San Antonio Bankruptcy Law Blog

The American Bankruptcy Institute (ABI) recently released a report on the number of consumer bankruptcy filings in the United States for both December 2011 and the entire calendar year 2011. The results? Bankruptcy filings -- including Chapter 7 and Chapter 13 filings -- continued to decline at a rather significant rate.

Specifically, the ABI -- using data supplied by the legal technology firm Epiq Systems, Inc. -- indicated in its report that there were exactly 96,264 consumer bankruptcy filings in December 2011. This represented a 16 percent decrease from the 114,738 consumer bankruptcy filings in December 2010.

"The decline in total filings reflects the retrenchment in consumer spending associated with a down U.S. economy," said Samuel J. Gerdano, an ABI executive. "As consumers continue to deleverage their debt and access to credit remains tight, bankruptcy filings will continue to decrease."

According to recent reports, the fear of incurring large debts or developing bad credit during these uncertain economic times is causing many Americans to keep their credit cards in their wallets. In fact, these same reports show that the average credit card debt in the U.S. declined by 11 percent in 2011, continuing a downward trend.

The website Credit Karma recently conducted a survey of over 300,000 users, which revealed that from 2010 to 2011 the average credit card balance in America declined from $7,404 to $6,576. As previously stated, this continued a trend from 2009 to 2010, in which the average credit card balance decreased by as much as seven percent.

Here, Credit Karma researchers attribute two factors to the two-year reduction in credit card debt:

• Banks are extending less credit to consumers and reducing the credit limits of current customers
• Americans are still uncertain about the economy and therefore spending less

A recent report by RealtyTrac provides fascinating insight into the number of foreclosures in the United States in 2011 and the foreclosure forecast for 2012. In fact, the findings present a clear-cut case of good news, bad news.

According to the report, the number of foreclosure filings in the United States -- including bank seizures, default notices and scheduled auctions -- fell by 34 percent from 2010 to 2011, with approximately 1,887,777 homes receiving some type of filing.

This constitutes the lowest foreclosure level since 2007.

What was behind this decline in foreclosure filings in 2011?

RealtyTrac experts believe that one of the primary reasons behind the decline in foreclosures filings in 2011 was the need for mortgage lenders to re-file thousands of foreclosures in state court systems. This step was necessitated after accusations surfaced that mortgage lenders wrongly foreclosed upon hundreds of thousands of homes using flawed procedures and/or partial data.

Last week, our blog reported on how the Eastman Kodak Company -- a photography giant and American institution -- filed for bankruptcy protection due to staggering losses largely precipitated by its failure to adapt to a changing marketplace. Now, yet another American institution -- so to speak -- is seeking bankruptcy protection.

According to news reports, Hostess Brands Inc. -- the food company behind such classics as Wonder Bread, Twinkies, DingDongs and HoHos -- filed for Chapter 11 bankruptcy last week.

For those unfamiliar with Chapter 11 bankruptcy, it typically entails a debtor proposing a plan of reorganization outlining how it will keep its business alive and pay off creditors over the course of time.

Here, Borders indicated in court documents that it plans to keep its business operations afloat with $75 million debtor-in-possession financing from a New York investment firm, and listed assets of $1 billion and debts/liabilities exceeding $1 billion.

Fortunately, the Texas-based company -- which employs roughly 19,000 people in bakeries, outlet stores and distribution centers throughout the United States -- is not planning any layoffs or closings.

Photography buffs around the world are likely feeling uneasy following the announcement that industry giant Eastman Kodak Company may be on the verge of filing for bankruptcy protection.

According to a recent report in the Wall Street Journal, Kodak is actively preparing for a potential Chapter 11 filing, including hiring a renowned bankruptcy/restructuring firm, and entering into discussions with possible lenders for so-called "debtor in possession financing" (i.e., a $1 billion loan to help keep the company operational during the bankruptcy process).

(For the uninitiated, Chapter 11 bankruptcy involves a debtor proposing "a plan of reorganization to keep its business alive and pay creditors over time.")

Interestingly, the report also indicated that Kodak is waiting to see if it can sell its 1,100 digital-imaging patents -- estimated to be worth between $2 to $3 billion -- before filing for bankruptcy. However, the patents have been on the market since July, and thus far, no takers have emerged.

While the economy is slowly improving and the real estate market is showing some signs of turning around, many homeowners are still struggling with mortgage payments and facing the threat of foreclosure.

However, rather than battling to keep a home they simply can't afford or ultimately losing their home to the bank, an increasing number of people are now utilizing another option: donating their homes to charity.

By choosing to donate their homes to charity, homeowners -- especially those with low-value property -- can rid themselves of crippling payments on an underwater mortgage and take advantage of a charitable tax deduction.

"People see this as a way out if they can't sell," said Charles Konkus, president of the national charity Real Estate Donations.

In fact, homeowners aren't the only one getting in on the act, as more and more mortgage lenders are now donating or selling (at a significantly reduced price) foreclosed property to charities such as Real Estate Donations or Habit for Humanity.

With the New Year upon us, many people are setting aside time to reflect on their personal and economic circumstances. Unfortunately, many people who ultimately find themselves to be in poor financial health often refuse to consider the financial lifeline offered by either Chapter 7 or Chapter 13 bankruptcy.

The reason?

Simply put, they are afraid to file for bankruptcy due to certain myths about its financial/social consequences or because they don't fully understand the process.

Today's post -- the second in a series -- will continue to attempt to debunk a few of the more common myths associated with bankruptcy.

Post continued ...

It's extremely difficult, if not impossible, to file for bankruptcy.

Fortunately, this couldn't be further from the truth. The truth is that while the bankruptcy process can be somewhat difficult for a person without a legal background to fully comprehend, an experienced attorney can break it all down into more understandable terms and help you examine your options. Furthermore, an experienced attorney can take care of complex filings/paperwork and attend court hearings on your behalf.

With the New Year upon us, many people are setting aside time to reflect on their personal and economic circumstances. Unfortunately, many people who ultimately find themselves to be in poor financial health often refuse to consider the financial lifeline offered by either Chapter 7 or Chapter 13 bankruptcy.

The reason?

Simply put, they are afraid to file for bankruptcy due to certain myths about its financial/social consequences or because they don't fully understand the process.

Today's post -- the first in a series -- will attempt to debunk five common myths associated with bankruptcy.

If you file for bankruptcy, everyone will know.

Bankruptcy is a matter of public record. However, you must remember that you are not the only one filing. Hundreds -- perhaps thousands -- of people are filing at any given time.

The publications that typically print this sort of information likely have no interest in you, and are only looking for bankruptcy filings involving notable figures or businesses.