Chapter 13 Bankruptcy and What it Means

Chapter 13 Bankruptcy and What it Means

Many home owners these days face the possibility of foreclosure due to the sluggish economy.  What’s worse is that their mortgages may be underwater i.e. the value of the mortgage exceeds the market selling price of the home.  When this happens, selling your home does not absolve you from all your debts to the bank.  What can you do to avoid foreclosure?
You can file for bankruptcy.  Although there is no guarantee that a bankruptcy filing will save your home from foreclosure, but it remains a viable option.
Most people will file for a Chapter 13 bankruptcy, named such after the section of the bankruptcy code it is derived from.  Chapter 13 bankruptcy is a scheduled payment plan ordered by the bankruptcy court for you to clear off your debts over a period of up to 5 years.  For it to work, you must have a regular source of income.
One good thing about filing for Chapter 13 bankruptcy is that once it is affected, the court grants you an automatic stay on all collection efforts on you.  This stops the phone calls, collection letters and foreclosures, giving you time to craft out your proposed Chapter 13 repayment plan with your bankruptcy attorney.
Besides your mortgage, you would probably have other unsecured debts also, such as credit card debts, medical bills etc.  Under a Chapter 13 bankruptcy, you will also pay some portion of these unsecured debts as a Chapter 13 filing permits you to discharge some of that unsecured debt.
How much your unsecured debts can be discharged depends on a few factors like how much you presently earn, the size of your mortgage and your mortgage arrears.  Ask you bankruptcy attorney to help you calculate your amount of discharge.  The amount discharged will release some money to help you in making your mortgage payments under Chapter 13.
Here’s another welcomed advantage of a Chapter 13 bankruptcy – you tend to be deemed more credit-worthy after filing it.  The reason is that credit companies will be more willing to grant you credit after you have freed up some of your funds than when you were laden with debts.  Some debtors are pleasantly surprised to find credit card offers given to them even before they exit Chapter 13.
Obviously, filing Chapter 13 bankruptcy will affect your credit score, but if you do it right, the impact may not be as devastating as you expect.  You should start with a reasonable amount, carefully limit your debt and slowly rebuild your credit.  By the time you complete your Chapter 13 repayments, your credit score might be better than when you entered Chapter 13.

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    Rockaways NY Hospital in Bankruptcy

    Peninsula Hospital in Rockaways, Queens, New York has begun bankruptcy proceedings after plans to close its doors to the public.  This leaves only one hospital to service the community in Rockaways.  Employees at the hospital will receive written notice of this after the board of the hospital convened an emergency meeting last Friday.
    City Councilman James Sanders Jr. (D-Laurelton) met with hospital officials and is trying to keep the hospital open to ensure sufficient quality health care is available to the community.  “Now it’s coming to a place where we must ensure that quality health care still takes place,” said Sanders, “I believe all is not lost.  I am fighting to keep this facility open.”
    MediSys Health Network, the company that owns Peninsula Hospital, owes vendors $13 million and its associated nursing home owes creditors another $2 million.  Officials from MediSys say that plans are being made for the ‘possibility’ of closure of the hospital.  Peninsula Hospital spokesman Ole Pederson said they are working with the relevant authorities including the State Health Department to try to save as many jobs as possible and draw up a plan that best addresses the need of health care in the community.
    Since last year, Peninsula Hospital has been behind on its payments to its employees, who also said the hospital has a shortage of certain essential supplies like gauze and alcohol pads.
    With the closure of Peninsula, Queens will be left with only one hospital.  With about 100,000 local residents affected, this situation is precarious.  Queens Borough President Helen Marshall said she will call for an emergency meeting with state health officials to come up with a plan to properly care for the local residents when only one hospital is functioning.  State health department spokesman, Jeffrey Gordon said, “We’re in discussions with parties and reviewing options to preserve access to care for the community and to establish a sustainable system to do so.”
    NY State officials say that they have not received the requisite 90-day notice before closure from the hospital.
    Understandably, some hospital employees fear for the many critical illness patients especially stroke and heart attack victims, for whom quick treatment time is crucial.  With the closure of the Peninsula, these patients will suffer consequences.
    “This community is going to be hit very hard with this,” said Teresa Bentley, a dental registrar.
    If you need bankruptcy services, call us at (813) 200 4133 or (813) 965 4133 for a free consultation.

