidation) for students, generates a minimal but still positive return for the government (i.e., it more or less pays for itself eventually), and can provide huge benefits by encouraging public service through forgiveness programs. And it lets students pick occupations that require major education but have minimal income, with ICR options that forgive the loans after 20 years of repayment.

In conclusion, here's to Sallie Mae - and to the hope that you die unloved, unmourned, and soon to be forgotten. And keep cashing my $200 a month checks.

Quasi-Obligatory Commentary

From http://www.bloomberg.com/apps/news?pid=20601087&sid=acQvgRoLQmXQ:

"More than 126,000 consumers filed for bankruptcy in the U.S. last month, 34 percent more than in July 2008, the ABI said in its latest report on Aug. 4. The increase came after a 36.5 percent rise in personal bankruptcies nationwide in the first six months, to 675,351, according to the ABI research group, which interprets data collected by the National Bankruptcy Research Center."

and:

"Credit Card Losses

JPMorgan said losses in its Chase credit-card portfolio may be 10 percent next quarter and will be “highly dependent” on unemployment after that. Losses for cards issued by Washington Mutual, which the bank acquired in September, may reach 24 percent by the end of the year, the company said.

JPMorgan’s credit cards lost $672 million, compared with income of $250 million in the second quarter last year. Home- equity charge-offs climbed to $1.3 billion, or 4.61 percent. Prime mortgage defaults rose to $481 million, or 3.07 percent, from $104 million, or 1.08 percent a year earlier."

Too bad the article failes to mention how Chase and most of the other lenders are at least partially, and often majorly, responsible for the bankruptcies themselves. Time and again I get client whose almost sole reason for filing bankruptcy is their credit card rates getting jack to 30%. I have seen debtors who have struggled along for years, through unemployment and famine, after tapping their 401(k)'s and IRA's dry, just to make their minimum payments. Then they watch their minimum payments triple and their interest rates quadruple.

Chase could very well be posting profits, or at least much smaller losses, if it had left the interest rates and minimum payments where they were. Instead, the screw around and drop some more straw on the camel's back, and the next step is a visit to my office.

Thank you Chase; you are one of the best feeders for my services. I love nothing better than adding you to Schedule F with a big fat 5 or 6 figure number in the amount column. You bring it down upon yourself by biting too hard on the teat of the honest but unfortunate debtor.

They even cut my limit and boosted my rate, after I paid off my balance from college. I was using the card for gasoline and whatnot, paying it off every month, and they cut my limit, 6 months after I paid off my $2,000 college indiscretion balance. I was only using it to keep it active and boost my credit score. Their reason: "Not paying bankcards as agreed," despite the fact that my balances are minimal and my monthly payments are quadruple the minimums.

Now? I'll just let it languish with a zero balance until they close it. I'll stick with my Sears Mastercard (they keep bumping my limit) and my credit union credit card (I love my credit union too) - the folks that actually treat me right.

The horrible downside is that, in the next few years, we'll see another bankruptcy reform act, which will further tighten the screws on the already completely-screwed, force more people into nearly impossible Ch. 13 repayment plans (100% of my disposable income for five years? God forbid I need a new alternator), all on the justification that too many debtors are filing bankruptcy after Chase (and others) gave them too much credit, and then turned around and screwed them by jacking the rates and payments.

An Apt Summary of Contested Divorce Cases

From the Onion: http://www.theonion.com/content/opinion/the_divorce_was_unfortunate_but

"There's no reason divorce has to be a terrible experience. What's important is that we both know in our heart of hearts that our divorce was as bad as it could be. It's a comfort to think that the utter dissolution of our marriage was as ugly as humanly possible, without resorting to actual, physical violence. After all, we're adults, right? There's no reason we shouldn't handle this matter with the maturity of two screaming, biting five-year-olds.

If not for us, then for our children. Or should I say your child and my child, now that the custody battles are finally settled?

Well, my darling ex-husband, it has certainly been memorable being your wife, your lover, and the counterclaimant in several vicious lawsuits. Even though our marriage has come to an end in the most spiteful manner possible, I hope that when you think of me, your once-wife, and the life we shared together, some part of you will always know that you can suck my dick, you two-faced, no-good fuckhead. I hope you burn in hell."

