Of course, not all news about residential real estate in Indiana is bad news. It just seems that way. Stories about residential real estate these days are as likely to mention foreclosure weeds and foreclosure pets as to paint pictures of white picket fences and granite-countered kitchens. Commercial real estate news seems to have a greater proportion of good news in the mix.

I’m always reading, trying to gather information that can be of use to my Indiana bankruptcy clients. I learned that, last month, DBSI Inc., the Idaho real estate firm that had sold interests in several central Indiana properties to investors around the country filed Chapter 11 bankruptcy. The first inkling Investors had that things were going very wrong was when, this October, DBSI stopped paying dividends and fired most of its staff.

On the positive side, Blue Real Estate, a company from California, has been using money earned from selling west coast real estate at its peak to buy up Indianapolis properties at a discount. Blue now owns the Century Building in downtown Indianapolis, along with office buildings and distribution centers in Park 100, Castle Creek (Progressive Insurance has headquarters there), and Park Fletcher (where Rolls Royce is one major tenant). This is a very hopeful development for Indy, because Blue’s newly acquired 1.6 million square feet of property in Indianapolis has a value of $120 million. Even better, the company is planning to hire a property management team that is locally based, starting with five full time positions. Another positive aspect of this story is that Blue is renovating and improving each property, spending money with local contractors and suppliers.

As a small business bankruptcy attorney in Indiana, I’m constantly being made aware of how the fates of different businesses and individuals are intertwined. When Blue Real Estate from California upgrades the heating and air conditioning in the Century Building, that could mean that one of my bankruptcy clients gets – or keeps – her job. That could mean that a small business owner who supplies parts or service to Blue gets to keep the doors of his business open despite the fact that other customers have been slow to pay their bills.

The bankruptcy system in which I practice law is designed to serve as a safety net for people whose circumstances have simply spun out of control. Post-bankruptcy, clients need steady income in order to make debt repayments and rebuild their financial lives. I’ll tell you, positive developments on the local business scene make this Indiana bankruptcy attorney very happy!

I admit it – I’ve got a soapbox. After almost twenty-five years of serving as adviser to small businesses and their owners, the one piece of advice that I just cannot seem to emphasize enough is the importance of getting help at the very first signs of financial trouble in a business. In one of my very earliest blog posts, I talked about how many people imagine that, when debts pile up for a small business, the only ending the story can have is bankruptcy. And with all the false information circulating around about the bankruptcy process and all the fear reaction that false information engenders, business owners simply put off making vital financial decisions until bankruptcy may in fact have become their only viable option.

Today’s business climate presents quite a set of challenges to even the best-run small business, no doubt about it. Lending standards are tightening, retail sales are down, costs for many of the supplies and commodities small businesses need to operate have climbed. But what the IBJ refers to as the “real aftershock” of the credit crisis that’s hitting small businesses especially hard are slow payments from customers. Small businesses are hugely dependent on their cash flow. If they aren’t being paid on time, they must cut costs and/or find alternate funding.

In my earlier bankruptcy blog Factoring – Small Business Bankruptcy Blockade?, I described one of the alternatives I discuss with small business owners as a way to buy time for the business to regroup. Factors are companies that provide cash in exchange for taking over some of the accounts receivable of a business. If a small business needs cash in a hurry to pay its own bills because its customers are delaying payment, factoring could make money available quickly. Business owners need to understand that a factor will be buying the accounts receivable at a considerable discount, making factoring a more expensive option than a short term bank loan. But, in cases where tightening bank standards have made it difficult for a small business to qualify for loans or even to renew existing loans, factoring may prove a viable choice.

A point I’ve often stressed is that there is no one strategy, in fact no one combination of strategies that’s right for every business in every situation. My function as a small business bankruptcy attorney is to debunk myths and help business owners explore their options – all of them.

Remaining in good standing with lenders “ain’t what it used to be”, as many of my small business owner bankruptcy clients are telling me these days. As a small business bankruptcy attorney in Indiana, I’m always alert for news about the credit markets that affect my business owner clients. A week or so ago in the Indianapolis Business Journal, reporter Greg Andrews was writing about Emmis Communications, the locally based radio company, and some of the remarks he made sum up the problems I see small business owners facing in today’s climate.

