Archive for December, 2009
Thursday, December 31st, 2009
cvnvideos asked:
www.legalhelpers.com - The only parties that receive notice of your bankruptcy are your creditors, the bankruptcy court and the IRS. For a free bankruptcy evaluation visit Legalhelpers.com or call 1800-260-1402. … personal finance bankruptcy bankrupcy filing Chapter “13 Chapter” “debt consolidation” att
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Thursday, December 31st, 2009
As 2009 winds down, we'll take a quick look at some of the biggest brands and names in business that decided to file bankruptcy.
Big Brand Businesses Filing in 2009:
- Chicago Cubs - The Northsiders briefly entered bankruptcy protection when the team was sold.
- Phoenix Coyotes -The Coyotes are playing on, and playing well, despite failed attempts to sell the team.
- Six Flags -Theme park faced difficulty, but that old guy is still dancing
- Eddie Bauer -Clothing manufacturer sold, but still open.
- Reader’s Digest -Popular magazine still publishing.
- Trump Casinos -Maybe the Donald needs a new apprentice?
- The Philadelphia Inquirer -Rough year for newspapers across the country
- Chicago Sun-Times -Not to be out done by their crosstown rivals at the Tribune, the home of Rogert Ebert filed bankruptcy before being sold.
- Bennigans -The popular restaurant chain closed up shop after filing.
- Charter Communications -One of the country's largest radio station operators - 255 stations across the country.
- Ritz Camera - Still open, but forced to shutter some shops
- Samsonite -Luggage maker and retail store closed some shops, but still operating
- Tavern on the Green -Future of famed New York restaurant still up in the air
- Crabtree & Evelyn -Soap-seller still open
- Filene’s Basement - Deals still available as clothing store purchased and still open
- S&K Menswear -Suit retailer got unbuttoned, future still undecided
- Gottschalks -Department store gone for good
- Southern Voice – Large gay magazine in Atlanta quickly folded up
- New York Off Track Betting Corp -State-run betting offices muddied in debt
- Steak & Ale Restaurant and Roadhouse Grill -Steakhouses across the country got burned during the recession
Posted in 2009, Bankruptcy News and Events, celebrity bankruptcy, new year's eve | Comments Off
Wednesday, December 30th, 2009
This was a banner decade for big bankruptcy.
Of the 20 largest corporate bankruptcy filings in history, all but three of them occurred in the last decade.
The 2000s featured three businesses with more than $100 billion in assets filing for bankruptcy. All the companies in the list here held more than $30 billion in assets.
Combined size of the biggest companies filing bankruptcy this decade: $1.5 trillion. That would make them the 10th richest country in the world with a greater GDP than Canada, India, Mexico, Australia and most of Europe.
The Biggest Business Bankruptcies of Decade
Pacific Gas and Electric: $36.1 billion
April 2001
The story: After California deregulated the state’s energy industry, the state entered an energy crisis as companies couldn’t sell energy for more than they paid for it. Pacific Gas and Electric began taking on debt as Californians experienced rolling blackouts across the state. The company was bailed out by the state government, which provided cash for the company during its reorganization. While this move saved the company, it did add to the long list of budget problems still plaguing the state.
Enron: $65.5 billion
December 2001
The story: At one time Enron was one of the world’s leading energy companies, a blue-chip stock, and regularly lauded by the business world. But all of that began to unravel in the late 1990s as a massive accounting fraud and insider trading scandal was unveiled. Enron had been hiding losses in offshore companies for years, and falsely inflating their stock. When this knowledge became public, the company was forced to file what was then the largest bankruptcy filing in history.
WorldCom: $107 billion
July 2002
The story: In 2002, WorldCom was the second largest long distance phone company, but nearly $4 billion in billing fraud led to what was then the largest bankruptcy in US history. Following bankruptcy, the company changed its name to MCI and was later purchased by Verizon in 2005.
Conseco: $61.4 billion
December 2002
The story: A large insurance company based in Indiana, Conseco launched a financial arm of the company in the late 1990s with the purchase of a leader in the mobile home financing industry. The move proved costly, and led to bankruptcy reorganization early this decade. The plan worked in the short-term, and Conseco emerged ready to do business again, although late this year new financial concerns may be appearing.
Lehman Brothers: $691 billion
September 2008
The story: The Lehman Brothers bankruptcy filing is far and away the largest by an American corporation in history. Founded more than 150 year ago, it eventually grew into the third largest brokerage firm in the country, and the largest mortgage underwriter. The firm made a fortune during the housing boom earlier this decade, but was at the center of the subprime mortgage collapse. After a frantic search for buyers that turned up empty, and no help from the US government, Lehman collapsed. The company has continued to be in the news as bonus paychecks for executives at the firm have triggered outrage and scrutiny.
