Saturday, December 14, 2013
Thursday, December 12, 2013
Friday, April 26, 2013
I'm thinking about filing Chapter 7 bankruptcy, should I talk to an attorney?
If you are contemplating Chapter 7 bankruptcy, you should definitely contact an attorney. Chapter 7 bankruptcy can have a long-lasting impact on your life as it will impact your financial future. An attorney can help tell you if you qualify for Chapter 7 bankruptcy and if this step makes sense for your individual circumstances. An attorney can also help highlight the benefits and disadvantages of filing for bankruptcy.
If you live in the Upper Peninsula of Michigan and are thinking about filing bankruptcy, call the attorneys at Church and Korhonen, PLLC for a free, initial telephone conference.
Hope is a phone call away: 800.758.5611
churchkorhonen@gmail.com
Sunday, February 12, 2012
Life is not Fair: Bankruptcy levels the playing field
Each year, millions of Americans decide that bankruptcy is the right choice for them, and the majority turn to Chapter 7 to help eliminate their debts. Chapter 7 is designed to wipe out unsecured debts like credit cards, medical bills, payday loans and some personal loans.
Chapter 7 can be a relatively quick and painless process. The average Chapter 7 case is over in as little as four months.
The majority of Chapter 7 bankruptcy filers are suffering from credit card debt, medical bills or payday loans.
In order to take advantage of this tool, you'll need to determine if you're eligible to file for Chapter 7 using the means test, which compares your income to your state's median income.
If you live in the Upper Peninsula of Michigan, find out if you can file during a free Chapter 7 case evaluation with a lawyer from Church and Korhonen, PLLC. Get answers about how filing could affect you and your future. Your lawyer will take you through the process step-by-step and show you how filing Chapter 7 could affect your future.
Call us directly at 800-758-5611. Church and Korhonen, PLLC is YOUR Bankruptcy Legal Team.
Isn't it time someone was on your side?
Thursday, December 15, 2011
What Monthly Expenses Am I Allowed in Bankruptcy?
Before you sign your bankruptcy petition, you must review everything for accuracy. One of the schedules, called “Schedule J – Current Expenditures of Individual Debtor(s)” is where your monthly expenses are listed. Unfortunately, many people are unaware of what their monthly expenses are, and what is allowed. A commonly asked question is, “What monthly expenses are allowed while in bankruptcy?”
Here are some personal monthly expenses that are allowed in bankruptcy: work expenses, ongoing legal fees, bank charges (monthly checking account fees, ATM fees), hair care and personal grooming products, annual tax return preparation fees, accounting fees, summer camp and summer activities, school lunches, sports fees, school uniforms, Christmas and birthday gifts, pet grooming and care, pet food, veterinary visits, oil changes for your car, cigarettes, car washes, and parking expenses.
Other allowable monthly expenses while in bankruptcy include: college expenses, home landscaping & lawn care, home alarm system and maintenance, annual registration cost for motor vehicles, postage, EZ Pass costs, OnStar system payments, vision care, doctor visits, dental visits, charitable donations, eyeglasses (care and replacement, including contact lenses and saline solution), home office supplies (including computer toner, ink, paper, and software), non-prescription medications, and shoe shines. Additional allowable monthly expenses include: monthly website subscriptions, monthly magazine and newspaper subscriptions, antacids, gym/YMCA fees, toothpaste, tooth whiteners, brush and floss, pain killers, cold/sinus/allergy remedies, vitamins, weight loss programs and aids, books, and music lessons.
Some expenses are easy to determine and record – fixed expenses such as mortgage or rent payments, car payments, health insurance, child support, and cable. Variable expenses are harder to determine since the payment amounts fluctuate. These expenses include food, electric costs, gasoline, day care, and phone. To determine your variable expenses, review the past year’s expenses and divide by 12 to calculate the average monthly cost. Don’t forget to include periodic expenses, such as clothing, medical expenses, and insurance.
Here are some personal monthly expenses that are allowed in bankruptcy: work expenses, ongoing legal fees, bank charges (monthly checking account fees, ATM fees), hair care and personal grooming products, annual tax return preparation fees, accounting fees, summer camp and summer activities, school lunches, sports fees, school uniforms, Christmas and birthday gifts, pet grooming and care, pet food, veterinary visits, oil changes for your car, cigarettes, car washes, and parking expenses.
Other allowable monthly expenses while in bankruptcy include: college expenses, home landscaping & lawn care, home alarm system and maintenance, annual registration cost for motor vehicles, postage, EZ Pass costs, OnStar system payments, vision care, doctor visits, dental visits, charitable donations, eyeglasses (care and replacement, including contact lenses and saline solution), home office supplies (including computer toner, ink, paper, and software), non-prescription medications, and shoe shines. Additional allowable monthly expenses include: monthly website subscriptions, monthly magazine and newspaper subscriptions, antacids, gym/YMCA fees, toothpaste, tooth whiteners, brush and floss, pain killers, cold/sinus/allergy remedies, vitamins, weight loss programs and aids, books, and music lessons.
Some expenses are easy to determine and record – fixed expenses such as mortgage or rent payments, car payments, health insurance, child support, and cable. Variable expenses are harder to determine since the payment amounts fluctuate. These expenses include food, electric costs, gasoline, day care, and phone. To determine your variable expenses, review the past year’s expenses and divide by 12 to calculate the average monthly cost. Don’t forget to include periodic expenses, such as clothing, medical expenses, and insurance.
Saturday, August 13, 2011
How do I know if bankruptcy is the best thing for me and my family?
Are you facing any of these obstacles?
- Are you heavily in debt with little prospect of getting out of that debt in the near future?
- Have you had, or are your creditors threatening foreclosure on your home or, repossession of your car?
- Have you experienced a drop in income that you don't realisticly know when or how it will be replaced?
- Are you frequently late paying bills, incurring outrageous late fees?
- Do you only pay the minimum on your credit cards?
- Are you unable to make even the minimum payments?
- Has the interest on your credit cards been increased dramatically?
- Do you have to sacrifice basic necessities just to make ends meet?
- Are you paying more money than you make on just your monthly living expenses?
- Are you losing sleep at night wondering how you're going to make it?
- Have you bounced more than one check in the last two months?
- Are your wages in jeopardy of being garnished?
- Have you recently become disabled?
- Are you going through a divorce resulting in a decrease of income and an increase in expenses?
If you answered yes to any of these questions, help may be closer than you realize. Many people keep trying and trying to pay their bills even though they fall further and further behind. They simply do not know what else to do. Bankruptcy can put an end to garnishments, law suits, credit card debt, repossessions and more.
Wednesday, August 3, 2011
Bankruptcy Fact Sheet
When You File Bankruptcy
You can choose the kind of bankruptcy that best meets your needs (provided you meet certain qualifications):
Your bankruptcy may be reported on your credit record for as long as ten years. It can affect your ability to receive credit in the future.
Chapter 7 – A trustee is appointed to take over your property. Any property of value will be sold or turned into money to pay your creditors. You may be able to keep some personal items and possibly real estate depending on the law of the State where you live and applicable federal laws.If you have already filed bankruptcy under chapter 7, you may be able to change your case to another chapter.
Chapter 13 – You can usually keep your property, but you must earn wages or have some other source of regular income and you must agree to pay part of your income to your creditors. The court must approve your repayment plan and your budget. A trustee is appointed and will collect the payments from you, pay your creditors, and make sure you live up to the terms of your repayment plan.
Chapter 12 – Like chapter 13, but it is only for family farmers and family fishermen.
Chapter 11 – This is used mostly by businesses. In chapter 11, you may continue to operate your business, but your creditors and the court must approve a plan to repay your debts. There is no trustee unless the judge decides that one is necessary; if a trustee is appointed, the trustee takes control of your business and property.
Your bankruptcy may be reported on your credit record for as long as ten years. It can affect your ability to receive credit in the future.
What Is a Bankruptcy Discharge and How Does It Operate?
One of the reasons people file bankruptcy is to get a “discharge.” A discharge is a court order which states that you do not have to pay most of your debts. Some debts cannot be discharged. For example, you cannot discharge debts for–
It is important to list all your property and debts in your bankruptcy schedules. If you do not list a debt, for example, it is possible the debt will not be discharged. The judge can also deny your discharge if you do something dishonest in connection with your bankruptcy case, such as destroy or hide property, falsify records, or lie, or if you disobey a court order.
You can only receive a chapter 7 discharge once every eight years. Other rules may apply if you previously received a discharge in a chapter 13 case. No one can make you pay a debt that has been discharged, but you can voluntarily pay any debt you wish to pay. You do not have to sign a reaffirmation agreement (see below) or any other kind of document to do this.
Some creditors hold a secured claim (for example, the bank that holds the mortgage on your house or the loan company that has a lien on your car). You do not have to pay a secured claim if the debt is discharged, but the creditor can still take the property.
- most taxes;
- child support;
- alimony;
- most student loans;
- court fines and criminal restitution; and
- personal injury caused by driving drunk or under the influence of drugs.
It is important to list all your property and debts in your bankruptcy schedules. If you do not list a debt, for example, it is possible the debt will not be discharged. The judge can also deny your discharge if you do something dishonest in connection with your bankruptcy case, such as destroy or hide property, falsify records, or lie, or if you disobey a court order.
You can only receive a chapter 7 discharge once every eight years. Other rules may apply if you previously received a discharge in a chapter 13 case. No one can make you pay a debt that has been discharged, but you can voluntarily pay any debt you wish to pay. You do not have to sign a reaffirmation agreement (see below) or any other kind of document to do this.
Some creditors hold a secured claim (for example, the bank that holds the mortgage on your house or the loan company that has a lien on your car). You do not have to pay a secured claim if the debt is discharged, but the creditor can still take the property.
What Is a Reaffirmation Agreement?
Even if a debt can be discharged, you may have special reasons why you want to promise to pay it. For example, you may want to work out a plan with the bank to keep your car. To promise to pay that debt, you must sign and file a reaffirmation agreement with the court. Reaffirmation agreements are under special rules and are voluntary. They are not required by bankruptcy law or by any other law. Reaffirmation agreements–
If you reaffirm a debt and then fail to pay it, you owe the debt the same as though there was no bankruptcy. The debt will not be discharged and the creditor can take action to recover any property on which it has a lien or mortgage. The creditor can also take legal action to recover a judgment against you.
- must be voluntary;
- must not place too heavy a burden on you or your family;
- must be in your best interest; and
- can be canceled anytime before the court issues your discharge or within 60 days after the agreement is filed with the court, whichever gives you the most time.
If you reaffirm a debt and then fail to pay it, you owe the debt the same as though there was no bankruptcy. The debt will not be discharged and the creditor can take action to recover any property on which it has a lien or mortgage. The creditor can also take legal action to recover a judgment against you.
Friday, June 3, 2011
Wednesday, June 1, 2011
Personal Bankruptcy
If you're struggling to change your financial life, the first step is understanding the options. Learn how the personal bankruptcy protections in the U.S. Bankruptcy Code have helped people across the United States with credit card debt, pending home foreclosure or other urgent financial matters.
The U.S. Bankruptcy Code offers two different personal bankruptcy protections: Chapter 7 bankruptcy and Chapter 13 bankruptcy.
Chapter 7 bankruptcy works to excuse, or discharge, unsecured debts. Unsecured debts may include credit card debt, medical bills, payday loans or other debts that are not tied to a specific item, like a home, car or boat.
Chapter 7 bankruptcy works through a "liquidation", or sale, of the debtor's non-exempt assets—but many Chapter 7 debtors find that all of their property is exempt and there is no liquidation.
On the other hand, Chapter 13 bankruptcy may help stop foreclosure or repossession through a 3-5 year repayment plan. The payment plan allows the breathing room to catch up secured debts over time while keeping most property.
