Not two months ago, I wrote a blog called “It’s Not Good When Gold Glitters”, explaining that, at times when investors are worried about stocks, gold prices tend to rise. When investors worry about inflation (meaning their dollars are losing buying power), gold prices rise. Gold is considered a “safe haven”, I explained, in times of uncertainty. At the time I was writing that article, gold prices were at $890 a Troy ounce.

Then, just a couple of weeks ago, the price of gold literally went through the roof, hitting a $1000 per ounce record high. Just as I had explained, this was the result of investors’ fear of a weakening U.S. dollar and of coming inflation.

Now, here we are just a couple of weeks after the big upward swing in gold, and the picture has changed. With stocks having bounced up quite a bit and the price of oil having come down a bit, we’re getting some bad news about gold (remember, that’s good news for stocks and the economy!). Gold prices took a dive back to the $900-an-ounce neighborhood.

A number of factors are all working at the same time to cause these price swings. The Federal Reserve lowered interest rates, and, contrary to expectations, the dollar gained in value against the yen, stock prices rose, and the commodity prices of wheat, sugar, corn, copper, and platinum all fell.

As a bankruptcy attorney in Indiana, I understand how all these price movements around the world come home to roost, affecting my family and friends as well as all my Indiana bankruptcy clients. That’s the reason I try to stay current on economic news. While, as I’ve often repeated, I’m no economics guru, I deal with financial matters day in and day out, counseling individual debtors and small business owners struggling to survive and to make sense of all these ups and downs.

A humorist once remarked about our weather here, saying “If you don’t like the weather in Indiana, don’t worry. Just wait a day or two and it will change!” Sometimes I think the same thing can be said of the economic climate….

As far back as eight to ten years ago, when rising bankruptcy rates began being the stuff of headlines, researchers debated whether the cause of all those bankruptcies was spendthrift consumerism. Some commentators were saying that small business bankruptcies were becoming fewer in number, especially under the new revised bankruptcy laws, while the number of personal bankruptcies was rising.

A more in-depth look at the situation with small businesses shows how misleading this perception can be. As a bankruptcy attorney in Indiana, I work with many small business owners in addition to working with individuals and families. What I am finding bears out the truth of a study published in the California Law Review called “The Myth of the Disappearing Business Bankruptcy.” The article brings out the fact that the computerized forms used to file bankruptcy often end up “pigeonholing” many debtors as consumers, rather than as self-employed workers and entrepreneurs driven to bankruptcy by business debt.

In my bankruptcy blog I’ve written many times about the fact that the small business owner’s personal and business finances tend to be closely intertwined. From a legal standpoint, as I’ve remarked in earlier blogs, if the business is a sole proprietorship rather than a corporation, the business cannot file bankruptcy on its own behalf; the business owner is the one who is filing. Nonetheless, the core reasons for the bankruptcy have to do with the business challenges, rather than with personal troubles.

That 2005 study revealed that 20% of bankruptcy filings were at least partly business-related. The study was funded by the non-profit Ewing Marion Kaufman Foundation for Entrepreneurship in the hope that the findings would be considered by lawmakers when revising bankruptcy laws. For example, current bankruptcy law (as I’ve written about in earlier blogs) requires credit counseling for debtors to help them with budgeting issues. The Kaufman Foundation emphasized that many business owners fail because of reversals in their marketplace and in their industry. Counseling on managing finances is hardly what is needed for such entrepreneurs!

In my years of dealing with business owners all over the state of Indiana, I’ve found the same thing. I’ve seen business owners brought down by forces beyond their control; even when the business itself has been well-managed and well-planned, sometimes it’s just bad timing for a particular business. That’s where the safety net of bankruptcy comes into play, and that’s where my work lies.

I came across a fascinating item the other day about a tourist attraction I’d never heard of. Even though I’ve been a bankruptcy lawyer in Indiana for almost twenty-five years, working with thousands of different situations, and I sometimes think I’ve heard it all and seen it all, this story bowled me over.

In Hiawatha, Kansas, inside the Mount Hope Cemetery, is a special memorial pavilion for a John and Sarah Davis. John Davis, I learned, had this built over a period of twenty years in the 1930’s, starting when his wife Sarah died. This is such an unusual memorial that each year tens of thousands of people come to Hiawatha to see what is called “The Weirdest Grave In The West”. Now that I know about it, I’m determined to pay a visit there myself.

