Archive for December, 2010


time to end your start-up? try plan B first.

Your new start up doesn’t always go according to plan.  Some businesses are not consistent with revenues throughout the year.  Some end up focusing on the wrong market.  Some underestimate the competition. 

If you can afford to stay around for a little while longer, and Plan A isn’t working, go to Plan B, or even Plan C.  Like a doctor tending to a patient, an owner has to quickly identify what’s obstructing the business and come up with a solution that will get the business into the black.

So what can a start up do?  According to business coach, Devon Attenbaumer, the first thing a business can do is look at its pricing.  It can be a fairly easy fix.  Is the business charging too little or even too much for its services or goods?   The business may be offering a service such as photography at a price that is too low and doesn’t generate enough revenue to cover costs.  Take it upscale and offer more than your competitors but charge a premium for the upscale service.

The point being that if the current model isn’t working, the business has to quickly move on to a plan that will work if it is to survive.

Once the bills and creditor claims start adding up, then it is time for Plan D, which would include filing for bankruptcy.


Some big names that went under in 2010

The recession creeps on and it was a tough year for some iconic brands.

A&P – East Coast grocery chain.

Affiliated Media – Newspaper publisher including the San Jose Mercury News, which I grew up reading.

Ambac – Insurer of toxic mortgage backed securities.  Maybe Ambac should have read Michael Lewis’ “The Big Short”.

American Media – Publisher of the National Enquirer among others.  Wait, Angelina Jolie, Brad Pitt and Jennifer Aniston didn’t sell magazines like they used to?  I didn’t think that story could get tired.

Blockbuster – What’s Blockbuster?  I seem to remember it having something to do with renting VHS movies.

Hummer – Giant SUV’s.

MGM – Movie studio.  Doesn’t it seem like MGM is always filing for bankruptcy, about to file for bankruptcy, should file for bankruptcy?  Well, it did.

Mercury – Part of the Ford family of cars whose most memorable model was the……………..?

Movie Gallery – Ran Hollywood Video.  See Blockbuster.

Newsweek – News magazine.  People don’t read anymore.  Well, except this blog.

Pontiac – GM car division.  It had more memorable cars than Mercury at least.

So the story would appear to be that it was a bad year for cars, print media, and movies.   Looking forward to 2011.


small business hiring doesn’t inspire confidence in a strong economic rebound

Small business in the U.S. does not seem to be hiring at too fast of a clip.  According to the Wall Street Journal, although U.S. small businesses continued to hire in November, this time adding the most jobs in a month’s time in nearly three years, according to payroll company Automatic Data Processing Inc., job growth remains modest compared with pre-recession years, and many entrepreneurs say they plan to hold back for some time to come.

Small, privately held businesses—companies with fewer than 500 employees—added a net 91,000 jobs last month, according to the ADP data released Wednesday. Though that was a sizeable jump over October’s net gain of 78,000 jobs, the average net monthly gain so far in 2010 has been just 35,000 jobs.

By contrast, small businesses in 2006 and 2007 added a monthly net average of 143,000 and 79,000 jobs, respectively, ADP’s data show.

A number of factors—including pending tax legislation, the ongoing credit crunch, and changes that owners made during the recession to stay afloat—are contributing to entrepreneurs’ restrained approach to hiring according to the Wall Street Journal.

What does this mean for consumer bankruptcy filings?  Probably more of the same. Small businesses play a major role in the U.S. economy, employing half of all private-sector workers, according to the U.S. Small Business Administration. They have also historically started adding jobs more quickly after recessions than large companies. For example, small businesses added a net monthly average of 38,000 jobs in 2003, while large businesses shed a net 22,000 jobs on average per month that year, ADP’s data show.  And the unemployment numbers are always deceiving because they do not take into account the underemployed and those who have given up looking for employment.  Add to this data the fact that the housing market still appears to be in a slum nationally and there is a recipe for continued economic hard times and more bankruptcy filings.


Small Business Filing for Bankruptcy? Don’t Forget the Small Stuff.

Times are tough, your small business has fallen behind on bills, and creditors are filing suit.  You make the decision to file for bankruptcy and liquidate the business.  When listing the assets of the company, don’t forget the small stuff.

Your company name, web address, phone number and other intangibles may have value and should be listed as an asset.

