Bankruptcies for Company and City

The prospect of bankruptcy is affecting not only individuals but also companies and even entire cities.  Last week it was reported that Lack’s Stores Inc. will soon file for Chapter 11 bankruptcy.  The retailer in home furnishing, which employs more than 800 store employees, intends to close 36 of its stores in 75 cities including stores in San Antonio and a new one in New Braunfels.  The affected stores will host closing down sales within the next 45 to 75 days.
According to Lack’s their financial problems stem primarily from their lenders.  The banks and other lenders have traditionally funded Lack’s account receivables by granting loans to the company for their customers to buy furniture.  But now the banks have given notice to Lack’s that they will no longer finance these accounts and demanded repayment for outstanding amounts.   This has resulted in the company seeking bankruptcy protection.
The other factor that precipitated the bankruptcy filing is the current economy.  Before the economy slumped in 2008, Lack’s employed over 1,200 employees and had revenue of more than $200 million per year.  But since the economic recession, the company had to lay off more than 300 of its staff as revenue dropped by 20%.
Lack’s will not give any comments on its reorganization plans at this time until its bankruptcy is filed and neither will it release details of its assets and liabilities.  Lack’s is currently based in Schertz, Texas in a 380,000 square foot distribution center.  What the company would do with its stores and distribution center remains to be seen.
In the meantime, the city of Hamtramck in Michigan is trying to get permission from the state to declare bankruptcy.  According to city manager Bill Cooper, the city will run out of money come end of January 2011.
Bankruptcy is the only way for the city to continue to pay its nearly 100 employees and 153 retirees whose salaries and pensions take up about a third of the city’s annual $18 million budget.  Hamtramck will be the first city in Michigan to declare bankruptcy in what is envisaged to be the first of many.
Part of Hamtramck’s financial problems stem from their dispute with Detroit city which itself is near bankrupt.  Hamtramck sued Detroit over shared tax revenue from the GM Poletown Plant but Detroit contends that it had previously overpaid it.
If you are struggling financially, consider seeking bankruptcy protection.  Call us at (813) 200 4133 for a free consultation.

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Elderly Driven to Bankruptcy by High Healthcare Costs

A study by the University of Michigan Law School by bankruptcy expert, Professor John Pottow shows that many elderly people have been filing for bankruptcy.  For example, from 1991 to 2007 the percentage of those between age 65 and 74 who filed for bankruptcy rose by 178%.  And since these figures are pre-recession, it is safe to assume that the figures after 2008 would be higher.

Healthcare expense is one of the primary expenditures for the elderly.  And since the cost of healthcare has dramatically increased (even higher than the rate of inflation), it can empty the retirement savings of the elderly pretty quickly.  A study by Fidelity Investments shows that the healthcare costs for retirees this year are up by 4.2% compared to last year.  This represents a significant 56% jump since 2002.  At the same time, inflation only rose by 1.1% this year.  Fidelity also found that the elderly spend an average of $535 per month on healthcare, an amount exceeded only by the cost of food.
Hence, health and medical expenses are major contributing factors to bankruptcy among the elderly in the US.  Having Medicare helps but Medicare does not cover everything.  It does not pay for out-of-pocket expenses if you become seriously sick or need nursing care.
A report by the Center for Retirement Research at Boston College (CRR) shows that the typical married couple at age 65 will expect to spend an average of $197,000 in uninsured costs in their lifetime, including insurance premiums, out-of-pocket expenses and home healthcare.  This does not include any long-term healthcare needs like nursing care.  If these are included, the figure will rise to about $260,000.  In 5% of cases, this figure might rise to $570,000.
Medical bankruptcies usually stem from high out-of-pocket expenses including the cost of financing these expenses, so says Melissa Jacoby who is a law professor specializing in bankruptcy cases in the University of North Carolina.  These out-of-pocket expenses are usually due to purchases of drugs and nursing costs, which are compounded when they are charged to a credit card.
Another key contributing factor to bankruptcy among the elderly is their loss of income since many of them no longer work.
Some legislation has been enacted to lighten the burden of the elderly.  The new healthcare reform law aims to close the gap in Medicare D prescription drug coverage for the beneficiaries with high expenses (known as the doughnut hole).
Likewise, the Affordable Care Act (ACA) increases the subsidy for low-income seniors who use the Extra Help prescription drug.  This subsidy now pays 100% of premiums for enrollees with annual income of $16,245 a year (single) or $21,855 (married couples).

If you need help in filing for bankruptcy to pay off your debts, call us at (813) 200-4133 for a free consultation.

