During the boom, many homeowners took out home equity lines of credit (HELOC) and are now struggling to repay those loans plus their mortgage.  Can a debtor discharge their HELOC in Chapter 7 bankruptcy and keep their home?  The short answer is no.  A debtor can discharge the home equity loan in Chapter 7 bankruptcy but they cannot discharge it AND keep their home.  However, if a debtor would like to keep their home, they may be able to file Chapter 13 bankruptcy and repay both their HELOC and their mortgage over a 3 to 5 year period. If, after completing your Chapter 13 bankruptcy repayment plan, there is a balance on your HELOC loan that may be discharged, effectively reducing the amount you pay out to the lender.

For example, if you had a $100, 000 mortgage with a $20,000 HELOC in Chapter 13 bankruptcy you may end up only paying $12,000 on the HELOC and the balance being discharge in bankruptcy.  But remember, in Chapter 13 bankruptcy, you will repay on all of your creditors, including credit cards. Also, your Chapter 13 bankruptcy repayment amount will be determined by your income and ability to pay.  If your income increases during your Chapter 13 bankruptcy that increase must be reported to the bankruptcy trustee and it may impact how much you pay to your creditors.  However, in a Chapter 7 bankruptcy, if you have a HELOC you will need to repay it only if you want to keep your home or you can discharge it and your mortgage loan and surrender the home to the lender.  It’s important for each debtor to carefully weigh the feasibility of keeping their home.  Ask yourself…can I really afford to keep this home?  If you do not earn enough income and attempt to keep your home during bankruptcy, you could possibly face foreclosure after your bankruptcy and end up in a bad financial situation again.

During wrestling celebrity Hulk Hogan’s (Terry Bollea) divorce from Linda Hogan (Linda Bollea) finances were a constant point of battle. His ex-wife accused him of hiding assets and Hulk Hogan claimed that he was drowning in medical debt. Here’s a snapshot of just what that battle looked like back in March:

Lawyers for Hulk Hogan filed documents requesting $300,000 of the his frozen assets. The hulkster had surgery on his back last month and said he is subsequently unable to work as a result. The documents claim Hogan’s bills eclipse $300,000 and he only has $411,000 in his bank account. Linda Bollea, his ex was granted attorney fees of $400,000 late last year.

For all of you suffering from medical debt, please take note.  Even the hulkster can pin down medical debt, it’s just too much.  Medical debt is a very powerful force that can send you to bankruptcy immediately or wipe out all of your assets.  Think about it, even Hulk Hogan, who I am sure had medical insurance, was left with a whopping $411,000 in medical debt.  How many ordinary people can handle that type of medical debt?  Not many. And not many ordinary people have $400,000 laying around in their bank account.  So do yourself a favor if you are facing a large amount of medical debt, please do not go broke trying to pay it.   It is good to pay your bills, but it is not good to destroy your finances in the process of paying medical debt or other types of debt.  There is nothing wrong with using bankruptcy to discharge or repay that medical debt under reasonable terms.  Remember, Chapter 7 bankruptcy will discharge unsecured debt and Chapter 13 bankruptcy will allow you to repay your debts under reasonable terms in a 3 to 5 year period.  And even in Chapter 13 bankruptcy some of your debt may be discharged.

Air America Radio, a radio network that was launched in 2004 was abruptly shut down after experiencing severe financial troubles.  The left leaning radio network, which owned 100 radio outlets nationwide, filed Chapter 7 bankruptcy so that it can be liquidated to repay creditors.

“The very difficult economic environment has had a significant impact on Air America’s business. This past year has seen a ‘perfect storm’ in the media industry generally,” the company said in a statement on its Web site.

Bankruptcy has become a common move for many media companies during this recession.  Sagging advertising revenue, low readership and in the case of Air America Radio, a lack of investor interest, has driven several media outlets to file Chapter 11 bankruptcy to restructure their debts or to liquidate in Chapter 7 bankruptcy.  When a company files Chapter 7 bankruptcy they will cease operations, liquidate their assets and give the proceeds of that liquidation to creditors.  Sometimes creditors prefer a Chapter 7 bankruptcy if they don’t believe the company is viable.  Secured creditors may favor Chapter 7 bankruptcy for companies because they are almost always guaranteed to get at least some of their loan repaid.  But on the other hand unsecured creditors rarely see much repayment when a business files Chapter 7 bankruptcy.

While Chapter 7 bankruptcy may seem abrupt to outsiders, usually companies who file Chapter 7 bankruptcy have a long history of financial troubles that they have not been able to overcome.  For example, Air America had financial troubles almost from the day it was launched and even filed a Chapter 11 bankruptcy in 2006.

