Atty. Larry Yang

Tired of having too much debt?

Sunday, 30 November 2008 21:13 Atty. Lawrence Yang

If any lesson is to be learned from the economic meltdown, it is that having too much debt can kill your business. In the last 3 months, Indymac, Countrywide, Washington Mutual, Wachovia, Bears & Stearns, Lehman Brothers, AIG all went bankrupt because of too much debt. These financial institutions were old and established institutions. Some of them had been in business since the civil war. Their assets were in the billions of dollars. But the mortgage meltdown caused them to become unable to pay for their debts resulting in their immediate bankruptcies. Large nationwide retailers have not been spared. Linen N Things, Levitz furniture, Sharper Image, Steve & Barry’s and even Mervyn’s, all household names and established businesses are in bankruptcy. All of them cannot pay their debts and have been forced to seek relief from bankruptcy courts. And last week, the big 3 car makers from Detroit, sent their CEO’s in private jets to Washington with tin cups, to plead for $25 billion of bail out funds so that they can continue operating. The once mighty titans of American industry and technology who at one time or another ruled the global market for cars, have only enough cash to operate for the next 3 months. If the government does not bail them out, they will have to seek relief from their debts in bankruptcy court.

Big 3 seek bailout to avoid bankruptcy

Sunday, 23 November 2008 21:12 Atty. Lawrence Yang

Chief executives of the BIG 3 went to Capitol Hill yesterday to plead for $25 billion of federal aid. Wait a minute. Just who are the BIG 3? Are they Manny, Moe, and Jack, aka, the Pep Boys, or Larry, Moe, and Curly Joe, aka the 3 stooges? Kidding aside, the Big 3 refers to Ford Motors, GM, and Chrysler, the Detroit carmakers. The once mighty titans of industry have been reduced to mendicants for federal aid to assure them of one last chance to become profitable again. Without new infusion of money, their cash reserve is good only for another quarter of operations. Thereafter, there is no money left to continue operating.

What or who is to blame for what is going on in the car industry? Who knows? The CEO’s testified recently that they spent too much money making big SUVs and large cars demanded by the public, and made a lot of money doing it. But they have fallen victims to the credit crunch and the new demand for fuel-efficient cars. So they have large inventories of SUV’s and trucks that are just sitting in their warehouses and dealer lots unsold. At the same time, their labor costs for union workers is sky high.

Circuit City seeks bankruptcy relief

Monday, 17 November 2008 01:30 Atty. Lawrence Yang

Circuit City Stores Inc. filed for chapter 11 bankruptcy reorganization this week, following the footsteps of other big retailers, which filed for bankruptcy relief this year. Linen n Things, Steve & Barry’s, Mervyns, Sharper image, Levitz furniture are other nationwide retailers who sought bankruptcy protection earlier this year. Circuit City said in it’s Chapter 11 petition that many of it’s suppliers have concerns about it’s liquidity and ability to pay for merchandise forcing it to seek the protection of a Bankruptcy Court before the crucial holiday season. It is interesting to note that many large businesses, including the companies of Donald Trump which has filed for bankruptcy reorganization several times and as recently as 2004, opt to reorganize itself through bankruptcy to subsequently emerge as a leaner and profitable business enterprise. Even K-Mart went through bankruptcy several years ago. Unlike AIG, the owners of these businesses do not seek a bailout using public funds. What they seek is the Bankruptcy Court’s protection from creditors allowing them to cut their debts and operating expenses so they can be profitable again, to survive. Lehman Brothers, one of the largest and oldest investment banks in America is still doing business right now as a debtor in possession of the business under protection of bankruptcy law since the Feds denied it bail out funds.

Possible bankruptcy amendments under President Obama

Sunday, 09 November 2008 18:56 Atty. Lawrence Yang

(1 vote, average: 5.00 out of 5)

NOW that the American people have chosen Senator Obama as the new president, possible amendments to the bankruptcy law may be ushered in as early as next year. During the debates, the Senator mentioned that his solution to the foreclosure problem would be to authorize bankruptcy judges to modify housing loans to make them more affordable. What he envisions is an amendment to the bankruptcy code empowering bankruptcy courts to modify mortgages in any way shape or form to make them more affordable to debtor thus allowing debtor to save his house. We anticipate that only residences would qualify for loan modifications in bankruptcy. Thus, investment properties or rentals would not qualify. Further, only residences purchased during a certain period of time might qualify. It would not be surprising to find out that housing loan modifications might apply both in chapter 13 and chapter 7 cases. This would be a wonderful amendment if loan modifications were allowed even in chapter 7 cases.

