Corny jokes featuring doctors often begin by the doc saying to the patient: “I have bad news and good news. Which do you want first?” As an Indiana bankruptcy lawyer, I don’t do a lot of joke-telling, but I do feel it’s important for me to keep my blog readers and clients up to date on Indiana job markets. That’s because my Chapter 7 bankruptcy filers will need to get a handle on their finances, keep the bills paid on time, and take advantage of the fresh start the bankruptcy safety net provided them. My Chapter 13 bankruptcy filers will need steady work to keep up with their three-to-five year debt repayment plan that is supervised by the bankruptcy court.

I’ll choose – the good news first. Two weeks ago I focused on the success of Cook Group in Bloomington Indiana, and the fact that Cook is in the process of creating new jobs. Now, I’m happy to report, IDC-USA, an Indianapolis-based cooperative for power transmission producers is expanding its facility near the airport, and hiring new workers as it plans for continued growth next year. Dow Agrosciences (I had been concerned by news that the parent company planned layoffs) will be adding new jobs in 2009, and its spokesman told an Indianapolis Star reporter that none of Dow’s Indiana operations will be affected by idling at plants elsewhere.

Good news was forthcoming from the Indiana Economic Development Corporation as well. Perkins Specialized Transportation in Noblesville is investing $15 million to improve its headquarters, and will add twenty or so new jobs. Meanwhile, Carmel software developer Interactions corp. announced it plans to add 100 jobs as it launches its new conference call technology product “Hey Otto 1.0”.

I know, I know – I’m making it sound as if all the news that’s fit to print is good, and that’s simply not true, far from it. With bankruptcy law offices serving 38 counties around the state of Indiana, I’ve heard reports about Knauf Insulation cutting 11% of its work force in Shelbyville, Kite Realty Group Trust dropping 10% of its staff in Indianapolis, and Deflect-o (manufacturer of dryer vent tubes and heat register deflectors) closing its Fishers and Indianapolis operations totally, eliminating more than 200 jobs. In Kendallville and Ligonier, Dalton is closing a foundry, and auto parts manufacturer Vibracoustic is closing a plant. A combined 400 jobs will be lost.

I also know that the Indianapolis Public School Board voted to close six schools, which will mean the loss of 240 administrator and teacher jobs. Meanwhile, in order to avoid or at least put off downsizing its staff, Atlas World Group in Evansville will cut employee pay by 5% starting in January, while in Lafayette, Indiana, Wabash National is suspending dividends to shareholders to shave costs.

No joke here – these are serious times. The one recommendation I offer to all my clients and readers is to seek experienced legal advice as soon as financial challenges (such as a job loss) occur. It’s obvious that, in these times, if your financial situation is deteriorating, you’re not alone. In an earlier blog, Before Bankruptcy, The Brain Isn’t Interested In Reality, I brought out the fact that under stress, it’s extremely difficult to make wise decisions. That’s why I so strongly recommend that the moment you begin to make only minimum payments on credit cards, or find yourself choosing which bills to pay and which to roll over to the next month, you need to begin getting organized and keeping exact records that you might need in the event you later choose to file bankruptcy.

With rising foreclosures and job layoffs around Indiana, the number of vacant houses continues to grow. Boarded-up windows and overgrown lawns create a problem for homeowners nearby, further depressing real estate values. Besides the tragedy of starving pets left behind by the former homeowners and spreading overgrowth of weeds that attract varmints, empty buildings are a magnet for crime. The Indianapolis Star called abandoned houses the “city’s plague”, because often those homes are trespassed by crackheads and prostitutes.

With bankruptcy law offices serving thirty eight different counties in Indiana, I’m particularly interested in how different cities are addressing the problem. South bend, Indiana began a “Vacant and Abandoned House Initiative”, which demolishes abandoned homes. The Greater South Bend-Mishawaka Association of Realtors formed a “training academy” for local realtors to promote “market rate housing” in economically depressed areas of the city.

The Federal Neighborhood Stabilization program is distributing $152 million to Indiana cities to address the problem of abandoned homes as well. According to South Bend city planner Jeff Vitton, it costs about $100,000 to rehabilitate an abandoned home, which means federal aid can provide a partial solution at best.