After having said that Emmis seems to be in an enviable position, since it has $68 million in cash and had negotiated favorable borrowing terms with its lenders (ahead of the “meltdown”), with its loan not coming due until the year 2013, Andrews adds, “But it’s not that simple”. What he’s referring to is that lenders today have much, much stricter rules and requirements. Emmis, for example, had to agree to stay within certain “leverage limits” (meaning keep the company’s overall debt levels within a certain percentage of their overall balance sheet and within a certain percentage of earnings). If the company were to exceed the limits, their lender could force Emmis to renegotiate terms, raising fees and interest rates, or even (Greg Andrews says analysts think this is unlikely) force the company into bankruptcy court. Emmis, the report emphasizes, is going on a cost-cutting binge to stay within those debt level limits.

Emmis is a much, much larger company than many of my Indiana small business bankruptcy clients who are struggling financially. As I brought out in Stitches In Time Can Save Nine For Troubled Businesses, in my four bankruptcy law offices in Indianapolis, Columbus, Bloomington, and Anderson, I work with hundreds of small business owners, and one of the saddest aspects of these meetings is that they’re often taking place months or even years after the businesses started having financial problems. What that means is that certain remedies that might have been available no longer are.

Businesses need capital to operate, and that usually means borrowing. The facts of business life today include banks’ going back to much stricter lending standards. On perhaps a smaller scale than Emmis, most small businesses are going to have to stay “in compliance” with debt level limits, just as is happening with Emmis and its lenders. In an earlier blog post, I paraphrased a local bank’s commercial to sum up the way things are today for small businesses trying to borrow money – “It’s not easy, needing green!”

I noticed a piece in the October issue of Employee Benefit Adviser, one of the many professional journals I read in order to provide the most current advice to my Indiana bankruptcy clients, called “Gen X and Y Fret Much, Save Little.” The article described a survey showing that Americans aged 19 – 39 are too concerned about paying bills and keeping their jobs to pay much mind to saving for their future. 50% of the Gen X/Y’ers responding to the survey said other financial priorities kept them from saving.

In addition, a Fidelity Consulting Group officer remarked, “Younger generations are more likely to use credit than to save for purchases, which results in an ongoing struggle with debt management.”

After more than two decades of practice as a consumer bankruptcy specialist, I tend to be somewhat less critical of younger Americans. I’ve found that, while debt often prevents savings in older generation people, debt presents a special challenge for my younger bankruptcy clients. The less well-educated tend to have lower incomes and, to a large extent, less job security. College-educated younger workers who come to see me about their debt problems often struggle with substantial student loan debt in addition to their overall financial concerns.
College educated or not, Gen X/Y, I find, lack basic money management training.

In my earlier bankruptcy blog, Bankruptcy And Being A better Father, I explained that the bankruptcy system was never meant to solve everyone’s problems. In fact, the more folks can rise to the challenges they face without filing bankruptcy, the more help and resources will be available for those truly in need of relief.

In The Good New Days, I was very emphatic about the fact that the problems and pressures that bring people to one of my four bankruptcy law offices around the state of Indiana very often have little to do with overspending on luxuries. In fact, today’s financial anxieties are focused on housing health, and education, and there has been an enormous rise in the cost of each one of these. Job instability, a function of our struggling U.S. economy, is the reason for much of Gen X and Gen Y’s lack of savings. According to one source, 45% of employees are forced to dip into their retirement plans – before retirement – just to get by!

Let’s face it – there’s no age discrimination in debt problems or bankruptcy!

Just the other day on the morning news, I heard a news bulletin about Michael Vick. Back in August I’d written about this unusual bankruptcy filing in my blog (see Michael Vick Files Chapter 11 Bankruptcy). Vick, once the National Football League’s highest-paid player, is serving time in a federal penitentiary in Leavenworth, Kansas for a dogfighting conviction. In my bankruptcy blogs, I’ve been emphasizing the fact that bankruptcy is not a single event, but a process, and there are many aspects to the Vick case that bring out how that bankruptcy process works.