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      Lambuth University is Bankrupt

      Lambuth University has filed for chapter 11 bankruptcy protection.  This is the first of several steps expected to lead to a transfer of the Jackson, Tennessee university to the Tennessee Board of Regents and through the state board of regents to the University of Memphis.  This process would make Lambuth University become a public university run by the University of Memphis.
      On the same day that Lambuth University filed for bankruptcy in US Bankruptcy Court for the Western District of Tennessee (Thursday, June 30), a group of Jackson leaders made an offer to buy the campus and its assets.  Needless to say, the Lambuth board accepted the offer.  The meeting was on the last day the private school was scheduled to be open.
      The same board voted April 14 to close June 30 and not accept applications for the fall 2011 semester.The April decision set in motion a complicated process unlike any seen recently in Tennessee Higher Education – the conversion of a private university to a public university.  Lambuth University had all the while been privately owned and run, associated with the United Methodist Church.
      The transition had already been explored in 2009 when Lambuth first encountered financial problems and University of Memphis officials contemplated running the university.
      The plan is for the Jackson group, which includes West Tennessee Healthcare, a nonprofit hospital group, the Jackson Energy Authority and Jackson-Madison County government, to pay off about $10 million in debt owed by the university or negotiate a lesser amount with creditors.  With the debt paid or settled, the state of Tennessee would then make Lambuth part of the Board of Regents, the statewide higher education apparatus that includes the University of Memphis.  From there, the regents would approve the University of Memphis running the school.
      University of Memphis officials have said their intent is to take over starting in August with the fall semester.  Tennessee Gov. Bill Haslam included $5 million in the state budget for the fiscal year that began Friday, July 1, expressly for the University of Memphis to run Lambuth.
      The Tennessee Higher Education Commission (THEC) is still working on an inventory of the campus as well as specific contingencies in the transition. The study will answer as many questions as possible about the details of daily operations scheduled to begin shortly as a university with one set of procedures converts to a higher education system with a different set of procedures.  The THEC study is working toward an Aug. 1 deadline for completion.

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        Roots of Quincy Medical Center Bankruptcy

        In 1986, Quincy Medical Center borrowed $60 million to pay for an expansion.  That was when its financial woes began.  Subsequently, an addition was finished in 1989, and the bonds used to pay for it were refinanced in 1993.  In 1996, payments on that debt became higher.  Then after a surgeon removed the wrong kidney from a patient it started a steady decline in the number of patients.
        Since 1996, the state forgave a $12 million loan it made to the city to help the hospital pay part of the sum it needed to cover employee-related expenses when the hospital privatized in 1999.  But yet this did not help Quincy’s financial constraints much.
        Three years ago, to take advantage of low interest rates in the bond market, the hospital refinanced the $32.9 million it still owed for the 1980s expansion, and it added $20 million to fund more upgrades to the emergency room and equipment.  The $60 million loan meant the hospital would be paying for it up to 2038.  Add in interests costs and the total came up to $135.6 million.  By the time the hospital missed making a payment on the debt last month, it was clear that paying off the debt would be impossible without an injection of new investment.
        The hospital board recently decided to sell Quincy Medical Center to Steward Health Care System.  The deal was if Quincy Medical Center files for bankruptcy and resolves its $56 million debt then Steward will agree to pay $38 million for the hospital and make no less than $34 million worth of improvements to its facilities in five years.  That $38 million will have to satisfy all the creditors – from the big bondholders to small creditors who have been supplying the hospital with everything from X-ray frames to cleaning supplies.
        Quincy Medical Center, which last year derived 62% of its revenue from Medicare and Medicaid patients, is dependent on government reimbursement rates.  Citing competitive market pressures and a push toward delivery of more outpatient services, the hospital began to see deep losses in 2009.  Last week, the hospital filed for bankruptcy.
        Quincy Medical Center’s filing for Chapter 11 protection in U.S. Bankruptcy Court seeks to relieve some of that burden by reorganizing debt so creditors get less back but share in the sale proceeds.  Steward has agreed to buy the hospital if the restructuring, about a three-month process, goes through as planned.

