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Tuesday, June 30th, 2009

Michael Couldn’t Beat It ~ The King of Pop’s Deflated Finances

Jackson died this week while organizing a highly anticipated 50-night venue of shows at London's ‘02 Arena.

It’s been a long-awaited return for Michael Jackson, as this would be his first concert in 8 years.

Jackson's Curtain Call: The Comeback Concert that Will Never Be

Whether the concert series was Jackson’s intent on returning to the music which gave him his glory, or if it were more of a financial life vest to keep Jackson and his entourage afloat, it’s certain his return was celebrated by his fans across the world.

In the course of Michael Jackson’s life and career he sold hundreds of millions of records and played in sold out arenas around the globe.

Jackson was a pop icon who gave us memories to last a lifetime.

With all this fame certainly came a fortune, so it’s plausible to assume that Jackson should of collected one of the largest fortunes in the entertainment industry in recent memory.

Sadly, this is not the case.

Due to faulty management and representation, excessive personal spending and surmounting legal bills, it’s rumored that Michael Jackson was facing bankruptcy.

Bankruptcy is Blind

The news of such financial distress came as both a shock and comfort to those in similar peril.

To know that an iconic person such as Jackson could be faced with the probability of filing bankruptcy made many feel they were not alone.

It also served as further proof that bankruptcy is not biased nor prejudice, it crosses all socio and ethnic borders.

The financial predicament which Jackson found himself navigating through was mostly due to the fact that Jackson’s camp continued to spend tens of millions of dollars a year even while his musical creation had been limited to his latest album in 2001.

In plain terms, his income did not meet his expenses, which is so often crisis which leads many into the bankruptcy fold.

To compound the issue, Jackson was faced with having to render himself to typical acts of desperation, which many do when in a similar situation, Jackson financed these personal debts by borrowing against assets and by some estimates his total borrowings at his death may have exceeded $500 million.

The iconic nature of Michael Jackson was not enough to ward off financial ruin.

As many others throughout the country are facing financial distress and the prospect of bankruptcy, there might be comfort in knowing the same man who will forever be known as the King of Pop, the creator of the ‘moon walk’ and owner of Never-Never Land was in the path of bankruptcy.

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Posted in Bankruptcy News and Events | 2 Comments »

Monday, June 29th, 2009

Got Credit? Is Your Credit Card Limit Going to be Cut?

Many credit card companies are cutting credit limits for many borrowers, according to a recent BusinessWeek.com article.

For many Americans, access to credit could decrease even more at a time when credit is already notoriously tight.

The reason? They're reacting to increased unemployment rates and card defaults. Too many people are missing their payments.

Even if you've made all of your payments on time, you may still see your spending limit cut.

Why Credit Reductions Traditionally Happen

Traditionally, credit card issuers have reduced customers’ borrowing limits for one of the following reasons:

  • Bouncing checks: When done consistently, this shows carelessness and suggests a borrower may not have enough money to make regular credit card payments.
  • Making late payments: Though such payments may earn card issuers extra money in the form of late fees, late payments are dangerous if they become too late… that is, if they never arrive.
  • Collecting unemployment: Unfortunately, job loss generally signals income loss. Though layoffs in this economy are often beyond an employee’s control, they may still push card issuers to limit borrowing ability.
  • Taking cash advances: Besides being a terrible way to borrow money, cash advances (often in the form of payday loans) can signal to your card issuer that you’re in over your head financially.
  • Living in the "wrong" neighborhood: Unfair as it may seem, your address may trigger a limit cut. If property values near you are falling, your credit card company may decide to slash your spending power.

Why More Credit Reductions Are Happening Now

Thanks to the unstable credit market, some people are seeing their limits cut for other reasons as well, including:

  • Defaulting on another card: Universal default is the phenomenon that allows your action on one account to affect all your other accounts. In this case, a late payment on one card may cause your limit to be cut on another.
  • Not using your card: Inactive or hardly active accounts seem to be getting hit by limit decreases, even when borrowers are in good standing.
  • Running a low balance: Though this has traditionally been a positive move for credit building, sources report that these accounts have seen some cuts as well.

