Archive for January, 2010
Thursday, January 21st, 2010
Stephen Morgan asked:
OK perhaps the above headline might be accused as being slightly on the sensationalist side of things but go with me slightly as I explain my reasoning and the logic behind such a potentially controversial headline.
The core message put out recently by the UK Governments Insolvency Service was that a record number of people in the UK were made officially insolvent between July and September 2006.
The Governments Insolvency Service claimed that 27,644 people were either made bankrupt or entered into an Individual Voluntary Arrangement (IVA) as a way to control or manage their debts in an ordered fashion.
It was too early obviously to know how big a percentage of those who entered into an IVA had it failed by their manager or supervisor but it has been claimed previously that in some cases up to 50/60 percent of those entering an IVA fail to complete it in an orderly manner and therefore find themselves being made forcibly bankrupt at a later date.
The other key statistic was that insolvencies were apparently 55% higher than during the comparable period this time last year and the smart money (to spoil the metaphor) is on the figure topping the 100,000 mark for the year.
Add to that the latest trend in Lifelong Mortgages whereby the Lender gives the Borrower up to 57 years to repay the mortgage and will extend up to 5 times the borrowers annual income on a LTV basis then you can see where it would be very easy to over extend oneself.
It would appear that the proportion of those applying for and entering IVAs rose as compared to those deciding (or having decided for them) to go down the straight bankruptcy route. This latter fact has been heavily criticised (and understandably so) by the mainstream press as the process of an IVA or (Chapter 13 Bankruptcy, its equivalent in the US) is very heavily marketed as the ultimate solution to provide the maintenance of the maximum amount of dignity in an otherwise sordid scenario.
This is not entirely the case and is most certainly not always true. Whilst the principle of an IVA is fine and extremely noble, sometimes it is just not practical and therefore should be counselled against at the earliest opportunity. That is not to say that IVAs are a totally worthless idea in principle.
In the right circumstances they are ideal and managed correctly work extremely well for those who enter into the process with their eyes firmly open. Sadly this is not always the case and most often the reality is the exact opposite.
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Posted in Non Fiction | No Comments »
Thursday, January 21st, 2010
As many people now know, the current recession was touched off by the collapse of the real estate market, which ballooned out of control in the mid-2000s.
Now, according to CBS News, mortgage lenders have learned a tough lesson and are changing the way they do business. Here’s a look at some notable changes and why they’re cropping up.
Big-Time Losses
During the subprime lending boom, many lenders (including big players like Fannie Mae and Freddie Mac) offered high- or variable-interest loans, no-down-payment loans, and other types of loans that people were unlikely to pay off easily.
Now, many of those loans have gone bad, meaning that the borrowers were unable to make payments and the houses in question have gone into foreclosure. Lenders are thus writing off (that is, accepting as lost) billions of dollars in bad debts – and they have to do something about it.
- Credit score requirement: In the era of subprime lending, people with low credit scores were often specifically targeted for high-interest loans. Now, according to sources, Fannie Mae will not issue loans to anyone whose FICO credit score is below 620.
- Equity requirement: If you’re looking to refinance your current home loan, lenders now require you to have some equity (that is, some amount of the principal paid off) in your original loan.
- Down payment a must: In the olden days, buying a house without a down payment was unheard of; the subprime lending "innovations," though, introduced loans with no down payment required. Major lenders, it seems, are returning to the traditional wisdom that you must pay a significant amount of money up front.
- Debt-to-income ratio consideration: Fannie Mae has also reportedly announced that it will not lend to anyone whose debt-to-income ratio rises beyond 45 percent – that is, in order to get a loan, you must not pay more than 45 percent of your monthly income on all debt payments (including car, credit card, student loan, etc.) combined.
So what does this mean for people thinking about buying a home? Basically, it means you need to be at the top of your game financially. You should be checking your credit report regularly and making sure you’re an attractive candidate to home lenders – and if you aren’t right now, it’s time to take steps to become one.