Automatic Stay Violations and Sanctions

Alternative title: Stupid Creditors

Today I started work on yet another motion for sanctions for violations of the automatic stay. For those unfamiliar with the intimacies of bankruptcy law, the primary protection that bankruptcy provides is the Automatic Stay, 11 U.S.C. 362. Under Section 362, once a debtor files for bankruptcy, creditors are prohibited from taking basically any collection action against them. That code section triggers automatically - and it is powerful. It will stop foreclosures, repossession, creditor calls, lawsuits, garnishments . . . basically every sort of collection activity.

Violation of the stay is pretty egregious. One case involved a car dealer who repossessed a vehicle despite having sufficient notice of the bankruptcy. Others involve creditors continuing to place collection calls and so forth.

As an attorney, I understand that things can slip through the cracks. The first step is almost always a letter, fax, or phone call to let the creditor know that is going on. In most cases, they are quick to acknowledge the issue and cease their actions.

My favorites are the ones that don't. Sanction awards for continuing violation of the stay can be pretty harsh. Awards of attorney's fees and even punitive damages are common. I am definitely looking forward to the results of these motions. Most of the time debtors are on the losing side - so payback can be a b!tch.

The Transient Nature of Bankruptcy

My last post was a bit of a client-rant; I should clarify a little. Not all clients are unpleasant. Some are very understanding, very helpful, and generally on top of things. Consumer bankruptcy requires very little on the part of the debtors - some pay stubs, some tax returns, a couple of credit counseling classes, and occasionally a market analysis or appraisal.

Some clients come prepared - printouts, spreadsheets, credit reports, paystubs, taxes, and tons of other information. These are my favorite clients. Their efforts make my life easier and makes their bankruptcy run all the smoother.

Others have no idea what their financial situation is, and more often than not they blame us for that lack of knowledge.

Some clients understand that I have 10 files on my desk, all of which need attention, and that they are #11. Others expect to be dealt with immediately, even for small things of little or no consequence.

Today, I sent out the discharge papers for one of my favorite clients, one of the early good ones. It makes me a little sad, in a way: no more patient explanations of the mysteries of the bankruptcy code, no more thoughtful questions, and nothing further with a good guy who ran into some terrible financial difficulties.

Bankruptcy is ultimately a transient operation; almost no repeat business, and a constant need for new clients. Each month we open 60 to 100 new files, and close almost as many. Sixty new people, starting their short transition though my sphere of responsibility, and 60 more passing on into the wild green yonder of post-bankruptcy life.

Psycho Clients

For some clients, no matter how well you treat them, or how honest you are with them, they still do nothing but complain and moan and whine throughout the entire process. I have had days when I have been both complemented on the ease of access to attorneys - it is relatively easy to speak directly to an attorney at our firm - and lambasted for not working quick enough.

The bottom line is that there are simply a lot of very, very stupid people out there, who expect an attorney to magically wave his wand and fix it all. The reality though is that it takes time and money - this is a business for us, after all.

So here, in my quasi-anonymity, I will rant regarding the general state of my client base. At the end of the day, no matter how you slice it, almost everyone who comes to see me is a debtor who can't manage money, who can't manage credit, and who really can't manage their own impulsive habits. As much as I love working with people directly (and I truly do), there are days when some or all of my clients go die in a fire and I would calmly mark the file "closed."

So, to all those potential clients out there - remember, attorneys are people, we do this for a living, and we deserve some f*cking respect.

Not Forgotten . . .

My life has been very busy lately - I have recently moved, and work has been picking up, so I have not had a lot of time to post, despite a lot of great topics coming to mind. I am going to make an effort to start posting more, with a focus on bankruptcy topics, hopefully towards making this blog a half-way decent place to post my thoughts and insights into consumer bankruptcy.

Stay tuned for more information.

On Elizabeth Warren

http://www.thebigmoney.com/articles/judgments/2009/04/23/elizabeth-warren-my-hero?page=0,0

School Searches and the Supreme Court

http://www.slate.com/id/2216608/

I posted on this topic back in January. Now the Supreme Court has heard oral argument, and things don't look so good for the right to privacy in the school system. We'll see what the Court actually decides when the opinion is published.

I will return to these topics . . .shortly

Two articles have caught my attentions:

(1) This article makes what is probably the most important point of this year. It discusses the rising cost of health care v. wages and some changes.

(2) Judge Posner's opinion on mutual funds / CEO compensation and evidence on breach of fiduciary duty.

I'm packing for vacation tomorrow, and leaving soon, so I should get back to this the end of next week. Ta ta for now.