Post-petition income may cause non-eligibility for discharge

Sunday, 02 November 2008 21:31 Atty. Lawrence Yang

Bankruptcy courts normally look at debtor’s income at the time of filing and two months before filing of the bankruptcy case to determine eligibility for a chapter 7 discharge of debts. Debtor’s future income usually does not factor into eligibility. However, in some instances, the totality of circumstances may be such that the court may dismiss a case under § 707 (b) (3). This section is the catchall provision that authorizes the court to dismiss a case if the circumstances of the case demonstrate abuse of the bankruptcy system by debtor. This is a general standard that gives the court broad authority to dismiss abusive filings.

Optometrist found not to have lavish lifestyle

Saturday, 25 October 2008 13:25 Atty. Larry Yang

Debtor was an optometrist who had unpaid credit card debts of $318,000. Apparently, his divorce in 2004 caused his financial problems. However, the US trustee alleged that debtor filed his chapter 7 case in bad faith based on his lavish lifestyle. The UST filed a motion to dismiss the chapter 7 case (in re Harter) pursuant to 707 (b) (3) alleging that the debtor lived a lavish lifestyle taking European vacations and driving luxury cars.

How to use debt

Wednesday, 22 October 2008 11:22 Atty. Larry Yang

If there is anything that we all should have learned from the debt and financial crisis of our country, it is that incurring debt should be avoided entirely if that is possible, but if it is not possible, then incur only the amount of debt that you have no difficulty paying off. In both cases, having too much debt that cannot be paid will eventually result in a financial hurricane that will wipe you out. What’s the other lesson that we learned from recent events? If you are big enough and important enough, Uncle Sam will come in and bail you out, and if there is no bailout for you, you will have to file for bankruptcy like Lehman Brothers.

False Prosperity

Thursday, 09 October 2008 10:56 Atty. Larry Yang

(3 votes, average: 3.67 out of 5)

The economic and debt problems of our country have been highlighted in the last two weeks. Very large and very old banks as well as the largest insurance company in the United States have all become bankrupt because of their exposure to bad mortgage loans. Both presidential candidates inserted themselves into the $700 billion bail out package last week with both saying that the bail out was necessary to prevent the meltdown of the entire financial system of the United States. It is unfortunate but true. In the last 20 years, Americans have generally been living lavish lifestyles financed by easy credit, and spending money as if there was no tomorrow. Half a million dollar houses were the norm with zero down. Luxury cars were purchased for $40,000 seven-year loans with zero down. Vacations abroad were taken several times a year and placed on credit cards. Thus, Americans spent way beyond their means and relied on debt to finance their luxurious lifestyles. The party started to end last year when homeowners who bought houses they could not afford began defaulting on mortgages that started to adjust upward.

Worried about your credit score?

Saturday, 04 October 2008 10:34 Atty. Larry Yang

(1 vote, average: 5.00 out of 5)

When you land as an immigrant in America, you have no credit history here. So, when you apply for a credit card, your credit report will be blank. You might wonder how creditors can tell if you are credit worthy enough to buy a house based on your credit report. Well, if they are able to tell your credit worthiness by looking at your credit report before they lend you money to buy a house, then our financial system should not be broken now, right? Because the root cause of our failed financial system is the giving of home loans to people who are not able to pay them back. When I bought my first house twenty years ago, I was required to put a downpayment of 25%. I purchased that house for $130,000 with a downpayment of $32,500 and a mortgage of $97,500. My mortgage payment was $700 based on a 30 year fixed rate mortgage. Requiring a downpayment ensured that the homebuyer had equity in the house. It also made the mortgage smaller and the mortgage payments smaller and more affordable for the homebuyer. Thus, if you had no money saved up to make a downpayment for the purchase of a house, you would not be able to buy a house. You would have to keep on saving money for several years until you had enough for a downpayment to buy a house.