In a recent ruling that can be viewed on our News page, Bankruptcy Judge Olson awarded our client punitive damages. The client, a condominium association, had been plagued for years by the abusive tactics of a former management company. When it became necessary for the Association to file for protection under Chapter 11 of the Bankruptcy Code, the former management company filed an inflated proof of claim. When the Association challenged the claim the management company began a campaign to intimidate witnesses and Board member. They even offered bribes to potential witnesses. We filed a motion for contempt and sanction and motions to prevent witness tamperiing. After a year of motions, hearings and trial, the Court award compensatory damages, punitive damages and attorneys fees totaling $238,463.00. Awards of this type and size are extremely rare in Bankrutpcy Court.
I came across a nice article from another bankruptcy attorney on keeping your rental property in bankruptcy - http://www.megerdomianlaw.com/blog/?p=154. Here in Florida we have had an additional problem with Chapter 7 Trustees selling property that has no equity.
In cases we have had where the client owned investment property that was not claimed as exempt, but the debtor owed more than the property was worth, we have always assumed that the trustee would have no desire to take the property. However, a cottage industry developed in which investors would buy the trustee's interest in he property (the debtor's ownership subject to the bank's lien), then rent the property and fight the bank foreclosure. We saw one property sell for $8,000.00.
However, we have not seen this happen in the past few months. I have been advised that the Broward County Property Appraisor demanded taxes on all such sales and that made it too costly. In any event, we now caution all clients of this problem.
In Chapter 13 you can still 'redeem' investment property through the Chapter 13 Plan. That is, you can pay the value of the property rather than the loan amount. In Chapter 13 you are limited to five years, so you must be able to pay off the entire value in 60 monthly payments with interest (usually 5.25%). That may work well for a $50,000 condo rented for $1,000.00 per month. It may be impossible for a $200,000.00 rental home. A Chapter 11 allows for a longer plan, although that form of bankruptcy is more expensive.
A number of successful people have found themselves overextended and ended up filing for bankruptcy, only to successfully stick it out and find firmer financial footing again. Here are a few famous names who knew what it’s like to be strapped for cash.
1. Abraham Lincoln
His face may now appear on the penny, but at one time, Lincoln didn’t have a single cent to spare. Lincoln tried many occupations as a young man, including buying a general store in New Salem, Illinois, in 1832. While he may have been terrific at splitting rails, winning debates, and wearing stovepipe hats, Honest Abe wasn’t much of a shopkeeper. Lincoln and his partner started buying out other stores’ inventories on credit, but their own sales were dismal. As the store’s debts mounted, Lincoln sold his share, but when his partner died, the future President became liable for $1,000 in back payments. Lincoln didn’t have modern bankruptcy laws to protect him, so when his creditors took him to court, he lost his two remaining assets: a horse and some surveying gear. That wasn’t enough to foot his bill, though, and Lincoln continued paying off his debts until well into the 1840s.
Lincoln’s not alone in the annals of bankrupt commanders-in-chief, though. Ulysses S. Grant went bankrupt after leaving office when a partner in an investment-banking venture swindled him. William McKinley went bankrupt while serving as Ohio’s governor in 1893; he was $130,000 in the red before eventually straightening out with the help of friends. He won the White House just three years later.
2. Henry Ford
Speculation abounds about the future of the Big Three motor companies, leading some observers to wonder what Henry Ford would think of this financial peril. Ford actually couldn’t be too judgmental, though, because he was no stranger to debt himself. In 1899 the young mechanic and engineer started the Detroit Automobile Company with the backing of three prominent politicians. Ford hadn’t quite mastered the innovation and production techniques that would eventually make him rich, though. Over the next two years, Ford proved to be too much of a perfectionist, and his plant only produced 20 cars as he painstakingly tinkered with designs. The enterprise went bankrupt in 1901 and reorganized into the Henry Ford Company later that year. Ford eventually left that group and finally got things right in 1903, when he founded the Ford Motor Company. Things didn’t go so badly for the Henry Ford Company after he left, either; it changed its name into one you might find a bit more recognizable: the Cadillac Automobile Company.
Ford wasn’t the only auto magnate who knew how bankruptcy felt, though. General Motors founder William Crapo Durant took a massive hit during the Great Depression that saw his fortune fall from $120 million to bankruptcy. He spent his last few years running a bowling alley in Flint, Michigan.
3. Walt Disney
His name may be a stalwart brand today, but early in his career, Disney was just a struggling filmmaker with too many bills. In 1922 he started his first film company with a partner in Kansas City. The two men bought a used camera and made short advertising films and cartoons under the studio name Laugh-O-Gram. Disney even signed a deal with a New York company to distribute the films he was producing. That arrangement didn’t work out so well, though, as the distributor cheated Disney’s studio. Without the distributor’s cash, Disney couldn’t cover his overhead, and his studio went bankrupt in 1923. He then left Kansas City for Hollywood, and after a series of increasingly successful creations, Disney debuted a new character named Mickey Mouse in 1928.
4. Milton Hershey
Milton Hershey always knew he could make candy, but running a successful business seemed just out of his reach. Although he never had a formal education, Hershey spent four years apprenticing in a candy shop before striking out on his own in Philadelphia in 1876. Six years later, his shop went under, as did a subsequent attempt to peddle sweets in New York City. Hershey then returned home to Lancaster, Pennsylvania, where he pioneered the use of fresh milk in caramel productions and founded the successful Lancaster Caramel Company. In 1900 he sold the caramel company for $1 million so he could focus on perfecting a milk chocolate formula. Once he finally nailed the recipe down, he was too rich (and too flush with delicious chocolate) for anyone to remember the flops of his early candy ventures.