The Cost of College v. Payout

I saw this article on Slate, and it resonated with me. As a lawyer, my college loan debt level is approximately $100k. Fortunately, I have a job I like and I make decent (but by no means the mega-bucks Big Law pays) money. Right now, I am looking at paying about $800 a month for the next 10 or 15 years. I had some scholarships, but largely my family simply could not afford to pay for college, so my education was financed by government loans.

One part of the article I noted is the part that discusses the sociology degree and its comparative worth. There are a lot of degress that aren't worth the paper they are printed on in the open market. I remember back to the meetings with my academic advisor - one of the rarest topics was whether the major I picked had any significant employment prospects. The ivory tower academics can provide some very expense and ultiamtely worthless pieces of paper, and even that degress that have value do little to prepare students for their future.

I went through three years of law school, a largely practical education, full of discussions on case law, precedent, argument, and so forth - and my on-the-job training still continues. For degrees like psychology and sociology, at least a Master's level degree is basically required in order to participate fully in the job market - and for jobs that pay $30k to start.

So I add my voice to the chorus - we need to seriously consider revising the seconday education system. The liberal arts education has become a joke. Certainly there are necessary areas that need to be taught - writing, literature, math - but there is an awful lot of fluff in the cirriculum. For example: two credits of physical education - in my case, archery and golf. What a waste of $1,000 (I went to a private undergrad @ $500 a credit hour). Put a joke in here, but my ethics class was a joke too - I learned nothing in it.

There is another aspect too - many of these degrees are basically "toxic" debt - they aren't worth it. Why are we, the taxpayers and goverment, investing in the education of individuals, sometimes to the tune of $200,000 plus, when their chances of paying it off in any reasonable amount of time are zero?

Past, Present, Future

Some days just are not nearly as fulfilling as others.

Today I was tasked with 341 Meetings of Creditors, which is a highly routine event in which the clients meet with the trustee in bankruptcy. For chapter 7 bankruptcies, the ideal outcome is one involving a finding of no assets. There's lots of jargon and etc., but generally most cases are straightforward.

One gets me is how, well, care-worn most of the trustees are. I have met only one trustee who I would classify as even remotely personable. Put it this way: if I was at a bar, sitting at the bar enjoying my drink and watching a game, and any one of most of the trustees I encounter would sit down next to me and order a beer, I would probably get up and move.

Most of them I have met (one exception) just seem, well, sad - careworn, unhappy, and overall miserable.

It worries me, a little bit - what is my future going to be like? Here I am, 25, finally starting my career; where am I going to be, who am I going to be, in ten or fifteen years? If I met the future me know, would I even like me?

I look back at the younger "me's," and I can still see the seeds of the current "me." I might try to talk some sense into my past self, but other than that, I probably wouldn't change a lot.

But if I were to wind up like some of the trustees I meet . . . well, I really don't like that thought.

Musings on Bankruptcy

I was reviewing the number of bankruptcy filings so far this year, and to my surprise there really hasn't been any noticeable increase in them. That mirrors my own observations in the course of my employment, that we haven't had any spike in business. When clients ask about whether we have seen any major spike in business, I do not have any good answer for them.

After thinking on it, I have some thoughts. First, due to the state of the economy, the layoffs, impending foreclosures, and all the other horrible consequences are "long-tail" events. Folks struggle on for a good long time before consulting bankruptcy attorneys. It might be a year or more after someone loses his or her job that she finally thinks of the "b-word." In the mean time, they get harrassed by creditors, struggle to make payments, and generally live in a state of wretched existance.

Why does the "b-word" have such a horrid connotation? In the Northern District of Illinois, we are already on case number 12,000. Twelve Thousand(!) cases filed so far this year, in an area of perhaps 6 million people. That means 0.2% (two-tenths of one percent) of the people have filed for some form of bankruptcy - or 1 in 500. The occurrence is not that uncommon.

Secondly, the damage to one's credit isn't that bad, in the grand scheme of things. Certainly it will be on your credit report for a decade, but if you are at the point where you are considering bankruptcy already, your credit is probably already thoroughly screwed over anyway.

Basically, if someone makes less than the median income for their family size, has no assets with any equity, and can't pay off their debts in the next 2 years, they should be meeting with a bankruptcy attorney now.

Instead, people struggle with the decision, and the terrible connotation of bankruptcy, for months and years, through all the harrassment, aggravation, and the general unpleasantness, for no good reason at all.