One very important step in the process is the creditors’ meeting that is presided over by a bankruptcy trustee appointed by the court (see The Creditors’ Meeting – Be There Or Be Square). The whole idea, of course, is to help individuals who’ve fallen on hard times to get back on their financial feet, while still treating all the creditors fairly. In order to do that, as I brought out in the case of another celebrity figure, Anna Nicole Smith, all the assets a person has need to be considered, including potential assets.

With Michael Vick, he says he plans to play in the NFL again, and use the money he earns to pay back his creditors. (Right now, Michael’s suspended indefinitely from the league because of his conviction, and that was the subject of the interview I was hearing about on the news.) Meanwhile, I learned, with Michael Vick listening in on the conversation from prison, his attorneys asked the federal bankruptcy judge to appoint a mediator to help settle his debts One interesting aspect they brought out is that, if all the assets were to be liquidated now to pay creditors, that could hinder Vick’s ability to get back into the NFL.

When I first wrote about the Vick case, I stressed the fact that, while I have dealt with tens of thousands of bankruptcies, they have involved everyday working people rather than celebrities. Needless to say, confidentiality is the rule, and no details of any case would ever be shared outside the legal process. But because the celebrity cases are in the news, I see them as a tool to illustrate the underlying principles of the bankruptcy system.

Vick’s attorneys said it all, “He is in the process of paying his debt back to society for the federal prosecution. This (meaning the bankruptcy) will give him the opportunity, when he gets out, to start his life fresh.”

Car talk’s not very cheerful these days. According to Experian Automotive, nearly $25 billion in car loans are past due, and many car dealerships have closed their doors, with others on the verge of doing the same. Back in September, in Big Auto Companies Request Big Loans From Big Brother, I described Ford’s, GM’s, and Chrysler’s desperate requests for government help. Secretary of the Treasury Paulson was saying a big NO then, and, now some sort of help is being considered. With credit markets not yet thawed despite bailout capital, the auto companies are having trouble borrowing enough money to keep factories running. GM has already closed four pickup truck and SUV plans, and Indianapolis workers are worried that transmission and stamping operations will be closed here.

As a bankruptcy attorney in Indiana, I see the direct effects of the situation in the layoffs that inevitably follow when companies are struggling for survival. The auto industry is especially important in our state. An auto company failure would affect not only those Hoosiers directly employed in the plant, but those who work in sectors supported by car companies, such as parts, accessories, and service. What’s more, retirees receiving health benefits – or their survivors – could be hurt. Meanwhile, with all the past-due consumer loans, lenders are cautious, making it harder for buyers to get behind the wheel of new cars.

With all this bad news, it’s heartening, although ironic, that car talk out of Greensburg, Indiana is very encouraging. Just two months ago the first new Honda Civic rolled off the line in the brand new $500 million plant in Greensburg, and the company expects to hire 2000 employees by next year. That, of course, offers hope to parts and service suppliers hurt by GM’s troubles. With U.S. auto sales declined 13% so far this year, Honda’s sales are up 12%.

News about the Big Three automakers and about Honda is much more than just talk to me. Since job loss is one of the “Big Three” causes of individual bankruptcy, along with medical costs and divorce), I’ve always made it my business to stay current on developments in the employment markets. The bankruptcy system is designed to function as a safety net. The fact is, however, that in order for people to be able to gain relief in order to make a new financial start, they need jobs – and cars to get to those jobs. My work for the past almost twenty-five years is to help folks buy time to regroup before getting back on the road!