The U.S. Bankruptcy Code offers two different personal bankruptcy protections: Chapter 7 bankruptcy and Chapter 13 bankruptcy.
Chapter 7 bankruptcy works to excuse, or discharge, unsecured debts. Unsecured debts may include credit card debt, medical bills, payday loans or other debts that are not tied to a specific item, like a home, car or boat.
Chapter 7 bankruptcy works through a "liquidation", or sale, of the debtor's non-exempt assets—but many Chapter 7 debtors find that all of their property is exempt and there is no liquidation.
On the other hand, Chapter 13 bankruptcy may help stop foreclosure or repossession through a 3-5 year repayment plan. The payment plan allows the breathing room to catch up secured debts over time while keeping most property.
Tuesday, May 31, 2011
Americans Struggling to Afford the Basics
A variety of factors have combined to put a new pinch on Americans, even as the economy is beginning to show signs of recovery, according to a number of news outlets. Here’s a look at the forces behind this new pinch and what it might mean for the typical American.
Prices Going Up
Fuel: We’ve already begun to see prices at the gas pump climb, and chances are it’s not a fluky trend that will reverse in the near future.
Food: Some food prices have already started increasing, but as shipping costs soar (because of more expensive fuel), those prices could climb even higher. As a sort of bonus bit of gloom, analysts are saying that chocolate prices are expected to leap upward in the coming months, thanks to political upheaval in the Ivory Coast (where 40 percent of the world’s cocoa beans are produced).
Apartments: As hiring picks back up in many industries, it seems that more people are deciding to sign leases rather than continue living with family members or friends. And others, the Wall Street Journal suggests, are upgrading as they feel more stable about their employment prospects. Naturally, this kind of movement en masse is likely to trigger higher prices in rental markets – in fact, some sources indicate that there’s a chance even middle- and upper-income Americans will find rent payments taxing in the coming years.
Houses: Another factor contributing to higher rental costs is that, despite moderate recovery in some areas of the economy, most people aren’t feeling secure enough to take on a long-term commitment like a mortgage. Other potential homebuyers may be waiting for the market to bottom out, and still others may feel that the expiration of the first-time homebuyer tax credit has left them with little motivation to buy. This wariness about buying could also be contributing to an increased demand (and thus a likely increase in prices) for apartments.
This combination of factors, according to reports, has left millions of Americans with housing costs at or above 50 percent of their household income. (Most financial advisers recommend that housing costs account for no more than 30 percent.)
With costs as high as they are, some families are left to choose between necessities: rent payments, credit card bills, food bills, utilities, medical costs, savings – when categories like this are in jeopardy, the potential for a financial disaster increases.
Is Bankruptcy an Option?
Between steadily climbing prices for necessities and continued insecurity in employment, it would be unsurprising if bankruptcy filings surge in coming months.
The good news here is that, despite the restrictions and new hurdles imposed by the 2005 law changes, most Americans who have found themselves in need of bankruptcy protection in the years since the law took effect have been able to get it.
Prices Going Up
Fuel: We’ve already begun to see prices at the gas pump climb, and chances are it’s not a fluky trend that will reverse in the near future.
Food: Some food prices have already started increasing, but as shipping costs soar (because of more expensive fuel), those prices could climb even higher. As a sort of bonus bit of gloom, analysts are saying that chocolate prices are expected to leap upward in the coming months, thanks to political upheaval in the Ivory Coast (where 40 percent of the world’s cocoa beans are produced).
Apartments: As hiring picks back up in many industries, it seems that more people are deciding to sign leases rather than continue living with family members or friends. And others, the Wall Street Journal suggests, are upgrading as they feel more stable about their employment prospects. Naturally, this kind of movement en masse is likely to trigger higher prices in rental markets – in fact, some sources indicate that there’s a chance even middle- and upper-income Americans will find rent payments taxing in the coming years.
Houses: Another factor contributing to higher rental costs is that, despite moderate recovery in some areas of the economy, most people aren’t feeling secure enough to take on a long-term commitment like a mortgage. Other potential homebuyers may be waiting for the market to bottom out, and still others may feel that the expiration of the first-time homebuyer tax credit has left them with little motivation to buy. This wariness about buying could also be contributing to an increased demand (and thus a likely increase in prices) for apartments.
This combination of factors, according to reports, has left millions of Americans with housing costs at or above 50 percent of their household income. (Most financial advisers recommend that housing costs account for no more than 30 percent.)
With costs as high as they are, some families are left to choose between necessities: rent payments, credit card bills, food bills, utilities, medical costs, savings – when categories like this are in jeopardy, the potential for a financial disaster increases.
Is Bankruptcy an Option?
Between steadily climbing prices for necessities and continued insecurity in employment, it would be unsurprising if bankruptcy filings surge in coming months.
The good news here is that, despite the restrictions and new hurdles imposed by the 2005 law changes, most Americans who have found themselves in need of bankruptcy protection in the years since the law took effect have been able to get it.
Monday, May 30, 2011
What is Bankruptcy?
There are two main forms of personal bankruptcy: Chapter 7 bankruptcy and Chapter 13 bankruptcy.
Chapter 7 Bankruptcy: The Debt Discharge
Chapter 7, the U.S.’s most common form of bankruptcy, is typically filed in a federal court when an individual or business facing a great deal of debt is unable to pay it.
A successful Chapter 7 bankruptcy results in the Chapter 7 debt discharge, which eliminates the filer’s unsecured debt, such as:
• credit card debt
• payday loans
• personal loans
• utility and medical bills
Keep in mind, a person must prove eligibility to file Chapter 7 bankruptcy.
In general, that means they must typically make less than their state’s minimum income level.
Chapter 13 Bankruptcy: The Wage Earner’s Repayment Plan
Chapter 13 bankruptcy, also known as the wage earner’s plan, is often an option suitable for those facing foreclosure or looking to reorganize finances within the confines of a court-approved, debt repayment plan.
Supervised by a federal court, Chapter 13 bankruptcy gives some income-receiving debtors the ability to:
• stop foreclosure
• silence creditors
• get on a more realistic, interest-free debt repayment plan
• possibly receive a discharge from unsecured debts
At the beginning of the Chapter 13 repayment period, which normally lasts three to five years, a court-appointed trustee is assigned to an individual case and thereupon acts as the go-between for the debtor and creditors.
The trustee receives a set monthly payment from the debtor to give back to creditors regularly or as specified in the court-ordered plan.
Exceptions to these payment types are current mortgage payments and some leases. At the completion of the plan, debts are usually discharged, or legally forgiven.
Once the discharge is entered by the court, no creditor who had notice of the bankruptcy can attempt to collect debt unless it is categorized as “non-dischargeable”, examples being some forms of criminal restitution, domestic support or student loans still not paid in full.
With every year that passes after filing bankruptcy, its record on a credit report is typically viewed with less scrutiny.
Chapter 7 Bankruptcy: The Debt Discharge
Chapter 7, the U.S.’s most common form of bankruptcy, is typically filed in a federal court when an individual or business facing a great deal of debt is unable to pay it.
A successful Chapter 7 bankruptcy results in the Chapter 7 debt discharge, which eliminates the filer’s unsecured debt, such as:
• credit card debt
• payday loans
• personal loans
• utility and medical bills
Keep in mind, a person must prove eligibility to file Chapter 7 bankruptcy.
In general, that means they must typically make less than their state’s minimum income level.
Chapter 13 Bankruptcy: The Wage Earner’s Repayment Plan
Chapter 13 bankruptcy, also known as the wage earner’s plan, is often an option suitable for those facing foreclosure or looking to reorganize finances within the confines of a court-approved, debt repayment plan.
Supervised by a federal court, Chapter 13 bankruptcy gives some income-receiving debtors the ability to:
• stop foreclosure
• silence creditors
• get on a more realistic, interest-free debt repayment plan
• possibly receive a discharge from unsecured debts
At the beginning of the Chapter 13 repayment period, which normally lasts three to five years, a court-appointed trustee is assigned to an individual case and thereupon acts as the go-between for the debtor and creditors.
The trustee receives a set monthly payment from the debtor to give back to creditors regularly or as specified in the court-ordered plan.
Exceptions to these payment types are current mortgage payments and some leases. At the completion of the plan, debts are usually discharged, or legally forgiven.
Once the discharge is entered by the court, no creditor who had notice of the bankruptcy can attempt to collect debt unless it is categorized as “non-dischargeable”, examples being some forms of criminal restitution, domestic support or student loans still not paid in full.
With every year that passes after filing bankruptcy, its record on a credit report is typically viewed with less scrutiny.
Welcome to the Bankruptcy Question Blog
If you have questions about bankruptcy and whether it might be a good solution for your financial situation, this is the blog or you.
Many questions about filing Chapter 7 are addressed in this blog.
Take a look at the blog titles and click on any that you find interesting.
If you have suggestions for new post topics, or, general questions that are not addressed here, post a comment to let me know.
Cathy Church
Many questions about filing Chapter 7 are addressed in this blog.
Take a look at the blog titles and click on any that you find interesting.
If you have suggestions for new post topics, or, general questions that are not addressed here, post a comment to let me know.
Cathy Church
Friday, January 21, 2011
Path Is Sought for States to Escape Debt Burdens
By MARY WILLIAMS WALSH
Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.
Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.
But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.
Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.
Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.
“All of a sudden, there’s a whole new risk factor,” said Paul S. Maco, a partner at the firm Vinson & Elkins who was head of the Securities and Exchange Commission’s Office of Municipal Securities during the Clinton administration.
For now, the fear of destabilizing the municipal bond market with the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor, although Senator John Cornyn, a Texas Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the possiblity in a hearing this month.
House Republicans, and Senators from both parties, have taken an interest in the issue, with nudging from bankruptcy lawyers and a former House speaker, Newt Gingrich, who could be a Republican presidential candidate. It would be difficult to get a bill through Congress, not only because of the constitutional questions and the complexities of bankruptcy law, but also because of fears that even talk of such a law could make the states’ problems worse.
Lawmakers might decide to stop short of a full-blown bankruptcy proposal and establish instead some sort of oversight panel for distressed states, akin to the Municipal Assistance Corporation, which helped New York City during its fiscal crisis of 1975.
Still, discussions about something as far-reaching as bankruptcy could give governors and others more leverage in bargaining with unionized public workers.
“They are readying a massive assault on us,” said Charles M. Loveless, legislative director of the American Federation of State, County and Municipal Employees. “We’re taking this very seriously.”
Mr. Loveless said he was meeting with potential allies on Capitol Hill, making the point that certain states might indeed have financial problems, but public employees and their benefits were not the cause. The Center on Budget and Policy Priorities released a report on Thursday warning against a tendency to confuse the states’ immediate budget gaps with their long-term structural deficits.
“States have adequate tools and means to meet their obligations,” the report stated.
No state is known to want to declare bankruptcy, and some question the wisdom of offering them the ability to do so now, given the jitters in the normally staid municipal bond market.
Slightly more than $25 billion has flowed out of mutual funds that invest in muni bonds in the last two months, according to the Investment Company Institute. Many analysts say they consider a bond default by any state extremely unlikely, but they also say that when politicians take an interest in the bond market, surprises are apt to follow.
Mr. Maco said the mere introduction of a state bankruptcy bill could lead to “some kind of market penalty,” even if it never passed. That “penalty” might be higher borrowing costs for a state and downward pressure on the value of its bonds. Individual bondholders would not realize any losses unless they sold.
But institutional investors in municipal bonds, like insurance companies, are required to keep certain levels of capital. And they might retreat from additional investments. A deeply troubled state could eventually be priced out of the capital markets.