Why It Matters

Part of your credit health (as quantified in your FICO credit score) is determined by your debt-to-credit ratio.

In other words, a comparison of how much money you’re currently borrowing (debt) to how much you could borrow (credit).

Staying well under your limits is one way to strengthen your credit.

What to Do if Your Credit Limit Has Been Cut

First, be sure to read all mailings from your card issuer carefully.

If you receive a notice that your limit has been cut, don’t accept it without a fight.

Call and question your card issuer, particularly if you believe your account is in good standing and doesn’t merit such an action.

--Was your credit limit cut because you were slipping behind on the bills? Learn about the filing bankruptcy option.

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Posted in Credit and Bankruptcy | No Comments »

Saturday, June 27th, 2009

Michael Jackson, Neverland Ranch and Foreclosure

When ambulances were called to Michael Jackson's home last Thursday, they went to the Beverly Hills mansion he had been renting.

Jackson's most famous residence, the lavish, one-of-a-kind, amusement park-like Neverland Ranch, hadn't been his home for many years.

Amazing pictures of Neverland Ranch.

Jackson purchased the property in 1987 for almost $20 million. At the time, it was a working ranch, but under Jackson's care it would become a shrine to the childhood Jackson never had. From nineMSN:

The singer spent $35 million improving the property, which featured two railway lines, two helicopter pads, its own fire department, a zoo and a plethora of amusement part-style rides. The property cost an estimated $10 million a year to maintain.

Jackson lived at the ranch for many years, and underprivledged and sick children from California and across the country came to visit his theme-park.

But all the while Jackson was very private about the property. Visitors weren't allowed to take pictures inside, and they were required to sign confidentiality agreements upon arrival.

Perhaps the most intimate view of the property came from a lengthy 20/20 report that highlighted some of the property's extraordinary features.

Foreclosure on Neverland Ranch?

But the joy of Neverland Ranch, named after the magical land in "Peter Pan" were children never grew up, wouldn't last.

Jackson had an almost $25 million loan out on the house. In 2007, he was $23 million delinquent on the loan and foreclosure proceedings began.

In California, after you miss three mortgage payments in a row you have 90 days to make a payment. Jackson, who hadn't released an album since 2001, was unable to make a payment.

For most people, this would have been the end of the line. For most people facing imminent foreclosure, filing bankruptcy is the best option for protecting their home. Of Course, Michael Jackson isn't most people.

Jackson's celebrity helped stop foreclosure. His debt was transferred to another loan company, and the property stayed with him.

However, Jackson continued to have money problems. The zoo and many of the amusement park rides were auctioned off. With money problems and child molestation charges - stemming from a child's visit to the ranch - Jackson said he could no longer feel at home there.

And then the man who had already spent so many nights in hotels across the world while on tour, began living elsewhere.

At the time of his death Neverland Ranch was still in Jackson's possession. Today, the property is valued somewhere between $90-120 million. With his death, the property may be worth even more.

But with Jackson's debts rumored to be near $500 million, the property could be auctioned off to pay his creditors. Others, however, say that the property may become a museum similar to Elvis Presley's Graceland.

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Posted in Mortgage Foreclosure | 2 Comments »

Friday, June 26th, 2009

Michael Jackson Lived Like a King, Died Nose-Deep in Debt

Michael Jackson’s death has shocked the world.

If we were too young to remember him belting out top hits as a round-faced child, we probably have vivid memories of him monster-dancing on MTV or dangling his kid over a Berlin balcony.

And as the globe starts to process his death, we take a look at the entertainer’s troubled fiscal life.

Michael Jackson’s Wild Spending Habits

Jackson left this world with his checkbooks in disarray.

There was hope that his upcoming, sold-out 50 show London tour would sweep him out of the red, but that hope shattered yesterday when he died in an LA hospital after a cardiac arrest that was rumored to stem from a Demerol injection.

