Tuesday, January 22, 2019

Quartz: Now we know the average American’s credit card balance

People in the US hold over $1 trillion in credit card debt. Credit cards are the most essential source of day-to-day financing for millions of Americans. Yet little is known about the true demographics of who owns credit cards, how much they charge on them, and whether they pay their balances on time. The information we have is based on surveys, and people are notoriously bad at accurately reporting their finances.

A new study by Federal Reserve economist Joanna Stavins sets out to fix this problem. Every year since 2008, the Federal Reserve Bank of Boston conducts a nationally representative survey asking Americans how they pay for things. It includes a section on credit cards. In order to check the accuracy of their responses, Stavins compared respondents’ answers with administrative data from credit reporting agency Equifax,which holds their actual data. 
Stavins found that people tend to overreport the number of credit cards they have, underreport their balances, and greatly undervalue their credit limits. But most importantly, by combining demographic data from the Fed’s survey with Equifax, we finally have accurate public data about how different groups of people use credit cards. The survey was conducted in 2015 and 2016.

The data show that whether a person owns a credit card diverges hugely by age, income, and education. Overall, 74% of adults have a credit card, but just 48% of those under 25 have one, compared with 87% who are 65 or over. The difference is even greater across education and income levels.

Credit card balances also vary hugely. While the average American maintains an average balance of $4,560, this is highly dependent on age. Balances are relatively low for the young, about $2,340 for those under 25, but grow as people get into middle age, reaching over $6,000 for people 45-54, before falling as they get older. At the peak of a person’s earning power, typically in middle age, they are given larger credit limits from card companies.

Finally, the analysis estimated the share of people who have “revolving” credit card debt—meaning they don’t pay off their balance in full at the end of the month. Stavins found that 44% of adults have revolving credit, and these people typically have an outstanding balance of $6,600. Revolvers are generally poorer and less educated than the typical American.

It is worrisome that financially strapped Americans are incurring high interest payments on credit cards that reduce their already modest incomes, writes Stavins. Yet she also notes that credit cards offer the poor a source of funds that may help them through tough times that would otherwise be worse.

© 2019 Quartz Media, Inc. All rights reserved.

Monday, January 21, 2019

Bankruptcy trustee "claw back" of college tuition payments

Here at Shenwick & Associates, one of our goals when a client files for bankruptcy is to flag potential issues that may complicate their bankruptcy filing.  One of those potential issues is an action by the chapter 7 bankruptcy trustee to recover fraudulent conveyances.

A fraudulent conveyance is a transfer of the debtor’s assets to a third party with the intent to prevent creditors from reaching the assets to satisfy their claims against the debtor.  There are two types of fraudulent conveyances, involving either actual fraud (where the debtor intends to defraud creditors) or constructive fraud (where the debtor makes the transfer for less than “reasonably equivalent value”).  Fraudulent conveyances are governed by Article 10 of the New York Debtor and Creditor Law and § 548 of the Bankruptcy Code.

In a recent case in the U.S. Bankruptcy Court for the Southern District of New York, a chapter 7 trustee commenced an adversary proceeding to recover allegedly constructively fraudulent transfers made by the debtors to or for the benefit of their two daughters.  Both the chapter 7 trustee and the daughters filed cross–motions for summary judgment of whether the debtors received “reasonably equivalent value” for the transfers for college tuition and expenses.

In his opinion, Bankruptcy Judge Martin Glenn examined the split among courts as to whether college tuition payments made by parents for the education of their children after they reach the age of majority are constructively fraudulent.  He held that the transfers to both daughters for college tuition and related expenses were avoidable as constructive fraudulent transfers if the debtors were insolvent at the times the transfers were made.  However, the transfers to one of the daughters for college tuition and related expenses while she was a minor were supported by reasonably equivalent value (not a fraudulent conveyance and not subject to claw back).

The lesson here is for parents who are considering bankruptcy not to pay college tuition for a child who is above the age of majority (in New York, the age of majority is 21) and file chapter 7 bankruptcy or risk a chapter 7 trustee trying to “claw back” tuition payments from educational institutions and their children.  For a smooth bankruptcy process guided by specialists in bankruptcy and debtor/creditor practice, please contact Jim Shenwick.

New York Times: ‘Suicide Surcharge’ or Crucial Fee to Fix the Subway? Taxi Drivers Brace for Battle Over $2.50 Charge

By Winnie Hu

The new fees were supposed to help fix New York City’s ailing subway by raising more than $1 million a day from those who could afford to take taxis and Ubers in Manhattan.

But before the $2.50 fees on rides could even go into effect as planned on Jan. 1, they were sidelined by a lawsuit brought by a coalition of taxi owners and drivers.