The story is that Sarah Davis died in 1930, and her husband planned to build the most elaborate memorial anyone had ever seen. He began contracting with sculptors and monument deals to erect statues of himself and Sarah at various stages in their life. Today, there are eleven sets of statues inside a granite-roofed structure.

Here’s the part that’s so interesting to me. John was told by his doctors that he had only six months to live. He then proceeded to spend all his money on more statues, and even sold off his house, with the condition that he be allowed to live in it as long as he could. The memorial pavilion ended up costing $200,000, which is the equivalent of a million dollars today! The only problem was, John didn’t die after six months. In fact, he lived for ten more years, dying penniless, literally living in what they used to call a poorhouse. The elaborate monument to John’s married life, however, lives on.

Yes, I’ve heard and seen it all, but this has to be the most unusual “I could’ve filed bankruptcy” story I ever heard!

Spring break is just a memory for most Indiana schoolkids and their teachers, but the U.S. Congress is just now getting back from their two-week recess. Your senators and congressmen weren’t enjoying the attractions at Disney World, however – this was an in-state, in-district work period for them.

As a bankruptcy attorney in Indiana, I make it a priority to stay on top of what’s going on in and around our state. I take particular interest in any national legislation and discussion that could affect our economy here in Indiana, especially if those decisions could directly or even indirectly affect my bankruptcy clients.

One very important and interesting topic that’s on the front burner now in Congress is the estate tax. There has been much talk, and there will continue to be much talk, about the estate tax law, which is due to expire or “sunset” in 2010. There are proposals on the table to raise the exemption from estate tax to as high as $10 million for married couples, and to lower the maximum estate tax rate to 35%.

It’s so interesting, and so ironic… On the one hand I’m dealing day in, day out, with people struggling for financial survival, and here all this attention is being paid to people with ten million dollar estates! What possible connection could there be between these two extremes?
Although I am no economist, I understand that there is an important connection. The more jobs we create in Indiana, the greater chance people have to avert bankruptcy, and the easier it’s going to be for people who have to file bankruptcy to rebuild their financial lives. One thing I do know is that a very large percentage of new jobs being created are in small, family-owned businesses. As the older generation of business owners reach their older years and then pass away, passing their businesses on to the next generation, lower estate taxes will make it more feasible for that younger generation to stay in business and continue to keep people working in those businesses.

The way I view all of this (and, let me remind you again, economics is not my field) – everything’s connected with everything else, even if it’s under the surface. Farming is connected to industry, small business is connected to big business, estate taxes are connected to preserving businesses, and it’s all connected to jobs. And the job situation is very, very much connected to the future for my bankruptcy clients.

Just this month, several fairly large companies filed motions with the bankruptcy court. While I did not serve as legal counsel for any of the companies I’m going to talk about here, I wanted to share these stories with my blog readers and clients. Why? These companies are good examples of bankruptcy being used as a valuable tool to enable companies to deal with problems and get their businesses back on track. As a consumer bankruptcy specialist and small business bankruptcy attorney, one theme I try to stress to everyone is that the bankruptcy process should be thought of as a beginning rather than an ending, because bankruptcy buys precious time for businesses to regroup.

Hancock Fabrics is my first example. This company filed a motion with the bankruptcy court to allow them to conduct Going-Out-Of-Business sales at three of their stores in Arizona and Illinois. The purpose here is not to shut down the company, just the opposite! Hancock wants to continue to operate the business. The bankruptcy process is giving them the opportunity to downsize and to devote their efforts to the most profitable locations.

W.R.Grace, which had previously filed their bankruptcy case and is now working through the rebuilding process, got permission from the bankruptcy court to make the required minimum contributions to their employee retirement fund. By keeping up with these retirement contributions, the company helps employee morale and productivity while they work to pay their debts and become profitable again. This is another case in which the bankruptcy process is “buying” crucial time.

In the case of Leiner Health Products, which filed Chapter 11 bankruptcy in Delaware, they do want to sell the business. But the company still needed time, which they are using to restructure their debt obligations and negotiate in unhurried fashion with potential buyers.

Dura Automotive System, which filed a Reorganization Plan with the bankruptcy court, has yet a different goal in mind. Dura expects to emerge from its Chapter 11 bankruptcy as a brand new public company.