The King of Pop died with as much as $500 million in debt, according to sources recently cited in the Wall Street Journal.

When you look at some of his wild purchases, it’s not hard to understand how his debt got so out of control.

Some of the items he bought included:

  • a Ferris wheel and the rest of the infamous Neverland playground
  • a bronze sculpture of an Indian
  • an arcade collection
  • a personal ice cream cart
  • a life-sized Lego model of Darth Vader
  • a 1989 Rolls Royce limo with 24-karat gold trim
  • a statue of E.T.
  • a zoo (remember Bubbles Jackson?)

And that’s just a fraction of his possessions.

When Jackson was on trial in 2005 for child molestation charges, a forensic accountant testified that Jackson was spending $20-$30 million every year. (Jackson was later acquitted of all criminal charges.)

But Jackson’s money problems go well beyond shopping sprees.

Michael Jackson's Legal Problems Contribute to Debt

Years before the criminal trial, Jackson settled a civil lawsuit for $22 million with a boy’s family who alleged Jackson sexually assaulted the child.

Jackson and his reps denied any wrongdoing and said he was settling to “move on”.

As recently as last year, Jackson was sued by the son of the King of Bahrain who said he owed him $7 million.

Jackson argued that he thought the sheik had given him gifts, but the sheik said he had actually invested in a songwriting business with the pop legend.

Jackson ended up settling with him for an undisclosed amount.

Lawsuits, settlements and frantic shopping sprees add up quickly.

So, the question left to answer is what happens to all of his debt now he’d dead?

Debt After Death—Is Jackson’s Family Responsible?

Typically, family members are not responsible for the debts of a deceased love one; however, there are exceptions.

Read on for information on how Jackson’s debts could fall to people close to him.

Repossession and Foreclosure After Death

Contrary to popular belief, in many cases, loans are not automatically dismissed just because the debtor dies.

Secured debt (debt tied to a property, such as a home or car loan) can still be repossessed by the bank to cover the balance of an unpaid loan.

That means a dead person can lose their home or car even after they’ve been laid to rest.

If another person’s name is on the loan, they would likely be responsible for the debt.

So, for example, if Lisa Marie Presley (Jackson’s former wife) signed on a mansion with him, she could likely be responsible for that debt.

Credit Card Debt After Death

If any person held joint credit cards or lines of credit with Jackson, it’s probable they would be responsible for paying the remaining debt.

Keep in mind, if a person is an “authorized user” on a credit card, (which is different than a co-applicant or joint account holder), then they typically don’t have to pay.

But there’s a twist—under certain circumstances, an authorized user may still be liable for those debts because the balances on those accounts may become the responsibility of the estate.

Did Jackson Have Co-Signers?

If someone was a co-signer on a loan Michael Jackson took out, he or she may very well be responsible for that debt.

Co-signers often get the short stick.

In fact, co-signers are usually even responsible for debt if the original debtor files bankruptcy (except in most cases of Chapter 13 bankruptcy).

Michael’s Debt Didn’t Define Him

As fans wander through the stages of mourning, a strong feeling emerges—Michael Jackson can’t not easily be defined, nor should he be.

He, like us, is a multifaceted, complex human being.

Being on the brink of filing bankruptcy doesn’t define you.

Yes, he was a debtor and a shopaholic, but he also was the King of Pop, a father, a son, a brother, an artist, a philanthropist and a friend to many.

Our hearts go out to his family.

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Posted in Bankruptcy News and Events | 5 Comments »

Thursday, June 25th, 2009

Credit Card Scam Alert: Unsolicited Calls from Machines

Receiving telemarketing calls can be annoying, but receiving unsolicited calls from non-human callers is even worse.

And, according to this recent report from MSNBC, one scam currently plaguing the U.S. and Canada could cost you significant money.

The Promise: Lower Interest Rates

Apparently, these calls work by alerting you that nothing is wrong with your credit card account, but that it is “urgent” or “imperative” that you contact the calling company to lower your credit card interest rates.