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          America Heading for Bankruptcy

          Will our nation ever go bankrupt?  Consider the report from the Congressional Budget Office (CBO).  The CBO reports that the national debt is already the highest in history except for World War II, reaching roughly 70% of GDP this year.  If things do not change, CBO projects the national debt held by the public will climb to 100% of GDP by 2021, equal to our entire economy.  By 2023, it will break the World War II historical record of 109% of GDP.   It will then continue to skyrocket to 190% of GDP by 2035, which is higher than the level suffered by Greece when it collapsed into national bankruptcy.
          Bankruptcy for a country happens when the federal government can no longer borrow enough in the credit markets to finance its budget deficit.  Already this year, 43 cents of every dollar the federal government spends is borrowed.   95% of all the tax money collected goes to Social Security, Medicare, Medicaid, and the income security programs (mostly welfare).  After that, there is nothing left to pay even the interest on the national debt, which is equal to 10% of federal revenues.  All other federal government expenses, including all of national defense, law enforcement, transportation, agriculture etc comes from borrowed money.
          With the federal deficit already at $1.6 trillion, America faces a potentially crippling bankruptcy threat just from another recession in the short term.  How high will the deficit then soar, as revenues decline again and spending skyrockets?
          By 2013, the top tax rates will be raised under current law, with the ObamaCare tax increases going into effect, and the expiration of the Bush tax cuts.  Obama has refused to renew tax cuts for singles making over $200,000 and couples making over $250,000 beyond next year.
          The ObamaCare tax increases will mean the top two income tax rates would rise by nearly 20%, the capital gains tax would rise by nearly 60%, the tax on corporate dividends would nearly triple, the death tax would rise from the grave with a 55% top rate, and the Medicare payroll tax rate would increase by 62% on the nation’s small businesses, job creators, and investors.
          This is on top of the current corporate tax rate of nearly 40% nationwide on average, counting state corporate tax rates.  Even Communist China has a 25% corporate tax rate, with the average in the socialist European Union below even that.  Yet, the President continually proposes more tax increases on American companies.

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            Direct Brands to Buy Bankrupt Borders

            Borders, the bookstore chain giant that has filed for bankruptcy protection, has found a buyer.  Once America’s second-largest book chain, Borders is still losing revenue and cash since shutting down more than 200 stores after filing for bankruptcy.  The prospective buyer for Borders’ assets and liabilities is Direct Brands.
            Once the proposed purchase is approved by the bankruptcy court, Direct Brands, a portfolio company of Najafi, will purchase Borders’ assets for $215.1 million in addition to assuming roughly $220 worth of liabilities.  The bankruptcy court will consider the deal this July 21.
            Borders had considered two offers through the “stalking horse” bid before it agreed to the Direct Brands deal.  The other “stalking horse” bid was from private-equity investor Alec Gores.  Now the Ann Arbor-based company will apply to seek the necessary approval from the bankruptcy court.
            In a prepared statement, the company said, “Borders believes a sale provides the best path forward to reposition the business for a successful future and to maximize value for the company’s stakeholders”.
            Najafi bought Direct Brands in 2008.  In turn, Direct Brands is the owner of Book-of-the-Month Club, Doubleday Book Clubs and Columbia House.
            Brick-and-mortar bookstores have found it hard to make money since the recession and the fast growth of digital books.  Late last year Barnes and Noble, America’s largest bookstore chain, said it was in discussions for a possible sale and looking at other strategic options for the future since it was losing money as buyers pulled away from hardcover books, the most lucrative product brick-and-mortar stores have traditionally sold.
            For about 10 years, Borders resisted developing its own online bookstore, as Barnes and Noble did, partnering for many years with Amazon instead before finally launching its own online bookstore in the past year.  That move was viewed by many industry observers as costly to Borders’ future.
            Previously a publicly traded stock, Borders has lost millions of dollars in recent years, and in closing 200 stores since filing for bankruptcy, some properties like one near Wall Street in New York that were once among the chain’s highest volume stores are now shuttered, empty and up for lease.
            Borders said there would be no changes in its day-to-day operations pending approval of the sale.

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