Washington Mutual: $327.0 billion
September 2008
The story: Another victim subprime mortgage victim in September of 2008, WaMu burst as quickly as the housing bubble that helped it grow into one of the largest banks in the country. But after the Lehman Brothers collapse, customers made massive withdrawals at WaMu for fears it would soon fold, too. The government quickly took over, and forced a sale to JP Morgan Chase, marking WaMu’s fate as the largest bank failure ever in the US.
Chrysler: $39.3 billion
April 2009
The story: Though not the first car company hit by weak sales and high loses, Chrysler was the first American automaker to file bankruptcy since Studebaker in 1933. The company was reorganized through bankruptcy and government invervention that led part of the company to be acquired by the United Auto Workers Union and another portion to be sold to Italian company Fiat.
Thornburg Mortgage: $36.56 billion
May 2009
The story: Thornburg specialized in “jumbo” adjustable rate mortgages: Those worth more than $400,000. But, as the value of these mortgages fell along with mortgage values across the board in the middle part of this decade, Thornburg was one of many mortgage companies with a bankruptcy case in the $30 billion range. Although the company officially entered Chapter 11, it sold its assets and was officially closed.
General Motors Corporation: $91 billion
June 2009
The story: The beleaguered car company was forced into bankruptcy earlier this year as the federal government poured in billions of dollars to keep the company afloat. The auto-maker’s executives had asked the government for financial help and declared they were close to insolvency. But in exchange for financial support, the feds wanted GM to be reorganized in Chapter 11. The bankruptcy led to the closing of brands Saturn and Pontiac; Hummer was sold to a Chinese company; and the future of Saab is still up in the air.
CIT Group: $71 billion
November 2009
The story: CIT Group is one of the largest commercial lenders in the country, specializing in loans to small and mid-size businesses. But they lost $3 billion over two years, and continued to struggle despite receiving billions in cash and loans from the federal government and other lenders. Despite plans to emerge quickly, their bankruptcy raises questions on how small businesses, including 2,000 vendors supplying goods to 300,000 stores, will be affected.
Posted in 2000s, Bankruptcy News and Events, Business Bankruptcy, Lehman Brothers, Washington Mutual, enron | Comments Off
Tuesday, December 29th, 2009
It's been a rough decade economically, and not even celebrities were immune from financial turmoil. Some of the names on this list were no longer in the spotlight, while others encountered difficulty at the peak of their fame.
This list includes those who filed on personal debts as well as celebrity business owners who used bankruptcy to protect their brand.
- Randy Quaid (2000): The actor, famous for his role as Cousin Eddie in the National Lampoon's Vacation movies, had a rough decade. He ran into money problems and filed bankruptcy in 2000, ironically over a film called "The Debtors", which starred Quaid, was directed by his wife Evi, and was produced by the couple. The decade ended with Randy Quaid banned from stage acting, and the Quaids arrested for allegedly defrauding an innkeeper.
- Stan Lee (2001): Creator of Spider-Man, The Fantastic Four, The Incredible Hulk and The X-Men, Stan Lee got caught up in the dot-com bubble of the late 1990s. He and a business partner created Stan Lee Media, an internet-based comic book venture. However, the company quickly burned through its capital, Lee's partner was accused of securities fraud, and Lee and the company filed Chapter 11 bankruptcy.
- Mike Tyson (2003): After retiring from boxing and going through a divorce (plus getting a facial tattoo), the former Heavyweight champ found his finances in disarray. Tyson blamed lavish spending on cars, mansions and Bengals tigers, plus poor financial advice, for the state of his affairs, leading to his 2003 bankruptcy.
- Lorenzo Lamas (2004): The former Renegade and soap opera star file bankruptcy for debts that included $200,000 for a private jet. He also owed on a Harley-Davidson motorcycle, a H2 Hummer, and alimony for his four ex-wives.
- Donald Trump (2004, 2009): Trump's Atlantic City hotel & resort company filed Chapter 11 bankruptcy twice this decade in order to reorganize debts related to construction. In the first bankruptcy in 2004, Donald Trump gave up his majority stake in his Trump Hotels & Casino Resorts company to creditors, which reemerged as Trump Entertainment Resorts. The second time around in 2009, Trump stepped down from the board. Trump has since reached a deal to reacquire the company.
- Michael Vick (2008): Vick's financial problems were directly tied to his legal ones. After being convicted on federal dog-fighting charges, Vick was left was heavy fines and no income to pay his obligations (or entourage). Vick, once of the highest-paid athletes in the country, filed bankruptcy from behind bars in 2008.
- Bill Buckner (2008): Sports fans will know that Bill Buckner is no stranger to bad luck. Despite a productive career in Major League Baseball, his error in Game 6 of the 1986 World Series became his legacy. After retiring, Buckner moved to Idaho and founded a car dealership. It was another error, and Buckner was forced to file bankruptcy in 2008 to recoup his losses.