People under great financial strain sometimes grasp at any offer of help, trying at all costs, to avoid bankruptcy. All too often, that’s all those poor people get – all costs. As a bankruptcy attorney in Indiana for the past twenty-plus years, I can understand why folks might snatch at straws and go, as I put it in my earlier blog, Looking For Help In All The Wrong Places.
In order to alert my Indiana bankruptcy clients about predatory practices to watch out for, I follow news about “debt help” scams around the country. The Federal Trade Commission has charged several different sets of Florida residents with violating federal law by deceiving consumers into believing their homes could be saved from foreclosure in return for a fee. Not only didn’t the scammers help stop the foreclosures, they induced the consumers to wait passively for weeks rather than contacting their lenders to explore possible options. The upfront fees these crooks charged the consumers were never refunded, and some consumers lost both the fee money and their homes!
Some “debt settlement agencies” are predators, too. A person pays money every month to be deposited into a trust account, with the idea that the agency will use the money to work out a lump sum settlement with the creditors. But, while the money is accumulating (minus the “commission” the agency takes from each payment), the interest continues to compound on the debts. The debtors are making payments to the debt settlement agency, but they’re not making payments to their own creditors! Meanwhile, nothing is protecting the debtors from having their wages garnished, or from having liens put on their property. A bad situation becomes worse.
According to the Center For Responsible Lending, even legal payday lending practices could be considered predatory, in that the interest rates are extraordinarily high, as are late fees and penalties.In Still A Pan For Payday Loans, I explain that these cash advances, especially when “rolled over” or extended, account for a downward spiral in many people’s financial situation.
Post-bankruptcy, it’s important to watch out for predators as well. Unscrupulous creditors often flood people emerging from bankruptcy with low-balance credit-card offers to “help rebuild credit after bankruptcy”. These cards sometimes have activation fees and membership fees that push users near the credit limits before they even begin. After bankruptcy, I actually advise clients to open a credit card account, but to use it solely for emergencies (see The Hair Of The Dog That Bit You.).
Today more than ever, people need advice and they need help. With so many job layoffs, unbearable medical costs, and rising costs of living, many individuals are looking for guidance and, for many, their debt problems are urgent. It’s crucial to get legal advice quickly – from all the right places! – and select a course of action.

I was so interested in the recent news story about of Aubrey McClendon, the billionaire who lost billions of dollars just two weeks ago (see Bankruptcy Can Loom Even For a Billionaire), I started looking around the Internet for more information about McClendon and his company Chesapeake Energy. I came across a blog with some really interesting things to say about entrepreneurs like McClendon.

To catch you up on the story, McClendon owned billions of dollars’ worth of the stock of Chesapeake. He’d bought the stock on margin, meaning with borrowed money. When the stock price fell dramatically, the lender demanded more collateral, and since McClendon didn’t have the money to repay, he needed to sell. This caused McClendon to go from multi-billionaire status to relatively modest means, all within in a matter of days.

As I began reading different articles posted online about this story, I found that many, many people had derogatory things to say. The general attitude was that McClendon was a “fat cat” and good-for-him-if-he-was-taken-down-a-peg-or-two! In other words, ordinary people were gloating about the fact a billionaire had lost money, saying that he had gotten what he deserved for being so high and mighty. Now, as I stressed in several earlier bankruptcy blogs, I’m never inclined to gloat over someone’s troubles, having worked with so many thousands and thousands of people at very painful times in their lives. In fact, I relate stories of celebrities who filed bankruptcy only to show that financial troubles can, indeed, happen to anyone. I specifically mentioned how difficult it often is for small business owners to admit that their business is no longer viable (see Business Bankruptcy – It Is What It Is).

I really liked what Eric, the “Red Dirt Dude”, had to say about the financial reversals of Aubrey McClendon. “First”, says Eric, “I’m not asking anyone to feel sorry for this man. He gambled with his money and lost, fair and square, and he should take his lumps….But let’s not overlook something very important here. Aubrey McClendon staked everything he had in a corporate venture, and over the next nineteen years built it up to create vast sums of wealth for investors, tens of thousands of jobs for everyday working people, billions of dollars in tax revenue for local, state, and federal government, while also providing a product that is vital to our society, one that keeps people warm on cold winter nights, heats their water, and cooks their food….So, love him or hate him, let’s all admit that Aubrey McClendon has a very unique kind of ability that is vital to the American economy.”

From now on, whenever a business owner who’s facing bankruptcy tells me he feels like a failure, I think I’ll share with him Red Dirt Dude’s admiration – along with my own – for the entrepreneurial spirit they displayed just by getting in and trying.

Just two weeks ago, the unbelievable happened in Oklahoma City. As a bankruptcy attorney in Indiana for almost twenty-five years, I’m used to the fact that life’s reversals can drive even the once well-to-do to the brink of bankruptcy. In my bankruptcy blogs, I’ve often listed the three main causes of personal bankruptcy – medical bills, job layoffs, and divorce. More typically, it’s some combination of all three that hurts people’s finances so badly that they must turn to the bankruptcy system for relief. Small business bankruptcies can be caused by lawsuits, weather disasters, disputes between partners, or a downturn in a particular industry or in the economy in general. After working with tens of thousands of people facing bankruptcy or foreclosure over the years, I thought I had seen and heard just about everything. I must tell you this radio news bulletin from Oklahoma City surprised even me.