A Quasi-Rant on the MPAA

I caught this article today on Sacha Baron Cohen's Bruno. The initial cut of the movie received a NC-17 rating - a death-knell for any wide release movie. Most theatre chains simply won't show an NC-17 movie, period.

Contrast to this piece by Emily Bazelon of Slate, which looks at the Tale of Despereaux and describes it as "too scary" for a G rating.

The rating system starts with G, for General Audience. Next is PG, for parental guidance suggested. Third up in the rating scale is PG-13, strongly cautioning parents, and fourthly is R, for over age 17. NC-17 is everything else.

Now, I am 25 years old, and I look back at my own maturity level at age 17, and I think of how different I look at movies, the world, and just about everything. A huge portion of the movie-going public is age 20+, yet the movie rating system effectively tops out at age 17 - anything too graphic or intense for a 17 year old is lumped in NC-17, an effective purgatory for movies.

What we wind up with, then, is very little market for the upscale, the more mature, and the more intense. I won't even touch on the violence v. sex debate in movies, which is an entirely separate issue.

Why can't a film-maker make a movie with me in mind, without having to tone it down or edit it for the 17 year old version of me? I'm not talking about graphic sexuality, but rather just in the depth of story, the level of maturity, the subject matter of the film, and so on. Movie's like Planet Terror and Sweet Sweetback's Badassss Song come to mind. Even films like American History X and Last Tango in Paris are suggestive that we need to accept the NC-17, or perhaps add another rating, for movies aimed at adults. Other good examples are movies like Casino, Resevoir Dogs, or Rambo IV - those are movies that shouldn't be screened for 17 year olds.

Overall though, the entire rating system needs to be revisited - not only for the filmmakers and the parents, but for the viewing audience. I want movies aimed at me, not at the 17 year old counterpart of me.

Watching the Economy Implode

Watching the news about the economy, and especially the AIG stupidity, it strikes me as amusing to draw parallels between our current socio-economic situation and that of Ayn Rand's Atlas Shrugged.

Now, I am not an objectivist by any means - the views on religion do not suit me, and there generally just seems to be something missing from the theory - but there are a lot of elements in Atlas that ring true.

I think that now, when anyone says anything about the economy, I am going to reply, "Who is John Galt?" and see if anyone catches the reference.

Blogging and Life . . . Life and Blogging

Again and again, life seems to be striving to keep me from posting by keeping me busy and (more or less) happy. My angsty need to post continues to diminish.

As a general note though, I do hope that sooner or later the economy does get fixed, or at least better. I had yet another friend laid off due to economic realities. While I may be a bottom-feeding bankruptcy attorney, and hence virtually immune to economic shifts (or perhaps in the best position to benefit), those I care for and call friend are facing harsher realities.

There is no magic bullet, and I understand that the economic realities are grim, but surely someone somewhere has a solution?

Oh, and one more thing: the new median income numbers for bankruptcy have gone up this month. How the hell that happened I have no idea - but from February to March, the median income for a single person household went up almost $2,000.

Economics makes my brain hurt.

Jim Bunning - /headdesk

First as a law student and now as an attorney, I've always been a fan of Ruth Bader Ginsburg - her opinions have generally showed clarity of thought and a good deal of appreciation for the bottom line, as opposed to some long-winded Founding Fathers interpretation or some off the wall precedent.

I was saddened by her recent illness, and I hope she will recover. The loss of any great legal mind is always painful, and I sincerely hope that Justice Ginsburg will be with us for a long, long time before she goes and joins the Great Bar Association in the Sky.

So, today, we get the wonderful Kentucky jackass Jim Bunning, playing cliche partisan anti-court rhetoric cards and stating that Ginsburg has 9 months to live. He later apologized, but still misspelled Ginsburg's name.

This moron represents his state in the House of Representatives, and he can't even spell the name of a Supreme Court justice right. He is another great example (along with Roland Burris) of why democratic government requires constant vigilance - and also the dark downside of letting everyone's vote count equally.

"Oyez! Oyez! Oyez! [. . .] God Save the United States and this Honorable Court."

Another Non-Law Post - Oscars = bleh

A couple of notes on the Oscars (or rather, my venomous disagreement with the overstuffed, pretentious academy):

Actor in a Leading Role: Rourke's performance was such a wonderful, truthfully savage look at a man's soul . . . though I haven't seen Milk yet, so maybe I really am off base here - but I doubt it.