- Lenny Dykstra (2009): Another baseball star, Dykstra became an entrepreneur after retiring from the Major League, and founded The Players Club, a glossy magazine for athletes, in 2008. The venture tanked, and led to at least 20 lawsuits. As a result, Dykstra filed Chapter 11 bankruptcy.
- Stephen Baldwin (2009): The youngest brother of the acting family, Stephen Baldwin had a resurgence this decade—as a professional reality show cast member. However, his appearance fees were not enough for the actor to keep up on his mortgage and other debts. Baldwin and his wife filed bankruptcy in New York in early 2009 as their home was in foreclosure.
- Sinbad (2009): The one-named comedian may have made a career as a family-friendly entertainer, but allegedly failed to pay taxes on his income from Jingle All The Way and his other hits. The state of California filed a lien for more than $2.5 million in unpaid taxes in 2008. Sinbad filed bankruptcy in December, 2009.
And an honorable mention goes to...
- Jose Canseco (2008): The baseball star and New York Time best-selling author didn't file bankruptcy, but he did walk away from his Encino, Calif., mansion, which went into foreclosure after he stopped paying the $2.5 million mortgage. Canseco was one of the first celebrities to admit being caught up in the foreclosure crisis.
Posted in Bankruptcy, Setting the Record Straight about Bankruptcy, celebrity bankruptcy, decade | Comments Off
Tuesday, December 29th, 2009
Cheryl asked: I want to file a personal bankruptcy (chapter 13) due to personal debts. I also happen to be a managing member of an LLC. The LLC is doing ok, and is not involved in the bankruptcy. There is nothing in our LLC operating agreement as to what happens if a member files bankruptcy. Given that, can I still continue to be a member of the LLC after filing for bankruptcy? Also, how do I determine the value of the LLC as an asset in my bankruptcy filings?
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Monday, December 28th, 2009
TheLeadFrog asked:
www.legalhelpers.com - Bankruptcy is not the end of the world. In fact it is often a brand new beginning for you and your family. For a free bankruptcy evaluation visit Legalhelpers.com or call 1800-260-1402.
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Monday, December 28th, 2009
mom03222007 asked: I need to file for bankruptcy and I need a lawyer that is cheap and will let me do payments because I am a single mom. I have to file and because I can’t afford to pay all the bills and it cost a lot to file. Is there a way to file and be able to make payment on it? If so . Where can I go to get this done?
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Posted in Credit | 3 Comments »
Sunday, December 27th, 2009
10000Pennies asked:
How do the Obama deficits compare with past presidents? And how did the national debt get so big anyway. This video tries to answer those questions by looking at the debt as a road trip and seeing how fast different administrations have been traveling. Historical debt data: www.treasurydirect.gov Inflation data: www.westegg.com Future debt data (2010 - 2016): www.whitehouse.gov For more, follow my Twitter account at PoliticalMath or visit my blog at politicalmath.wordpress.com…
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Sunday, December 27th, 2009
The Credit Card Accountability Responsibility and Disclosure (Credit CARD) Act of 2009, which will take full effect in February, limits many practices now common in the credit card industry. Some, however—like issuing a card with an interest rate near 80 percent—will still be permissible under the new law.
Subprime Credit: Still a Bad Idea
The subprime lending boom and the “unconventional” lending techniques that accompanied it were major factors in the housing market’s explosion and collapse, and thus the current recession.
But just because people have grown more wary about some types of subprime lending doesn’t mean it’s disappeared entirely. In fact, according to an MSNBC article, some of the worst credit cards on the market are still as costly as ever.
The First Premier credit card reportedly provides a source of credit for people with limited or shaky credit histories – that is, the so-called subprime borrowers. But, because of the potentially high risks associated with having a blemished credit history, this card comes with some shockingly expensive terms:
- Initial limit of $300: Users of the First Premier card will have access to only $300 in credit when they open their accounts, an increase from the card’s former limit of $250. But that’s not even as much as it seems.
- Maximum permissible fees: The Credit CARD Act prohibits issuers from charging fees that total more than 25 percent of a card’s limit, and the First Premier charges exactly that: $75 in fees each year. Formerly, the first year’s fees totaled $256 – on a $250 limit.
- Astronomical interest rate: Presumably to make up funds lost from the limited fees, the First Premier issuers jacked up the interest rate on their card to a whopping 79.9 percent. The new law sets no limit on credit card interest rates, so while shockingly high, this limit is legal.
Avoid the Trap: Wait It Out
Naturally, getting tangled up with a card that carries a nearly 80 percent interest rate is not a good idea, no matter how badly you want to start rebuilding your credit after a bankruptcy filing or other financial stumbling block.