Additional Resources
Home Buying Brochure
Posted in Foreclosure, Mortgage Foreclosure, Mortgages, lending | Comments Off
Tuesday, January 19th, 2010
Matthew Hick asked:
If you are considering bankruptcy, you’ll need to know what to expect during each phase of the process after filing.
Here’s a basic overview of what to expect during the entire process:
First, you must decide which type of bankruptcy you want to file. Chapter 7 will free you of all of your debt, and allow you to begin rebuilding your credit after a few years. Many people do not qualify for this type of bankruptcy under new government guidelines established in 2005, however, which allow the court to determine if you indeed do qualify. Basically, the law requires you make less than the medium income in your state to file for Chapter 7 bankruptcy.
Chapter 13 bankruptcy requires you to pay back all of your debt within a specific timeframe in accordance to a schedule set by the court. While this may sound like a good solution, after all it’s allowing you to pay back everyone you owe, it can be difficult since the court decides how much of your income is used for debt payments, and how much you are able to keep to live on. Their criteria is usually stringent, and doesn’t allow for anything but necessities during the repayment period.
Once you’ve decided which type of bankruptcy to file for, it’s time to start filing out mounds of legal paperwork. If you’ll be filing yourself, be prepared to file app. 30 to 60 pages in your petition, including schedules and other papers filed at the time of your bankruptcy. You must follow all local and federal bankruptcy court rules carefully when completing these forms. It can be very tedious and confusing work. You must learn and understand a variety of bankruptcy laws and requirements specific to your state, and be able to type them in a specific manner.
About 4-6 weeks after filing for bankruptcy with the court, you will be required to attend a hearing presided over by the bankruptcy trustee called the First Meeting of Creditors. You will be required to answer detailed questions about your bankruptcy papers, assets, debts and other matters from both the trustee and your creditors.
Your creditors now have 60 days in most states to contest your bankruptcy filing. Once that deadline has passed you can expect the court t notify you of your official debt discharge in about 60 to 75 days.
Does filing bankruptcy mean the end of credit for a lifetime? Absolutely not! You can begin to reestablish your credit two years after the discharge of Bankruptcy. However, it will be recorded for 10 years and must be reported if asked. You may not file a new bankruptcy request for six years.
Bankruptcy Questions
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Monday, January 18th, 2010
Most people who file bankruptcy do so reluctantly and as a last resort; most bankruptcy debtors are honest people who would pay back every penny if they could afford to do so. Most of my clients feel horrible and ashamed about bankruptcy. And then, there are people who use bankruptcy to make money and wring every dollar they can from their lines of credit and credit cards.
Here’s this week’s bankruptcy scam-plan. A client consulted me about a future bankruptcy filing. I told him he had to postpone bankruptcy because his recent repayment of a loan created a creditor preference issue. Since he had to delay bankruptcy anyway, he asked me about his plan to make the most of it. He would use his untapped credit cards to buy department store gift cards. He did not want to use the cards to shop at department stores. What he planned to do is to sell the gift cards for cash, at a discount, over a web-based gift card market. He would run up credit cards to their limit to buy the gift cards, sell the card for cash, and put the cash in his pocket. Then, he would wait several months until the credit charges "aged" before he would wipe out the credit cards in a bankruptcy. The cash, of course, would not be disclosed. Pretty slick.
Naturally, I told this person that I could not be the attorney who would file his bankruptcy knowing what I know. Nor, could I advise him about his plan because I can not help him steal money from banks. When it comes time he’ll find another attorney for the bankruptcy and disclose nothing about the gift card purchases or the cash, and the truth is he’ll probably get away with it.
There are creditors who abuse honest debtors, and then there are debtor who cheat the banks. There are bad actors on both sides. Its not bankruptcy, its not banks, its just people.
Posted in True Stories | Comments Off
Monday, January 18th, 2010
High unemployment rates and sluggish recovery in the job market mean that many Americans are still budgeting carefully and watching every penny that leaves their wallets. It’s times like these when studies like the one conducted by researchers at San Francisco State University can help us make important spending decisions.
