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Albuquerque Law Blog

Bankruptcy rates climb among older Americans

Overall, consumer bankruptcy filings have remained relatively steady across America. For one demographic, however, the rate of bankruptcies has more than tripled since 1991: retirees over the age of 65. More than 12 percent of filers are now age 65 and older, up from 2.1 percent just a generation ago.

Why are retirees seeking bankruptcy protection?

Toys R Us bankruptcy continues to unfold with severance package

Thousands of workers laid off when toy retailer Toys R Us filed for Chapter 11 bankruptcy might soon be receiving severance payments. The multimillion-dollar severance package, funded by two of the three equity firms that purchased the company in a 2005 leveraged buyout, could provide relief for workers struggling since the company closed all 850 stores back in June.

Details of the severance package have not yet been confirmed, but the Washington Post and Wall Street Journal have both reported that the fund, set aside by part-owners Bain Capital and Kohlberg Kravis Roberts, is worth an estimated $20 million. That is far less than the $75 million that workers were promised prior to the bankruptcy, but still enough to provide payments to thousands of lower-level employees.

Sears CEO suggests plan to avoid bankruptcy

The CEO of Sears, a well-known department store chain with a long history in New Mexico and across the country, recently revealed a plan to hopefully help the company avoid a bankruptcy filing. The plan involves leveraging assets including real estate and inventory, and taking advantage of CEO Eddie Lampert's hedge fund, ESL Investments, to raise capital and reduce debt.

The proposed plan would involve selling many of the chain's remaining stores, then leasing them back to the company, thus keeping the stores in business. This, along with other actions, would reduce the company's debt load by about $1.875 billion, bringing total debt obligations down to about $1.2 billion. While clearly that number is still astronomical, it allows the company to free up cash and make due payments on the debt while remaining in business and avoiding a bankruptcy filing.

Good news may be on the way for defrauded student loan borrowers

A recent court decision may mean that much-needed debt relief will finally be on the way for students defrauded by unscrupulous for-profit colleges and universities. The decision, handed down by a federal judge earlier this month, finds that the U.S. Department of Education - and its leader, Secretary Betsy DeVos - acted in an "arbitrary and capricious" manner by delaying Obama-administration rules regarding debt forgiveness and forbearance for affected students.

The lawsuit, brought by 20 attorneys general (including 19 states and the District of Columbia) and former students, found that the DOE's delay in implementing the rules to be without merit. The rules, enacted back in 2016, should have been implemented on July 1, 2017, but DeVos halted that, saying that the rules as written were subject to abuse by students. No further rulemaking has been done since that time, however, and affected students are still on the hook for millions of dollars' worth of predatory student loan debt.

Commercial Litigation

While no business wants to be involved in litigation of any kind, being the target of commercial litigation cuts to the very heart of your business. Giddens & Gatton Law, PC, has the know-how to obtain the most favorable outcome possible for our clients.

Consumer medical debt still driving bankruptcy filings

Medical debt - and medical debt collection - are both billion-dollar industries in America. Our healthcare system, such as it is, means that millions and millions of us have insurance coverage, yet costs of medications, treatments and physician visits still put countless of Americans in debt annually.

Past studies have shown that medical expenses are a driving force behind a majority of personal bankruptcy filings each year. Despite improvements in the accessibility to and quality of care, costs still prove difficult for many, particularly when it comes to out-of-network and balance billing.

Be cautious when tapping in to home equity

Financial data provider Black Knight reports that Americans are sitting on nearly $6 billion in home equity value. Though those assets are obviously impressive, more people are making poor choices when it comes to how - and if - to spend their home equity.

Ideally, home equity loans and lines of credit should only be used to capitalize home improvements or to pay for emergency expenses. What they shouldn't be used for are debts that should ideally be paid off in a relatively short time, like vehicles, credit card consolidation, expensive vacations or other similar expenses. This is because home equity loans (HELOs) and home equity lines of credit (HELOCs) are amortized over a period of years, usually between 10 and 20.

Creditors' Rights - Options for Getting Your Clients to Pay

Clients who refuse to pay for services rendered are not only frustrating but can represent a real threat to your company's bottom line. Fortunately, creditors have recourse at their disposal. But taking self-help measures is not always the right way to go. Here are some strategies to help you collect from delinquent clients without resorting to strong-arm techniques that could put your company at risk.

U.S. Trustee's office objects to Toys R Us bankruptcy plan

The U.S. Trustee's office announced this week that they have major concerns about the viability of the Chapter 11 bankruptcy plan for Toys R Us (and subsidiary Geoffrey Holdings LLC) due to the fact that the current arrangement fails to adequately compensate vendors and other creditors. The bankruptcy watchdog office filed an official objection due to the so-called "death trap" provision currently written into the plan, which only allows creditors to collect from a $180 million fund if they agree to sign third-party releases.

Such coercive action directly flies in the face of protections written into the U.S. Bankruptcy Code, hence the Trustee's objection. The Code requires that creditors consent to the Chapter 11 plan; the Trustee argues that the "take it or leave it" nature of the signing of third-party releases in exchange for payment invalidates the plan.

Moving forward after bankruptcy

Bankruptcy is, simply put, not a life sentence. It is not an indication of failure. It is not the rock bottom, or the end of your financial life. Bankruptcy is there to help people get back on their financial footing after a rough stretch of late payments, overwhelming debt, write-offs/charge-offs and other related issues.

Bankruptcy offers a fresh financial start, but it does take time to recover from a bankruptcy, though. If you have filed – or you are learning more about the process – you might be curious as to what that recovery time looks like.

Watch our videos to learn of the many ways we can help you with your legal needs.

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