Actress in a Leading Role: Should have gone to Anne Hathaway, but she's still suffering from all the nice, fun roles in Get Smart and Ella Enchanted and hasn't yet fully gone over to the Academy darkside.

Supporting Actress: Again, I would go with The Wrestler and Marissa Tomei.

Animated Feature: Kung Fu Panda was head and shoulders above Wall-E. Another solid "bleh."

Now, for my big, big rant: Makeup and Costume design. Did anyone who voted actually watch Hellboy II? F*ck you Benjamin Button. Del Toro's Hellboy II stands out as probably one of the most elaborate visual effect movies since Clash of the Titans, and yet it gets snubbed. Bleh. And Double Bleh.

Yet another Post that has Nothing to do with Law

I feel like I am only posting to stay in the habit of posting - but perhaps I am using the word habit a bit strongly.

This blog started as a way to vent angst about my uncertain future, and now things are looking bright (or at least moderately well lit). I'm even developing some semblance of social life. (And now this is starting to sound like a LiveJournal entry . . .).

Oh well. I promise that I will post something law-related tomorrow.

Haven't Posted in a Bit

I haven't posted in several days, and I probably should.

The only thing is, I really don't have much to talk about. Life is going pretty well right now. I like my job, I've got some steady income, and I'm pretty content.

In a way, this change is pretty major. For the last 7 years or so, my life has been about "what's next." College, law school, the bar exam, and now the job - there was always something around the corner, some new goal to accomplish.

Now? Now I've ran projections on my estimated student loan payoff (Sometime in 2017, heh . . .). Life is on cruise control now, to a pretty big extent. My priorities are to pay off my credit card debts, then my private student loans, and then my federal loans. That's really it. I've started saving a good chunk of my paycheck as well, with hopes to buy a car in 18 months or so.

I'm just waiting for life to happen - making new friends, meeting new people, perhaps that special someone - and that's really it.

In a way it is a bit scary. I feel like I am almost inviting life to throw me a curveball. On the other hand, I have been pretty focused for the last decade, so perhaps it is time I was able to relax and just live day by day, instead of focused on some future event.

Oh, and I bought a topcoat today. I love it, and it is very sweet - now I look like a lawyer when I walk down the street downtown, instead of some schmuck.


Insert inside joke here: Booyah.

Economic Stimulus and Math (Or How to Be Thrifty)

The current proposed economic stimulus plan being debated on Capitol Hill has a cost of $800 billion dollars, and the powers that be tell us it will create 4 million jobs.

$800,000,000,000 divided by 4,000,000 = $200,000. Each of those jobs will cost the American Taxpayer (and their children, and their children's children) $200,000.

There are currently ~11,600,000 people unemployed in the United States today.

$800,000,000,000 divided by 11,600,000 = ~$68,965.52.

So, here's the plan. We create the Re-Employment Agency. To qualify, you must be: unemployed, and work at least 25 hours per week. For an employer to qualify, they must agree to freeze their current employment numbers and salary for a year. In exchange, those employers will gain access to the pool of unemployed for free. The government will pay those employees $20 per hour, up to 40 hours per week.

If every single unemployed person took advantage of the program, the cost would be $41,600 per worker, for a total of about $482 billion dollars.

That would save the taxpayer over $300 billion dollars, give the private sector up to 464 million free man-hours per week, and it would reduce unemployment in the United States to zero.

Treat the employees at independent contractors, use 1099 forms to track hours, and let the employer eat the cost of worker's comp/etc.

Free labor + zero unemployment + saving money = win. Also, the $41,600 is a tad bit more than I'll make this year, as an attorney with 7 years of post-high school education.

Good Days and Bad Days

Today was the latter. Since I'm still a new attorney, I haven't really developed the thick skin that armors most others in the rough and tumble world of consumer bankruptcy. Behind every file name is a story, a series of poor choices, easy credit, and lots and lots of regret. We do what we can, and most of the time, for most of the people, we help them.

Today thought, came the exception. The client was an older female, and unfortunately had a whole life insurance policy and a car with a little equity in it - less than $10,000 in total. Some trustees wouldn't bother, but of course we get one who is exceedingly thorough (that is, a more polite way to say something I won't state in public about a bankruptcy trustee).

