Federal Reserve Policy and Its Effect on Bankruptcy

For the last several years, the United States Federal Reserve Bank, the financial entity with the ability to set interest rates, has kept the cost of borrowing money low in an attempt to encourage economic growth and prevent a “double-dip” recession. In Texas, during this period, the economy has been improving. But it’s difficult to know whether this growth is because of – or in spite of – Fed policy.

 

And some suspect that the number of bankruptcies in D/FW is artificially low as a result of Fed policy and that a flood of filings may be just around the corner.

 

In North Texas, the Fed’s low-interest policy has likely resulted in a significant decrease in the number of business bankruptcies. The first quarter of 2013, for instance, saw an 11 percent decline from the same period in 2012 in Chapter 11 filings. Looking back even further to 2011, the decline is even more steep.

 

Critics of the Fed’s “cheap money” policy and its effect of discouraging Chapter 11 filings have prompted some to call this the era of “extend and pretend.” Banks are extending loans, they say, and pretending that their debtor’s underlying business reality is not as bad as it appears.

 

If these predictions are accurate, debtors and their creditors may soon find that even a modest increase in interest rates may kick off a wave of business filings. That may, in turn, put pressure on bankruptcy professionals and courts to process the significant influx of bankruptcy filings.

 

Want to know the extent to which your small business is exposed to the risk that interest rates increase in the months ahead? Do you have your own “break the glass” plan in which you begin taking steps toward bankruptcy? Answer these questions and many more important concerns like them by talking to the dedicated professionals at Fears Nachawati today. We’re prepared to advise you.

Put the Brakes on Your Car's Repossession

If you’ve fallen behind on your monthly car payments, your lender likely has the legal right to repossess your vehicle. From your lender’s perspective taking action may make sense. If your creditor doesn’t think that you can make timely payments, the value of the car may be the only thing standing between him and a bad debt.

 

From your perspective, of course, losing your car is the last thing you need. If you’re like most Texans, your car isn’t a luxury. It’s a necessity. To get to work in the morning, go home at night, or to buy groceries on the weekend, you must have your car. Losing access to your car – even temporarily – may cost you thousands of dollars in lost time, lost wages, and lost opportunity.

 

To tap the brakes on your car’s repossession, exercising your state rights and remedies may be required. To repossess your car, your creditor must have an attached, enforceable security interest in your car. If the creditor has fallen short in executing the necessary steps for an attached, enforceable security interest, you may be able to keep your car. Additionally, your creditor cannot breach the peace in the act of repossession. So, there may be practical limits on his repossession efforts, too.

 

To slam the brakes on your car’s repossession, filing for personal bankruptcy may be necessary. The Bankruptcy Code’s automatic stay and other powerful provisions may give you the ability to retain your car. By filing a Chapter 13 plan, you may be able to restructure your note, reducing the size of your monthly payments, and moving toward a more acceptable debt structure.

 

Need to find out more information about how to manage your creditors expectations and, if necessary, protect your legal rights and interests? The attorneys at the law firm of Fears Nachawati are prepared to help you do just that. With years of experience, we’re prepared to give you the advice you need to navigate the challenges you face.

 

Planning for Life after Bankruptcy

If you’re planning on declaring bankruptcy, you should also be planning for life after bankruptcy. Bankruptcy is a double-edged sword; you should take care to make sure that the weapon that cuts into your creditors’ pocketbook doesn’t cut into your own.

 

In the first couple of years following bankruptcy, you’ll have a poor credit score. As a result, finding available credit will be difficult and interest rates will likely be higher. With a little work, however, you can build back your financial life surprisingly quickly.

 

What will cost more in the years after bankruptcy? In addition to higher interest rates, you may find that some apartment complexes may deny you a unit. For many insurers, such as car insurance providers, your rates may go up, too. Finally, you probably won’t be able to make big purchases – like a car or home – on credit either.

 

How can you make it work? For the first twenty-four months, you’ll probably have to be disciplined. All cash transactions may be the rule around your house. However, if you make conscious choices that reflect financial prudence, it’ll get better in a hurry. Making timely payments, keeping your overall debt level low, and holding on to a few legacy credit accounts will gradually improve your prospects for cheap credit in the future.

 

Have questions about your particular situation? The attorneys at the Dallas law firm of Fears Nachawati have years of experience helping debtors just like you. We know what it takes to lay out a game plan that moves you through the bankruptcy process – and to a life of greater financial certainty. Talk to our professionals today.