Here’s how you can tell calls like this are bogus:

  • Company not identified: The automated calls reportedly do not include the name of the company supposedly offering to help you lower your rates. Red flag number one – any legitimate company wouldn’t hide its identity.
  • Calls at strange hours: The Fair Trade Commission (FTC) has outlined strict rules for telemarketers, and one is that they cannot call after 9 pm local time. Any unsolicited business calls later than this are illegal and should be reported.
  • Demands for personal information: Legitimate companies do not require you to give your Social Security number or credit card account information over the phone. If anyone calls and asks for this sort of info, hang up – you have no way of knowing who’s on the other end of the line.

The Catch: Upfront Fees and No Real Services

Many consumers have already lost money to this type of credit card scam – and it’s no wonder, considering what it offers.

Many Americans could benefit from lowered interest rates on their credit cards, so the offer appeals to unsuspecting victims. Here’s how the scam works:

  • Upfront fees for “services: The companies charge fees in the ballpark of several hundred dollars, insisting that such fees are fully refundable if the consumer isn’t happy with results.
  • Consumer pays and loses: Unless you have a promise in writing that you’ll get your money back, you can expect to part with it forever. And, according to sources, some unfortunate individuals already have.
  • No work done: Unfortunately, the company isn’t likely to negotiate with your card issuers at all, meaning that you’ll have paid them for nothing. And, even if they do “negotiate,” they’re likely to do no more than call and ask for a lower rate – which you can and should do yourself (for free!).

What to Do if You’re Victimized by a Credit Card Scam

If you receive an automated call offering you lowered interest rates on your credit cards, take action by filing a complaint with the FTC.

Reports show that the three companies behind these calls (CSTR Solutions, Genesis Capital Management and Mutual Consolidated Savings) all have failing ratings from the Better Business Bureau.

And the FTC apparently knows about the scams, and has recently prosecuted other companies for similar violations of consumer protection laws.

Similar Scams Have Led to Some Folks Filing Bankruptcy

Unfortunately, some scams have led to people going broke and filing bankruptcy to get out of that "scam debt".

If you've been victimized by a scam and are considering filing bankruptcy, visit www.TotalBankruptcy.com to connect with a sponsoring bankruptcy lawyer for free.

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Posted in Financial Literacy | No Comments »

Wednesday, June 24th, 2009

Debt Relief Company is Filing Bankruptcy

In a headline that seems so ironic it hurts: Texas based Debt Relief USA is filing bankruptcy.

We talk sometimes about the differences between debt relief and bankruptcy, but this news, as reported by the Dallas Morning News, makes the contrast stark.

When you file for bankruptcy, all of rulings and work and efforts are protected by law. This means that when the court says your debt is clear, it's clear. Creditors, by law, cannot continue to collect on those debts or call or make threats after your case ends.

But with debt relief, you are putting your faith, and your money, in a third party that may or may not get results.

In the case of Debt Relief USA, many customers had been sending the company money in hopes that this would be used to reach a settlement with a credti card company.

Now, that money may be completely lost. No settlement. No refunds. They're back to square one, and still vulnerable to lawsuits and repossession.

Had Debt Relief USA's customers turned to bankruptcy instead, their actions would be protected by law. So when a bankruptcy court ruled their debts would be discharged or reduced, that would decision would be final.

If you need debt relief help, be sure to do your homework and get complete, accurate information before you take any kind of action. Get informed about your options,  and how your choices will affect you and your debt.

If you have questions, speak with someone you trust. If you want to ask questions from a bankruptcy lawyer in your state, we can put you in touch a sponsoring attorney near you.

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Posted in Bankruptcy News and Events | 3 Comments »

Tuesday, June 23rd, 2009

The Case For Bankruptcy Lawyers

Rick Bloom, a financial advisor and columnist with the Detroit-area Observer & Eccentric, had some direct and stern words for a reader that recently wrote in and asked if he should represent himself when filing bankruptcy.