The developers of the 6,000-acre Dallas Logistics Hub have filed for Chapter 11 bankruptcy protection to reorganize their debts and improve their dismal balance sheet.  Master Land Holding LLC and its parent company Allen Capital Partners LLC said the bankruptcy filing would allow them to “extend debt maturities, improve their capital structure and further strengthen the Dallas Logistics Hub’s competitive position.”

“We have a balance sheet problem, not an operational one,” said Richard Allen, chief executive of DLH and ACP. “The unprecedented collapse of the U.S. real estate and capital markets has made it impossible to continue without restructuring our financial obligations.”

DLH and ACP have received a debtor –in-possession loan which should help them meet their financial obligations to employees, customers and suppliers while in Chapter 11 bankruptcy.  The Chapter 11 bankruptcy fling is not expected to impact the logistics park’s daily operations.  The developers said that both creditors and investors have been supportive; but it is not yet clear if the company will or can arrange a prepackaged bankruptcy plan.  A prepackaged Chapter 11 bankruptcy could guarantee a significant reduction in their debt load and speed their process through bankruptcy.  However, even without a prepackaged bankruptcy, the company can still emerge more viable after the bankruptcy.

The developers of the Dallas Logistics Hub aren’t the only commercial real estate developers to be hit by this recession.  The number of foreclosures and bankruptcy filings in the commercial real estate industry has been steadily rising since the recession began.  There is currently no positive outlook in the near future for commercial real estate; however many developers are using Chapter 11 bankruptcy to create their own mechanisms for recovery.

Tropicana Entertainment is poised as the first major casino company to emerge from Chapter 11 bankruptcy later this month after nearly 2 years of restructuring and negotiations. The company’s debt has been discharged and Tropicana’s new owner, Carl Icahn is infusing the company with $150 million to pay creditors and upgrade casino properties.

The corporation’s drop into bankruptcy traces back to former owner Bill Yung’s pricey, boom-era gamble in 2007 — the purchase of Aztar casino chain, which saddled it with $2.7 billion in debt the same year the economy started its downturn…The company suffered a major blow in December 2007 when New Jersey regulators revoked its license to operate the Tropicana in Atlantic City, forcing the sale of one of its largest and most profitable assets… Net operating revenue grew 77 percent in 2007 after the Aztar acquisition. But expenses rose 210 percent, resulting in a net loss of $1 billion. A big chunk of that went to interest payments on the company’s mammoth debt. Tropicana Entertainment entered bankruptcy with debts about equal to its $2.8 billion in assets.

Tropicana’s CEO Scott Butera said that he saw the bankruptcy as an opportunity and beamed about its positive impact on the company’s profits.

“This word, bankruptcy, frightens people. But it’s been incredibly beneficial for us,” Tropicana Entertainment CEO Scott Butera says.

Even while still in bankruptcy, Tropicana is on track to generate about $700 million in cash per year and that’s with a very low debt obligation.  Many casino companies are trying to avoid bankruptcy at all costs because of the perceived negative stigma of filing bankruptcy amongst those in the casino industry.  However, Tropicana is proving that bankruptcy can work “miracles” even for companies that operate in industries that still harbor animosity towards bankruptcy.   Also, many casinos are struggling financially due to the recession with very high debt loads.  Those casinos will be hard pressed to compete against a company like Tropicana who has used bankruptcy to reduce debt and increase profits.

Older workers have suffered terribly during this recession.  On average it takes an older worker much longer than their younger counterparts to find new employment and employment that pays at least a living wage. And unfortunately, the number of unemployed older workers has increased dramatically.

The number of unemployed workers age 55 to 64 has nearly tripled since the recession began, to about 1.6 million of the nation’s 15.4 million unemployed as of November, according to the Labor Department. These unemployed job seekers say it is even harder for them to find work because of what they see as age bias.

Age bias in the job market is apparent for many older workers; but what may not be readily apparent is how that bias may negatively impact their finances and even force them into bankruptcy.  The longer an individual remains unemployed, the more precarious their finances may become.  Credit cards become delinquent, mortgages go unpaid and eventually a foreclosure notice and/or lawsuit may be filed against the individual.  Many of those older workers may choose to file bankruptcy as they realize that no new or viable job prospects await them in the near future.  For older workers who want to be prepared, after a job loss it is important to assume that your job search may be a little more difficult.  Right now it takes about a year to find new work and if you are facing age bias, it may take even longer.  If your finances are already damaged, (delinquent debts etc.) you may want to consider bankruptcy.  Bankruptcy will stop creditors from pursuing you in court, filing a foreclosure against you or seizing your assets.  Bankruptcy will also protect your retirement savings which will be critical to your financial recovery.