If you currently have a rough or limited credit history and don’t think you’ll qualify for a credit card with more favorable terms, your best bet may be to simply wait a while. With a few months or years of responsible and timely bill paying, you may qualify for much better credit products.
Additional Resources
Credit CARD Act of 2009 (PDF)
Posted in Credit Card, Credit and Bankruptcy, Interest Rates, subprime lending | Comments Off
Saturday, December 26th, 2009
The Federal Trade Commission recently released a statement warning about the potential cost of free trial offers that end up costing consumers significant amounts of money. The warning, made jointly by the FTC, the Better Business Bureau (BBB) and Visa, includes red flags to watch out for and action to take to avoid getting scammed.
The “Negative Option”
Offering free trials is a common technique companies use to introduce consumers to new products and services. Sometimes, though, free trials are offered by scammers bent on collecting money from unsuspecting consumers. Often, the scam works like this:
- Emphasis on free: An online advertisement may offer something free (usually for a trial period), available to you by clicking a link. In most cases, you’ll have to enter a credit card number of some sort.
- Excessive fine print: In the fine print, the offer notes that, once the trial period is over, you will be charged for the product or service unless you cancel it. This is known as the negative option, because you must opt out in order to stop paying.
- Charges to your card: Once the trial period ends, your account will be automatically charged on a regular basis for the product or service. Even if you cancel after a month, you can end up paying significant money for something you never wanted.
Avoiding Free Trial Scams
So how can you make sure you aren’t lured in by an expensive online scam? Here are some tips, as posted on the FTC’s web site.
- Read everything. If there’s more fine print than you care to sift through, that’s usually a bad sign. Any time you’re giving out personal information, make sure you know exactly what you’re getting yourself into.
- Note the checks. Some offers trick customers by pre-checking boxes that seem insignificant but actually include continued-payment agreements. Uncheck any boxes that offer something you don’t want.
- Review your statement. When your credit card bills arrive each month, check for strange or questionable charges.
- Take action. If you do find any charges that you don’t agree with, call the merchant and ask to have the charge clarified, and, if necessary, removed. If you cannot work anything out with the merchant, contact your card issuer and contest the charge.
If you think you’ve been scammed by a free trial offer, don’t hesitate to file a complaint with the FTC or contact the BBB in your state.
Additional Resources
FTC’s Risk-Based Pricing Notice (PDF)
Posted in Financial Literacy, consumer awareness, online scams, opt-out | Comments Off
Friday, December 25th, 2009
compelled2283 asked:
Quick and easy way to purchase silver: silversnowball.com Paul Grignon’s 47-minute animated presentation of “Money as Debt” tells in very simple and effective graphic terms what money is and how it is being created. It is an entertaining way to get the message out. The Cowichan Citizens Coalition and its “Duncan Initiative” received high praise from those who previewed it. I recommend it as a painless but hard-hitting educational tool and encourage the widest distribution and use by all …
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Friday, December 25th, 2009
Chris Cooper asked: The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 went into effect in October of that year. As its name clearly implies, it was designed to make bankruptcy less attractive to filers and curb perceived abuses of the bankruptcy system.
The fight about this law was waged by financial institutions on the one hand and consumer rights advocates on the other. Lenders felt that the bankruptcy courts were being abused and that borrowers who had the means to repay were allowed to walk away from their obligations.
This, in turn, raised the cost of credit for the rest of us, since the losses were spread among those still solvent.
Consumer advocates argued that the majority of filers were in that position because of unexpected bills - generally due to medical conditions - and that it would be a hardship to deprive them of their “fresh start” in order to fatten the profits of the lenders.
On the middle ground where those that felt the changes to the bankruptcy law would make little difference, since most filers fell under the median income of their home state and were so hopelessly in debt that they could never repay their bills.
The lenders won and the law, which is considered the most far reaching reform of the bankruptcy laws in 20 years, passed.
Here are highlights of the major changes likely to affect individual filers:
1. Credit counseling is required and must take place within 6 months before filing. The counselor is supposed to determine if the debtor can file for Chapter 7 & or Chapter 13. He is also supposed to set up the Chapter Thirteen repayment plan, if applicable.
2. Since the main thrust of the act was to make it more difficult for high wage earners to get a Chapter Seven discharge, if their income exceeds their state’s median income, they are forced into a Chapter Thirteen repayment plan.
Once in this plan they are placed on a strict - some say draconian - budget determined by IRS regulations. They are told how much of their money is to go to debt repayment and how much they can spend on things like food and housing.
3. If the debtor ran up bills of $500 or more for “luxury goods” from a single source within 90 days of filing or borrowed $750 or more within 70 days of filing, these debts will be considered non- dischargeable. If he bought a car within 2 and a half years of filing, the lien holder will keep his lien until the entire debt is repaid.