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USPS Heading Towards Bankruptcy

If the United States Postal Service (USPS) were an ordinary private company, it would have filed for Chapter 11 bankruptcy already.  With the massive drop of about 6 billion in mails, especially from first class, they lost about $8.5 billion in the fiscal year ended September.  The USPS said it would run out of money in 2011 if Congress doesn’t step in to rescue them in the event the economy does not recover.

The USPS now delivers some 170.6 billion pieces of mail per year.  Contributions of about $5.4 billion towards pre-fund retiree health benefits and another $2.5 billion to the government’s workers’ compensation insurance scheme also led to the poor financial performance.  Because USPS is a quasi-government organization, it has workers’ compensation obligations to help fund four major disability compensation programs.
The USPS has a $15 billion credit line available to it which it has utilized up to $11.5 billion already.  It intends to borrow the remaining $3.5 billion to stay afloat.  Even with this injection of funds, the USPS will likely go broke at the end of fiscal year 2011 unless Congress acts to save them.
Over the last 2 years, the USPS has laid off about 105,000 full-time workers and cut costs by $9 billion.  Its Chief Financial Officer, Joe Corbett said they will continue to be frugal and take measures to improve efficiency while hoping there would be changes in legislation, regulations and labor contracts in their favor.
The USPS’ situation is that as long as they remain a quasi-government organization, they are not at liberty to take measures to reform that other ordinary businesses could.  They are bound by government regulations and union agreements that force them to pay workers even though they don’t work.  In fact, the USPS spends more than $1 million per week paying thousands of workers who sit in empty rooms doing nothing (a practice known as ‘standby time’).
According to postal officials, the amount of standby time averages about 45,000 hours per week which is equivalent to having 1,125 full-time workers idling, at a cost of more than $50 million a year.
A drop of 12.6% in mail volume compared to last year means that postal supervisors do not have enough work to keep employees busy.  To make things worse, union agreements stipulate that the USPS cannot lay off any surplus employees and even temporarily prohibits them being re-assigned to other departments that need them.  So they sit there, some for their entire shifts.  Some 15,000 employees have spent time on standby this year.

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    How Will Bankruptcy Affect Texas Rangers

    The Texas Rangers baseball team has finally come out of bankruptcy after being bought by a consortium lead by Hall of Famer Nolan Ryan and his business partner, attorney Chuck Greenberg.  Ryan and Greenberg won the auction after an intense battle with many rival groups, primarily the group led by Mark Cuban, owner of the Dallas Mavericks.  The final price paid was around $590 million, inclusive of taking over the team’s current debts of about $208 million.

    With the end of the bankruptcy saga of the popular baseball team, many pundits and the general baseball-loving fans would be asking, “How will the Texas Rangers perform now?”
    To get an idea of this, it’s good to evaluate the performances of other sports teams who have been in similar situations in the past.  In 1993, the Baltimore Orioles were on the verge of bankruptcy when it was bought over by a group led by attorney Peter Angelos.  The purchase price was $173 million.  Angelos was a native of the area and hence his move won the praises of many in the League.  However, the Orioles have only once won the American League East (in 1997) and this season seem to be headed for a 100-loss record.
    On the other hand, NHL team Pittsburgh Penguins was about $100 million in debt in 1998.  The team would have folded up if not for the business acumen of one of its players, Mario Lemieux who was owed some $30 million.  He teamed up with Ron Burkle and together they bought over the team.  Ten years after their purchase, the Penguins won the Stanley Cup in 2008.
    It appears the ownership factor does play a significant role in the success of the team.  Like Lemieux, Nolan Ryan is a former player who used to pitch for the Rangers.  He was also the team president just before the sale was finalized.  With such an owner who has both financial and personal stake in the team, you would expect the Texas Rangers to start making a serious challenge for major honors in Major League baseball.  Furthermore, the team also comprises of exciting talents like Josh Hamilton, Michael Young and Nelson Cruz.  The team has improved their starting pitch with recent additions, Cliff Lee andRich Harden.
    It appears that the prospects for Texas Rangers seem bright.
    If you are in financial difficulties in these tough economic times, bankruptcy can provide you with a way out of your debts.  Many others have sought bankruptcy protection (which is your right under the law) and successfully eliminated their debts.  So call us at (813) 200-4133 for a free consultation or visit

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    4 Alternatives to Bankruptcy for Repaying Student Loans

    Are you struggling to repay your student loans?  This is not an uncommon situation.  You might owe $100,000 in student loans but your only earn $30,000 in your first job.  And with other commitments you have, it’s impossible to repay your loans according to the schedule.  Can you seek bankruptcy protection to absolve this debt?  The short answer is ‘no’.