Memories Last Longer than Stuff
The new budget study examined recent purchases made by adults enrolled at SFSU. Here's what the researchers discovered:
- Happiness from
things
fades. On average, researchers found, the thrill brought about by new objects faded in six weeks to three months. This means that, no matter how much you love that new computer, dress or TV, you will get used to it in a few months and the pleasure it brings you will dwindle.
- Happiness from memories lasts. On the other side of the coin, the pleasure induced by spending money on experiences (like sporting events, plays, hikes, etc.) endures, thanks to our ability to remember and relive these experiences.
So how can you use this information to make the most out of the money you have for leisure? Focus on participating in events rather than accumulating goods. And, suggests the study, recruiting friends and loved ones to join you is a particularly useful way to make sure you enjoy yourself and create enjoyable memories.
Here are some ideas to consider when thinking about an experience (rather than an object) to spend money on:
- Take a class. Many community colleges and organizations offer continuing education departments that offer fun classes like ballroom dancing, cooking, yoga or sculpture.
- See a play. Check local newspapers or schools for events put on by community and school theatre or music groups. Bonus: these are often low-cost outings.
- Plan a picnic. Even in bad weather, you can organize a picnic indoors to shake up the monotony of chilly days. Team up with friends and make everyone responsible for one part of the meal. Or have everyone agree to bring a dish they've never had before.
- Be a tourist at home. Spend a day visiting museums or landmarks close to home that you've never actually explored. See what you can learn about your hometown.
- Get lost. Team up with a friend and try to get lost. Then spend the day driving or walking around areas you’ve never seen before. Take pictures as souvenirs.
Posted in Budget, Financial Literacy, saving money, spending money | Comments Off
Sunday, January 17th, 2010
A number of stories have recently appeared in bankruptcy and 
consumer rights blogs suggesting that the Atlanta based collection firm Mann, Bracken, LLC has gone out of business. On his Caveat Emptor blog, Minnesota bankruptcy attorney Sam Glover has written several posts about the Mann, Bracken firm including one on December 22, 2009 stating that the calls to the firm's phone number instructs callers to communicate directly with their creditors. I called several numbers listed for Mann, Bracken but the calls were answered by a message that "all circuits are busy, try your call again later."
Although based in Atlanta, Mann, Bracken has a national practice and it has apparently been growing by merging with other law firms. I found a web site called paymbw.com which purports to be a payment gateway for debtors to make electronic check or credit card payments on debts being handled by Mann, Bracken. This site notes that Mann, Bracken is the successor by merger to Wolpoff & Abramson L.L.P., and Eskanos & Adler P.C., two collection law firms well known to debtor's lawyers.
The domain mbllc.com has a "coming soon" page and the registration information for that domain is private. I looked up the contact information for the partners. Douglas Mann's shows him as an inactive lawyer affiliated with Mann, Bracken. Chris Bracken's registration shows a gmail.com email address, a business address at Mann, Bracken's location, but the space for the law firm information is blank. Two other partners – Bill Layng and Steve Knezo – are now affiliated with other law firms.
Atlanta TV station WSB sent a crew to the Mann, Bracken offices and found deserted premises along with handwritten placards stating that the firm has closed down. According to WSB, Mann, Bracken was associated with a large debt collector called Axiant, which is now in Chapter 7.
Based on all the information I can gather, the law firm of Mann, Bracken is no more. However the demise of this firm does not mean that debts owed to clients of Mann, Bracken or Axiant are no longer collectible. Apparently another large debt buyer/collector, NCO, has purchased or is about to purchase Axiant's accounts.
If you had a deal with Mann, Bracken to settle your debt, you may find that the underlying creditor or a subsequent collection agency may not honor your deal – so hold on to any paperwork you may have. As attorney Glover notes on his blog, you should contact your creditor directly if you have previously been dealing with Mann, Bracken.
Posted in Bill Collectors, General consumer bankruptcy info, Georgia Bankruptcy, a, atlanta, axiant, based, bracken, bracken , called, chris, collection, collection law firm, collector, debt, douglas, firm, including, large, mann, mann bracken, partners , the | Comments Off
Saturday, January 16th, 2010
The Bureau of Labor Statistics has released its most recent unemployment numbers (for December 2009), and they paint a gloomy picture of the U.S. job landscape.