The reader was concerned about the bankruptcy lawyer's fees. He found some Web sites to help him with the paper work and was considering trying it himself. Naturally, if you're considering filing bankruptcy money can be tight.

But Bloom didn't mince words when offering his take:

I think it is a lousy idea for people to handle their own bankruptcy.

He offered lots of reasons, but perhaps the most compelling:

If you fail to dot all of the “I's” and cross all of the “T's,” you may find you did not get the results you desire and that could lead to problems. After all, your creditors, whether they are a charge card company or a bank, are going to have lawyers represent them. You are at a severe disadvantage if they have an attorney and you don't.

If you are concerned about the costs of filing bankruptcy, there are a few things that you can do:

  • Speak with an attorney about fees. As Bloom points out, your lawyer should be able to give you a "good faith estimate" of the costs associated with filing.
  • Speak with the local state bar association. Depending on the circumstances, this governing body for bankruptcy lawyers may be able to provide support.
  • You need to be comfortable discussing matters with your bankruptcy attorney, especially money matters. If you aren't comfortable with your lawyer, find one that suits you better.
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Monday, June 22nd, 2009

Your Second Mortgage Debt Could Potentially be Dismissed by Filing Bankruptcy

What type of debt you have can make a big difference in how bankruptcy can affect your debt.

Generally speaking, unsecured debt is more likely to be dismissed - that is, retired completely - than secured debt.

And, your debt is usually either secured or unsecured, one or the other. So stuff like credit card debt and payday loans are considered unsecured, because ther'es no property attached to them.

Car notes and mortgages are secured debt, because they are connected to a property.

However, as columnist and attorney Ronald H. Surabian points out in the Burlington Union, second mortgages are a different story. After attending a recent workshop he wrote:

The thing that I found interesting about the Chapter 13 bankruptcy proceedings is that second mortgages, home equity loans and the like can be wiped out if these second mortgages are considered unsecured.

And this is something that we even overlook here. We often speak of how filing bankruptcy may help your credit card debt or mortgage, but we don't often discuss second mortgages.

Perhaps we should be because millions of homeowners have a second mortgage - often taken out to fund home repairs or improvements - and are now struggling to make that extra monthly payment.

So, is your second mortgage unsecured and, therefore, potentially able to be dismissed by filing bankruptcy? Surabian provides a clear example:

Assume the fair market value of your home is $370,000 and you have a first mortgage of $376,000 and a 2nd mortgage of $95,000. The second mortgage will be treated as unsecured and will be treated in the same way as credit cards. It will either be wiped out or paid off for pennies on the dollar.

There you have it. If you're facing foreclosure because of a second mortgage and other debts, then bankruptcy may be able to save your home.

To see if your second mortgage is considered unsecured, speak with a local attorney about filing bankruptcy.

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Friday, June 19th, 2009

Defending the ‘Little Guy’ ~ Obama Proposing New Consumer Protection Agency

This could be good news for consumers: President Obama is reportedly poised to proposed a new group to improve consumer protection in the United States.

The group, called the Consumer Financial Protection Agency (CFPA), could provide an exciting variety of regulations and protections for Americans.

The agency is reportedly going to be based on legislation introduced by Senator Dick Durbin (D, Ill) and backed by Senators Ted Kennedy (D, Mass) and Chuck Schumer (D, NY).

Consumer Protection with Teeth

Various news outlets have been emphasizing the idea that this consumer protection agency (unlike other consumer protection agencies?) would “have teeth,” presumably meaning significant power.

The realm of the CFPA would likely include the following.