Commercial real estate foreclosures may be poised to be a major Achilles heel for the financial recovery we all hope to see.  Many commercial real estate properties are losing serious value and tenants causing a jittery reaction of commercial real estate lenders.   It’s becoming a common headline to hear about some “poor” real estate developer who lost his/her shirt because a loan became due and no commercial lenders were willing to extend a helping hand in the form of a new loan.  Those “poor” real estate developers often find themselves swimming in foreclosure filings and being forced into bankruptcy because of it.

Dallas-Fort Worth has seen its share of commercial real estate foreclosures and we may see many more.  The problem is that much of Dallas-Fort Worth may be too over-developed for the current economy as is most of the country.  With this over-development comes falling prices, low vacancy rates, reluctant lenders and an abundance of foreclosures.  Many commercial real estate developers who file bankruptcy may be able to survive if they can negotiate a win-win solution with their creditors and somehow increase their revenue.  What we have seen is a slew of commercial real estate bankruptcy filings which end with investors taking over property, renting it out and/or finding a buyer even if they need to look abroad.  How does this impact the ordinary Citizen Joe and Jane?  Well, real estate has been the driving force behind the economic boom we experienced; but now that this industry is experiencing a major contraction we could see even more job losses—or what I like to call “silent” job losses.  Many of those working in the real estate industry were not “regular” employees who have access to unemployment insurance. For example, real estate agents and even some loan brokers don’t work as employees, but as independent contractors who do not have access to unemployment insurance.  So when we hear about how many jobs have been lost and unemployment rate, we are not counting many who work in the real estate industry.  And many more workers who work in the commercial real estate industry may struggle financially has the industry faces mounting foreclosures.

Wal-Mart Stores, Inc. is implementing 11,200 job losses at its Sam’s Club warehouses in an effort to stop financial losses being experienced by the discount grocery chain.  Approximately 1,200 of those job losses will be in Texas.

The cuts represent about 10 percent of the warehouse club operator’s 110,000 staffers across its 600 stores. That includes 10,000 workers, mostly part-timers, who offer food samples and showcase products to customers. The company also eliminated 1,200 workers that recruit new members.

Sam’s operates 72 warehouse clubs in Texas, including 20 in the Dallas-Fort Worth area. The cuts average about 18 workers per store. If that average is true for North Texas stores, about 360 jobs would be lost here.

Wal-Mart has already closed 10 Sam’s Club locations last year, including one Houston location causing 1,500 job losses. But some analysts claim that the job losses won’t have any impact on the local or national economy because workers will be hired by Shopper Events.  I think that may be an erroneous assumption.  First of all, for those who have experienced a job loss, finding new employment has been difficult to say the least.  The average American is remaining unemployed for at least a year and that time period may extend has the economy gets worse.  Another thing we must be aware of is that those who have been affected by the Sam’s Club job losses were already vulnerable.  Many of these workers were part-time and it can probably be safely assumed that they struggled financially to pay full-time bills on a part-time salary.  I suspect that as the economy worsens and job losses continue to mount, we may see more lower-income individuals who have lost part-time jobs consider bankruptcy as way out of their financial crisis.

It’s tax season again and many of you may be considering bankruptcy.  But before you file your taxes and spend your refund, there are few things you need to know about how taxes can impact your bankruptcy:

1. If you receive a tax refund after you file bankruptcy, that refund may become part of the bankruptcy estate.  What that means is that the bankruptcy trustee can use your tax refund to repay creditors, even if you filed a Chapter 7 bankruptcy.
2. Your tax refund may be able to receive protection by using a bankruptcy exemption, if it is small enough.  This is something you need to discuss with your bankruptcy attorney because he/she may decide that your bankruptcy exemptions are better suited protecting other, more important assets.
3. If you file your taxes and receive your tax refund before filing bankruptcy your tax refund might not be considered as part of the bankruptcy estate.  This will be determined by how much of a tax refund you received and when you received it.  For example, if you received a $5,000 tax refund a few days before you filed bankruptcy, that money may still be considered part of the bankruptcy estate. Also, if you have unusually large tax refunds, a bankruptcy trustee may decide that you are attempting to hide assets via taxes. On the other hand, if you received a $300 tax refund, six months before you filed bankruptcy and spent the money on bills and other necessities, the tax refund would not be considered part of the bankruptcy estate.  Because this area of the law came sometimes become murky, it is best to discuss your tax refund and bankruptcy with a qualified bankruptcy attorney.
4. Debtors filing bankruptcy must disclose any tax refund they are planning to receive.  Failure to disclose a tax refund can cause your bankruptcy case to be dismissed.
5. A bankruptcy trustee has the power to direct the IRS to send your tax refund directly to the bankruptcy court.