What I want to bring out here is that bankruptcy is a tool. That tool is flexible enough to use in different ways, buying the time for business owners to make decisions and chart a course for the future.

Just one month ago, in my blog “A Good News/ Bad News Week In Indiana And In The Nation”, I wrote about the huge layoffs that had taken place at the Pfizer plant in Terre Haute, Indiana, adding six hundred citizens to the ranks of the jobless. As a consumer bankruptcy specialist and bankruptcy attorney in Indiana, I know only too well that layoffs are one of the biggest factors leading to bankruptcy, and that Indiana needs to get people back to work.

Well, last week brough some really good news about the opening of a Boral Bricks plant twelve miles south of Terre Haute. According to the Indianapolis Star, the Indiana Boral plant will be the largest such facility in the nation, and will employ 50 full-time workers.

Boral Bricks, by the way, is an Australian company headquartered in Atlanta, Georgia, and the plant here will make enough bricks every hour to build two all-brick homes. Importantly, Boral is a very technologically advanced company, using “green energy” and recycling all scrap materials and waste water. Boral actually uses waste materials from neighboring coal mines in their manufacturing process. Since Borat uses robots, the workers will not be doing heavy lifting, but will be used for more skilled tasks.

Then, I learned, another manufacturing company is set to open a large facility in Terre Haute this spring. CertainTeed, which is a construction materials manufacturer based in Pennsylvania, will employ 145 people.

What these pieces of good news say to me (I’m a student of all things that can affect my bankruptcy clients in Indiana and their families, as well as all of us as citizens of the state) is first of all, Boral Bricks and CertainTeed are modern manufacturing companies doing global business, so there are not likely to be layoffs and job displacements at either plant in the foreseeable future. Second, it means that Indiana is beginning to attract interest as a center for modern manufacturing.

I can’t help but think that, as folks work on rebuilding their financial lives after bankruptcy, the growth in manufacturing activity in our state of Indiana and the resulting job and business revenue opportunities should turn out to be “a good thing”. This news sounds good not only for my clients around the state, but for all of us in Indiana!

A family friend was vacationing in Tampa, Florida a couple of weeks ago and sent me a news item from the Tampa Tribune that she thought I’d find interesting. An Ohio corporation by the name of Unit 44 Inc., owner of three popular restaurants and clubs in Florida, Margarita Mama’s, Banana Joe’s, and the Velvet Room, filed a Chapter 11 bankruptcy a month ago. The business listed assets of under $500,000, with liabilities of $1-10 million. One of the restaurants, Margarita Mama’s, is located on the second floor of a big center named Channelside Bay Plaza, which holds dozens of other businesses, many of them restaurants. Owners of seven other restaurants in Channelside Bay Plaza all reported rising revenues, and hinted at infighting caused partially by the raucous crowds that Margarita Mama was attracting to what was meant to be a family-oriented shopping center.

As a small business bankruptcy lawyer with offices in four cities in Indiana, I found one detail of this sad story to be especially interesting. The creditors with claims against Unit 44 Inc. included the IRS and Florida Department of Revenue, which is quite typical for businesses that are driven to file bankruptcy. But the biggest claim against the corporation came from a woman who in the past had been a business partner of the owner’ in several different ventures.

I see this situation so often – people team up in business because they appear to have skills that complement each other, and, of course, to share the risks and the capital costs of owning and operating a business. While some partnerships last for decades, with the partners’ reliance on each other’s strengths carrying them through difficult times, very often the stresses of the business turn friends into enemies. Perhaps one of the partners feels the other isn’t pulling his or her weight. Perhaps family members interfere in the partners’ decisions. Many different factors result in rifts between business partners, and, more often than you might imagine, one partner sues the other. I then end up hearing the story from the partner being sued, who is seeking my help in dealing with the partner and with all the other creditors.

The Tribune article tells us that the owners of the mall can’t be reached, and the business owner said he’s “dealing with personal matters”. As a bankruptcy attorney who deals with thousands of different situations each month, I know only too well how business and personal affairs are intertwined for small business owners.

