Friday, February 24, 2012

Student Loans: what to do?

For the first time in history, consumers owe more in student loan debt than they owe in credit card debt. Here's an interesting report from the National Association of Consumer Bankruptcy Attorneys:  The Student Loan "Debt Bomb": America's Next Mortgage-Style Economic Crisis?

Because there are few escapes for consumers who are unable to pay their student loans, the NACBA calls for Congress to restore the bankruptcy discharge of student loans and reimpose a reasonable statute of limitations on student loan collections.  This will be an interesting debate to watch.

Tuesday, February 21, 2012

The Cost of Bankruptcy

The question examined in a recent national study was “whether the 2005 amendments to the Bankruptcy Code improved bankruptcy law and practice or whether the amendments  made the system more cumbersome and costly to use.”  Cumbersome and costly appears to be the answer.  You can view the full report here:  The Consumer Bankruptcy Fee Study

The study found that the 2005 changes increased debtors' costs to file bankruptcy, without generating a statistically significant increase in distributions to creditors.  Nationwide the total cost to file a no-asset Chapter 7 case increased 51%.  Locally, Oregon ranked third nationally with an 85% increase in Chapter 7 fees.  The largest increase in Chapter 13 fees was in Idaho (a 115% increase).

In Washington, there was a 27% average increase in Chapter 13 costs.  The increase was far from uniform though:  fees rose 6% in Eastern Washington and 29% in Western Washington.  The statewide increase in  Chapter 7 fees was 45% (34% in Eastern Washington and 52% in Western Washington).

Another observation gleaned from the data: at $538.27, Eastern Washington appears to have the lowest current average Chapter 7 attorney fee among judicial districts nationwide!

Friday, February 17, 2012

WA Supreme Court's latest exemption ruling

Yesterday, the Washington Supreme Court ruled that money paid to a beneficiary from the Law Enforcement Officers' and Firefighters' Retirement System (LEOFF) loses its exempt status once it is deposited in the beneficiary's bank account.  The deposited funds become a target for garnishment by judgment creditors:  Anthis v. Copland

The Decline of the Median Household Income in the PNW

When I interview new clients, some of the first questions I ask are aimed at determining gross annual household income.  Why?  By comparing their income to the median income for a family of their size in Washington or Oregon, we can usually determine what bankruptcy they should file.  Most above-median income debtors will need to file a Chapter 13 bankruptcy and pay debt for up to five years.  Most under-median income debtors can file a Chapter 7.  Additional calculations come into play later when we complete the means test but median income is the starting point. 

The U.S. Department of Justice publishes median income data from the Census Bureau, which it adjusts periodically:  While it’s hardly surprising, the median household income for families in Washington and Oregon has declined steadily in recent years.  In October of 2008 the median incomes for four person families in Washington and Oregon were $79,397 and $70,046 respectively.  The numbers rose to $82,716 and $72,667 in November of 2009, but income has declined since.  In November of 2011 the median income for a family of four in Washington dropped to $80,404 - close to the 2008 level.  In Oregon the number dropped to $66,616.  It seems counter-intuitive but this decline may lead to more chapter 13 filings for middle income families whose income has stagnated in recent years.

Thursday, February 16, 2012


For starters, it's probably a good idea to introduce myself.  My name is John O'Leary and I am an attorney in Kennewick, Washington. My practice is centered around consumer and business bankruptcy law in Eastern Washington and Oregon.  I will periodically post subjects of interest to clients and fellow lawyers, and I'd love to read your comments.  Also visit my law firm's website:  Take care!