Chances are unless your Microsoft or Home Depot these items are not going to have much value and it’s not going to be worth the trustee’s time to try to sell them.  Nevertheless, in my personal experience I have run across creditors who were interested in purchasing the phone number and company name.  So for practitioners and debtors alike, be sure to keep in mind the small stuff when listing assets.


Myths About Bankruptcy

Sometimes, a fresh financial fresh start makes sense – just don’t fall victim to the common myths and misperceptions about Bankruptcy.

Bankruptcy has a bad reputation based on a little bit of truth and a great deal of unknown. Now, if you’re considering filing bankruptcy, of course not everything has turned out perfectly in your financial world.  But bankruptcy can be your ticket to a better financial future.

All debts are wiped out in Chapter 7 bankruptcy. Not exactly. Certain types of debts cannot be erased. They include child support and alimony, student loans, most taxes and debts incurred as the result of fraud.

I’ll lose everything. This is the myth that keeps people who really should file for bankruptcy from doing it.  You’re not left with a barrel and suspenders to wear.  Most Chapter 7 cases are “no asset” cases where the bankruptcy trustee does not take any property whatsoever either because it is exempt from sale or the property doesn’t have a fair market value that makes it worth the time to attempt to sell it.

All my neighbors and friends will know I’ve filed for bankruptcy. Unless your friends and neighbors are going to search public records the chances are very good that the only people who will know about a filing are your creditors. Bankruptcy is a public legal proceeding but the numbers of people filing are so large, very few publications have the space, the wherewithal or the inclination to run all of them.

I’ll never get credit again. Not necessarily. You will be able to obtain credit, it will just cost more as in a higher interest rate and/or more money down.  However, if your credit is shot, you’re already struggling to find credit and if you do it is already expensive.

Only deadbeats and cheaters file for bankruptcy. Many times the reason people fall behind on their debts is because something traumatic has occurred – the loss of a job, a medical emergency, etc.  The lack of income, the staggering medical bills, or other tragedy becomes overwhelming.  It happens to the best of people.  Bankruptcy offers a financial fresh start.

I can run up my credit cards and if I have to I’ll just file for bankruptcy. Filing for bankruptcy is the worst ‘negative’ you can have on your credit report. Unlike other negatives, which stay on your report for seven years, bankruptcy can be there for 10 years.  And if your thinking about filing for bankruptcy and decide “well, I’m going to file bankruptcy anyways, I might as well max out my cards before I do it” that’s fraud.  That could land you in a world of hurt you’d much rather avoid. Bankruptcy is not a step one should take lightly.

Find out more at


The quick and dirty of filing bankruptcy

Common Bankruptcy Questions

One should consider filing for bankruptcy after determining that bankruptcy is the most beneficial way to deal with your financial problems. This post cannot explain every aspect of the bankruptcy process. If you still have questions after reviewing it, you should speak with a bankruptcy attorney.


What Is Bankruptcy?

Bankruptcy is a legal proceeding in which a person or married couple that cannot meet their financial obligations can obtain a fresh financial start. Federal law provides for the right to file for bankruptcy. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until the bankruptcy trustee examines the debts.


What Can Bankruptcy Do?

Bankruptcy may make it possible for you to:

• Eliminate the obligation to pay most or all of your debts. The law refers to this as a ‘‘discharge’’ of debts. This provides you with a fresh financial start.

• Stop foreclosure on your house and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, eliminate mortgages and other liens on your property without payment.)

• Prevent repossession of a car or other property.

• Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.

• Restore or prevent termination of utilities.

• Allow you to challenge the fraudulent claims of creditors who are trying to collect more than is really owed.


What Bankruptcy Cannot Do

Bankruptcy cannot, however, alleviate every financial problem.

Bankruptcy may not be the correct step for every individual. In bankruptcy, it is usually not possible to:

• Eliminate certain rights of ‘‘secured’’ creditors. A ‘‘secured’’ creditor   is one that has a mortgage or other lien on property as collateral for the loan. Regular examples are car loans and home mortgages. You may force secured creditors to take payments over time in the bankruptcy process and bankruptcy may eliminate your obligation to pay any additional money if your property is taken.

However, you generally cannot keep the collateral (the home or the car for example) unless you continue to pay the debt.

• Discharge types of debts identified by the bankruptcy law for special treatment, such as child support, alimony, most student loans, court restitution orders, criminal fines, and some taxes.

• Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.

• Discharge debts that the debtor incurs after bankruptcy has been filed.


What Different Types of Bankruptcy Cases Should Be Considered?

There are three common types of bankruptcy cases provided under the law:

Chapter 7 is recognized  as a ‘‘straight’’ bankruptcy or ‘‘liquidation.’’ It requires  a debtor to give up property which exceeds certain limits known as ‘‘exemptions,’’ so the property can be sold to pay creditors.

Chapter 11, known as ‘‘reorganization,’’ is used by businesses and a very rarely  individual debtors whose debts are very large.

Chapter 13 is called ‘‘debt  adjustment.’’ It requires  a debtor to file a plan to pay debts (or parts of debts) from current income.

Most people filing bankruptcy will want to file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly.


Chapter 7 (Straight Bankruptcy)

In a bankruptcy case under chapter 7, you file a petition asking the court to discharge your debts. The basic concept in a chapter 7 bankruptcy is to eliminate (discharge) your debts in exchange for your giving up property, except for ‘‘exempt’’ property which you are allowed to keep. In most cases, all of your property will be exempt. But property, which is not exempt, is sold, with the money disseminated to creditors. If you want to keep property like a home or a car and are behind on the payments on a mortgage or car loan, a chapter 7 case probably will not be the right choice for you. That is because chapter 7 bankruptcy does not abolish the right of mortgage holders or car loan creditors to take your property to cover your debt.


Chapter 13 (Reorganization)

In a chapter 13 case you file a ‘‘plan’’ describing how you will pay off some of your debts over three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property— especially your home and car—which might otherwise be lost, if you can make the payments which the bankruptcy law requires  to be made to your creditors. In most cases, these payments will be at least as much as your regular monthly payments on your mortgage or car loan, with some extra payment to get caught up on the amount in arrears.

You should consider filing a chapter 13 plan if you

(1) own your home and are in danger of losing it because of failure to make payments;

(2) are behind on debt payments, but can catch up if given some time;

(3) have valuable property which is not exempt, but you can afford to pay creditors from your income over time.

You will need to have enough income in chapter 13 to pay for your necessities and to keep up with the required payments as they come due.


What Does It Cost to File for Bankruptcy?

It now costs $299 to file for bankruptcy under chapter 7 and $274 to file for bankruptcy under chapter 13, whether for one person or a married couple. The court may allow you to pay this filing fee in installments if you cannot pay all at once. If you hire an attorney you will also have to pay the attorney’s fees you agree to.


What Property Can I Keep?

In a chapter 7 case, you can keep all property which the law says is ‘‘exempt’’ from the claims of creditors.

The value of property is not the amount you paid for it, but what it is worth now, the fair market value. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.

You also only need to look at your equity in property. This means that you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you count your exemptions against the $10,000 which is your equity if you sell it.

While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not affect the right of a mortgage holder or car loan creditor  to take the property to cover the debt if you are behind. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy if you want to keep the property.


What Will Happen to My Home and Car If I File Bankruptcy?

In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13.

However, some of your creditors may have a ‘‘security interest’’ in your home, automobile or other personal property.

This most commonly means that you gave that creditor  a mortgage on the home for the debt. Bankruptcy does not eliminate these security interests. If you fail to make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.

There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep your property without making any more payments on that debt.


Can I Own Anything After Bankruptcy?

Yes. Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true.

You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.


Will Bankruptcy Wipe Out All My Debts?

Yes, with some exceptions. Bankruptcy will not normally wipe out:

(1) debts owed for child support or alimony, fines, and some taxes;

(2) obligations not listed on your bankruptcy petition;

(3) loans you obtained by knowingly providing false information to a creditor, who reasonably relied on it in making you the loan;

(4) debts resulting from ‘‘willful and malicious’’ harm;

(5) student loans owed to a school or government body, unless the court decides that payment would be an undue hardship;

(6) mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will eliminate your obligation to pay any additional money if the property is sold by the creditor).

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The content found on the financialfreshstart Blog is not legal advice and is purely for informational purposes. The Zarcone Law Firm does not guarantee the accuracy, integrity or quality of submissions. The information provided by the bloggers on this site may not represent the opinions of the Zarcone Law Firm or its affiliates. The information contained herein is not a substitute for the advice of an attorney.

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