    With the inception of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) 2005, all student loans, whether public or private, are no longer dischargeable unless you can prove undue hardship on your part.  The legal definition of ‘undue hardship’ goes beyond not being able to repay your student loans because you earn too little.
    The definition of undue hardship comes from the legal case Brunner vs. New York State Higher Education Services Corp in 1987.  According to this case, undue hardship is seen when three things occur:
    1. The debtor cannot maintain a minimal standard of living based on current income and expenses, if he or she repays the student loan

    2. Additional circumstances indicate that this state of affairs is likely to persist for a significant portion of the repayment period of the student loan

    3. The debtor has made genuine efforts to repay the student loan
    Arising from this definition, it means that the only way you can have a discharge to your student loans is if you have a mental or physical condition that prevents you from working.
    Since it is highly unlikely that you will get your student loan discharged, what alternatives are there open to you?  Here are 4 alternatives that may reduce or reprieve your student loan.
    1. Opt for a New Repayment Plan
    One type of repayment plan is an income-based one where you pay based on the amount you can afford.  However, if you choose an income-based loan, it will be more than your total debt and interest divided over 25 years.  The good news is that if you can afford more (which you should as your salary increases), you would be able to repay your loan in less than 25 years.
    On the other hand, if you choose a consolidated loan repayment plan, it fixes the repayment amount regardless of your salary.  Each repayment plan has its own pros and cons so you should choose wisely.
    2. Obtain a Payment Reprieve
    You can get a temporary stay on your repayment by requesting a forbearance or deferment form.  This applies to federal student loans.  You may be granted such a stay of repayment due to active military duty or temporary financial problems.
    3. Negotiate for Fresh Terms
    If you are on a private student loan, talk to your loan provider and try to negotiate a temporary reduction in repayment amount or an extension on the repayment term.
    4. Keep Track of Legislation
    Congress may change legislation governing repayment of student loans in future.  But as of now, the non-dischargeability of student loans through bankruptcy remains.
    Reducing your burden in repaying student loans is possible when you explore the four alternatives above.
    Although bankruptcy cannot eliminate student loans, it can absolve other unsecured debts like credit card and medical bills.  Get more information about how bankruptcy can discharge your debts by calling (813) 200-4133 or visit

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    Bankruptcy Sale of a Nightclub and Baseball Team

    Love Files for Bankruptcy

    Popular nightclub Love in Washington DC is filing for bankruptcy to protect itself from creditors while its owners negotiate the sale of the establishment.  Park Place Inc, the owners of Love nightclub, have listed liabilities of between $1 million and $10 million to about 15 creditors, including music and equipment vendors and up to $50,000 worth of assets in their bankruptcy filing.  Park Place also owns The Place at 14th, a second establishment it opened in 2007.
    Marc S. Barnes, the chairman of Park Place is unable to state when negotiations to sell the nightclub would be concluded.  “It’s been taking a little bit longer to negotiate the sale than we expected. It could be (completed) any day or it could take another two months”.  Creditors of the nightclub have refused to budge on their demands to clear the way for the completion of the sale.
    Barnes and his wife Anne have also filed for bankruptcy protection as individuals under Chapter 11 to protect their residential property and the two businesses.
    It has been a difficult year for Love, a classy establishment that together with The Place at 14th, are frequently used for political functions and have drawn big name performers like Beyonce and Jay-Z since opening its doors in 2001.  Earlier this year, the authorities issued an order for Love to cease operations for three months following a stabbing that took place there on New Year’s Day.  The Alcoholic Beverage Control Board of Washington DC also banned Barnes’ liquor license because of the stabbing and other incidents.
    Since its reopening in March, the nightclub has primarily been used for special events.

    Group Buys Texas Rangers in Bankruptcy Auction

    A group that included Hall of Famer Nolan Ryan successfully bid for the Texas Rangers baseball team, outbidding rival bidder Mark Cuban, owner of the Dallas Mavericks baseball team.  Ryan and his partner, attorney Chuck Greenberg, bid $385 million for the team and offered to assume its debts amounting to $208 million at the auction at a Fort Worth, Texas courthouse.
    Shortly after the winning bid was made, Cuban pulled out of the auction.  His lawyer, Clifton Jessup congratulated Ryan and Greenberg.  US Bankruptcy judge D. Michael Lynn is expected to give his approval to the sale.  Under Major League Baseball rules, the sale would also require the approval of 75% of the team’s 30 owners.  The owner’s are due to hold a meeting of their own later this month.
    If you own a business that is burdened with debts, consider filing for bankruptcy as a way out.  Bankruptcy is a legal right under the law that offers protection from creditors and allows you to either eliminate or pay off your debts under a payment plan.
    Call us at (813) 200-4133 for a free consultation or visit

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    Bankruptcy Trustee alleges Guidices Fraudulently Filed Documents

    The court appointed trustee in the bankruptcy filing of Housewives actress Teresa Guidice and her husband Joe filed papers that allege the Guidices “knowingly and fraudulently” made ‘false oaths’ or ‘accounts’ when filing their original bankruptcy petition back in October of 2009 and went on to make additional false ‘accounts’ on amendments filed after the original petition while under oath during subsequent hearings.