“The precipitating event at G.M. was they were out of cash and had no ability to raise the capital they needed,” said Harry J. Wilson, the lone Republican on President Obama’s special auto task force, which led G.M. and Chrysler through an unusual restructuring in bankruptcy, financed by the federal government.
Mr. Wilson, who ran an unsuccessful campaign for New York State comptroller last year, has said he believes that New York and some other states need some type of a financial restructuring.
He noted that G.M. was salvaged only through an administration-led effort that Congress initially resisted, with legislators voting against financial assistance to G.M. in late 2008.
“Now Congress is much more conservative,” he said. “A state shows up and wants cash, Congress says no, and it will probably be at the last minute and it’s a real problem. That’s what I’m concerned about.”
Discussion of a new bankruptcy option for the states appears to have taken off in November, after Mr. Gingrich gave a speech about the country’s big challenges, including government debt and an uncompetitive labor market.
“We just have to be honest and clear about this, and I also hope the House Republicans are going to move a bill in the first month or so of their tenure to create a venue for state bankruptcy,” he said.
A few weeks later, David A. Skeel, a law professor at the University of Pennsylvania, published an article, “Give States a Way to Go Bankrupt,” in The Weekly Standard. It said thorny constitutional questions were “easily addressed” by making sure states could not be forced into bankruptcy or that federal judges could usurp states’ lawmaking powers.
“I have never had anything I’ve written get as much attention as that piece,” said Mr. Skeel, who said he had since been contacted by Republicans and Democrats whom he declined to name.
Mr. Skeel said it was possible to envision how bankruptcy for states might work by looking at the existing law for local governments. Called Chapter 9, it gives distressed municipalities a period of debt-collection relief, which they can use to restructure their obligations with the help of a bankruptcy judge.
Unfunded pensions become unsecured debts in municipal bankruptcy and may be reduced. And the law makes it easier for a bankrupt city to tear up its labor contracts than for a bankrupt company, said James E. Spiotto, head of the bankruptcy practice at Chapman & Cutler in Chicago.
The biggest surprise may await the holders of a state’s general obligation bonds. Though widely considered the strongest credit of any government, they can be treated as unsecured credits, subject to reduction, under Chapter 9.
Mr. Spiotto said he thought bankruptcy court was not a good avenue for troubled states, and he has designed an alternative called the Public Pension Funding Authority. It would have mandatory jurisdiction over states that failed to provide sufficient funding to their workers’ pensions or that were diverting money from essential public services.
“I’ve talked to some people from Congress, and I’m going to talk to some more,” he said. “This effort to talk about Chapter 9, I’m worried about it. I don’t want the states to have to pay higher borrowing costs because of a panic that they might go bankrupt. I don’t think it’s the right thing at all. But it’s the beginning of a dialog.”
Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.
Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.
But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.
Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.
Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.
“All of a sudden, there’s a whole new risk factor,” said Paul S. Maco, a partner at the firm Vinson & Elkins who was head of the Securities and Exchange Commission’s Office of Municipal Securities during the Clinton administration.
For now, the fear of destabilizing the municipal bond market with the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor, although Senator John Cornyn, a Texas Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the possiblity in a hearing this month.
House Republicans, and Senators from both parties, have taken an interest in the issue, with nudging from bankruptcy lawyers and a former House speaker, Newt Gingrich, who could be a Republican presidential candidate. It would be difficult to get a bill through Congress, not only because of the constitutional questions and the complexities of bankruptcy law, but also because of fears that even talk of such a law could make the states’ problems worse.
Lawmakers might decide to stop short of a full-blown bankruptcy proposal and establish instead some sort of oversight panel for distressed states, akin to the Municipal Assistance Corporation, which helped New York City during its fiscal crisis of 1975.
Still, discussions about something as far-reaching as bankruptcy could give governors and others more leverage in bargaining with unionized public workers.
“They are readying a massive assault on us,” said Charles M. Loveless, legislative director of the American Federation of State, County and Municipal Employees. “We’re taking this very seriously.”
Mr. Loveless said he was meeting with potential allies on Capitol Hill, making the point that certain states might indeed have financial problems, but public employees and their benefits were not the cause. The Center on Budget and Policy Priorities released a report on Thursday warning against a tendency to confuse the states’ immediate budget gaps with their long-term structural deficits.
“States have adequate tools and means to meet their obligations,” the report stated.
No state is known to want to declare bankruptcy, and some question the wisdom of offering them the ability to do so now, given the jitters in the normally staid municipal bond market.
Slightly more than $25 billion has flowed out of mutual funds that invest in muni bonds in the last two months, according to the Investment Company Institute. Many analysts say they consider a bond default by any state extremely unlikely, but they also say that when politicians take an interest in the bond market, surprises are apt to follow.
Mr. Maco said the mere introduction of a state bankruptcy bill could lead to “some kind of market penalty,” even if it never passed. That “penalty” might be higher borrowing costs for a state and downward pressure on the value of its bonds. Individual bondholders would not realize any losses unless they sold.
But institutional investors in municipal bonds, like insurance companies, are required to keep certain levels of capital. And they might retreat from additional investments. A deeply troubled state could eventually be priced out of the capital markets.
“The precipitating event at G.M. was they were out of cash and had no ability to raise the capital they needed,” said Harry J. Wilson, the lone Republican on President Obama’s special auto task force, which led G.M. and Chrysler through an unusual restructuring in bankruptcy, financed by the federal government.
Mr. Wilson, who ran an unsuccessful campaign for New York State comptroller last year, has said he believes that New York and some other states need some type of a financial restructuring.
He noted that G.M. was salvaged only through an administration-led effort that Congress initially resisted, with legislators voting against financial assistance to G.M. in late 2008.
“Now Congress is much more conservative,” he said. “A state shows up and wants cash, Congress says no, and it will probably be at the last minute and it’s a real problem. That’s what I’m concerned about.”
Discussion of a new bankruptcy option for the states appears to have taken off in November, after Mr. Gingrich gave a speech about the country’s big challenges, including government debt and an uncompetitive labor market.
“We just have to be honest and clear about this, and I also hope the House Republicans are going to move a bill in the first month or so of their tenure to create a venue for state bankruptcy,” he said.
A few weeks later, David A. Skeel, a law professor at the University of Pennsylvania, published an article, “Give States a Way to Go Bankrupt,” in The Weekly Standard. It said thorny constitutional questions were “easily addressed” by making sure states could not be forced into bankruptcy or that federal judges could usurp states’ lawmaking powers.
“I have never had anything I’ve written get as much attention as that piece,” said Mr. Skeel, who said he had since been contacted by Republicans and Democrats whom he declined to name.
Mr. Skeel said it was possible to envision how bankruptcy for states might work by looking at the existing law for local governments. Called Chapter 9, it gives distressed municipalities a period of debt-collection relief, which they can use to restructure their obligations with the help of a bankruptcy judge.
Unfunded pensions become unsecured debts in municipal bankruptcy and may be reduced. And the law makes it easier for a bankrupt city to tear up its labor contracts than for a bankrupt company, said James E. Spiotto, head of the bankruptcy practice at Chapman & Cutler in Chicago.
The biggest surprise may await the holders of a state’s general obligation bonds. Though widely considered the strongest credit of any government, they can be treated as unsecured credits, subject to reduction, under Chapter 9.
Mr. Spiotto said he thought bankruptcy court was not a good avenue for troubled states, and he has designed an alternative called the Public Pension Funding Authority. It would have mandatory jurisdiction over states that failed to provide sufficient funding to their workers’ pensions or that were diverting money from essential public services.
“I’ve talked to some people from Congress, and I’m going to talk to some more,” he said. “This effort to talk about Chapter 9, I’m worried about it. I don’t want the states to have to pay higher borrowing costs because of a panic that they might go bankrupt. I don’t think it’s the right thing at all. But it’s the beginning of a dialog.”
Thursday, January 13, 2011
Banks repossess 1 million homes in 2010
by JANNA HERRON, AP Real Estate Writer
NEW YORK – The bleakest year in foreclosure crisis has only just begun.
Lenders are poised to take back more homes this year than any other since the U.S. housing meltdown began in 2006. About 5 million borrowers are at least two months behind on their mortgages and more will miss payments as they struggle with job losses and loans worth more than their home's value, industry analysts forecast.
"2011 is going to be the peak," said Rick Sharga, a senior vice president at foreclosure tracker RealtyTrac Inc.
The outlook comes after banks repossessed more than 1 million homes in 2010, RealtyTrac said Thursday. That marked the highest annual tally of properties lost to foreclosure on records dating back to 2005.
One in 45 U.S. households received a foreclosure filing last year, or a record high of 2.9 million homes. That's up 1.67 percent from 2009.
For December, 257,747 U.S. homes received at least one foreclosure-related notice. That was the lowest monthly total in 30 months. The number of notices fell 1.8 percent from November and 26.3 percent from December 2009, RealtyTrac said.
The pace slowed in the final two months of 2010 as banks reviewed their foreclosure processes after allegations surfaced in September that evictions were handled improperly. Under increased scrutiny by the government, lenders temporarily halted taking actions against borrowers severely behind on their payments.
However, most banks have since resumed their eviction processes, and the first quarter will likely show a rebound in foreclosure activity, Sharga said.
Foreclosures are expected to remain elevated through the year as homeowners contend with stubbornly high unemployment, tougher credit standards for refinancing and falling home values. Sharga said he expects prices to dip another 5 percent nationally before finally bottoming out. The decline will push more borrowers underwater on their mortgages. Already, about one in five homeowners with a mortgage owe more than their home is worth.
The pain likely will be the most acute in states that have already been hit hard. That includes former housing boom states Nevada, Arizona, Florida and California, along with states that are suffering most from the economic downturn, including Michigan and Illinois.
Nevada posted the highest foreclosure rate in 2010 for the fourth straight year, despite a 5 percent decline in activity from the year before. One in every 11 households received a foreclosure filing last year in the state. In December, foreclosure activity increased 18 percent from November with a 71 percent spike in bank repossessions.
Arizona and California also showed sharp December increases in the number of homes banks took back, at 52 percent and 47 percent, respectively. Arizona, along with Florida, finished the year at No. 2 and No. 3 for the highest foreclosure rates.
One in every 17 Arizona households got a foreclosure filing last year, while one in 18 received a notice in Florida.
California, Utah, Georgia, Michigan, Idaho, Illinois and Colorado rounded out the top ten states with the highest foreclosure rates.
More than half of the country's foreclosure activity came out of five states in 2010: California, Florida, Arizona, Illinois and Michigan. Together, these states recorded almost 1.5 million households receiving a filing, despite year-over-year decreases in California, Florida and Arizona.
RealtyTrac tracks notices for defaults, scheduled home auctions and home repossessions — warnings that can lead up to a home eventually being lost to foreclosure.
NEW YORK – The bleakest year in foreclosure crisis has only just begun.
Lenders are poised to take back more homes this year than any other since the U.S. housing meltdown began in 2006. About 5 million borrowers are at least two months behind on their mortgages and more will miss payments as they struggle with job losses and loans worth more than their home's value, industry analysts forecast.
"2011 is going to be the peak," said Rick Sharga, a senior vice president at foreclosure tracker RealtyTrac Inc.
The outlook comes after banks repossessed more than 1 million homes in 2010, RealtyTrac said Thursday. That marked the highest annual tally of properties lost to foreclosure on records dating back to 2005.
One in 45 U.S. households received a foreclosure filing last year, or a record high of 2.9 million homes. That's up 1.67 percent from 2009.
For December, 257,747 U.S. homes received at least one foreclosure-related notice. That was the lowest monthly total in 30 months. The number of notices fell 1.8 percent from November and 26.3 percent from December 2009, RealtyTrac said.