Here’s a question I, as a bankruptcy attorney, hear all the time: Does filing bankruptcy help avoid foreclosure? And here’s the answer: Yes and no. Filing a Chapter 7 bankruptcy triggers the “automatic stay” I’ve been writing about in former blogs. The stay is sort of a “time out” period for creditors, when no collection efforts can be made, and that includes foreclosing on a home. And, no, it’s not permanent. What the automatic stay does is buy time, time to take one of the following steps:

First, in the right circumstances, a debtor could “catch up” by bringing his house payments current, perhaps over a five-year period of time. Obviously, the homeowner needs to prove he or she is now in a position to resume regular payments. But, even if a Chapter 13 bankruptcy isn’t feasible, the bankruptcy automatic stay almost always buys time to strategize and plan, time to consider those four tactics I spoke about in an earlier blog: mortgage modification, repayment plan, deed in lieu of foreclosure, and short sale. And, almost always, the stay buys time to stop an immediate sale of the home, keeping the wolves at bay.

Having spent my entire career working on behalf of consumers and small business owners and helping them cope with financial challenges, I always come back to the same message. I say the same things to everyone I talk to about bankruptcy, whether I’m seeing people in my office in Columbus, Indiana, or whether it’s in Anderson, Bloomington, or Indianapolis: If finances are a serious challenge,
1. Face up to your situation. 2. Get help. 3. Get help early!

Are there ways to avoid having a lender foreclose on your home? Certainly, but just the same as at an antique auction, everything depends on your reaction time. The first “Going” sound you should hear (and this is the one so many people refuse to acknowledge), means things are sliding rapidly out of control in your financial life. You keep hoping for a “fix” – perhaps a job offer, an insurance claim payment, a loan from a relative, a winning lottery ticket. Meanwhile, with each passing day, you put off taking action to keep yourself and your family financially afloat.

The second “Going” sound is an actual foreclosure notice. Now some of your options are gone, but, if you respond quickly, there are still choices remaining to save the home. “Gone!” means the sheriff’s sale has taken place, and essentially your options are few to none.

I’ve spent almost twenty-five years urging folks whose circumstances have taken a dramatic downward turn to get professional help before the “auctioneer” sounds the three-count. As an Indiana consumer bankruptcy specialist, I’ve learned over the years that, the earlier in the game I can help clients negotiate with their home lenders, the more flexible and positive a response they are likely to receive from those lenders.

There are many variations on settlements that have been negotiated between homeowners and their creditors, but most fall into four general categories. The first two types keep the homeowner in the home. The first is getting the lender to modify the terms of the mortgage by either reducing the interest rate or lengthening the payment terms. The second is a repayment plan, under which the homeowner “catches up” on the arrears by making a somewhat larger payment each month. In some cases, the catch-up can be moved to the end of the note’s term.

The second two types involve the homeowners losing the home, but they get out from under the debt. The first strategy is called “deed in lieu of foreclosure”, in which the debtor gives the house back to the lender in exchange for total forgiveness of the mortgage (even if the home is worth less than the amount owed). The second is a “short sale”, in which the homeowner sells the home to a third party and the creditor accepts this price as full payment.

I’ve worked with every possible variation of these four strategies, and there is no one-size-fits-all. It depends on the situation. The main thing is not to wait until the countdown begins, because what might be “gone!” are valuable options and choices.

More than 130 million households are getting a letter this week, and, if the government knows how to find you, you might be among the recipients.

As a bankruptcy attorney in Indiana these many years, I know my clients usually cringe when an envelope arrives bearing an Internal Revenue Service seal, so I’m tickled that these letters might actually elicit smiles. The IRS letter reminds you to file your 2007 tax return, so you can get your… no, not your refund, although you might be getting one of those, too, but your stimulus payment! Treasury Secretary Henry Paulson says most Americans won’t need to do anything more in order to receive their check. Meanwhile, though, the IRS is working with the Department of Veterans’ Affairs, the Social Security Administration, and even AARP to reach those who don’t need to file tax returns but who might qualify to receive checks.

The stimulus package was passed last month in an attempt to give our economy a boost. Individuals (depending on income levels) will receive up to $600, with $1200 for married couples filing jointly, and $300 extra for each child under age 17.

As I’ve said in earlier blogs, $600 probably will not mean the difference between prosperity and bankruptcy for anyone. But, hey, it doesn’t make sense to look a gift horse in the mouth, as they say. So, don’t throw away any envelope with “Economic Stimulus Payment Notice” written on it, because your check really might be in the mail!