As a bankruptcy attorney who often deals with foreclosure issues, I strongly advocate that people seek legal advice at the first signs of financial trouble. Aside from the problems of neighborhood blight and crime, “walking away” from a mortgage leaves ‘blight” on homeowners’ lives, damage that can last for years and years. By contrast, filing Chapter 13 bankruptcy may stave off foreclosure. In other situations, it may be best to allow foreclosure and use bankruptcy to gain relief from creditors and the chance for a fresh financial start.

One thing is for sure: the desperation-driven quick way out, compete with the boarded-up windows and doors, the weeds, the starving pets and the crime that result from abandonment of a home – that choice offers positive long-term benefits to no one!

Same story, different stock… Just a couple of weeks ago, it happened in Oklahoma City (see Bankruptcy Can Loom Even For A Billionaire) and now it’s happened here in Indiana. The CEO of Chesapeake Energy, Aubrey McClendon, who’d borrowed massive amounts of money to finance the purchase of Chesapeake shares, got hit with a margin call from his broker that forced him to sell a large portion of his multi-billion dollar net worth to pay his loan. Now, I learned, the retired chairman of Duke Realty, John Wynne, went through the same thing very recently here in Indianapolis when Merrill Lynch sold millions of dollars’ worth of Duke Realty shares to cover Wynne’s borrowing.

Although most of my Indiana bankruptcy clients are everyday working folks rather than billionaires, as a bankruptcy attorney in Indiana for more than two decades, I’ve seen my share of financial reversals. And, whenever I share stories about rich people who have financial difficulties, it’s certainly not to gloat over anybody’s misfortune. My purpose is always to encourage people who have allowed myths about bankruptcy to get the help they need, and to understand that they’re not alone.

In his Indianapolis Business Journal’s “Behind the News” column, reporter Greg Andrews writes that, in uncertain economic times, there is concern that margin calls might be the downfall of corporations whose CEO’s borrowed money to invest in company stock. “Like the rest of us,” says Andrews, those executives “didn’t foresee the market’s going down as much as it has.”

As I well know from dealing with tens of thousands of different clients over the years, “life happens” even to some very, very smart and enterprising and even very rich people. It’s precisely for that reason that our society has created the bankruptcy safety net system to provide relief and a chance for fresh start.

President George W. Bush is leaving the White House, but the Soldier’s and Sailor’s Civil Relief Act of 1940, amended and signed into law by Bush in 2003, remains. Now called Servicemembers Civil Relief Act, the law is meant to provide relief to families from civil actions against a service member who’s on active duty. The Act is quite broad, protecting against creditor actions in cases of default on mortgages and leases and on car and credit card debt, preventing wages from being garnished and preventing eviction. The interest rate accruing on unpaid debt is capped at 6%.

Now, unlike bankruptcy law, the Act does not eliminate or discharge debt, but it does postpone repayment deadlines up to ninety days after the service member’s active duty ends. In one of my earliest bankruptcy blogs,Special Treatment For Special People In Bankruptcy, I explained that our bankruptcy laws make special allowances for veterans and active military people, allowing needy service members and veterans to have more income and still file a Chapter 7 bankruptcy.

An interesting case relating to the Servicemembers Civil Relief Act came up a month or so ago. The husband is serving in Iraq, and the wife discovered her wages were being garnished by a creditor for a truck the couple had owned. Under the Act, the court forced the creditor to return the money it had taken from the wife’s wages and postpone debt collection until the husband gets out of the service.

There is one aspect of this case that relates to what I’ve been writing in my blogs about car repossession and auto loans (see Repossessing Repos In Bankruptcy). Years earlier, before the husband had gone overseas, the couple had bought a pickup truck. They got behind on their payments and voluntarily surrendered the truck to the finance company. The finance company sold the truck for less than the couple owed, and this is the debt for which the creditor garnished the wife’s wages.

The Servicemembers Civil Relief Act does not solve all the financial issues this couple has, but it buys time for them to seek financial advice. If a decision is made to file bankruptcy, it will be crucial for them to include the debt they owe to the truck creditor in the paperwork they prepare for the bankruptcy court process. Meanwhile, the special relief provided by the federal law seems like the least we can do for our servicemember families.