5. Burt Reynolds
Burt Reynolds was one of Hollywood’s biggest stars of the 1970s. Unfortunately, though, he spent money like his career would never hit a downswing. He owned mansions on both coasts, a helicopter, and a lavish Florida ranch. Gradually, his financial situation got grimmer as he weathered a difficult divorce from Loni Anderson. By 1996, the Bandit owed $10 million to his creditors, and the royalties from Cop and a Half just weren’t flowing in quickly enough. Reynolds declared Chapter 11 bankruptcy, from which he emerged in 1998.
6. H.J. Heinz
When Heinz was just 25 years old, he and two partners began a company that made horseradish. As the legend goes, the spicy root was the first of Heinz’s famed 57 varieties, but it wasn’t as lucrative as he’d hoped. A business panic in 1875 bankrupted his enterprise, but Heinz’s passion for condiments remained strong. The very next year, Heinz got together with his brother and a cousin to start a new company in Pittsburgh. The reorganized group started making ketchup, and the business took off. Last year the H.J. Heinz Company had over $10 billion in revenue.
7. P.T. Barnum
Famous showman P.T. Barnum was always quick with a quip, but he wasn’t so snappy about paying back his loans. Although he was successful showing off oddities in New York and around the globe, Barnum had a habit of borrowing cash from anyone who would open their wallet for him. He’d use these funds to buy real estate, particularly around Bridgeport, Connecticut, where he was trying to foster industrial development. Unfortunately for Barnum, he went too far with borrowed cash, and in 1855, things bottomed out. Barnum was bankrupt and owed his creditors nearly half a million dollars. Barnum didn’t give up, though, and he slowly worked himself out of debt over the next five years. The showman gave lectures around England about showmanship and making money, and he regained control of his main attraction, The American Museum in New York City, in 1860. In 1871, just a few months shy of his 61st birthday, Barnum entered the circus business with Barnum’s Grand Traveling Museum, Menagerie, Caravan, and Circus, which raked in over $400,000 in its first year.
(CNN Money) Economists are now forcasting slower growth in the economy than expected. At the beginning of the year a 3% growth rate was predicted. That has been scaled back to 2% - the pace it has been stuck at for the prior three years.
The harsh winter is at least partly to blame. The economy is still growing, just not enough to signal the end of financial problems. See the article on CNN at http://money.cnn.com/2014/06/16/news/economy/imf-us-forecast/index.html?hpt=hp_t2.
Brookstone, based in Merrimack, New Hampshire, filed for bankruptcy April 3, 2014. The luxury gadget retailer, with stores in many malls, is seeking to sell all of its assets to a group of Chinese buyers through a bankruptcy auction. A hearing on the potential sale is scheduled for June 23.
The company started as a catalog business in 1965. It has grown to 242 locations throughout the US. The Bankruptcy case is pending in Bankruptcy Court for the District of Delaware, Case Number 14-bk-10752.
"Creditors have done worse" since the bankruptcy law was amended in 2005 to enhance recoveries, according to a study by University of Maine School of Law Professor Lois R. Lupica. In her study, funded by the American Bankruptcy Institute, Lupica said the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was intended to prevent "the discharge of debt consumers could afford to pay."
"The theory that there are can-pay debtors lurking in the shadows was not confirmed by the data," Lupica said in an interview.
The professor said the 2005 law was designed to compel individual bankrupts to pay more by restricting access to Chapter 7, where creditors typically get nothing. The theory, according to Lupica, was that more consumers would be forced into Chapter 13, where creditors are often paid a portion of their debts through payment programs spread over about five years.
Lupica said she wasn't surprised by the findings. "The data confirmed my intuition developed from speaking with hundreds of bankruptcy trustees and judges," she said in an interview. We are not surprised either. The revisions to the Bankruptcy Code have made it more difficult and expensive to file, but not more fair. Many who could have filed Chapter 7 before the amendments cannot file Chapter 7 now and cannot afford a Chapter 13. We are hoping future amendments will fix some of these problems.
The Supreme Court issued rulings on two highly-anticipated cases on gay marriage June 26th. By 5-4, it ruled the federal Defense of Marriage Act, which defines marriage as a union between one man and one woman, is unconstitutional.
The 1996 Defense of Marriage Act, or DOMA, was signed into law by President Bill Clinton, barring federal recognition of same-sex marriages for purposes such as Social Security survivors' benefits, insurance benefits, immigration and tax filing.In a separate ruling, it declined to take on the broader issue of gay marriage. The court decided that supporters of Proposition 8, a 2008 ballot measure that had outlawed same-sex marriages in the California, did not have standing to bring the case to the court.
This means that same-sex married couples can now file a joint bankruptcy. Many jurisdictions have ignored the Defense of Marriage Act in recent years and allowed such filings. The Supreme Court ruling eliminate any question.
Los Angeles (CNN) -- Dionne Warwick, one of the most recognizable pop voices of the 1960s, filed for bankruptcy last week, citing more than $10 million in tax debt dating back to 1991.
"Due to several consecutive years (the late '80s through the mid-'90s) of negligent and gross financial mismanagement, Dionne Warwick has realized the current necessity to file personal bankruptcy," Warwick publicist Kevin Sasaki said in a statement to CNN Tuesday.
Warwick, 72, made hits out of many Burt Bacharach and Hal David songs, and won five Grammys in a 50-year career. The singer is down her last $1,000 in cash and only owns furniture and clothing worth $1,500, according to the Chapter 7 filing in New Jersey.
This just shows that no one is exempt from financial problems in this difficult economy.