4. Debtors used to shield assets by buying homes in states with big or even unlimited “homestead” exemptions. They would, in effect prevent creditors from being able to collect on their debts, by tying all their money up in a home in one of these states. Now the debtor has to acquire the house about 3 and a quarter years before filing a bankruptcy petition. Otherwise his exemption is limited to $125,000.
5. The debtor must “reaffirm” his secured debt or reveal what his intentions are regarding that debt within 45 days after the first creditors meeting. If he fails, the automatic stay is lifted and the creditor can foreclose, repossess or start a suit to collect his money. A debtor can no longer just pay the debt without reaffirming it.
6. Automatic stays will not be granted if it can be shown that the debtor has had a habit of abusing the bankruptcy system. Many used to file bankruptcy petitions merely to hold off their creditors or to buy themselves time, having no intention of following through on the bankruptcy.
7. A Chapter 13 discharge will not be granted if the debtor obtained a Chapter 7, 11 or 12 discharge within the 4 years prior to the date of filing or if a Chapter 13 case was filed within 2 years of the pending case.
8. More documentation must now be provided by the debtor. In addition to the list of creditors, schedules of assets and liabilities, income and expenses, debtors must also file:
A certificate of credit counseling
Evidence of payment from employers received 60 days before filing
A statement of monthly net income and any anticipated increase in income or expenses after filing
Tax returns for the most recent tax year
Tax returns filed during the case including tax returns for prior years that had not been filed when the cases began
A photo ID.
Failure to provide the documents within 45 days after the petition has been filed will result in automatic dismissal of the case. However the debtor can apply for a 45 day extension.
9. The court will give support obligations first priority over everything but the administrative costs of a trustee.
The automatic stay does not apply to the payment of domestic support or to the enforcement of a wage garnishment. This includes obligations incurred either before or after the bankruptcy filing. Failure to remain current on support claims is grounds for conversion of a Chapter 7 to a Chapter 13 case or complete dismissal of the petition. The debtor must be current on all his obligations in order to confirm a repayment plan and the plan must provide for priority payment of support. 9. The new law curbs the ability of the court to grant discharge of certain debts at the completion of the 5 year plan. Unpaid trust fund taxes, taxes for which returns were never filed or filed late within two years of the petition, taxes for which the debtor filed a false return in order to evade taxes, debts from fraudulent activities, debt unlisted in the petition, theft by a fiduciary, domestic support payments, student loans, damages for injuries caused by drunk driving, criminal restitution, fines, civil restitution or damages awarded for willful or malicious personal actions resulting in personal injury or death are now excepted from Chapter 13 discharge.
10. The automatic stay will not prevent eviction if the debtor fails to pay his rent after the petition is filed.
11. Attorney’s can’t represent themselves as “Debt Relief Agencies”. They cannot advise the debtor to incur more debt before filing and among other things they must enter into a written contract specifying all costs and informing the debtor that a lawyer is not necessary to file bankruptcy.
12. The trustee can void all transfers made to self directed trusts within 10 years of the filing, if he can show that the transfer was made to harm or defraud a creditor.
13. Federally guaranteed student loans were never dischargeable. Now student loans owed to for-profit and nongovernmental entities are also not dischargeable.
14. A Chapter 13 discharge will not be granted until the debtor takes a course in financial management as determined by the trustee.
15. The time between Chapter 7 discharges has been extended to 8 years to discourage “serial” filers.
Before the law took effect, there was a rash of filings, which was expected.
But since then, after taking a brief dip, the number of bankruptcy filings is starting to climb again, which seems to indicate that maybe all has not gone as planned - which is, of course, nothing new where the government is concerned.
This article does not purport to offer legal advice, nor is it a complete summary of all changes made to the bankruptcy laws.
Bankruptcy Questions
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Thursday, December 24th, 2009
Jason E asked: I live in Michigan and need to file bankruptcy. However, even doing that costs money that I really don’t have. I know that I can file it myself and save on lawyer fees, but I don’t know how hard the paperwork is to do.
I don’t own any real property, nor do I have any mortgage debt. I currently do not have any income - I’m going to school. Mostly its credit card and various other stuff thats almost 5-8 years old now.
Has anyone done this before? And how difficult was it?
Or if I should pay to have it done, does anyone know of a low cost way to go?
Thanks ahead of time!
The debt amount is around $20,000
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Posted in Personal Finance | 5 Comments »
Wednesday, December 23rd, 2009
Sergeant Vince Carter, USMC asked: It appears the tide is turning on the Big Three grovelers and their minions in the UAW. 80 plus percent of people surveyed said they would still consider a car from a company in Chapter 11, many, many smart economists have come forth and said Chapter 11 is a viable option and in fact the best option for the bloated Big Three.