Small business owners sometimes seek my advice without bankruptcy being the topic of our discussion. In some cases, bankruptcy’s been a part of their past with some other business they’ve owned. They know bankruptcy law has changed, and want to know what to expect if things get to that point again. Other times business owners simple come to me for advice on managing debt or obtaining credit. Of course, as a consumer bankruptcy specialist in Indiana for such a long period of time, finances, credit, and debt are topics I deal with every day in my four bankruptcy law offices.

One big challenge right now for small businesses is being able to borrow enough money to keep their operations going smoothly and to expand. Banks in our state generally have capital to lend, but they’re being very picky about that lending. Established borrowers are definitely given preference over newer borrowers, but even companies that have been in business a long time are having trouble if their credit record is not quite up to snuff. Lenders are asking more questions, including details about exactly how the business plans to use the money, and, even more important, how the business plan supports repaying the loan. Lenders are wanting to see well-thought out and carefully researched plans about target markets, competition for that business, etc..

In Small Business Bankruptcy And The Corporate Veil, I talked about the fact that business owners are often required to pledge personal assets, including home equity, as security for a business loan. Today, I’m finding, even if personal assets are not required as collateral, a personal credit check is always a requirement before a business loan is granted. With home values down, there are meager pickings as far as home equity is concerned, so that’s one more part of the challenge for a small business owner.

In an Indianapolis Star piece called “Advice On How To Get A Loan“, Jean Wojtowicz, president of Cambridge Capital Management Corp., puts a fine point on it by saying “Look very closely at your personal credit. Banks and other lenders are relying an awful lot on personal credit scores.”

Timing is everything, they say, and as a bankruptcy lawyer in Columbus, Indiana, I found that statement especially true earlier this month. Second only to a home threatened by foreclosure, and in some cases even more important, an automobile is the one asset Indiana bankruptcy clients try their hardest to hang on to. Whether it’s getting their children to daycare or to the doctor, or even just getting to work and back every day (or to job interviews after a layoff!), for most people, keeping their car seems to be their key to carrying on.

In the case of one Columbus, Indiana gentleman, Mike, (who subsequently turned to me for help filing bankruptcy), he arrived home from a walk to the corner store to find a repo team getting ready to haul away his car. (By way of background information, creditors are allowed to come and take the car if the payments are more than thirty days behind, and Mike’s were.) Mike resisted forceably (but with no violence), standing in front of the car shouting that he had to have the car to get to work and to take his daughter for her treatments. Fortunately the repo people were aware of their boundaries and backed off, saying they’d get a court order to do a “replevin” (court-ordered repossession), which in fact took place.

All was not lost. Mike located my Columbus bankruptcy law office and filed a Chapter 13 bankruptcy. We worked out a plan for the creditor to surrender the vehicle back to Mike, with an agreement for him to make payments over the next five years at a very low interest rate. As I explained in my earlier blog Bankruptcy May Be The One Way To Keep Wheeling Along, in most cases, if a Chapter 13 bankruptcy case is filed within ten days of an auto repossession or replevin, the creditor must return the repossessed vehicle and allow for the repayment over a three to five year period.

The car was the key to Mike’s “carrying on” his life. The two keys for my success in helping Mike were these: First, we were reacting swiftly, within the ten day window allowed under the law when a Chapter 13 bankruptcy is filed after a repossession. Second, as an experienced bankruptcy attorney, I was able to negotiate the terms of the “redemption” of the car in such a way that Mike has been able to handle the payments. He had done two things right – getting help, and getting help in time. Because of that, Mike’s back in the driver’s seat.

Earlier this month, in my Indiana bankruptcy blogs, I’d written about some positive job developments I was seeing around the state of Indiana (see Indiana Bankruptcy Attorney Glimpses Good News In The Indiana Jobs Pipeline and It’s Holiday Time, With Glimmers Of Hope In Indiana Job Markets). Unfortunately, today’s update is not as positive. As a bankruptcy lawyer serving 38 counties in Indiana, my intense interest in the availability of jobs comes from the knowledge that steady income is the key to my clients being able to rebuild their financial lives as I help them work through the bankruptcy process and then emerge from bankruptcy.