You may not have heard of Aubrey McClendon, but he’s the co-founder and the Chief Executive Officer of a company in Oklahoma called Chesapeake Energy. Chesapeake is the largest independent producer of natural gas in the United States. McClendon, as it turns out, had borrowed massive amounts of money to buy more stock in Chesapeake. He was betting that even if the rest of the economy was down, energy stocks would always do well. This was no small investment decision on Aubrey McClendon’s part – after this latest purchase, he owned more than thirty three million Chesapeake shares! At the time of the purchase, according to the New York Times, Chesapeake stock was trading at $60 a share; that meant McClendon was worth two billion dollars!

The problem was that, on a very large scale, McClendon did what so many of my bankruptcy clients had done in a smaller way – purchase stuff with borrowed money. Back in 2006, he’d invested millions in Michigan real estate, and, having lost a lot of money there, didn’t have enough cash to buy all the Chesapeake stock he wanted to own. So, he bought the stock on margin, which means he borrowed money and used the stock itself as collateral for the loan. When energy prices fell rather than rising the way Aubrey had expected, he got the margin call of all margin calls. (In a margin call, the investor must deposit cash or other assets for collateral for the borrowed money.) Two weeks ago, McClendon was forced to sell his shares (during one of the worst downturns in recent history, no less!) to repay his loans. In one transaction his net worth plummeted from double billionaire almost to…well, closer to, anyway.. the level of an Average Joe.

Now, as I brought out in an earlier blog This Anderson Bankruptcy Attorney Knows It Can Happen to Anybody, my purpose in telling stories of rich and famous people who were forced into bankruptcy is never to gloat over anyone’s misfortune. What I’ve found over the years is that, when people are first meeting with me in one of my bankruptcy law offices, they’re feeling very alone. It’s important for them to realize they’re far from being alone. And, it’s precisely because “life happens” even to very smart, very hardworking, and sometimes even very rich people, that our society has provided the bankruptcy safety net to provide relief and offer a fresh start.

Even though I’m a bankruptcy attorney only in the state of Indiana, in order to stay current on bankruptcy matters, I like to read up on bankruptcy court cases from other states. One recent case that was appealed to a higher court had to do with life insurance policies. Most of us don’t think of our life insurance policies as property, but if those policies have a cash value, (whole life or universal life policies usually have cash values, term policies do not) then they are, in fact, a form of property.

Well, the situation I was reading about involved a man and wife who had both filed bankruptcy. Each of them owned a life insurance policy with the other being the beneficiary (meaning the person who receives the money when the insured dies). When the bankruptcy court was looking at the couple’s assets to determine what money they had to pay creditors, a question came up about the cash value of the life insurance policies, and whether their insurance should be cancelled and the cash value used towards paying off the couple’s debts. The final ruling was that the insurance cash values were “exempt”. That meant the couple could keep their policies without needing to use the cash value money towards paying creditors. Life insurance for the purpose of taking care of family members was considered “sacred” by the court.

Life insurance cash values are not the only assets that are exempt in bankruptcy. In Money Double-Exempt in 401K, I explained that, under the newest version of Indiana bankruptcy law (I helped write the exemption portion of this law!), money in 401K retirement plans and even money in IRAs (Individual Retirement Accounts) is protected from creditors. That’s because those accounts are meant to help provide financial security in retirement. That means, even if someone gets behind financially and is forced to file bankruptcy, it’s considered of crucial importance to preserve his or her retirement money.

Besides 401K money and life insurance cash value, there’s a third category of assets that enjoys special protection under bankruptcy law. In 5+2+9 Adds Up To Protection In Bankruptcy, I mentioned that, in order to encourage savings to educate our young, the law says that money that’s been in a 529 College Savings Plan or Coverdell Education IRA account for longer than two years is exempt from creditors.

Every legal system is based on a series of beliefs. Our society believes we need to encourage savings to help educate our young, and encourage saving towards retirement security for our older citizens. Then, if things fall apart for some people in between – that’s where the bankruptcy safety net goes into action.