The pace slowed in the final two months of 2010 as banks reviewed their foreclosure processes after allegations surfaced in September that evictions were handled improperly. Under increased scrutiny by the government, lenders temporarily halted taking actions against borrowers severely behind on their payments.
However, most banks have since resumed their eviction processes, and the first quarter will likely show a rebound in foreclosure activity, Sharga said.
Foreclosures are expected to remain elevated through the year as homeowners contend with stubbornly high unemployment, tougher credit standards for refinancing and falling home values. Sharga said he expects prices to dip another 5 percent nationally before finally bottoming out. The decline will push more borrowers underwater on their mortgages. Already, about one in five homeowners with a mortgage owe more than their home is worth.
The pain likely will be the most acute in states that have already been hit hard. That includes former housing boom states Nevada, Arizona, Florida and California, along with states that are suffering most from the economic downturn, including Michigan and Illinois.
Nevada posted the highest foreclosure rate in 2010 for the fourth straight year, despite a 5 percent decline in activity from the year before. One in every 11 households received a foreclosure filing last year in the state. In December, foreclosure activity increased 18 percent from November with a 71 percent spike in bank repossessions.
Arizona and California also showed sharp December increases in the number of homes banks took back, at 52 percent and 47 percent, respectively. Arizona, along with Florida, finished the year at No. 2 and No. 3 for the highest foreclosure rates.
One in every 17 Arizona households got a foreclosure filing last year, while one in 18 received a notice in Florida.
California, Utah, Georgia, Michigan, Idaho, Illinois and Colorado rounded out the top ten states with the highest foreclosure rates.
More than half of the country's foreclosure activity came out of five states in 2010: California, Florida, Arizona, Illinois and Michigan. Together, these states recorded almost 1.5 million households receiving a filing, despite year-over-year decreases in California, Florida and Arizona.
RealtyTrac tracks notices for defaults, scheduled home auctions and home repossessions — warnings that can lead up to a home eventually being lost to foreclosure.
Saturday, November 13, 2010
The Amazing Benefits Of Checking Your Free Credit Reports
Many people don’t understand the importance of checking their annual credit report. They think this document cannot help them with anything, but that’s not true. If you dig deeper into the details, you will then realize the fact that your credit report gives you an idea of how you have been doing during the last year. Once you get information about this, you can make certain changes and help yourself with credit repair.
Actually people don’t understand the importance of this particular document because they don’t know what they will find on it. On a credit report, you will find information about different aspects of your financial life. If you consider it seriously and pay attention to all entries, you will get an idea of how well you have been performing in the past.
If you are under debt and don’t know how to get out of it, you can consult with your annual credit report to find out the points where you have gone wrong. Sometimes, people try to use their credit card and money in the right way, but they unknowingly start using it incorrectly. In other words, your bad spending habits always take control of you. The problem is that most people having such issues don’t ever realize about their bad spending habits. This is the reason why it is recommended to check your credit report after regular intervals.
It is crucial to mention that although you can get your credit reports whenever you want, you should at least get one at the end of each year. However, there are certain benefits of getting it after short times. For instance, if you check your report after some time, you will come to know if there are some suspicious activities happening in your credit account. This will save you from dealing with the issue of identity theft.
The whole thing implies is that you should never shy away from checking your credit report. It costs you nothing to get a credit report, but it saves you from many big issues.
The fact is that the credit report will have information about your residence at present and your residence in the past. It will have information about the mode of payment of your bills. It will have details whether you have been sued or arrested. It will also have details about your present and past employers. It will also show details about whether or not you have filed for bankruptcy.
You can get a lot of vital information by doing a research of free credit reports. You will get reports of hundreds of companies that can sell you the credit report or the ongoing credit monitoring. Beware of certain sites that act like imposters. The real goal of these sites is to snag people. These people think that they are looking at an official site for free credit reports but actually the case is different.
Actually people don’t understand the importance of this particular document because they don’t know what they will find on it. On a credit report, you will find information about different aspects of your financial life. If you consider it seriously and pay attention to all entries, you will get an idea of how well you have been performing in the past.
If you are under debt and don’t know how to get out of it, you can consult with your annual credit report to find out the points where you have gone wrong. Sometimes, people try to use their credit card and money in the right way, but they unknowingly start using it incorrectly. In other words, your bad spending habits always take control of you. The problem is that most people having such issues don’t ever realize about their bad spending habits. This is the reason why it is recommended to check your credit report after regular intervals.
It is crucial to mention that although you can get your credit reports whenever you want, you should at least get one at the end of each year. However, there are certain benefits of getting it after short times. For instance, if you check your report after some time, you will come to know if there are some suspicious activities happening in your credit account. This will save you from dealing with the issue of identity theft.
The whole thing implies is that you should never shy away from checking your credit report. It costs you nothing to get a credit report, but it saves you from many big issues.
The fact is that the credit report will have information about your residence at present and your residence in the past. It will have information about the mode of payment of your bills. It will have details whether you have been sued or arrested. It will also have details about your present and past employers. It will also show details about whether or not you have filed for bankruptcy.
You can get a lot of vital information by doing a research of free credit reports. You will get reports of hundreds of companies that can sell you the credit report or the ongoing credit monitoring. Beware of certain sites that act like imposters. The real goal of these sites is to snag people. These people think that they are looking at an official site for free credit reports but actually the case is different.
Thursday, September 16, 2010
US homes lost to foreclosure up 25 pct on year
By ALEX VEIGA, AP Real Estate Writer
15 mins ago
LOS ANGELES – Lenders took back more homes in August than in any month since the start of the U.S. mortgage crisis.
The increase in home repossessions came even as the number of properties entering the foreclosure process slowed for the seventh month in a row, foreclosure listing firm RealtyTrac Inc. said Thursday.
In all, banks repossessed 95,364 properties last month, up 3 percent from July and an increase of 25 percent from August 2009, RealtyTrac said.
August makes the ninth month in a row that the pace of homes lost to foreclosure has increased on an annual basis. The previous high was in May.
Banks have been stepping up repossessions to clear out their backlog of bad loans with an eye on eventually placing the foreclosed properties on the market, but they can't afford to simply dump the properties on the market.
Concerns are growing that the housing market recovery could stumble amid stubbornly high unemployment, a sluggish economy and faltering consumer confidence. U.S. home sales have collapsed since federal homebuyer tax credits expired in April.
That's one reason fewer than one-third of homes repossessed by lenders are on the market, said Rick Sharga, a senior vice president at RealtyTrac.
"These (properties) are going to come to market, but very slowly because nobody wants to overwhelm a soft buyer's market with too much distressed inventory for fear of what it would do for house prices," he said.
As a result, lenders are putting off initiating the foreclosure process on homeowners who have missed payments, letting borrowers stay in their homes longer.
The number of properties receiving an initial default notice — the first step in the foreclosure process — slipped 1 percent last month from July, but was down 30 percent versus August last year, RealtyTrac said.
Initial defaults have fallen on an annual basis the past seven months. They peaked in April 2009.
Still, the number of homes scheduled to be sold at auction for the first time increased 9 percent from July and rose 2 percent from August last year. If they don't sell at auction, these homes typically end up going back to the lender.
More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to RealtyTrac. The firm estimates more than 1 million American households are likely to lose their homes to foreclosure this year.
In all, 338,836 properties received a foreclosure-related warning in August, up 4 percent from July, but down 5 percent from the same month last year, RealtyTrac said. That translates to one in 381 U.S. homes.
The firm tracks notices for defaults, scheduled home auctions and home repossessions — warnings that can lead up to a home eventually being lost to foreclosure.
Among states, Nevada posted the highest foreclosure rate last month, with one in every 84 households receiving a foreclosure notice. That's 4.5 times the national average.
Rounding out the top 10 states with the highest foreclosure rate in August were: Florida, Arizona, California, Idaho, Utah, Georgia, Michigan, Illinois and Hawaii.
Economic woes, such as unemployment or reduced income, are now the main catalysts for foreclosures.
Lenders are offering a variety of programs to help homeowners modify their loans, but their success rates vary. Hundreds of thousands of homeowners can't qualify or fall back into default.
The Obama administration has rolled out numerous attempts to tackle the foreclosure crisis but has made only a small dent in the problem. Nearly half of the 1.3 million homeowners who enrolled in the Obama administration's flagship mortgage-relief program have fallen out.
The program, known as Making Home Affordable, has provided permanent help to about 390,000 homeowners since March 2009.
Regardless, many troubled borrowers have seen their efforts to get a loan modification stymied.
Larry Book of Winter Garden, Fla., was one packet away from a permanent loan modification from Chase under the Obama administration's foreclosure prevention plan after more than a year of back and forth and one failed attempt.
But his modification never went through. Instead, his loan was transferred from Chase to IBM Lender Business Process Servicers in July and he was told he owed $9,562.62 and must bring his mortgage current by Sept. 15 or foreclosure proceedings will begin.
"It just becomes too exhausting," Book said about the modification process. "That's why some people walk away. But I've invested too much and given up too much to just let it go."
15 mins ago
LOS ANGELES – Lenders took back more homes in August than in any month since the start of the U.S. mortgage crisis.
The increase in home repossessions came even as the number of properties entering the foreclosure process slowed for the seventh month in a row, foreclosure listing firm RealtyTrac Inc. said Thursday.
In all, banks repossessed 95,364 properties last month, up 3 percent from July and an increase of 25 percent from August 2009, RealtyTrac said.
August makes the ninth month in a row that the pace of homes lost to foreclosure has increased on an annual basis. The previous high was in May.
Banks have been stepping up repossessions to clear out their backlog of bad loans with an eye on eventually placing the foreclosed properties on the market, but they can't afford to simply dump the properties on the market.
Concerns are growing that the housing market recovery could stumble amid stubbornly high unemployment, a sluggish economy and faltering consumer confidence. U.S. home sales have collapsed since federal homebuyer tax credits expired in April.
That's one reason fewer than one-third of homes repossessed by lenders are on the market, said Rick Sharga, a senior vice president at RealtyTrac.
"These (properties) are going to come to market, but very slowly because nobody wants to overwhelm a soft buyer's market with too much distressed inventory for fear of what it would do for house prices," he said.
As a result, lenders are putting off initiating the foreclosure process on homeowners who have missed payments, letting borrowers stay in their homes longer.
The number of properties receiving an initial default notice — the first step in the foreclosure process — slipped 1 percent last month from July, but was down 30 percent versus August last year, RealtyTrac said.
Initial defaults have fallen on an annual basis the past seven months. They peaked in April 2009.
Still, the number of homes scheduled to be sold at auction for the first time increased 9 percent from July and rose 2 percent from August last year. If they don't sell at auction, these homes typically end up going back to the lender.
More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to RealtyTrac. The firm estimates more than 1 million American households are likely to lose their homes to foreclosure this year.
In all, 338,836 properties received a foreclosure-related warning in August, up 4 percent from July, but down 5 percent from the same month last year, RealtyTrac said. That translates to one in 381 U.S. homes.
The firm tracks notices for defaults, scheduled home auctions and home repossessions — warnings that can lead up to a home eventually being lost to foreclosure.
Among states, Nevada posted the highest foreclosure rate last month, with one in every 84 households receiving a foreclosure notice. That's 4.5 times the national average.
Rounding out the top 10 states with the highest foreclosure rate in August were: Florida, Arizona, California, Idaho, Utah, Georgia, Michigan, Illinois and Hawaii.
Economic woes, such as unemployment or reduced income, are now the main catalysts for foreclosures.
Lenders are offering a variety of programs to help homeowners modify their loans, but their success rates vary. Hundreds of thousands of homeowners can't qualify or fall back into default.
The Obama administration has rolled out numerous attempts to tackle the foreclosure crisis but has made only a small dent in the problem. Nearly half of the 1.3 million homeowners who enrolled in the Obama administration's flagship mortgage-relief program have fallen out.