So, will those grovelers do the right thing, quit begging and file Chapter 11?
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Posted in Politics | 8 Comments »
Wednesday, December 23rd, 2009
Maggie asked: If the family is on welfare (government-assisted apartments & food stamps) but has much unpaid medical bills? Husband has only VA insurance but apparently they won’t pay much of the bill because he reported it past 90 days (or something close to that). Not sure what bankruptcy entails but I know it means “start from scratch” but we also don’t have anything to give….so can a person on welfare file?
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Tuesday, December 22nd, 2009
Jon Arnold asked: In recent years, the rate of filed bankruptcies has been closely tracked. From the recent high in 2005 of bankruptcy filing, the year 2006 represented a significant drop in the reported number of filings, but after the end of 2006, the rate of bankruptcy filing has started to increase again.
One of the factors for this may be the new bankruptcy ruling laws that requires consumers to attending financial management and credit counseling sessions before they can file bankruptcy. But since that law was put into effect, numerous studies have shown clearly that such counseling does little good for the consumer. The big problem with this law is that it makes the assumption that the consumer who is filing bankruptcy is doing so out of excessive financial mismanagement or credit abuse. Anyone who has spent any amount of time studying the underlying causes for why someone would file bankruptcy can tell you, almost after a casual glance, that this is not the case at all with the majority of consumers who file bankruptcy.
The studies bear this fact out. In fact, out of more than 400,000 consumers that were counseled via these mandatory classes before filing bankruptcy, more than 95% of them continued their bankruptcy filing after completing the classes. The biggest problem here is that by the time a consumer is in a situation to need to file bankruptcy, they have typically exhausted all other viable options, and it is too late to make any significant difference for almost all of them.
The following can be considered early warning signs of possible future bankruptcy that consumers should be aware of:
No/little savings cushion
Most consumers in the US have little or no savings to rely on in case of an expected huge necessary expense. Most Americans spend more than they earn, and they finance their greater lifestyle on credit cards and borrowing from Peter to pay Paul. Although saving is hard, a shift needs to occur in the minds of most consumers about putting a higher emphasis on savings instead of always “living for today”.
Consistently living paycheck to paycheck
Many people say they do not enjoy it but find themselves living from paycheck to paycheck, such that when something happens to prevent that next paycheck from showing up, like a job layoff, they are already in deep sneakers. Some reports have indicated that more than 60% of Americans are in this situation.
Higher than 20% non-mortgage debt to income ratio
If you are spending more than 20% of your net income to pay your credit cards and financial obligations outside of your mortgage, this is a problem, and a warning sign that financial troubles could be near.
Always making only minimum payments on credit cards
Almost half of all people who have credit cards carry a balance forward from month to month. If you pay only the minimum payment due each month, it will take you three or more times as long to pay off the balance, even if you don’t charge anything more to the card.
Inadequate insurance
Many people consider insurance to be a ripoff – until they need it. Many bankruptcies are due to very high cost of medical treatments or car accidents, where the consumer was inadequately insured to allow the insurance company to carry the burden of the majority of the expense.
If you find yourself in these situations, you should take action to straighten things out so that you do not become the next bankruptcy statistic. In addition, consider your alternatives to bankruptcy such as personal loans or debt consolidation, which offer some financial breathing room without the long-term negative effects of bankruptcy.
Bankruptcy Questions
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Tuesday, December 22nd, 2009
As America closes out 2009 with roughly 1.4 million bankruptcy filings, a new survey reveals the possible economic factors behind the surge.
Respondents were asked which economic factor forced them to consider bankruptcy, and how many people they know who had also considered bankruptcy in the past year.
Posted in Bankruptcy Statistics, Setting the Record Straight about Bankruptcy, bankruptcy survey | Comments Off
Tuesday, December 22nd, 2009
As America closes out 2009 with roughly 1.4 million bankruptcy filings, a new survey reveals the possible economic factors behind the surge.
Respondents were asked to select which economic factor forced them to consider bankruptcy, and how many people they know who had also considered bankruptcy in the past year.
Add this graphic to your site:
Add this graphic to your site:
Read the full press release: Job Loss, Credit Crunch Driving Bankruptcy Inquiries
Posted in Bankruptcy Statistics, Setting the Record Straight about Bankruptcy, bankruptcy survey, economic statistics | Comments Off
Saturday, December 19th, 2009
A recent ruling by an Idaho bankruptcy judge, reported by the Des Moines Register, could mean bad news for parents with 529 tax-advantaged college savings plans for their children who file for bankruptcy.
The Ruling
The case in question apparently involved a couple who had put $14,500 into a 529 college savings account for their daughter. The girl’s grandmother reportedly contributed an additional $40,000. Ideally, the funds would have been used for the daughter’s education expenses (including textbooks, tuition, room, board and fees).