While the actual unemployment rate and number of unemployed people in the country remain unchanged from the last recorded period (10.0 percent and 15.3 million, respectively), certain figures point to a dismal immediate future.
Unemployment by the Numbers
Here's a look at a breakdown of the current unemployment figures for the United States:
- Adult men: 10.2 percent
- Adult women: 8.2 percent
- Teenagers: 27.1 percent
- Whites: 9.0 percent
- Blacks: 16.2 percent
- Hispanics: 12.9 percent
- Asians: 8.4 percent
While these numbers represent little movement in either direction from the BLS's last report, they also don’t paint the whole picture. For example:
- Long-term unemployment continued its upward movement, reaching 6.1 million people who have been without work for 27 weeks or more, composing approximately 40 percent of the total number of unemployed people.
- The number of underemployed people remains at 9.2 million – though these people are working, they have fewer hours than they’d like because of economic restraints.
- A whopping 929,000 workers are considered "discouraged," meaning they’re out of work and they would like to work but have stopped looking for jobs because they believe none are available. A year ago, the number of discouraged workers was only 642,000.
Perhaps unsurprisingly, job losses continued in certain sectors (including construction, manufacturing and wholesale trade) and increased in temporary help services (likely from holiday hires).
Looking Ahead
So what do these numbers mean for the future of the U.S. economy and job market? Some analysts suggest the unemployment rate will actually get higher as the economy begins to pick up.
This may sound counter-intuitive, but makes sense upon closer examination: as the economic situation improves nationally, more people will likely enter the work force, believing more opportunities for work are available. And, even if more jobs do crop up, they may not keep pace with the number of new workers seeking employment.
For now, the problem of long-term unemployment continues to plague Americans: the average length of time without a job was 29.1 weeks as of December, which is apparently the highest average since 1948, when records were first kept.
Additional Resources
Employment Situation (BLS News Release, January 2010)
Posted in employment, recession, unemployment | Comments Off
Friday, January 15th, 2010
In a decade with two recessions, two wars and skyrocketing unemployment, bankruptcy became a financial safety net for a record 13 million Americans.
It's no wonder that Time called it the decade from hell.
Between January 2000 and December 2009, 13,363,085 personal bankruptcy petitions were filed as Americans attempted to defy debt, stop foreclosure and get a fresh financial start.
A large percentage of those came in 2005, when a new bankruptcy law threatened to make it more difficult to file Chapter 7 bankruptcy. More than 2 million bankruptcies were filed that year, as consumers rushed to beat the October deadline.
The decade total was an increase of nearly 29% over the bankruptcies filed in the 1990s.
Posted in year in bankruptcy | Comments Off
Thursday, January 14th, 2010
Debt Settle Inc asked: 10. Not having a plan in case of emergency
A lot of people cut their budgets very close. If you have you money portioned out precisely for your regular expenditures and you haven’t left anything in the budget for emergencies, how will you pay for repairs if your car breaks down? If your house suddenly needs repair? If you have emergency medical bills not covered by your insurance? It is important to make sure you have a plan to cover emergency spending. If that means cutting things out of your regular budget that may not really be necessary, make sure you do that.
9. Spending money on luxury items you don’t need
This one should be obvious, but a lot of us violate this simple rule anyway. When you see a new car, an article of brand-name clothing or piece of electronics equipment, ask yourself a couple of questions. 1) Is there money in my budget for this? And 2) Do I really need this? If it’s an impulse buy, odds are first answer is no. The second answer is probably no in any event. Think about whether you’d rather have the item or financial stability.
8. Buying extravagant gifts for friends and family
This is basically the same as the previous item on this list. The difference is that some people have a problem not with buying things for themselves, but with buying things for others. Selflessness is commendable, but it doesn’t have to be as expensive as you might be making it. It’s not going to do your friends and family any good for you to go bankrupt buying them extravagant birthday presents.