Secured versus Unsecured Creditors

At first glance, bankruptcy may seem like a fight between a debtor and his creditors. The reality, however, is often more complicated. A debtor’s bankruptcy frequently gives rise to fights among creditors, too.

 

Why are creditors fighting amongst themselves? In situations in which there are more mouths to feed than food to distribute, creditors will clamor in court to receive a greater percentage of the debtor’s assets. Ultimately, the distribution of a debtor’s assets is determined by the Bankruptcy Code’s priority scheme.

 

So, which creditors win and which lose – and why? Although there are a number of fine divisions between types of creditors, the single greatest separation is whether a creditor is secured or unsecured. Secured creditors are those who have an attached, enforceable security interest in the debtor’s property.

 

In some cases, a creditor may successfully establish a secured interest by taking possession of the underlying collateral. Possession may be actual, such as driving the car from in front of your house. Possession may also be constructive, such as acquiring the key to a house.

 

More commonly, a creditor will establish a secured interest by acquiring a contract with the debtor that outlines the terms of a financial arrangement and subsequently filing that contract with a state registration office. In this manner, both the debtor and other creditors are on notice that the debtor’s assets are not entirely his own, but the creditor’s.

 

However securitization occurs, the bottom line is that secured creditors will often receive the value of the underlying collateral in the event of bankruptcy rather than the unsecured creditors’ lot: a pro rata distribution of the debtor’s available assets. Frequently, the difference between specified collateral and the pro rata remainder is significant.

Do you have questions about what kind of interests your creditors hold in your property – and whether their status might give you leverage as you consider your financial obligations? The attorneys at Fears Nachawati are prepared to help you answer these and many more questions. Find out how we can help you by contacting us today.

Are You Ready for the Fiscal Cliff?

Tax increases are likely coming, one way or another. And if Republicans in Congress and President Obama are unable to reach an agreement to avoid the so-called fiscal cliff, the combination of tax increases and benefit cuts could be severe. Are you ready for the financial world you’ll find on January 1, 2013?

 

The fallout from a fiscal cliff isn’t simply financial, but economic. Not only may you face a higher tax bill in 2013, but many economists worry that legal changes at the federal level could have major effects in the broader economy. A renewed recession may result in reduced consumer spending, revenue shortfalls, and, ultimately, job losses.

 

Are you prepared for a reduction in your earnings or a job loss? Do you know how you might be affected if interest rates rise, as some financial advisors predict, in the months to come? Bankruptcy or a managed financial restructuring may be necessary solutions.

 

Personal bankruptcy isn’t the end of the world. In fact, in many ways it’s more helpful to think of a Chapter 7 or Chapter 13 bankruptcy for what it is: a fresh start. By wiping excess debt off your family’s budget, you can begin to make meaningful strides toward a brighter and more hopeful financial future. Yes, it’ll take time, but you can do it.

 

Ready to prepare the bankruptcy plan you may need to execute? Talk to the attorneys and dedicated professionals at Fears Nachawati today. With years of experience and expertise, we know how to protect your rights and advance your interests.

Military Servicemembers: Know Your Bankruptcy Rights

In an effort to protect military personnel from state-side, civil worries, such as lawsuits, Congress passed the Servicemembers’ Civil Relief Act (SCRA) in 1940. Generations of American soldiers and sailors have benefited from the protections of the SCRA. In fact, predecessor statutes of the SCRA go back all the way to the American Civil War.

 

Bankruptcy proceedings are one of the most important instances in which servicemembers rely on the SCRA. The provisions of the SCRA may require servicemembers’ creditors to forbear loans and reduce interest in some cases. The SCRA operates as a kind of second automatic stay in some instances. The SCRA prevents creditors from entering default judgments and stops rental evictions.

 

Who SCRA may protect can be just as important as what it does. The provisions not only apply to active duty personnel, but also the families of servicemembers, qualified reservists and inductees, and even some U.S. citizens participating in a U.S. conflict. Also, the SCRA’s provisions may apply 90 days after discharge from the armed services, meaning that their protections extend while soldiers return to civilian life.

 

Are you or a loved one enlisted in the military and struggling to make ends meet? The dedicated bankruptcy professionals at the Dallas law firm of Fears Nachawati know how to advise you of your rights both within bankruptcy law and in important ancillary bodies of law, such as SCRA. Contact us today for your free consultation.