The program, known as Making Home Affordable, has provided permanent help to about 390,000 homeowners since March 2009.
Regardless, many troubled borrowers have seen their efforts to get a loan modification stymied.
Larry Book of Winter Garden, Fla., was one packet away from a permanent loan modification from Chase under the Obama administration's foreclosure prevention plan after more than a year of back and forth and one failed attempt.
But his modification never went through. Instead, his loan was transferred from Chase to IBM Lender Business Process Servicers in July and he was told he owed $9,562.62 and must bring his mortgage current by Sept. 15 or foreclosure proceedings will begin.
"It just becomes too exhausting," Book said about the modification process. "That's why some people walk away. But I've invested too much and given up too much to just let it go."
Monday, August 23, 2010
What are the income limits for Chapter 7 Eligibility?
You must undergo a "means test" to qualify for Chapter 7 bankruptcy. This means your income and expenses are examined to see how they compare to the standard for your area as set by the IRS.
For example, if you earn less than the median income for a family of your size in your state, you can file for Chapter 7 bankruptcy. However, if your income from the last six months is greater than the median income, and you can pay at least $6,000 over five years or $100 a month, toward your debt you can't file for Chapter 7. You must file for Chapter 13 instead.
The median incomes for families of various sizes are as follows:
Family Size Median Income
(# of family members)
1 $43,456
2 $52,433
3 $61,517
4 $74,558
5 $82,058
6 $89,558
7 $97,058
8 $104,558
9 $112,058
10 $119,558
For example, if you earn less than the median income for a family of your size in your state, you can file for Chapter 7 bankruptcy. However, if your income from the last six months is greater than the median income, and you can pay at least $6,000 over five years or $100 a month, toward your debt you can't file for Chapter 7. You must file for Chapter 13 instead.
The median incomes for families of various sizes are as follows:
Family Size Median Income
(# of family members)
1 $43,456
2 $52,433
3 $61,517
4 $74,558
5 $82,058
6 $89,558
7 $97,058
8 $104,558
9 $112,058
10 $119,558
Wednesday, July 28, 2010
Article: Credit card fees transfer wealth to rich, study finds
By Kristina Cooke
Mon Jul 26, 2:33 pm ET
NEW YORK (Reuters Life!) – Credit card fees and rewards programs exacerbate income inequality by acting as a transfer of wealth from poor to rich, according to a Federal Reserve Bank of Boston study released Monday.
The researchers argue that reducing card rewards and merchant fees "would likely increase consumer welfare."
Merchants usually don't charge different prices for card users to recover the costs of fees and rewards, but instead, mark up the prices for all consumers.
As a result, people who pay cash -- and who are more likely to be lower income -- end up subsidizing those who pay by credit card.
U.S. consumer finance data shows that people on a low income are less likely to have a credit card, and those who do, spend less a month on average, than higher earners. High-income consumers are also 20 percentage points more likely to receive credit card rewards -- be they frequent flier miles, cash back or other enticements.
"What most consumers do not know is that their decision to pay by credit card involves merchant fees, retail price increases, a nontrivial transfer of income from cash to card payers, and consequently a transfer from low-income to high-income consumers," Scott Schuh, Oz Shy and Joanna Stavins wrote.
They found that about 83 percent of banks' revenue from credit card fees is obtained from cash payers "and disproportionately from low-income cash payers."
After accounting for rewards paid by banks, households who earn more than $150,000 annually receive a subsidy of $756 on average every year, while the households earning $20,000 or less pay $23.
Financial regulatory reform signed into law last week gives the Federal Reserve responsibility for regulating fees associated with debit, but not credit, cards.
The researchers said that the transfer of wealth highlighted by their study "may be a concern that U.S. individuals, businesses or public policy-makers wish to address."
They suggest that if merchants and banks don't take steps to reduce the wealth transfers, policy-makers could mull ways to push different pricing depending on the payment method, more transparency on fees, or regulating fees and rewards.
(Reporting by Kristina Cooke; Editing by Jan Paschal)
Mon Jul 26, 2:33 pm ET
NEW YORK (Reuters Life!) – Credit card fees and rewards programs exacerbate income inequality by acting as a transfer of wealth from poor to rich, according to a Federal Reserve Bank of Boston study released Monday.
The researchers argue that reducing card rewards and merchant fees "would likely increase consumer welfare."
Merchants usually don't charge different prices for card users to recover the costs of fees and rewards, but instead, mark up the prices for all consumers.
As a result, people who pay cash -- and who are more likely to be lower income -- end up subsidizing those who pay by credit card.
U.S. consumer finance data shows that people on a low income are less likely to have a credit card, and those who do, spend less a month on average, than higher earners. High-income consumers are also 20 percentage points more likely to receive credit card rewards -- be they frequent flier miles, cash back or other enticements.
"What most consumers do not know is that their decision to pay by credit card involves merchant fees, retail price increases, a nontrivial transfer of income from cash to card payers, and consequently a transfer from low-income to high-income consumers," Scott Schuh, Oz Shy and Joanna Stavins wrote.
They found that about 83 percent of banks' revenue from credit card fees is obtained from cash payers "and disproportionately from low-income cash payers."
After accounting for rewards paid by banks, households who earn more than $150,000 annually receive a subsidy of $756 on average every year, while the households earning $20,000 or less pay $23.
Financial regulatory reform signed into law last week gives the Federal Reserve responsibility for regulating fees associated with debit, but not credit, cards.
The researchers said that the transfer of wealth highlighted by their study "may be a concern that U.S. individuals, businesses or public policy-makers wish to address."
They suggest that if merchants and banks don't take steps to reduce the wealth transfers, policy-makers could mull ways to push different pricing depending on the payment method, more transparency on fees, or regulating fees and rewards.
(Reporting by Kristina Cooke; Editing by Jan Paschal)
Saturday, July 17, 2010
Despair as Job Search Drags On and Money Dries Up
July 17, 2010
By MICHAEL LUO
CARLISLE, Ky. — In her well-thumbed, leather-bound Bible, Terri Sadler recently highlighted in bright pink a passage in the Gospel of Matthew.
In it, Jesus urges his followers not to “worry about tomorrow, for tomorrow will worry about itself.”
But Ms. Sadler’s tightening throat and halting breath when she tries to read the words aloud make it clear that she is having trouble mustering enough faith to follow them.
Ms. Sadler, who lost her job at an automotive parts plant in October 2008, learned last month that her unemployment insurance had been cut off. She is one of an estimated 2.1 million Americans whose benefits have expired and who are waiting for an end to an impasse that has lasted months in the Senate over extending the payments once more to the long-term unemployed.
Times have changed politically, however, and opposition is growing in Washington and abroad to deficit-bloating government spending, even for those who are hurting.
For Ms. Sadler, and many like her, each passing day has become an excruciating countdown of debts and deadlines.
“I’m basically applying for everything, trying to get something,” said Ms. Sadler, 52, who since early June has not received an unemployment check, which used to be about $388 a week before taxes. “If I don’t, I’m going to lose everything. I’m not going to have a roof over my head. I’m just going to have to walk away with what I have on my back, and my dog.”
She is down to $44 in her purse and a quarter-tank of gas. She says she has exhausted the help of family and friends.
Members of her tiny Baptist church just up the road from her cramped mobile home pooled their money on Sunday to come up with her car payment and insurance. A county ministerial association paid her water bill. A nonprofit organization covered her last two electric bills.
A notepad on her refrigerator lists the other outstanding bills: $102 cellphone, $79 cable and Internet, which she relies on for job-hunting; $15 for her credit card; and $30 for an end table she had bought on layaway. Not listed was $275 for her rent this month, which she still owes.
Every morning, after Ms. Sadler takes her dog out and turns on the coffee maker, she switches on the television to C-Span. Then she cracks open her laptop to resume a job hunt that has become frantic.
But as she has run low on money, her search has also become increasingly circumscribed. She used to drive to drop off résumés with businesses; now she is mostly limited to scanning online listings.
Ms. Sadler eagerly tuned in to C-Span last Monday, mistakenly believing that Senate Democrats returning from recess would quickly take up the unemployment insurance extension. But they remain a vote short of being able to block a Republican filibuster, forcing them to wait for Carte Goodwin, the successor to Senator Robert C. Byrd, who died last month, to be sworn in. The Senate majority leader, Harry Reid, said the vote on an extension would occur on Tuesday.
The measure is now expected to pass, but advocates for unemployment insurance are hardly declaring victory yet. Fears about the country’s skyrocketing deficit, which are at the heart of Republican objections, have gained growing prevalence, even with moderate Democrats. Economic arguments that additional government spending is needed to spur the economy have been swamped.
Some Republican politicians have argued that continuing to extend unemployment benefits offers a disincentive for the jobless to find work. Supporters of unemployment insurance counter that job openings remain in short supply.
Ms. Sadler estimates that she used to spend six hours a day searching for work; now it is at least double amount of time.
“There’s been times I’ve had to make myself stop looking for jobs because it was driving me nuts,” said Ms. Sadler, who admitted that she had contemplated suicide.
Every day has become a tense scramble, highlighting just how thin the governmental safety net for the jobless becomes beyond unemployment benefits. After Ms. Sadler was cut off from jobless benefits, she qualified for $200 a month in food stamps, but food stamps do not pay her bills, nor do they cover other necessities.
She recently wrote to Tom’s of Maine, because she uses the company’s toothpaste, mouthwash and deodorant, asking whether it might be able to donate some products to her. But she was informed that the company usually gives only to nonprofit organizations.
Ms. Sadler lives alone here in this small town in the northern part of the state, where Amish are sometimes spotted heading down the main road with horse and buggy. She has only her 2-year-old dog, Tootie-muffin, for company.
Before she lost her job, she had enrolled in community college to study medical billing and coding. She finished the program in May, but most of the medical billing jobs she has applied for require experience. The framed certificate, and another one for data entry, on her bedroom wall are just decorations at this point.
How she landed in this predicament is a product of both mistakes she made and forces beyond her control. She dropped out of high school and had her daughter, Chastity, at age 15. She started working in factories soon after and eventually earned her G.E.D. She had managed to scratch out a relatively comfortable life before she lost her job, making $14.65 an hour at Vuteq, in Georgetown, Ky., a company that makes sun roofs and windshields for Toyota.
But she never accumulated much savings, besides $3,000 she had socked away in a 401(k) account, which she quickly ran through. She has always had a thing for Ford Mustangs and bought a used red one in 2006 that she now admits was a bad decision.
She filed for bankruptcy in March 2009 and was allowed to keep her car on a reduced payment schedule, but she was barred from selling it.
After moving several times, she finally found her mobile home here, with cheap green siding and outdated wood paneling, at a monthly rent she could afford on unemployment insurance.
She had used up 79 weeks of benefits but was expecting an additional 20 weeks under the extended federal program.
On Tuesday, Ms. Sadler scored just her third interview since 2008, for a $7.50-an-hour job at a check-cashing business that is an hour’s drive from her home. It would have paid less than she received on unemployment benefits and left her still unable to cover her expenses, but she had little choice.
It took all her willpower not to reach across the table to shake her interviewer and beg for a chance. The company said she would know by Thursday, but as of Friday she had not heard back.
By MICHAEL LUO
CARLISLE, Ky. — In her well-thumbed, leather-bound Bible, Terri Sadler recently highlighted in bright pink a passage in the Gospel of Matthew.
In it, Jesus urges his followers not to “worry about tomorrow, for tomorrow will worry about itself.”
But Ms. Sadler’s tightening throat and halting breath when she tries to read the words aloud make it clear that she is having trouble mustering enough faith to follow them.