The opponents warn that the fee will add up for passengers, and will also deal a final blow to a taxi industry teetering on the brink. They say the surcharge will drive away customers when they are already losing business to Uber and other app-based services and struggling with enormous debt and bleak prospects.

Three taxi owners and five other professional drivers have committed suicide over the last year.

“If they put the surcharge on, that’s it, we’ve lost our whole life investment,” said Gloria Guerra, 62, who with her husband, William, owns a taxi medallion, the aluminum plate required to drive a yellow taxi in New York that once sold for more than $1 million. “The business will be bankrupt. All the medallions will be bankrupt.”

On Thursday, the Guerras and other taxi owners and drivers took their fight against what they call a “suicide surcharge” to a state court hearing in Lower Manhattan, capping off months of protests. Their lawsuit contends that by imposing the new taxi fee, state and city officials “seek to drive the final nail in the proverbial coffin by making medallion taxicab rides so financially unattractive to consumers that the industry is sure to collapse in its entirety.”

Last month, a state court judge temporarily blocked the fee until both sides could present arguments. At Thursday’s hearing, a judge continued the suspension of the fee until the next hearing, scheduled for Jan. 31.

The $2.50 taxi fee was passed by state lawmakers last year along with a $2.75 fee on other for-hire vehicles, including Ubers and Lyfts, and a 75-cent fee on shared pool rides. The fees are expected to raise more than $400 million annually, according to budget projections.

Every day those fees go uncollected means lost revenue for the Metropolitan Transportation Authority, which runs the subways and buses. As a result, taxi drivers and owners have found themselves pitted against state officials, business leaders and transit advocates who see the new fees as crucial to the city’s transit system.

“Transit riders, individual taxpayers and business are all contributing toward the cost of modernizing our transit system and it is only fair that the taxi industry and their customers do the same,” said Kathryn S. Wylde, president of the Partnership for New York City, a group of influential business leaders that supports the fee.
The $2.50 taxi fee has also divided city officials and transportation advocates and complicated a renewed effort by Gov. Andrew M. Cuomo and transit advocates to push for a comprehensive congestion pricing plan for Manhattan that would charge all drivers a fee for entering the busiest neighborhoods at peak times. Mr. Cuomo and others have called the fees on taxis and for-hire vehicles the first phase of congestion pricing.

Mayor Bill de Blasio has also backed the new fees on for-hire vehicles.

But Meera Joshi, the commissioner of the New York City Taxi and Limousine Commission, has criticized the fee, saying that it would be “potentially devastating” for the taxi industry. Ms. Joshi, who is stepping down in March, is named in the taxi lawsuit and declined last week to comment on the case.

The $2.50 fee will raise the minimum taxi fare to $5.80 — which is still lower than an Uber ride. The cost for Uber, which has an $8 base fare in Manhattan, will rise to a minimum of $10.75, including the new $2.75 fee.

Unlike the taxi industry, Uber and two other ride-app services, Lyft and Via, have supported the fees as a step toward addressing congestion and transit challenges in the city.

“In order to truly address these issues, it’s imperative that all vehicles, including personal and commercial, are included in this effort,” said Campbell Matthews, a spokeswoman for Lyft.

Danny Pearlstein, a spokesman for the Riders Alliance, a grass-roots group of transit riders, said most taxi riders in Manhattan can afford to pay the fees. They have access to more public transit options than in the other boroughs, he said, and should pay more if they choose to use a taxi or car service.

“There are a privileged number of people who take taxis and Ubers to get around the core of the city,” he said. “They can afford to support the transit system that makes New York what it is.”
But others said the new fees unfairly single out taxis and for-hire vehicles without a larger plan in place to charge all cars on congested streets — and by itself, will have little, if any, impact on reducing gridlock.

Marco Conner, a deputy director of Transportation Alternatives, an advocacy group, said the taxi lawsuit — and the resulting court-ordered delay in fees — “shows the fallacy of taking baby steps to address a problem as tremendous as congestion and the M.T.A. crisis.”

In the lawsuit, taxi owners and drivers also claim that they should not be charged a so-called “congestion tax” because their numbers have been capped by city law at 13,587 “to prevent an overabundance of cars and congestion,” even as Uber and other ride-app services had been allowed until recently to expand exponentially. In August, the city declared a one-year moratorium on new vehicle licenses for Uber, Lyft and other ride-app services.

Bruce Schaller, a former city transportation official, said taxis and ride-app cars have contributed to Manhattan gridlock. In a study last year, he found equal numbers of taxis and black cars in the central business district during the weekday — together accounting for two-thirds of all the vehicles there. Making matters worse, the for-hire vehicles often drove around with empty back seats.