7. Letting small expenditures add up
If your money is disappearing every month and you can’t figure out where it’s going, odds are you’re not keeping track of minor expenditures. Say you take a trip to the grocery store to pick up a gallon of milk for three dollars. While you’re there you pick up some ice cream, maybe a twelve pack of soda. You spend three dollars on candy for the kids in the checkout line. Swing through a drive-through on the way home to get some food. Why not get the large for only a few cents more? Each of these items individually may not be very significant, but by the time you get home, you may have spent $30-$40 during you trip out for some milk. If these sound like the kind of expenditures you might make without keeping track, that’s probably where your money is going.
6. Not saving money
If despite your best efforts you find yourself owing more money than you expected, it can be a huge relief to realize you have some money saved up that can help gt you out of trouble. Try putting a percentage of every paycheck into a savings account you never touch. If something you didn’t expect rears up and you have to pay a lot of money, you may find that you can take care of it without declaring bankruptcy.
5. Not keeping track of your funds
How much money do you currently have in your checking account? How about your savings? What have you put on your credit card in the past week? If you don’t know the answer to all three of these questions, you’re probably going to wind up overspending.
4. Putting too much on your credit card
Credit card debt is a serious problem in this country. One main reason is that people treat them as free money without really planning how they will pay off the money they put on them. Another is that people don’t think about the interest rate they will have to pay on purchases on their credit card. If you are making a purchase on credit that you could pay in cash, it may be better to use cash than to risk interest rates running away from you.
3. Letting late fees build up
Almost everyone is late with a bill from time to time. What can really kill you is being late with your bills so often that late fees and surcharges start to build up. Before long, the late fees you pay every month may be as large as any of your other bills.
2. Ignoring bills
This should be obvious, but some people simply don’t take action. If you don’t pay your creditors, they are within their rights to take collection action against you. Most of them, however are willing to be lenient if you will simply talk to them. A lot of companies will allow you extensions if you need them as long as you talk to them in time. Give it a try.
1. Spending more than you earn
Everything else on this list is derived from this one simple rule: Know how much you make, and spend less than that. It’s sounds simple, but it can fell complicated. Once you start keeping track of you earnings and expenses, however, you’ll probably be surprised at how easy it becomes.
Debt Settlement / Debt Consolidation Help / Debt Settlement Services
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Posted in Debt Consolidation | No Comments »
Thursday, January 14th, 2010
There is less homestead protection in bankruptcy than under Florida law outside of bankruptcy court. Florida law provides immediate homestead protection without any limit on value. In bankruptcy, a debtor may protect only $137,000 of homestead value for the first 40 months. A client called me today because he was concerned about whether or not he passed the "40 months test" for homestead protection if he had to file bankruptcy. The client purchased a residence in Florida four years ago for $350,000 all cash. The client has been renting a home in Georgia during a temporary job assignment. He intends to return to the Florida house after the temporary assignment, or alternatively sell the Florida house and look for a new home when he gets back to the Florida home office.
The client said he read an online article written by another attorney that he interpreted to jeopardize his homestead exemption in a bankruptcy. The article stated that bankruptcy law requires 40 months of continuous occupancy in order to qualify for unlimited homestead protection in bankruptcy. The client thought his homestead protection would be limited to $137,000 because he has been temporarily living in Georgia.
What my client read, or thought he read, is not correct. The bankruptcy law does not require 40 months continuous occupancy for unlimited homestead protection; the Bankruptcy Code limits homestead exemptions in Florida to $137,000 if the debtor "acquired their home within the 1215 days before the filing." Courts interpreting the statute found that homestead exemption is based on the time of ownership and not time of occupancy.
Courts also have held that the time limit applies to acquisition of equity and not acquisition of legal title. If a debtor sells one homestead and rolls-over all the equity into a new homestead the clock does not reset because no additional equity was acquired. Paying down a mortgage during a 40 month time period does reset the clock because the debtor would have acquired new equity.
Posted in Bankruptcy Questions | Comments Off