  • Enforcing protection from deceptive practices. Although the term “predatory lending” hasn’t been used, the agency would ensure that consumers could access clear, concise information about the financial products offered to them and that agencies refrained from using deceitful marketing.
  • Enforcing fuller disclosure about financial products. Theoretically, requiring companies to be upfront about fees, penalties, costs and risks would better equip consumers to make smart financial decisions.
  • Discouraging exotic financial products. The agency would add hurdles to the process of signing agreements for complex products like subprime mortgages and complex credit cards for consumers whose needs would be served by more standard products.
  • Removing the risk factors for another mortgage crisis. This could involve implementing significant structural changes to the mortgage lending industry so that excessively risky loans would no longer make financial sense.
  • Toughening requirements for lenders. To discourage excessive leveraging by lenders, the agency could require lenders to hang on to at least five percent of their loans instead of selling them in full to investors. This would, in theory, encourage lenders to make less risky loans.
  • Overseeing the Community Reinvestment Act. The agency would also be involved in checking in on the progress of the CRA, which encourages financial institutions to lend to financially disadvantaged communities.

Support and Opposition

Unsurprisingly, many business organizations have expressed concern about the CFPA, suggesting that the proposed regulations could hinder their ability to make profits.

In fact, the CFPA would do just that – specifically, hinder businesses from making profits by using deceitful and/or dishonest tactics.

Lawmakers and consumer advocates from all over the political spectrum, though, have shown support for the agency and its proposed powers.

Need more consumer protection or filing bankruptcy information? Visit our home, www.TotalBankruptcy.com.

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Friday, June 19th, 2009

One Wild Ride: Six Flags Filing Bankruptcy

Weighed down by old debt, Six Flags, owner of amusement parks across the country, has filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Wilmington, Delaware.

The company listed assets of $3 billion and debt of $2.4 billion as of the end of 2008, according to Forbes.com. Thirty-six affiliates also sought protection.

The company had a market value of $26 million on June 12, and investors did not seem confident that the company could refinance a large amount of debt coming due later in the summer.

Nonetheless, Six Flags president and CEO Mark Shapiro is optimistic.

In a letter to employees, Shapiro states that “[the] brand and [its] operations are on solid ground. This process is strictly a financial restructuring of our debt.”

Shapiro describes the current debt as “an unsustainable 2.4 billion debt load from the previous management team.”

The company released a statement saying that it will seek court approval of a predetermined reorganization plan to cut its debt by $1.8 billion and eliminate more than $300 million worth of preferred stock options.

Making the Filing Bankruptcy Decision

The filing illustrates how the current state of an entity and its overall health are not always the same thing.

Six Flags says it had a record year in 2008, making around $275 million.

The decision to file bankruptcy, Shapiro says, came because the company was paying out $175 million in interest on its debt load and $100 million in operating costs.

“That’s a balancing act you just can’t risk year in and year out,” he says. The additional $400 million of debt coming due this year “could not be refinanced in these financial markets.”

The company attempted to reorganize out of court with creditors, but these efforts proved fruitless. The principal investor in Six Flags is Daniel Snyder, who also owns the Washington Redskins football team.

He owns 6% of Six Flags and became company chairman in 2005.

Snyder installed a new management team to right the company, which had not posted an annual profit since 1998. Since Snyder became chairman, the company had losses of $558.8 million.

Six Flags operates 20 theme parks in the United States, Canada and Mexico.

Will Six Flags Close Because of the Bankruptcy?

None will close as a result of the Chapter 11 bankruptcy filing. Shapiro says that all of the parks are profitable, and none will lose employees, including, perhaps unfortunately, “Mr. Six,” the bald, dancing pitchman featured in many of the company’s advertising campaigns.

Jeff Speed, the Chief Financial Officer for Six Flags, indicated that some challenging circumstances had contributed to the filing, including the closure of Six Flags Mexico City for a week during the height of the Mexican outbreak of H1N1 influenza, commonly called swine flu.

At Six Flags Over Texas, president Steve Martindale reports business as usual. “We’ve received very few calls about the bankruptcy,” he said. “I am surprised, but not surprised. People have heard about so many companies involved in bankruptcies that they see it as a survivable incident. It really doesn’t affect the consumer.”

That may be true, but Six Flags is hoping for a swift ride through filing bankruptcy, with no loops or corkscrews on the way.

Sources: Forbes.com, Ft. Worth Star-Telegram

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