We had done what we could, but there was little we could really do to help her. So, now she's going to likely lose her car and her life insurance. Perhaps she can get a loan from a family member, or figure something else out, to buyout the trustee interest, but that isn't likely.

That's the thing that pisses me off about bankruptcy. If you have horrible judgment, rack up a f*ck ton of credit debt, your chapter 7 will sail cleanly through. If you have a ton of money and income, and you just made a couple of bad calls and got behind on your mortgage, chapter 13 will help you.

If you're in the middle, and you made some decent financial decisions right alongside the horrible ones, and you have a middling amount of equity, and a car that is worth something but not a lot, you get the short end of the stick. It creates a perverse incentive for asset management.

I feel bad for the client - she was in tears by the end of it. There's only so much we can do, and sometimes it isn't enough.

Bankruptcy, Consumer Credit Debt, and the Economy

Having been on the consumer end of consumer bankruptcy for several weeks now, I have gained some perspective (a dangerous thing, I know) on the recent economic meltdown.

My theory goes as follows: During the last ten or 15 years of steady economic growth, that growth has largely been fueled by consumer credit card debt. The boom in the consumer spending, on things like electronics, food, clothing, jewelry, vacations, and just about everything else, has largely been bought on credit. The statistics don't lie: the average consumer credit card debt is over $8,000. However, most households carry only about $2,000 worth - only 1 in 20 (5%) have more than $8,000 in debt. Total outstanding credit card debt in 2002 was $750 billion - the Gross Domestic Product of Australia.

That debt has almost no relation to any real number. Rather, the credit card companies transform that debt and turn it into a monthly payment. That payment is little more than a bribe for temporary respite, a purchase of time while the debtors wait for the other shoe to drop. The debt merry-go-round keeps going around only as long as those monthly payments, payments which only go to interest and fees and whatnot. Once that merry-go-round stops, the angry calls and collections start.

The main problem is that those payments are really only going to pad the earnings report of credit card companies. That money, the hard-earned money of working folks, is doing nothing. They are not buying consumer goods, not saving money, not buying a new car, not doing anything to stimulate economic growth.

The solution? This answer will be self-serving, but we should liberalize bankruptcy laws and clamp down on consumer credit. By making it easier to clear credit card debt, the hundreds of dollars families are spending on each month for their credit card respite will be turned instead towards economically stimulating activites. Secondly, by clamping down on the ease of access to credit cards, the slippery slope of the credit card money pit can be avoided.

To throw some numbers out:

Increase the exemptions for cars and real property by 50%, to protect the equity in the home: $3,600 for each car, and $22,500 (single) / $45,000 (joint) for real property.

Secondly, decrease the filing limits to every 5 years, from every 8, for chapter 7 bankruptcy. Also, increase the income levels to 30% over the median, instead of the median income.

These changes will make it easier to wipe credit card debt.

Now, as far as credit cards, put a limit on any revolving credit account for a person to $1,500 total, increasing the limit by $500 per year, and removing the limit after 10 years. Also, put strict limits on interest rates (say, prime + 15%) and all the various fees.

What will this accomplish? First of all, it will let most families get out of the credit card money pit, freeing up hundreds of dollars each month. That money can go to save mortgages, can be used to buy things to stimulate economic growth, and can generally be used in a more efficient way than buying time from the credit card company.

Secondly, the restrictions on credit cards will ensure that bad debtors, who suck with money, will have a much harder time racking up 5 figure credit card debts. The ease of bankruptcy will also force credit companies to be much more stringent with how they hand out credit.

Who will lose? The credit card companies will get hosed, big time. They are big, evil corporations and deserve it. Realistically though, their business model sucks anyway, and is likely doomed to failure, since it focues on easy credit, high interest, high fees, and short term gains over any long-term working relationship.

Who will win? Consumers and the economy as a whole. Who else will win? Consumers will win because they will be prevent from falling into the credit money pit, and one less pitfall will exist between them and financial independence.

Banks - They All Suck

Now that I've relocated and found a job, it is time to find a bank.

In short, they all suck. Chase wants $6 a month, Bank of America wants $6.95, and the rest are just as bad.

I love SIU Credit Union, in Carbondale, because they were (a) nice people; (b) gave full credit in most cases for deposits, immediately, and (c) a variety of locations. I prefer credit unions generally; it seems to me that by and large much of the recent economic meltdown has been caused by banks getting greedy/stupid/moronic. Credit unions, on the other hand, tend to be much, much smaller, and therefore much more likely to be conscious of their bottom line and very risk adverse.

