I saw another facet of the underwater home mortgage when my client was considering whether to cure the mortgage arrears or walk away.  If he cannot hang on to the property until it regains the $85,000 negative, he will not be able to sell the property in the future without the active cooperation of the lender for a short sale.  After our current experiences with lenders and underwater properties, who wants to bank on that?

The homeowner was a single man and the property was a one bedroom one bath condo.  Life wouldn’t have to change much before a 1 and 1 is too small for a married man.  He’s filing bankruptcy now and will take the credit hit and get on the way to a fresh start.

If he elects to keep the condo and cure the arrears, he sets himself up for another possible credit hit when he needs to sell a property still underwater.

My Bankruptcy Law Network colleague Craig Andresen reported on a decision that found large payments on secured debt, including some for boat and RV, were permissible deductions in the means test.  The UST had argued that the debtors were abusing the system if they didn’t stop paying on the secured debt in order to fund a Chapter 13 plan.

Note that the UST’s argument was that the debtors should stop paying on the secured debt in order to pay other creditors, the unsecureds.  What business does the UST have in trying to further the interests of one set of creditors over another?  What makes the unsecured creditors more deserving than the secured creditors?

You wonder how the UST determines when a house payment is excessive, in its view.  Does the title make one all knowing?

In the crazy world of BAPCPA, hurray for a judge who reads the (idiotic] law and applies it as written.

Senator McCain this morning on Meet the Press reprised the Republican view of the approach to stimulus:  tax cuts for small businesses.  I thought about the small businesses I had seen in the past couple of weeks.  Not one of them was paying income taxes, and their expenditure on payroll taxes was small, because they’d cut back on  employees. For the very small business, I don’t  see taxes as the culprit.

Credit card merchant fees are a much bigger piece of the small business expense picture than are taxes for most of my clients.  Each merchant pays a percentage of each credit transaction to the card issuer.   7-Eleven store owners are petitioning  Congress for regulation of the fees charged merchants  by the card issuers .

Everywhere you look you see the impact of credit cards on the economy.  Often it’s suit by American Express that brings a small business owner to my office.  Or the businessman makes a list of their credit card debt and the interest rates after the recent round of increases and realize that they can never pay off the debt at 28% interest.

I’m certainly not an economist and don’t have a Moran Plan for reinvigorating the economy, but the people I see in trouble aren’t there because of their tax burden.

Mom and pop businesses are beginning to dominate the list of my new clients over the past 30 days.  Retail businesses, construction, internet sales, real estate,  all are reaching the end of their ropes.  Distressingly,  these include a high percentage of long running, well established businesses.

Often, the business has been supported on the credit cards of the business owner, so the solution is a bankruptcy filing for the shareholders, freeing the business of servicing that debt.  I can’t tell if that will be enough, but often a small business can survive when relieved of the debt service from the past.

The trend, though, is ominous when you look at the economic health of the country.

Callers to my office often expect a free consultation.  Somehow, bankruptcy attorneys got in the habit of so undervaluing what they do that they gave it away for nothing. I have always swum up stream on this one: there has always been some sort of charge for my time, usually discounted, but a charge nonetheless.

But maybe I’ve been wrong.  A client came to me recently after a free consultation with another bankruptcy lawyer.  I was interested in what had occurred that the client and attorney didn’t bond.  I probed.  Come to find out, the free “consultation” was 15 minutes long and the client was instructed to bring no documents!

In my book, that’s not a consultation, that’s an introduction to the lawyer and sitting through a sales pitch.  So maybe what others have been giving away isn’t really legal advice but marketing.

Like it or not, bankruptcy involves the sweep of a client’s life, their living situation, financial history, goals, debts, assets, and financial interconnections with others.  I have trouble getting that information, analyzing it, and making recommendations to the client in less than an hour, and often two hours.

The initial consultation is some of the best work I do and the most valuable.  I charge for it because I invest real work in that meeting.  I want the client to leave with real information and an overview of their choices.