Ms. Sadler, who lost her job at an automotive parts plant in October 2008, learned last month that her unemployment insurance had been cut off. She is one of an estimated 2.1 million Americans whose benefits have expired and who are waiting for an end to an impasse that has lasted months in the Senate over extending the payments once more to the long-term unemployed.
Times have changed politically, however, and opposition is growing in Washington and abroad to deficit-bloating government spending, even for those who are hurting.
For Ms. Sadler, and many like her, each passing day has become an excruciating countdown of debts and deadlines.
“I’m basically applying for everything, trying to get something,” said Ms. Sadler, 52, who since early June has not received an unemployment check, which used to be about $388 a week before taxes. “If I don’t, I’m going to lose everything. I’m not going to have a roof over my head. I’m just going to have to walk away with what I have on my back, and my dog.”
She is down to $44 in her purse and a quarter-tank of gas. She says she has exhausted the help of family and friends.
Members of her tiny Baptist church just up the road from her cramped mobile home pooled their money on Sunday to come up with her car payment and insurance. A county ministerial association paid her water bill. A nonprofit organization covered her last two electric bills.
A notepad on her refrigerator lists the other outstanding bills: $102 cellphone, $79 cable and Internet, which she relies on for job-hunting; $15 for her credit card; and $30 for an end table she had bought on layaway. Not listed was $275 for her rent this month, which she still owes.
Every morning, after Ms. Sadler takes her dog out and turns on the coffee maker, she switches on the television to C-Span. Then she cracks open her laptop to resume a job hunt that has become frantic.
But as she has run low on money, her search has also become increasingly circumscribed. She used to drive to drop off résumés with businesses; now she is mostly limited to scanning online listings.
Ms. Sadler eagerly tuned in to C-Span last Monday, mistakenly believing that Senate Democrats returning from recess would quickly take up the unemployment insurance extension. But they remain a vote short of being able to block a Republican filibuster, forcing them to wait for Carte Goodwin, the successor to Senator Robert C. Byrd, who died last month, to be sworn in. The Senate majority leader, Harry Reid, said the vote on an extension would occur on Tuesday.
The measure is now expected to pass, but advocates for unemployment insurance are hardly declaring victory yet. Fears about the country’s skyrocketing deficit, which are at the heart of Republican objections, have gained growing prevalence, even with moderate Democrats. Economic arguments that additional government spending is needed to spur the economy have been swamped.
Some Republican politicians have argued that continuing to extend unemployment benefits offers a disincentive for the jobless to find work. Supporters of unemployment insurance counter that job openings remain in short supply.
Ms. Sadler estimates that she used to spend six hours a day searching for work; now it is at least double amount of time.
“There’s been times I’ve had to make myself stop looking for jobs because it was driving me nuts,” said Ms. Sadler, who admitted that she had contemplated suicide.
Every day has become a tense scramble, highlighting just how thin the governmental safety net for the jobless becomes beyond unemployment benefits. After Ms. Sadler was cut off from jobless benefits, she qualified for $200 a month in food stamps, but food stamps do not pay her bills, nor do they cover other necessities.
She recently wrote to Tom’s of Maine, because she uses the company’s toothpaste, mouthwash and deodorant, asking whether it might be able to donate some products to her. But she was informed that the company usually gives only to nonprofit organizations.
Ms. Sadler lives alone here in this small town in the northern part of the state, where Amish are sometimes spotted heading down the main road with horse and buggy. She has only her 2-year-old dog, Tootie-muffin, for company.
Before she lost her job, she had enrolled in community college to study medical billing and coding. She finished the program in May, but most of the medical billing jobs she has applied for require experience. The framed certificate, and another one for data entry, on her bedroom wall are just decorations at this point.
How she landed in this predicament is a product of both mistakes she made and forces beyond her control. She dropped out of high school and had her daughter, Chastity, at age 15. She started working in factories soon after and eventually earned her G.E.D. She had managed to scratch out a relatively comfortable life before she lost her job, making $14.65 an hour at Vuteq, in Georgetown, Ky., a company that makes sun roofs and windshields for Toyota.
But she never accumulated much savings, besides $3,000 she had socked away in a 401(k) account, which she quickly ran through. She has always had a thing for Ford Mustangs and bought a used red one in 2006 that she now admits was a bad decision.
She filed for bankruptcy in March 2009 and was allowed to keep her car on a reduced payment schedule, but she was barred from selling it.
After moving several times, she finally found her mobile home here, with cheap green siding and outdated wood paneling, at a monthly rent she could afford on unemployment insurance.
She had used up 79 weeks of benefits but was expecting an additional 20 weeks under the extended federal program.
On Tuesday, Ms. Sadler scored just her third interview since 2008, for a $7.50-an-hour job at a check-cashing business that is an hour’s drive from her home. It would have paid less than she received on unemployment benefits and left her still unable to cover her expenses, but she had little choice.
It took all her willpower not to reach across the table to shake her interviewer and beg for a chance. The company said she would know by Thursday, but as of Friday she had not heard back.
Thursday, July 15, 2010
Homes lost to foreclosure on track for 1M in 2010
By ALEX VEIGA, AP Real Estate Writer
Thu Jul 15, 1:10 am ET
LOS ANGELES – More than 1 million American households are likely to lose their homes to foreclosure this year, as lenders work their way through a huge backlog of borrowers who have fallen behind on their loans.
Nearly 528,000 homes were taken over by lenders in the first six months of the year, a rate that is on track to eclipse the more than 900,000 homes repossessed in 2009, according to data released Thursday by RealtyTrac Inc., a foreclosure listing service.
"That would be unprecedented," said Rick Sharga, a senior vice president at RealtyTrac.
By comparison, lenders have historically taken over about 100,000 homes a year, Sharga said.
The surge in home repossessions reflects the dynamic of a foreclosure crisis that has shown signs of leveling off in recent months, but remains a crippling drag on the housing market.
The pace at which new homes falling behind in payments and entering the foreclosure process has slowed as banks continue to let delinquent borrowers stay longer in their homes rather than adding to the glut of foreclosed properties on the market. At the same time, lenders have stepped up repossessions in an effort to clear out the backlog of distressed inventory on their books.
The number of households facing foreclosure in the first half of the year climbed 8 percent versus the same period last year, but dropped 5 percent from the last six months of 2009, according to RealtyTrac, which tracks notices for defaults, scheduled home auctions and home repossessions.
In all, about 1.7 million homeowners received a foreclosure-related warning between January and June. That translates to one in 78 U.S. homes.
Foreclosure notices posted monthly declines in April, May and June, but Sharga said one shouldn't read too much into that.
"The banks are really sort of controlling or managing the dial on how fast these things get processed so they can ultimately manage the inventory of distressed assets on the market," he said.
On average, it takes about 15 months for a home loan to go from being 30 days late to the property being foreclosed and sold, according to Lender Processing Services Inc., which tracks mortgages.
Assuming the U.S. economy doesn't worsen, aggravating the foreclosure crisis, Sharga projects it will take lenders through 2013 to resolve the backlog of distressed properties that have on their books right now.
And a new wave of foreclosures could be coming in the second half of the year, especially if the unemployment rate remains high, mortgage-assistance programs fail, and the economy doesn't improve fast enough to lift home sales.
The prospect of lenders taking over more than a million homes this year is likely to push housing values down, experts say.
Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties.
"The downward pressure from foreclosures will persist and prices will be very weak well into 2012," said Celia Chen, senior director of Moody's Economy.com.
She projects home prices will fall as much as 6 percent over the next 12 months from where they were in the first-quarter.
Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. Now, homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.
There are more than 7.3 million home loans in some stage of delinquency, according to Lender Processing Services.
Lenders are offering to help some homeowners modify their loans. But many borrowers can't qualify or they are falling back into default. The Obama administration's $75 billion foreclosure prevention effort has made only a small dent in the problem.
More than a third of the 1.2 million borrowers who have enrolled in the mortgage modification program have dropped out. That compares with about 27 percent who have received permanent loan modifications and are making payments on time.
Among states, Nevada posted the highest foreclosure rate in the first half of the year. One in every 17 households there received a foreclosure notice. However, foreclosures there are down 6 percent from a year earlier.
Arizona, Florida, California and Utah were next among states with the highest foreclosure rates. Rounding out the top 10 were Georgia, Michigan, Idaho, Illinois and Colorado.
___
Thu Jul 15, 1:10 am ET
LOS ANGELES – More than 1 million American households are likely to lose their homes to foreclosure this year, as lenders work their way through a huge backlog of borrowers who have fallen behind on their loans.
Nearly 528,000 homes were taken over by lenders in the first six months of the year, a rate that is on track to eclipse the more than 900,000 homes repossessed in 2009, according to data released Thursday by RealtyTrac Inc., a foreclosure listing service.
"That would be unprecedented," said Rick Sharga, a senior vice president at RealtyTrac.
By comparison, lenders have historically taken over about 100,000 homes a year, Sharga said.
The surge in home repossessions reflects the dynamic of a foreclosure crisis that has shown signs of leveling off in recent months, but remains a crippling drag on the housing market.
The pace at which new homes falling behind in payments and entering the foreclosure process has slowed as banks continue to let delinquent borrowers stay longer in their homes rather than adding to the glut of foreclosed properties on the market. At the same time, lenders have stepped up repossessions in an effort to clear out the backlog of distressed inventory on their books.
The number of households facing foreclosure in the first half of the year climbed 8 percent versus the same period last year, but dropped 5 percent from the last six months of 2009, according to RealtyTrac, which tracks notices for defaults, scheduled home auctions and home repossessions.
In all, about 1.7 million homeowners received a foreclosure-related warning between January and June. That translates to one in 78 U.S. homes.
Foreclosure notices posted monthly declines in April, May and June, but Sharga said one shouldn't read too much into that.
"The banks are really sort of controlling or managing the dial on how fast these things get processed so they can ultimately manage the inventory of distressed assets on the market," he said.
On average, it takes about 15 months for a home loan to go from being 30 days late to the property being foreclosed and sold, according to Lender Processing Services Inc., which tracks mortgages.
Assuming the U.S. economy doesn't worsen, aggravating the foreclosure crisis, Sharga projects it will take lenders through 2013 to resolve the backlog of distressed properties that have on their books right now.
And a new wave of foreclosures could be coming in the second half of the year, especially if the unemployment rate remains high, mortgage-assistance programs fail, and the economy doesn't improve fast enough to lift home sales.
The prospect of lenders taking over more than a million homes this year is likely to push housing values down, experts say.
Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties.
"The downward pressure from foreclosures will persist and prices will be very weak well into 2012," said Celia Chen, senior director of Moody's Economy.com.
She projects home prices will fall as much as 6 percent over the next 12 months from where they were in the first-quarter.
Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. Now, homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.
There are more than 7.3 million home loans in some stage of delinquency, according to Lender Processing Services.
Lenders are offering to help some homeowners modify their loans. But many borrowers can't qualify or they are falling back into default. The Obama administration's $75 billion foreclosure prevention effort has made only a small dent in the problem.
More than a third of the 1.2 million borrowers who have enrolled in the mortgage modification program have dropped out. That compares with about 27 percent who have received permanent loan modifications and are making payments on time.
Among states, Nevada posted the highest foreclosure rate in the first half of the year. One in every 17 households there received a foreclosure notice. However, foreclosures there are down 6 percent from a year earlier.
Arizona, Florida, California and Utah were next among states with the highest foreclosure rates. Rounding out the top 10 were Georgia, Michigan, Idaho, Illinois and Colorado.
___
Wednesday, July 14, 2010
Will My Spouse be Affected if I File Bankruptcy?
Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card they are probably responsible for that debt.
If I file Bankruptcy, will my creditors stop harassing me?