    The celebrity couple filed for Chapter 7 bankruptcy protection listing more than $11 million in debts.  At the same time, they claim they do not have any bank accounts, did not disclose all their businesses or their income from the year they filed for bankruptcy, did not provide details of a contract with a Bravo production company and Teresa did not disclose the book deal she signed where she was paid an advanced payment of $250,000 for ‘Skinny Italian’, among other things.
    According to the trustee, the Guidices have made ‘multiple amendments’ to their petition but in none of them did they reveal any information pertaining to Teresa’s ‘Skinny Italian’ cookbook deal, the advance she received amounting to a quarter of a million dollars, the publishing deal they had with Hyperion, the company Teresa was running called TG Fabulous LLC and the fact that Joe had an interest in one of his own properties.
    Furthermore, the trustee also recorded that Joe and Teresa included their 2006, 2007 and 2008 individual tax returns with their bankruptcy filing but the IRS confirmed never receiving these returns from the couple.  The court documents are silent on whether the Guidices have failed to file joint tax returns with the IRS.
    As such the trustee focused on the couple’s original petition’s financial statement that stated Joe earned more than half a million dollars in 2008.  In the opinion of the trustee, this income coupled with what Teresa earned from her online boutique, TG Fabulous (incorporated in 2009) and for her role in Real Housewives of New Jersey, was enough to pay for their debts.
    The bankruptcy trustee filed three counts against the Guidices that alleged they were involved in “Transferring, removing, destroying, mutilating, or concealing with intent to hinder, delay, or defraud creditors or the case trustee”.
    He also filed a fifth count which is an objection to the discharge.  The trustee based this on “failure to explain satisfactorily any loss of assets or deficiency of assets to meet the defendant’s liabilities”.   This is another way of saying the trustee does not support the couple’s petition to have their debts discharged through bankruptcy.

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    4 Things You should prepare for if your State goes Bankrupt

    The State of Illinois is unable to pay $120.6 billion of their debts.  Here are some of their debts:

    • Illinois bond borrowings: $29.1 billion• Promised pension benefits: $62.4 billion• Promised retiree health care benefits: $27.1 billion• Miscellaneous (including payments to nursing homes, child care facilities, etc): $21.9 billion.
    The state Financial Comptroller Dan Hynes, said recently Illinois owes $5 billion to schools, universities, child-care centers and rehab centers around the state.  He calls it ‘obscene’, telling the New York Times: “This is not some esoteric budget issue; we are not paying bills for absolutely essential services”.
    Having overrun their budget over the years and borrowing to fund the deficits, the day of reckoning has arrived.  With billions owed in bond IOUs the state’s credit – the ability to borrow – has been depleted.  As a result, they are not able to pay their bills.
    Unlike the federal government, state governments cannot print money.  So the state has become bankrupt and in a bankruptcy, debts are discharged.  That means someone loses, whether it is a credit card company, a goods supplier, a medical care provider or mortgage lender, when an individual or company files for bankruptcy.  Now when it is a state government that goes bankrupt, the ones who lose are its citizens.
    So what should you do if your state goes bankrupt?
    1. Save more money before you approach your retirement years.  As state funds dwindle, there will be cutbacks.  If you will draw a pension from a state agency (or most municipal agencies, school districts, etc) should expect to get less than the promised amount.  The federal government does not guarantee state pension payments.
    2. Prepare to pay more in state income taxes.  Any government can only raise money in three ways – print it, borrow it or tax the citizens for it.  Since the first two options are out for a bankrupt state government, the only option left is the third one.
    3. Prepare to get by on less state services.  Whether it be health services, subsidies or child care services, any one of them may be reduced or even canceled altogether.
    4. Vote a prudent and responsible governor and leaders.  We need leaders who will cater for the needs of the people and not their own ego, leaders with the courage to say ‘no’ to grandiose projects – high-rise buildings, arts centers, mega events – that cost the state an arm and a leg simply to gain votes for themselves.
    Don’t wait for your state to run out of money and pay for the consequences.  If you yourself are struggling with debts, seek bankruptcy protection.  Call us for a free consultation at (813) 200 4133 or visit

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    Dismal Bankruptcy Figures

    Bankruptcy figures continued to soar despite many big US corporations reporting positive financial results.  The number of filings jumped to 1.57 million (1,572,597 to be exact), up by 20% in the year ended June 30, 2010.  This figure is the highest in four years when the number of cases was 1.48 million in 2006.  At the same point of time last year, the number of bankruptcies stood at 1,306,315 cases, according to the Administrative Office of the US Courts.  The number of cases in July this year were up 9% over last July.