Until now, most of the job layoff news has related to manufacturing. But a recent spate of news relates to other business areas. In health care, St. Vincent Hospital announced that it would be eliminating 50 to 60 jobs in its West 86th Street Indianapolis location. Clarian Health had previously announced plans to lay off salaried workers in order to reduce operating costs by 5%, and Midtown Community Mental Health Center, part of Wishard Health Services, is cutting twenty positions. Then, on a different front, Office Depot plans to close two stores in Indiana, one in Valparaiso, plus one of its five Indianapolis stores. DHL will lay off 180 workers at two locations in Indy. On the good news front, the Indiana Live Casino in Shelbyville is getting ready to hire another 350 workers.

In manufacturing, the mix of good and bad news continues, as axle maker Dexter announced it would be closing a plant in North Manchester, but at the same time expanding its plant in Albion north of Ft. Wayne. In Mishawaka. Most of the laid off workers of AM General’s Hummer plant were called back to work. Out of Lafayette, Indiana, the news was negative, with truck-trailer maker Wabash National extending its holiday shutdown, planning to keep 800 employees on layoff status after it resumes operations, and Suburu of Indiana Automotive reducing its production this month and next. Closings planned for next year include Dalton’s Kendallville foundry, Magna Powertrain in Howe, auto parts manufacturer Vibracoustic in Ligonier, and Friction Holdings in Crawfordsville and Greenwood.

I’ve often written in these bankruptcy blogs about the fact that job layoffs and medical expenses, along with divorce are the “Big Three’ factors in bankruptcy. Needless to say, job layoffs and loss of insurance coverage are closely related. “More and more families”, writes Connie Schultz in the Indianapolis Star,
“joined the ranks of the already 46 million uninsured.” In fact, by way of explaining St. Vincent Hospital’s decision to make job cuts, spokesman Johnny Smith (Indianapolis Star) noted “an increase in uncompensated care.”

Just a little more than a year ago, one of the attorneys that works in my bankruptcy law office said that the words she hears most often from clients who come into our office for the first time are “I never thought I’d be here!” With so many job layoffs and plant closings, I suspect we’ll be hearing those six words even more frequently. When what hardworking, responsible people thought could never happen, happens to them – the bankruptcy safety net is available to give them a chance for a fresh start.

Which comes first, the chicken or the egg? When it comes to divorce and bankruptcy, even though I’ve been a bankruptcy attorney for almost twenty-five years, I’m not sure I know the answer. Divorce, as I’ve mentioned in earlier blogs, is one of the three main factors leading to bankruptcy. It’s certainly true that financial problems can cause stress in a marriage, and sometimes that stress leads to divorce. In other cases I’ve seen, though, it’s the divorce that’s the cause of financial problems for one or both of the couple (see Divorce And Bankruptcy Mix, But Don’t Expect A Delicious Blend). One thing I know for sure (as Oprah is fond of saying) from all those years in practice, is that bankruptcy, because it’s designed to stop stress and help people get organized in their finances, almost always helps a marriage rather than causing divorce.

With the crisis in the housing market, a third factor is coming into play – the home. Couples trying to divorce are often “tied together” by the home they own. In this difficult economy, it’s quite possible neither spouse can afford to rent an apartment or to purchase a new residence until they find a buyer for the home they’ve shared. In talking with different folks in my four bankruptcy law offices around the state of Indiana, I sometimes find that neither spouse wants to walk away from the home, or to sell it for less than the mortgage amount – even if one or both of them is preparing to file bankruptcy! Meanwhile, he’s living upstairs, she downstairs, or the reverse, an awkward situation by any standard.

Sometimes the couple has already gone through a divorce, and the non-custodial parent (who’s living in the same house!) isn’t keeping up with child support payments. In counseling this pair, I need to explain that child support is one type of debt that is non-dischargeable in bankruptcy. What’s more, they need to know how each one’s debts might affect the other’s bankruptcy case.

As I discuss all the options with these clients, we have to consider what type of mortgage they have on their home. If it’s an adjustable rate mortgage, it might be that when the mortgage payment jumps up to a higher rate, there will simply be no way for them to afford payments. As I explained in Keeping Home Sweet Home – It Depends!, in order to avoid foreclosure, they may need to dramatically “mark down” the price of that home, get it sold, and move on.