Yes, they will! By law, all actions against a debtor must cease once the documents are filed. Creditors cannot initiate or continue any lawsuits, wage garnishees, or even telephone calls demanding payments. Secured creditors such as banks holding, for example, a lien on a car, will get the stay lifted if you cannot make payments.
Consumer Bankruptcy Filings at Highest Level Since 2005
Consumer bankruptcy filings reached their highest point since 2005 in the first half of this year.
Through the first six months of 2010, consumer bankruptcy filings increased to 770,117 — 14% more than filings made over the same period last year, the American Bankruptcy Institute said. This marks the largest number of filings since the Bankruptcy Abuse Prevention and Consumer Protection Act was enacted to curb the increase in filings five years ago.
Month-to-month, June figures indicate a decline for the third consecutive month. Bankruptcy filings totaled 127,000 last month, down more than 7% from May. The number of June 2010 filings, however, was more than 8% higher than last year, based on data compiled by the National Bankruptcy Research Center.
ABI expects another 1.6 million bankruptcy filings by the end of the year, Executive Director Samuel J. Gerdano said in a statement Friday.
The southwestern and southeastern regions of the country saw the highest filing rates. Adjusting for households located in the state, Nevada, which has the highest unemployment rate in the country, had more than double the national filing rate — 15,000 filings per million households, compared to the national average of 6,800 filings per million households, according to a report by Ronald Mann, a professor at Columbia Law School. Alaska, Washington, D.C. and South Carolina had the lowest filing rates — less than 40% of the national average.
Changes in filing rates varied state to state. While most states are seeing increased filings, some southern states like Tennessee and Alabama have lower filing rates.
Through the first six months of 2010, consumer bankruptcy filings increased to 770,117 — 14% more than filings made over the same period last year, the American Bankruptcy Institute said. This marks the largest number of filings since the Bankruptcy Abuse Prevention and Consumer Protection Act was enacted to curb the increase in filings five years ago.
Month-to-month, June figures indicate a decline for the third consecutive month. Bankruptcy filings totaled 127,000 last month, down more than 7% from May. The number of June 2010 filings, however, was more than 8% higher than last year, based on data compiled by the National Bankruptcy Research Center.
ABI expects another 1.6 million bankruptcy filings by the end of the year, Executive Director Samuel J. Gerdano said in a statement Friday.
The southwestern and southeastern regions of the country saw the highest filing rates. Adjusting for households located in the state, Nevada, which has the highest unemployment rate in the country, had more than double the national filing rate — 15,000 filings per million households, compared to the national average of 6,800 filings per million households, according to a report by Ronald Mann, a professor at Columbia Law School. Alaska, Washington, D.C. and South Carolina had the lowest filing rates — less than 40% of the national average.
Changes in filing rates varied state to state. While most states are seeing increased filings, some southern states like Tennessee and Alabama have lower filing rates.
Monday, July 12, 2010
Article: More Americans' credit scores sink to new lows
By EILEEN AJ CONNELLY, AP Personal Finance Writer
NEW YORK – The credit scores of millions more Americans are sinking to new lows.
Figures provided by FICO Inc. show that 25.5 percent of consumers — nearly 43.4 million people — now have a credit score of 599 or below, marking them as poor risks for lenders. It's unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use.
Because consumers relied so heavily on debt to fuel their spending in recent years, their restricted access to credit is one reason for the slow economic recovery.
"I don't get paid for loan applications, I get paid for closings," said Ritch Workman, a Melbourne, Fla., mortgage broker. "I have plenty of business, but I'm struggling to stay open."
FICO's latest analysis is based on consumer credit reports as of April. Its findings represent an increase of about 2.4 million people in the lowest credit score categories in the past two years. Before the Great Recession, scores on FICO's 300-to-850 scale weren't as volatile, said Andrew Jennings, chief research officer for FICO in Minneapolis. Historically, just 15 percent of the 170 million consumers with active credit accounts, or 25.5 million people, fell below 599, according to data posted on Myfico.com.
More are likely to join their ranks. It can take several months before payment missteps actually drive down a credit score. The Labor Department says about 26 million people are out of work or underemployed, and millions more face foreclosure, which alone can chop 150 points off an individual's score. Once the damage is done, it could be years before this group can restore their scores, even if they had strong credit histories in the past.
On the positive side, the number of consumers who have a top score of 800 or above has increased in recent years. At least in part, this reflects that more individuals have cut spending and paid down debt in response to the recession. Their ranks now stand at 17.9 percent, which is notably above the historical average of 13 percent, though down from 18.7 percent in April 2008 before the market meltdown.
There's also been a notable shift in the important range of people with moderate credit, those with scores between 650 and 699. The new data shows that this group comprised 11.9 percent of scores. This is down only marginally from 12 percent in 2008, but reflects a drop of roughly 5.3 million people from its historical average of 15 percent.
This group is significant because it may feel the effects of lenders' tighter credit standards the most, said FICO's Jennings. Consumers on the lowest end of the scale are less likely to try to borrow. However, people with mid-range scores that had been eligible for credit before the meltdown are looking to buy homes or cars but finding it hard to qualify for affordable loans.
Workman has seen this firsthand.
A customer with a score of 679 recently walked away from buying a house because he could not get the best interest rate on a $100,000 mortgage. Had his score been 680, the rate he was offered would have been a half-percent lower. The difference was only about $31 per month, but over a 30-year mortgage would have added up to more than $11,000.
"There was nothing derogatory on his credit report," Workman said of the customer. He had, however, recently gotten an auto loan, which likely lowered his score.
Studies have shown FICO scores are generally reliable predictions of consumer payment behavior, but Workman's experience points to one drawback of credit scoring: lenders can't differentiate between two people with the same score. Another consumer might have a 679 score because of several late payments, which could indicate he or she is a bigger repayment risk.
On a broader scale, some of the spike in foreclosures came about because homeowners were financially irresponsible, while others lost their jobs and could no longer pay their mortgages. Yet both reasons for foreclosures have the same impact on a borrower's FICO score.
In the past too much credit was handed out based on scores alone, without considering how much debt consumers could pay back, said Edmund Tribue, a senior vice president in the credit risk practice at MasterCard Advisors. Now the ability to repay the debt is a critical part of the lending decision.
Workman still thinks credit scores alone play too big a role. "The pendulum has swung too far," he said. "We absolutely swung way too far in the liberal lending, but did we have to swing so far back the other way?"
NEW YORK – The credit scores of millions more Americans are sinking to new lows.
Figures provided by FICO Inc. show that 25.5 percent of consumers — nearly 43.4 million people — now have a credit score of 599 or below, marking them as poor risks for lenders. It's unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use.
Because consumers relied so heavily on debt to fuel their spending in recent years, their restricted access to credit is one reason for the slow economic recovery.
"I don't get paid for loan applications, I get paid for closings," said Ritch Workman, a Melbourne, Fla., mortgage broker. "I have plenty of business, but I'm struggling to stay open."
FICO's latest analysis is based on consumer credit reports as of April. Its findings represent an increase of about 2.4 million people in the lowest credit score categories in the past two years. Before the Great Recession, scores on FICO's 300-to-850 scale weren't as volatile, said Andrew Jennings, chief research officer for FICO in Minneapolis. Historically, just 15 percent of the 170 million consumers with active credit accounts, or 25.5 million people, fell below 599, according to data posted on Myfico.com.
More are likely to join their ranks. It can take several months before payment missteps actually drive down a credit score. The Labor Department says about 26 million people are out of work or underemployed, and millions more face foreclosure, which alone can chop 150 points off an individual's score. Once the damage is done, it could be years before this group can restore their scores, even if they had strong credit histories in the past.
On the positive side, the number of consumers who have a top score of 800 or above has increased in recent years. At least in part, this reflects that more individuals have cut spending and paid down debt in response to the recession. Their ranks now stand at 17.9 percent, which is notably above the historical average of 13 percent, though down from 18.7 percent in April 2008 before the market meltdown.
There's also been a notable shift in the important range of people with moderate credit, those with scores between 650 and 699. The new data shows that this group comprised 11.9 percent of scores. This is down only marginally from 12 percent in 2008, but reflects a drop of roughly 5.3 million people from its historical average of 15 percent.
This group is significant because it may feel the effects of lenders' tighter credit standards the most, said FICO's Jennings. Consumers on the lowest end of the scale are less likely to try to borrow. However, people with mid-range scores that had been eligible for credit before the meltdown are looking to buy homes or cars but finding it hard to qualify for affordable loans.
Workman has seen this firsthand.
A customer with a score of 679 recently walked away from buying a house because he could not get the best interest rate on a $100,000 mortgage. Had his score been 680, the rate he was offered would have been a half-percent lower. The difference was only about $31 per month, but over a 30-year mortgage would have added up to more than $11,000.
"There was nothing derogatory on his credit report," Workman said of the customer. He had, however, recently gotten an auto loan, which likely lowered his score.
Studies have shown FICO scores are generally reliable predictions of consumer payment behavior, but Workman's experience points to one drawback of credit scoring: lenders can't differentiate between two people with the same score. Another consumer might have a 679 score because of several late payments, which could indicate he or she is a bigger repayment risk.
On a broader scale, some of the spike in foreclosures came about because homeowners were financially irresponsible, while others lost their jobs and could no longer pay their mortgages. Yet both reasons for foreclosures have the same impact on a borrower's FICO score.
In the past too much credit was handed out based on scores alone, without considering how much debt consumers could pay back, said Edmund Tribue, a senior vice president in the credit risk practice at MasterCard Advisors. Now the ability to repay the debt is a critical part of the lending decision.
Workman still thinks credit scores alone play too big a role. "The pendulum has swung too far," he said. "We absolutely swung way too far in the liberal lending, but did we have to swing so far back the other way?"
Wednesday, July 7, 2010
When My "House of Cards" Collapsed
When my "house of cards" began collapsing I turned to the phone book first. The only attorney in my immediate area to handle bankruptcy cases was standoffish, indifferent, and too high priced. I then searched the internet for advice on a self help (do it yourself) approach to filing. I posted a couple of questions on the Legal Services of Northern Michigan website and Cara Korhonen was the volunteer who answered. She pointed out several potential hazards to working on my own and gave me the phone number of her firm for a free consultation. During that first call she calmed me down and offered to take my case--at a much lower price than I had been quoted elsewhere. She answered every little nit-picky question I had and sent me some easy to understand "fill in the blanks" paperwork. Throughout the entire process Cara proved to be extremely competent and compassionate. She made the harassing phone calls stop and brought hope back into my life. I cannot thank her enough.
~Paul G.
~Paul G.
Tuesday, July 6, 2010
What exactly does a chapter 7 bankruptcy discharge do?
A discharge releases you from personal liability for discharged debts and prevents the creditors owed those debts from taking any action against you or your property to collect the debts.
As a general rule, excluding cases which are dismissed or converted, individuals receive a discharge in more than 99 percent of chapter 7 cases.
In most cases, unless a complaint has been filed objecting to the discharge or you filed a written waiver, the discharge will be granted relatively early in the case, that is, 60 to 90 days after the date first set for the meeting of creditors. Bankruptcy Rule 4004(c).
The grounds for denying you a discharge are very narrow and are construed against a creditor or trustee seeking to deny you a chapter 7 discharge. Among the grounds for denying a discharge are:
You failed to keep or produce adequate books or financial records;
You failed to explain satisfactorily any loss of assets;
You committed a bankruptcy crime such as perjury;
You failed to obey a lawful order of the bankruptcy court; or
You fraudulently transferred, concealed, or destroyed property that would have become property of the estate. 11 U.S.C. § 727; Bankruptcy Rule 4005.
As a general rule, excluding cases which are dismissed or converted, individuals receive a discharge in more than 99 percent of chapter 7 cases.