    Bankruptcy continues to be the last resort for many Americans seeking financial relief from household debt, unemployment and the economic downturn.  Bankruptcy attorneys say that many people who were laid off at the start of the recession nearly three years ago are now filing for bankruptcy after failing to find work, depleting their savings and retirement funds and accumulating credit card bills to pay for their expenses while they hunted for jobs.  Small businesses especially those in the financial and construction sectors have failed resulting in more middle- to upper-income families seeking bankruptcy protection.
    After two years in which the bankruptcy filings dipped below a million, in 2009 the number of filings rose to 1.31 million.  At this rate, the American Bankruptcy Institute predicts that the number of bankruptcies could rise above 1.6 million by the end of this year.
    As for business bankruptcies, the numbers rose by 8% to 59,608 in the year ended June 30, 2010 compared to 55,021 year on year.  On the other hand, personal or non-business bankruptcies as at June 30, 2010 came up to 1,512,989 cases compared to 1,251,294 cases at the same period last year.  this represents a rise of 21% according to the Administrative Office.
    At the same time, U.S. Labor Department figures indicate that claims for unemployment benefits rose unexpectedly over the past few weeks.  This data that shows the pace of a national economic recovery may be slowing despite the government’s stimulus packages and indicates many employers are still hesitant to add new workers.
    The biggest obstacle to economic recovery is unemployment that results in loss of income.  The national unemployment rate is currently 9.5%.  Besides this, the other two most common reasons people file for bankruptcy are divorce and high medical bills.
    Nevertheless, many people have found bankruptcy to be a blessing that saved their homes from foreclosure and discharged many if not all of their debts.  You can enjoy the benefits of bankruptcy, too.  Call us at (813) 200 4133 for a free consultation or visit

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    American Apparel Heads for Bankruptcy

    American Apparel Inc., a garment retail company that popularized the hipster, is struggling in financial deep waters.  It’s maverick CEO and chairman, Dov Charney owns 53% of its stock and is known to be a very hands-on leader, personally evaluating fabrics and choosing designs in his LA factory.  But he is not known to be as meticulous when it comes to financial matters.

    The garment manufacturer lost its auditor, Deloitte & Touche LLP when the firm quit stating that American Apparel’s 2009 financial statements might not be reliable.  The Federal Securities and Exchange commission requested for documents used to prepare the financial statements.  An American Apparel’s lawyer said the files would be submitted as requested.  The company was also subpoenaed by the US Attorney’s Office over the irregularities in its auditing after Deloitte & Touche quit.
    Following reports of a preliminary second quarter loss, the company’s shares plunged into penny stock territory.  Lenders are withdrawing their support and the company might not have enough reserves to last another year.  Store-wide sales figures have fallen by double digits and the company’s debts amount to $120 million as at June 30, if company figures can be believed in the first place.  All these are typical signs of a company heading for bankruptcy.
    What may prove to be the last nail in the coffin might be the Immigration department’s raid on American Apparel’s factory in Los Angeles recently that resulted in the arrest of 1,500 factory workers.  It was a deemed to be an inevitability according to observers.  Two years ago, Charney displayed an American Apparel print advertisement that featured two Guatemalan-born employees likening the US immigration laws to an apartheid system.
    The loss of the factory workers resulted in delayed order fulfillment, shortages in key products and further worsened the company’s financial problems.  American Apparel might now be delisted from the New York Stock Exchange Amex because it could not submit its second quarter financial statements after Deloitte & Touche’s departure.
    It is also desperately in need of a new funding source after it was revealed that the company might default on a $75 million loan from Lion Capital LLP, a private equity fund based in London.  But any new investor coming in would almost certainly change the entire management of the company, pushing Charney out of the hot seat of the company he built from the ground up.
    If you or your company face financial problems too big for you to handle, consult us for advice on bankruptcy.  Bankruptcy is your right under the law and will protect you from your creditors giving you time to sort out your finances and repay your debts.  Call us at (813) 200 4133 for a free consultation or visit

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