In talking about all this with colleagues of mine who are judges and divorce attorneys, I find they’re seeing the same trend – couples continuing to live under the same roof during a separation or even following a divorce. In some very few situations, these colleagues report, a husband and wife some to the conclusion that, rather than dealing with all the costs of divorcing, selling their home for so much less than they had hoped, finding new places to live, moving, etc. – they’d be better off giving their marriage a second try!

Every week, as I deal with tens of people, helping them handle debt problems and guiding them through the process of using the bankruptcy safety net for relief, I’m struck by the irony of the situation. One of the largest and fastest-growing forms of debt is student loans, and in many cases, student loans are one form of debt that is not dischargeable in bankruptcy! In addition to the typical factors that get people to the point of discussing bankruptcy with me – job loss, medical bills, and divorce, I’m seeing clients at quite a young age who, on top of their other problems, are struggling with substantial student loan debt. In Are Gen X And Gen Y Sowing The Seeds Of Bankruptcy? I explained that the bankruptcy system was never meant to solve everyone’s problems. Some of the problems that plague my college-educated clients may have begun in college (see Can Bankruptcy Begin In College?),but have more to do with misuse of credit and debit cards than with student loans.

But, as the Indianapolis Star reported just a week or two ago in “Student Debt Levels Portend Rising Loan Default Rates”, the U.S. has never before experienced the combination of an economic downturn along with such high levels of student debt. Total borrowing for school for the ’07-’08 school year is $85 billion, double the number of a decade earlier, and the Star cited a statistic provided by Sallie Mae, the nation’s largest student lender, of a 9 ½% default rate on student loans in September, up 10% from one year ago.

As I mentioned, it’s ironic that the Bankruptcy Code rule is that student loans are non-dischargeable in bankruptcy, unless substantial hardship can be established. This in itself is complex, involving documented proof that efforts have been made to repay the student loans for at least five years leading up to filing bankruptcy, proof of severe physical disability, or proof of dependents’ needs that could not be satisfied if the money went towards repaying the student loans. Even private students loans are non-dischargeable under the 2005 changes to bankruptcy law. The bottom line is that the debtor has to prove he or she could not maintain even a minimally adequate standard of living and still repay the loan.

In most cases, the only way filing bankruptcy helps with respect to student loans is by eliminating other debts, freeing up money to repay the student loans. In the case of Chapter 13 bankruptcy, bankruiptcy buys time to spread out payments to other creditors. What’s crucial to remember is not to allow problems to progress before seeking professional help. College grads should be smart enough to know that, but, of course, that’s not always the way things play out.

I see tracking business and job statistics in the state of Indiana as an important part of my work as an Indiana bankruptcy lawyer. I need to know what the opportunities – and the challenges – are going to be for my Indiana bankruptcy clients to find, or to keep, well-paying jobs. For my Chapter 7 personal bankruptcy clients, I know they’ll need income to get back on their feet. The Chapter 13 bankruptcy filers will need to make regular debt repayments over a three to five year period. Everything depends on jobs, and employment news is mixed, to say the least. Last month (see Yet More Good News/ Bad News For Indiana Bankruptcy Clients) I reported about CNBC’s study that rated Indiana as “Most Improved State In Business”.

Since one of my four bankruptcy law offices is in Bloomington, Indiana, I was very happy to read about job expansion at Bloomington-based Cook Group. Cook makes medical devices used by doctors and hospitals around the world, and is one of the largest employers in the southern half of our state. With 3000 workers, Cook is adding hundreds of jobs and expects to hit a sales record this year. According to the Indianapolis Star, on any given day, Cook has at least fifty jobs waiting to be filled (these are usually for production employees who make, assemble, and inspect medical devices such as stents).

Meanwhile, I learned two positive pieces of news for Indianapolis, where my main bankruptcy law office is located. Shamrock Bulders started construction on two office projects, one on the southeast side of the city set to open in the spring, the second on the northeast side set to open next month to house New Life Generations. Then, at the Ameriplex Business Park near the airport, Holladay Properties is building a 66,000 square foot office location for Graybar Electric. All three of these locations mean jobs, and jobs represent music to the ears of this long-time Indiana bankruptcy attorney.