Unfortunately, and this applies to basically every banking institution in the universe, DuPage Credit Union does not have hours that work for me; their opening hours are my work hours.

Oh, and f*ck Chicago traffic.

Reflections on the First Week

Today marks my first full week of employment. I am very happy with my job so far - I like my colleagues, the work is somewhat fulfilling, and I generally come home satisfied if not very tired. I am still adjusting to the work schedule, after such an extended period of unemployment.

What amazes me, although perhaps it shouldn't, is the depth and breadth of the stupidity of the credit companies. I don't think I need to elaborate on the general "bad idea" of racking up tens of thousands of dollars in credit card debt, but someone at the credit companies need to grow a brain.

The credit company model is little more than a pyramid scheme - it almost requires its "customer" base to be morons. If someone uses credit ideally, by paying off any balances monthly, the credit company will make about 3% on each transaction, since it only pays the merchant ~97% of the receipt price. That margin is not, by any means, a high profit area, and certainly not enough to warrant some of the monster corporations that extend credit.

Instead, the typical and bad users build a house of cards, of sorts - using credit to buy necessities and luxuries in equal measure with almost no regard for the eventual payback. Instead, the credit card becomes another monthly bill, like a telephone or internet. However, instead of some useful service, the credit company provides only a space of time to hold back on its collections.

It is a racket, separated only from the loan shark model by a matter of degree, not in nature.

The Circle is Now Complete.

Fifteen years ago, my parents were divorced. It was a messy affair, and if it wasn't for a legal aid attorney who helped my mother get custody of my sister and me, I think my life may have been radically different. (Not to say my father is a bad person, but rather that he was going through a difficult time and not handling it in a constructive manner.)

I still remember sitting outside the courtroom in the Daley Center in Chicago, looking down out of the windows onto the street below.

Today, I went to the Daley Center as an attorney, and looked out those same windows, onto the same street below.

Life is funny sometimes.

Law School Debt

I saw this article on Slate a few days ago, and I meant to comment on it, before I got involved with the new job. The gist of it are the options one has regarding public service work with a law degree, in light of the substantial debts that are generally associated with a legal education.

As it stands now, I'm in a similar position - my total debt is somewhere around $100k. However, my first issue was getting a job, let alone finding a job that fits my own personal ideas, goals, wants, needs, and whatnot. Paying the rent seems like a good first start :).

There are a lot of great public service jobs - and Income-contingent repayment combined with loan forgiveness, with the excellent benefits some of the non-profit organizations provide, make public service a tempting, tempting career option. Of course, the dozen or so resumes and letters I sent out to the various public service jobs were largely in vain.

As horrible as the $100k debt trap sounds, it doesn't seem that horrible to me. Sure, I'm not "living large" right now, but I never wanted to. My goal is to repay my loans within 10 years - a noble goal, and perhaps only partially naive. My student loan debt is a rather high priority, especially the private loan that covered my summer classes and BarBri (and it's 11% interest).

And anyway, the 7% or so I'm paying on my federal loans, that gave me the chance to really make something of myself, is cheap at the price.

Good News!

Today, I was offered a job at the firm of David M. Siegel & Associates. I start tomorrow.

In what likely amounts to one of the strongest understatements I have ever made, I am pleased.
Thus, my "Days Unemployed:" count ends at 174.

Double Post Tuesday

Two bits of news.

First, I had a job interview today, and I'm hopeful. I did very good, hit on my strengths, and I generally feel I impressed the interviewer. I like the firm and the practice area, and the commute isn't bad. Overall, a very good fit for me.

Second, congratulations to Barack Obama, the 44th President of the United States. There isn't much that hasn't been said about him, and it is hard to underestimate the scale of what he has to accomplish, but if anyone can do it, it's Obama.

Strip Searches and the Supreme Court

On friday, January 16, the Supreme Court granted certiorari in the case of Redding v. Safford School District. For those unfamiliar with the case, a 13 year old girl was strip-searched for prescription-strength ibuprofen based solely on a statement by her friend.

At trial and on the initial appealing, the court found for the school. On rehearing en banc, the court held for the plaintiff.

Basically, under T.L.O. v. New Jersey, there's a sliding scale - the need for the search, the impact on the student, and the degree of intrusiveness are all factors. Courts have generally found that strip searches for drugs are permissible.