But, in this case, the girl’s parents filed for bankruptcy shortly after putting the money into the 529 account. And the judge overseeing their case ruled that the entire account (with the exception of the state’s $5,475 exemption) would be considered part of their assets and could thus be used to repay creditors.
The ruling landed this way, it seems, because the parents legally controlled the funds, and so could have used them for purposes other than their daughter’s education if they chose.
What It Means for You
So how could the Idaho bankruptcy court's ruling affect potential bankruptcy filers? If you or your relatives want to establish a 529 account for a child’s education, consider taking the following precautions:
- Invest early: Contributions made 720 days or more before a bankruptcy filing will likely be protected from the court. This provision was put in place to prevent filers from shielding their assets in 529 funds directly before a bankruptcy filing.
- Give up control: If you’re struggling financially but another family member interested in contributing education funds is not, consider keeping the account in that person’s name. That way, if you file for bankruptcy, the money will not be legally yours.
Further, the ruling in Idaho doesn’t necessarily mean that bankruptcy judges across the nation will follow suit in similar situations. While it’s likely that the same logic will be provided to other cases, it’s not guaranteed.
Besides, according to the Register, few people who file for personal bankruptcy have 529 accounts to worry about. But, if someone in your family is thinking about initiating such a fund, be sure to check with a lawyer first to make sure the money will be safe in case of a bankruptcy filing.
Additional Resources
A Guide to Understanding 529 Plans (PDF)
529 Tax Deduction Information (2009) (PDF)
Posted in 529 account, Bankruptcy Courts, Bankruptcy Laws, Idaho, college, savings accounts | Comments Off
Saturday, December 19th, 2009
Sergeant Vince Carter, USMC asked: Why do they need to be “saved” from their own bad decisions? Why not file Chapter 11, fix their cost structure and have a fighting chance at becoming competitive?
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Posted in Politics | 9 Comments »
Friday, December 18th, 2009
Once you file a Chapter 13 bankruptcy and begin contributing monthly to the payment plan, you may wonder where your money is going, who’s being paid and how much money you still owe until you get your Chapter 13 discharge. As a Chapter 13 debtor, you can have access to much of the same information that the Trustee and your attorney have.
The National Data Center allows Chapter 13 debtors to access their case at no charge through its website: www.13datacenter.com. In order to view your case on-line, you must first register for a user name and password. Just go to the www.13datacenter.com website and locate the box that asks for User Name and Password. If you are a new user, click the link “New Debtor Access – CLICK HERE” to register for a user name and password.
Step 1: You will be asked a series of questions to verify your identity. Make sure to enter your name exactly as it appears on your petition, your social security number and your case number.
Step 2: Once you’ve entered all information requested in the first screen, you will be taken to the second screen. Select one of the creditor names listed, which must also be one of the creditors included in your Chapter 13 petition. Select your correct mailing address (NOT the address of the creditor). Finally, select the name of the Trustee that has been assigned to your case.
Step 3: Once the second screen is submitted, you’ll be taken to the third screen. Here you will be able to choose your own username and password, as well as enter your email address.
Once you’ve completed Steps 1 – 3 of the registration process, you will receive an email with your username/password and will be automatically re-directed to the National Data Center homepage. Log-in using your username and password and freely navigate the National Data Center website to view your case on-line and keep tabs on where the money is going.
Post by Susan Blum.
Posted in Chapter 13 data center, Chapter 13 issues, General consumer bankruptcy info, chapter 13 didbursments, chapter 13 plan | Comments Off
Thursday, December 17th, 2009
Late last week, the U.S. House of Representatives voted to approve a bill that introduces a spate of consumer protection measures.
The amendment that would have permitted homeowners to address foreclosure in bankruptcy by altering the terms of mortgage loans (in what’s known as “cramdowns”), though, did not make the cut.
Provisions of the Bill
The Wall Street Reform and Consumer Protection Act, as it’s known, includes the following provisions:
- Mortgage lending reform: The bill would outlaw the type of predatory lending that allowed for the subprime boom and subsequent bust. Essentially, the bill requires mortgage lenders to lend only what their borrowers can repay.
- Increased consumer protection: It creates the Consumer Financial Protection Agency, a government group proposed earlier this year whose job would be to protect Americans from unfair financial practices and fraud of all stripes.
- Amped up oversight: The Financial Stability Council, another provision of this bill, would identify firms that are intrinsically risky and increase monitoring and oversight of these to prevent widespread financial crises.
- Bailout replacement: If this bill becomes law, taxpayer bailouts will be a thing of the past, because it includes orderly measures for closing firms that are “too big to fail.”