A Tarrant County grand jury indicted five people, including a home builder, for allegedly engaging in mortgage fraud involving loans worth $13 million.  Chekeelah Phelps, 45, of Mansfield; Clayton Bennett, 66, of DeSoto; Munzer Kawasmi, 30, of Arlington; Deborah Fernie, 48, of Keller; and Kelvin Kidd, 50, of Mansfield are all charged with hatching an elaborate scheme that mostly involved falsified loan documents originating in the subprime mortgage market.

The case stems from an anonymous letter that the Tarrant County district attorney’s office received months ago, asking authorities to look into why so many houses in Mansfield’s Twin Creeks subdivision were foreclosed on, vacant or for sale.

Chekeelah Phelps, a mortgage broker is accused of being the head of the fraudulent scheme and it’s not her first time being entangled with the wrong side of the law.

Phelps was indicted on charges of engaging in organized criminal activity in December 2004, accused of working with Bennett and three others to make false statements to obtain loans for property over $200,000.

Phelps was also indicted on three charges of money laundering related to possessing funds that were proceeds of criminal activity, namely making false statements to obtain property or credit valued at $20,000 to $100,000.

The mortgage scam allegedly involved a stray man, falsified loan documents and inflated loans. Prosecutors warn that more of these mortgage scams may be uncovered in the coming months.  Why is this not surprising?  While this alleged mortgage scam is blatant, in many ways other not so blatant scams have been played on the American homeowner.  This is why we have such an outrageous foreclosure rate.  Homeowners all over this country were placed in toxic mortgages. And while these toxic mortgages are not outright illegal, they would probably be considered unethical by any decent person’s standards.

Are you delaying filing your taxes because of a lack of money?  Well there are a few free resources you can use to file your taxes for free.

1. AARP Tax-Aide – Despite what the name may suggest, this program is not just for senior citizens.  AARP Tax-Aide is available for all taxpayers of all ages and income levels. Local volunteers who are trained in tax preparation and certified by the IRS will file your taxes for free.  Call 888-227-7669 to find locations and make an appointment.  Or, you can visit www.aarp.org/money/taxaide and submit a tax question online.
2. VITA is a tax preparation service that helps families earning $49,000 a year or less and military servicemembers file their taxes.    This tax service is free and available in both English and Spanish. No appointment is necessary; but you can call 800-829-1040 or a 211 operator to find locations and times the tax service is available.

And of course you can always go to www.irs.gov and file your taxes using their online system or one of their printable forms.  The IRS (www.irs.gov) website includes a ton of free and useful information for filing your taxes.  Remember, if you file your tax return electronically and use automatic deposit, your tax refund could be deposited into your account in as little as 10 days.  So if you are tempted to take out a tax refund loan, just remember that you could get your refund in as little as 2 weeks without the loan.  Also, if you owe taxes and are unable to pay, you can still file your taxes now, as long as your pay by April 15, 2010 you can avoid a penalty.  You can also request an extension for filing or paying your taxes.

As more Americans fall behind on their debt payments because of a job loss or reduced income, many are turning to the equity in their homes to their debts hoping that they can avoid bankruptcy.  But cashing out the equity in your home to repay debt may be a huge mistake here’s why:

1. When you cash out equity in your home to pay debt, you put your home at risk for foreclosure.  If you can’t repay that equity loan, the lender could foreclose.  And even if you were able to make payments on the loan, you may not be able to cover the cost of the mortgage (plus the equity loan) when you want to sell the house.  One common problem many homeowners are facing is the inability to sell their home and cover the cost of their mortgage. This is one of the leading reasons some homeowners file bankruptcy.
2. While most unsecured debts can be discharged in bankruptcy, you cannot discharge your mortgage AND keep your home in bankruptcy.   In other words, you must pay your mortgage if you want to keep your home using bankruptcy. When you take out an equity loan, you increase the costs attached to your home and reduce the chances that you can afford to repay the mortgage even if you filed bankruptcy.   If you feel the need to take out an equity loan to pay your debts, then you probably need to consider filing bankruptcy instead.
3. While taking out an equity loan may appear to solve your debt problems it is only a temporary solution and may only be delaying bankruptcy.  Eventually you will exhaust the equity loan and your debts will still need to be paid.  If you are currently unemployed or living on a reduced or fixed income, resolving that situation may take longer than you expect.  Currently the average unemployed American is remaining jobless for over 8 months.

Remember, taking out an equity loan is usually a sign that you exhausted all of your non-bankruptcy for repaying your debt.  Before you make your situation worse by taking out an equity loan, please consider how bankruptcy may help you discharge you debts and save your home.