“You don’t just tax the last person in,” Mr. Schaller said. “You tax everyone causing the problem. It’s not like moving around Manhattan was la-dee-da before Uber.”

While Mr. Schaller agreed that the taxi fee would do little to reduce congestion, he said that it would raise badly needed money for the transit system. Chicago, Seattle and other cities and states have adopted similar per-ride fees to pay for public transportation and other services. “It’s a misnomer to call this a congestion fee,” he said. “It’s all about raising revenue.”

Bhairavi Desai, the executive director of the New York Taxi Workers Alliance, said the new for-hire fee would force more taxi owners into bankruptcy, while taxi drivers would earn less and could have to cut back on food, medical care and other necessities.

“I don’t know anybody who has savings left,” she said. “They will face foreclosures because payments simply won’t get made. I believe it will be this dire.”

Augustine Tang, 34, a yellow taxi driver who planned to attend Thursday’s hearing, said he makes about $240 after 10 hours of driving. That is about $100 less than he earned four years ago when he said he inherited a taxi medallion — and the remaining $500,000 loan on it — when his father died.

“It’s a little annoying that people are saying the lawsuit is costing public transportation,” he said. “We’re trying to save our lives.”

Copyright 2019 The New York Times Company. All rights reserved.

Wednesday, January 09, 2019

An overview of the chapter 7 bankruptcy process

Here at Shenwick & Associates, the end of the holidays and the start of the new year brings new inquiries from potential clients who have resolved to tackle their debt in 2019.  This month, we’re going to discuss the timeline of the chapter 7 bankruptcy process (we also handle cases involving other chapters of the Bankruptcy Code, such as chapter 11 and chapter 13).

When a potential client contacts us, we schedule an hour-long meeting and ask for the following documents to be brought to the meeting: (1) a list of assets; (2) a list of liabilities; and (3) an after–tax monthly budget.  At the meeting, we review the documents and discuss their finances, debtor and creditor law and pre–bankruptcy planning.  Our goal in a chapter 7 filing is to discharge as much debt as possible (giving the client a “fresh start”) and exempting as many assets as possible from the bankruptcy estate that’s created when their petition is filed.

When the client retains us, we send him or her a link to enter the financial data we need to prepare the bankruptcy petition and information about the mandatory credit counseling course.  We draft the petition, review and review it with the client, and finally electronically file the petition and pay the filing fee.

Shortly after the petition is filed, we receive notice of the § 341 meeting of creditors.  Jim attends the meeting with the client (who must bring an original Social Security card and a current photo ID).  Before the meeting, we prepare the client on how to dress and questions that he or she can expect from the chapter 7 bankruptcy trustee. 

Creditors may also attend the meeting and have 60 days from the date of the meeting to object to a discharge of their claim in bankruptcy or the debtor’s discharge.  Our goal is to have the chapter 7 trustee close the case at the end of the meeting, which happens in about 90% of our cases.  Within 60 days after the meeting, the debtor needs to take a postbankruptcy debtor education course.

The process usually takes about two to six months from start to finish.  To discuss discharging your debts in 2019, please contact Jim Shenwick.

December 2018 TLC medallion sales

The December 2018 New York City Taxi & Limousine Commission (TLC) sales results have been released to the public. And as is our practice, provided below are Jim Shenwick’s comments about those sales results.

1. The volume of transfers fell from November. In December, there were 95 unrestricted taxi medallion sales.

2. 87 of the 95 sales were foreclosure sales (92%), which means that the medallion owner defaulted on the bank loan and the banks were foreclosing to obtain possession of the medallion. We disregard these transfers in our analysis of the data, because we believe that they are outliers and not indicative of the true value of the medallion, which is a sale between a buyer and a seller under no pressure to sell (fair market value).

3. The large volume of foreclosure sales (approximately 92%) is in our opinion evidence of the continued weakness in the taxi medallion market.

4. The eight regular sales for consideration ranged from a low of $162,500 (two medallions) to $170,000 (four medallions) and a high of $175,000 (two medallions), for a median value of $170,000, a 5.5 % decline from November’s median value of $180,000. 

5.  The fact that 92% of all transfers in December 2018 were foreclosure sales shows continued weakness in the taxi medallion market and no sign of a correction.

6. At Shenwick & Associates we believe that the value of a medallion is approximately $162,000+ and dropping.

Please continue to read our blog to see what happens to medallion pricing in the future. Any individuals or businesses with questions about taxi medallion valuations or workouts should contact Jim Shenwick at (212) 541-6224 or via email at jshenwick@gmail.com.