- Limits on executive pay: In addition to giving regulators an opportunity to halt what seem to be questionable payment policies, the bill would give shareholders a chance to weigh in on the salaries and retirement packages of a firm’s executives.
- Increased investor protections: The bill would increase the power of the Security and Exchange Commission (SEC) and mandate an examination of the securities industry to determine what reforms are needed.
- Regulations on derivatives: All-new regulations would be instituted for the derivatives market, which reportedly has a value of at least $600 billion.
- Hedge fund registration: Those who run hedge funds would have to register with the SEC and comply with regulatory guidelines to minimize risk for investors.
What Happens Now?
At this point, the bill will move on to the Senate, where it could be modified before becoming law, perhaps with a new bankruptcy amendment.
But, in the words of Speaker Nancy Pelosi, the bill “sends a message” to Wall Street and consumers about a new era of protection.
Additional Resources
Full Text of HR 4713 (PDF)
Posted in Bankruptcy, Consumer Protection, Legal Info, forelcosure, laws | Comments Off
Wednesday, December 16th, 2009
Between 2003 and 2009, the number of fraud cases investigated by the U.S. Justice Department saw a steep decline—including a 44% drop in bankruptcy fraud cases, according to an article in USA Today.
Bankruptcy fraud, corporate fraud and securities fraud cases all received less attention from Federal prosecutors, according to Justice Department documents, with corporate fraud cases falling 55%, even as our country fell into economic crisis.
And while the number of new fraud cases filed in federal courts has increased over the past few months as investigators struggle to prevent another financial mess, the case load is still lighter than it was at the beginning of the decade.
What is Bankruptcy Fraud?
Bankruptcy fraud is a federal felony offense that may include concealment of assets or debts from the bankruptcy petition. Failure to include an asset when filing bankruptcy is one of the most forms of bankruptcy fraud, and often includes "giving" a valuable asset, such as a car, to a relative or friend to protect it from liquidation.
If a debtor has transferred or sold any property within two years of filing bankruptcy, such property may be taken by the bankruptcy trustee as an asset.
According to the USA Today article, the Justice Department filed only 82 charges of bankruptcy fraud in the fiscal year ending September 20, 2009—despite nearly 1.5 million bankruptcies being filed in that time.
Posted in Justice Department, Legal Info, asset, bankruptcy fraud | Comments Off
Wednesday, December 16th, 2009
hearthealth1 asked: I just moved from VA to FL and I need to file bankruptcy, does anyone know when I can do so? I had an over the phone consultation with a bankruptcy attorney’s office (not the attorney) and was told that because of my length of residency in FL I’m not able to file yet. Is this true?
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Posted in Personal Finance | 1 Comment »
Tuesday, December 15th, 2009
In a recent report from CNNWorld, Columbian-born pop singer Shakira declares that her family’s bankruptcy when she was a child motivated her to become the successful, world-famous pop star she is today.
In addition to having recorded record-breaking number of worldwide hits and a wildly successful career as a musical entertainer, Shakira founded the Barefoot Foundation, a charity that helps promote and fund education for poor children in Columbia, where she grew up.
Bankruptcy as a New Beginning
In the article, Sharkia shares her family's experience with debt, including having to sell all of their furniture. However, her parents wanted their young daughter to know that bankruptcy wasn't the worst position to be in. Shakira’s experience provides one example about what bankruptcy can and cannot do.
- It IS a chance to start over. Those of us who have or have had problems with debt don’t need to be shamed or scolded. We know we’ve messed up. Bankruptcy offers us a chance for to start from the beginning, without the onerous weight of debt holding us back.
- It IS NOT a life ruiner. Bankruptcy doesn’t ruin people’s lives. It provides a solution to an overwhelming problem. Yes, your credit will be temporarily hurt by a bankruptcy filing. But it—and you—can recover, assuming you heed the advice in the financial management course and develop a new relationship with money and credit.
- It IS a major step. Shakira tells of her parents' bankruptcy as a life-changing event. And for many people, it is. Filing bankruptcy means you have to admit you’re over your head in debt and you need help getting out. But it also means you’re ready to start again and learn from your mistakes.
- It IS NOT a scarlet letter. As Shakira shows (as well as other celebs including Larry King, Cyndi Lauper, and Abraham Lincoln), bankruptcy does not brand you for life. In fact, if you’ve got the right attitude, it can provide motivation to improve your finances and strive to reach other goals, as well.
True, most of us won’t become Shakiras or Abe Lincolns. But the lesson here is valuable just the same: debt does not define us unless we let it. So, instead of looking at your financial difficulties as a dead end, see them as an opportunity to start over and reinvent yourself. I know it’s not easy, but it’s also not impossible.
Posted in Setting the Record Straight about Bankruptcy, Shakira, after bankruptcy, celebrity bankruptcy | Comments Off