In my humble opinion, this case is a terrible abuse of school power. They made a 13 year old girl strip naked for a couple of Advil! They never suspected she had a weapon, or serious street drugs, or even serious prescription drugs. Here we have a fine example of over-reaching, power-abusing school administrators. There was never any indication of a threat to school safety.

Another interstin issue is whether they will find the administrators liable in their individual capacity - whether they abused their power to the level that they knew was impermissible. Otherwise, the administrators have immunity via loco parentis powers.

Overall, I think the en banc rehearing got the decision right, both on the facts and the policy. A strip search needs something more, some element of danger to the school population, that simply isn't posed by a few Advil - even prescription strength Advil. Given the variety of opinions involving school searches, some Supreme Court guidance on T.L.O.'s standard is welcome, if they'll give it.

So Say We All . . .

Time for my inner Geek to go into fanboy mode - I am very pleased with tonight's premiere of the final ten episodes of Battlestar Galactica. I have eagerly awaited the conclusion all these months, and if this first episode is any measure, we are all in for one wild ride.

I won't give away any spoliers, but if you haven't seen it yet, it should be on Hulu shortly.

Transitions and Changes

Hello friends;

It's official now - I've relocated to the greater Chicagoland area, due to exigent circumstances (that should be readily apparent). I hope the change, along with the new year, will provide me with greater opportunities to get my legal career into gear.

I have a couple of leads, although nothing definitive. I hope to make the most of them.

Happy (belated) New Year, and may this year be filled with hope and opportunity.

65mpg Ford - and the Realities of Economics

Taken from: "The 65-mpg car Ford won't sell in US" by BusinessWeek. In brief, the 2009 Ford Fiesta ECOnetic gets 65mpg, runs on diesel, is as clean as a gas engine, and won't be sold in the U.S.

It won't be sold in the U.S. because, with the strength of the pound v. the weak dollar, it would run $25,700. The engines are built in the U.K., so even if the cars were built in Detroit, Canada, or Mexico, the key technology for that wonderful MPG figure would still make it cost prohibitive.

The cost to build or retool to build diesel engines in the U.S. is a prohibitive $350 million.

I've long liked diesel engines - the fun, drivable torque, the throaty rumble, and the great mileage. They also adapt well to performance modification. Vehicles like the European Jetta TDI and the Audi A5 TDI are great examples of efficient, sporty vehicles.

In the U.S. though, diesels are largely limited to commercial freight trucks and heavy-duty pickup trucks. The higher particulate levels in emissions are also a worry,as is the higher cost per gallon (which is largely a result of higher taxes aimed at commercial trucks as opposed to non-commercial gas taxes aimed at everyday drivers).

So Ford, which along with Chrysler and GM have become the red-headed step children of the economic downturn, has the potential for green, efficient cars and trucks. Unfortunately, due to U.S. regulations on diesel, consumer prejudice, and general cost issues, the money tree doesn't balance out.

Roland Burris - Just Accept Him Already, Please

As a lifetime resident of the great state of Illinois and a former resident of Chicago (actually Cicero), the recent news of Gov. Blagojevich's indictment comes as absolutely no surprise.

In idle speculation, I wonder at what would have happened if this indictment had come to light prior to Nov. 4. I applaud whoever decided to sit on it until after the election.

Back to my first point though, Blagojevich has demonstrated some serious political savy in naming Roland Burris as Barack Obama's replacement in the U.S. Senate. Sixteen years in Illinois politics without a single corruption investigtion is quite the achievement. The rest of his credentials are equally sterling. He's a solid choice to represent Illinois in the Senate.

It seems pretty clear, based on the indictment at least, that Blagojevich is yet another corrupt Illinois official, tainted with the almost unavoidable smell of Illinois politics. However, he has made a solid choice in Burris. Just because Blagjevich is corrupt does not mean he cannot make a clean appointment.

Watching Harry Reid and Co. make fools of themselves in opposition to Blagojevich's pick for Senate is closing the barn doors after the horse has left. It is little more than a useless gesture in defiance at political corruption, which will only result in more hassel and fighting and probably no real progress.

Burris is qualified, free from the Blagojevich mess, and willing to do the job - so let him.

Also, please, can the powers that be stop wasting their time and effort over this, and perhaps start focusing on the things that matter, like, I dunno . . . Iraq, Iran, Afghanistan, Gaza/Isreal, and the economy? Don't we have better things to do?