In most cases, unless a complaint has been filed objecting to the discharge or you filed a written waiver, the discharge will be granted relatively early in the case, that is, 60 to 90 days after the date first set for the meeting of creditors. Bankruptcy Rule 4004(c).
The grounds for denying you a discharge are very narrow and are construed against a creditor or trustee seeking to deny you a chapter 7 discharge. Among the grounds for denying a discharge are:
You failed to keep or produce adequate books or financial records;
You failed to explain satisfactorily any loss of assets;
You committed a bankruptcy crime such as perjury;
You failed to obey a lawful order of the bankruptcy court; or
You fraudulently transferred, concealed, or destroyed property that would have become property of the estate. 11 U.S.C. § 727; Bankruptcy Rule 4005.
Do I have to appear before a bankruptcy judge?
No, you will meet with a trustee and your creditors at a meeting called 341.
The 341 meeting is called the Meeting of the Creditors. The meeting is run by the trustee and creditors seldom appear at this meeting.
What is the trustee's job?
To find assets with equity, liquidate them and then pay off the secured creditors. If any money is left then they also pay unsecured creditors based on priority.
A trustee is appointed by the United States Trustee to administer the case and liquidate your nonexempt assets. 11 U.S.C. §§ 701, 704.
The 341 meeting is called the Meeting of the Creditors. The meeting is run by the trustee and creditors seldom appear at this meeting.
What is the trustee's job?
To find assets with equity, liquidate them and then pay off the secured creditors. If any money is left then they also pay unsecured creditors based on priority.
A trustee is appointed by the United States Trustee to administer the case and liquidate your nonexempt assets. 11 U.S.C. §§ 701, 704.
What exactly can I exempt?
How can I find out what I owe and who I owe it to?
You can order your free credit report from each of the three major credit reporting agencies: Experian, TransUnion and Equifax.
Under the current law, you are entitled to a FREE report annually from each agency or in the event you have been declined credit.
You can order your report via the Internet by going to Annual Credit Report by following this link: https://www.annualcreditreport.com/cra/index.jsp
Or by visiting any of the individual sites below:
Experian: http://www.experian.com/
Equifax: http://www.equifax.com/home/en_us
TransUnion https://www.transunion.com/
You can also use these phone numbers to order reports:
Equifax 1-800-685-1111 - you can get a free report if you have been denied credit in the last 60 days. Make sure that you order only the credit report. Mail within 48 hours.
TransUnion 1-800-916-8800 - receive within 6 to 8 business days.
Experian 1-888-397-3742 - receive within 8 to 10 business days.
Caution: If your phone request gets lost, you'll have to write to them anyway. If your letter is after 30 days of being denied credit, employment, or insurance, you might have to pay for the report. It would be a good idea to mention in your letter the date that you requested the report by phone. Your written request should contain proof of your identity and current address, such as your driver's license and a copy of a utility bill.
If, after reviewing your report, you feel there are errors in it, you can send a written dispute to:
Experian
NCAC
P.O. Box 9556
Allen, TX 75013
Equifax Information Services
P.O. BOX 740256
Atlanta, GA 30374
TransUnion
Customer Disclosure Center
Trans Union Consumer Relations
P.O. Box 2000
Chester, PA 19022-2000
When mailing your request, make sure you send all of the information contained here.
General Contact Numbers
Experian
Office in TX: 1-888-397-3742
Business: 1-888-211-0728
Equifax Information Services
Business Line (also has option for Personal): 1-888-202-4025
Office in GA: 1-800-685-1111
Dispute Fax #: 1-888-826-0573
Business: 1-802-304-0364
General: 1-800-797-6801
TransUnion
Office in PA: 1-800-888-4213
1-888-259-6845 (6am-12 pacific time)
1-800-916-8800 (consumer relations)
Under the current law, you are entitled to a FREE report annually from each agency or in the event you have been declined credit.
You can order your report via the Internet by going to Annual Credit Report by following this link: https://www.annualcreditreport.com/cra/index.jsp
Or by visiting any of the individual sites below:
Experian: http://www.experian.com/
Equifax: http://www.equifax.com/home/en_us
TransUnion https://www.transunion.com/
You can also use these phone numbers to order reports:
Equifax 1-800-685-1111 - you can get a free report if you have been denied credit in the last 60 days. Make sure that you order only the credit report. Mail within 48 hours.
TransUnion 1-800-916-8800 - receive within 6 to 8 business days.
Experian 1-888-397-3742 - receive within 8 to 10 business days.
Caution: If your phone request gets lost, you'll have to write to them anyway. If your letter is after 30 days of being denied credit, employment, or insurance, you might have to pay for the report. It would be a good idea to mention in your letter the date that you requested the report by phone. Your written request should contain proof of your identity and current address, such as your driver's license and a copy of a utility bill.
If, after reviewing your report, you feel there are errors in it, you can send a written dispute to:
Experian
NCAC
P.O. Box 9556
Allen, TX 75013
Equifax Information Services
P.O. BOX 740256
Atlanta, GA 30374
TransUnion
Customer Disclosure Center
Trans Union Consumer Relations
P.O. Box 2000
Chester, PA 19022-2000
When mailing your request, make sure you send all of the information contained here.
General Contact Numbers
Experian
Office in TX: 1-888-397-3742
Business: 1-888-211-0728
Equifax Information Services
Business Line (also has option for Personal): 1-888-202-4025
Office in GA: 1-800-685-1111
Dispute Fax #: 1-888-826-0573
Business: 1-802-304-0364
General: 1-800-797-6801
TransUnion
Office in PA: 1-800-888-4213
1-888-259-6845 (6am-12 pacific time)
1-800-916-8800 (consumer relations)
How long does it take before my debts are discharged?
Chapter 7 takes between 3 to 8 months;
Chapter 11 can take from just under a year to many years;
Chapter 13 can take several months while trying to get your repayment plan approved. However, the actual discharge is not final until you've met the payment plan requirements which takes from 36 to 60 months to complete.
Chapter 11 can take from just under a year to many years;
Chapter 13 can take several months while trying to get your repayment plan approved. However, the actual discharge is not final until you've met the payment plan requirements which takes from 36 to 60 months to complete.
What about my belongings? Do I have to list all of them in my bankruptcy?
Every belonging or asset you own must be included in the filing. After filing you may choose to exempt some of your assets form the bankruptcy.
What happens if I exempt my car or truck?
You didn't actually exempt the vehicle (or any asset) you really only exempted the equity (the value of the vehicle minus the debt owed on it) in the asset . To help you understand the concept of equity think about a situation where you have a loan for say, $20,000 on a car that is only worth $25,000. You have the difference between the value and the loan or $5,000 in this particular example. You would exempt $5,000 from your bankruptcy. However this does not mean you get to keep the car free. You only keep the vehicle if you make payments on it.
On the other hand, if the situation was reversed and you owed $25,000 on a vehicle worth only $20,000 then you could choose to simply give the vehicle back and owe nothing. One of the advantages to filing bankruptcy.
What happens if I exempt my car or truck?
You didn't actually exempt the vehicle (or any asset) you really only exempted the equity (the value of the vehicle minus the debt owed on it) in the asset . To help you understand the concept of equity think about a situation where you have a loan for say, $20,000 on a car that is only worth $25,000. You have the difference between the value and the loan or $5,000 in this particular example. You would exempt $5,000 from your bankruptcy. However this does not mean you get to keep the car free. You only keep the vehicle if you make payments on it.
On the other hand, if the situation was reversed and you owed $25,000 on a vehicle worth only $20,000 then you could choose to simply give the vehicle back and owe nothing. One of the advantages to filing bankruptcy.
Which bankruptcy chapter is the least expensive?
Chapter 7 is least expensive because you do not have to pay off any portion of your unsecured debt. The next least expensive is Chapter 13 where you repay about 10 cents on the dollar, followed by Chapter 11.
Church and Korhonen, PLLC charges $750.00 for attorney fees in a Chapter 7. Additional expenses are $299.00 in court filing fees and about $100 in mandatory credit counseling classes (these classes can be conducted over the Internet or phone).
Some people ask why are our attorneys fees are so low when compared to other bankruptcy attorneys practicing in Michigan. The answer is simple. At Church and Korhonen, PLLC, we have streamed-lined the process of gathering information from the clients, taking maximum advantage of time so that the filing process is efficient and responsive. We also understand that people seeking bankruptcy do not have large sums of money available to them. We want to help people out of these hopeless situations and our fees reflect that concern.
In this case, paying less gives you more.
Church and Korhonen, PLLC charges $750.00 for attorney fees in a Chapter 7. Additional expenses are $299.00 in court filing fees and about $100 in mandatory credit counseling classes (these classes can be conducted over the Internet or phone).
Some people ask why are our attorneys fees are so low when compared to other bankruptcy attorneys practicing in Michigan. The answer is simple. At Church and Korhonen, PLLC, we have streamed-lined the process of gathering information from the clients, taking maximum advantage of time so that the filing process is efficient and responsive. We also understand that people seeking bankruptcy do not have large sums of money available to them. We want to help people out of these hopeless situations and our fees reflect that concern.
In this case, paying less gives you more.
How would I know if Chapter 7 is right for my situation?
If you have very few assets with no property and your assets can be exempted then Chapter 7 may be right for you as long as you have no other obligations such as court ordered alimony, child support payments, criminal restitution, non-dischargeable taxes, or student loans. (list of non-dischargeable items) Many national creditors prefer that you file Chapter 7 if they cannot recover at least 50 cents on the dollar.
How long until my credit gets back to the point where I might hope to get a regular credit card or mortgage?
Rebuilding credit depends on how aggressively you try to get back on track, but don't figure less than 1-3 years. Remember, you can always get a secured credit card or a mortgage with a low loan to value (LTV) and high interest rate, sometimes even still in the middle of a bankruptcy.
How long does it take before my debt are discharged?
Chapter 7 takes between 3 to 8 months;
Chapter 11 can take from just under a year to many years;
Chapter 13 can take several months while trying to get your repayment plan approved. However, the actual discharge is not final until you've met the payment plan requirements which takes from 36 to 60 months to complete.
Chapter 11 can take from just under a year to many years;
Chapter 13 can take several months while trying to get your repayment plan approved. However, the actual discharge is not final until you've met the payment plan requirements which takes from 36 to 60 months to complete.
What happens to my credit if I file Bankruptcy?
The fact is that when lenders or other creditors review your credit report they rank bankruptcy as the worst.
However, you can rebuild your credit immediately with a secured loan or credit card. In fact you can even obtain these items while going through the bankruptcy process.
Why would creditors give you a secured loan or credit card if you filed bankruptcy? Because once you have filed bankruptcy, you cannot file again for 8 years. Creditors realize that if you have a job or source of income, and they give you credit after you have filed bankruptcy, you must repay the debt or they can garnish your wages and/or place liens against your property. Since you can't file bankruptcy there is no way you can stop the garnishments or liens. In this way, you are a better credit risk than someone who has never filed bankruptcy.
However, you can rebuild your credit immediately with a secured loan or credit card. In fact you can even obtain these items while going through the bankruptcy process.
Why would creditors give you a secured loan or credit card if you filed bankruptcy? Because once you have filed bankruptcy, you cannot file again for 8 years. Creditors realize that if you have a job or source of income, and they give you credit after you have filed bankruptcy, you must repay the debt or they can garnish your wages and/or place liens against your property. Since you can't file bankruptcy there is no way you can stop the garnishments or liens. In this way, you are a better credit risk than someone who has never filed bankruptcy.
What are the advantages of bankruptcy?
If you are struggling with debt from credit cards, medical expenses or unsecured debt, you may be able to discharge your debts through bankruptcy. A successful bankruptcy will erase your debt and you will no longer be responsible for its repayment.
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