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Archive for March, 2010
Saturday, March 27th, 2010
Community Group ACORN Nearing Bankruptcy?
The Washington Post reported recently that the community organization ACORN (Association of Community Organizers for Reform Now) may be on the verge of filing for bankruptcy.
The group has, since its founding in 1970, devoted itself to helping low-income Americans find housing and to bringing voters from under-represented groups to the polls. Last fall, though, things took a turn for the worse for the group. Here’s what happened:
- Rising criticism: In the months after President Obama’s election, critics of ACORN apparently accused the group of fraudulent registration of voters and even internal embezzlement. And the bad press got worse once Obama took office.
- Video embarrassment: Last fall, two conservative activists posed as a pimp and prostitute and got advice from an ACORN counselor about how to hide their line of work from the government so they could buy a house for business purposes. They recorded the incident with hidden cameras and released them to news outlets, which caused serious controversy over ACORN’s aims and methods.
- Dried-up funding: After the video’s release, many of ACORN’s donors (including larger organizations and the government) reportedly withdrew much of their financial support, leaving ACORN underfunded.
- Withdrawal of state chapters: The Post notes that some of the bigger state chapters of ACORN (notably New York and California) have broken off from the parent organization and formed individual community support groups without the ACORN name.
Though representatives of ACORN itself have apparently not made any public comment about bankruptcy plans, a glance at the events of the past few months leaves little doubt that such a step would not be entirely surprising.
Effect on Consumers
Sources indicate that ACORN plans to continue dedicating itself to aiding and advocating for low-income Americans; however, they may do so under a new name and organization, both of which could be established during the bankruptcy process.
And if you’re worried about finding guidance through the home buying process, there’s no need to panic: the reorganization of ACORN leaves plenty of other groups and organizations available.
If you’re interested in becoming a homeowner but aren’t sure how to begin the process, visit the government’s Department of Housing and Urban Development (HUD) page for links to helpful resources and information on how to get moving toward your goal.
Thursday, March 25th, 2010
Healthcare Bill Facts: How The Bill Affects the Uninsured AND the Insured
Why does the healthcare bill matter? Well, for starters, a 2009 Harvard study published in the American Journal of Medicine found that 60% of filers cited heath problems/medical bills as the main reason they filed bankruptcy.
The healthcare bill is now signed into law; but what does it mean for you?
We sifted through the press and propaganda to uncover how the new healthcare bill may affect you.
How the Healthcare Bill Will Affect…
The Uninsured
- $5 billion immediately goes to provide temporary coverage to the uninsured living with preexisting conditions. This measure is intended to bridge the divide until all the healthcare changes go into effect in 2014.
- By 2014, more people will qualify for Medicaid coverage, such as people who are low-income and have no children.
- By 2014, small businesses, the self-employed and the uninsured will be able to join together to buy less-expensive policies.
- By 2014, Americans who don’t qualify under a hardship plan must have healthcare insurance or face fines. Those who qualify under the hardship plan will be low-income individuals and families of four making less than $88,000.*
- By 2014, the uninsured will face fines of $95 (or 1% of the uninsured’s income). By 2015, the fines increase to $325 or (or 2% of their income). By 2016, the fines increase to $695 (or 2.5% of their income).*
The Insured
- If you buy a policy, insurance companies can’t limit your lifetime coverage anymore. This means your insurance money shouldn’t “run out” if you’re diagnosed with a serious illness.
- Insurance companies can no longer deny your child coverage because of a preexisting condition.
- By 2014, the same preexisting condition protections will arrive for adults.
- Adult children can now stay on family insurance plans until they’re 26 years old.
- By 2011, prescription drug costs are expected to drop by 50% as manufacturers drastically discount brand-name drugs. By 2020, it’ll drop by 75%.
- Those on Medicare Part D will soon receive $250 for prescription help.
- By 2014, families will receive tax breaks to help cover healthcare premiums. The amount will depend on household income.
- Six months from now, insurers must provide some specific preventive healthcare (such as immunizations) for infants, children and teens with no cost to the insured.
* Based upon House changes to the bill, which must still be approved by the Senate.
Quick Healthcare Facts
The Bill Aims to Cover 32 Million People.
That’s the combined populations of Alabama, Colorado, Illinois, New Mexico and Wisconsin, according to the Census Bureau.
Healthcare Spending = 16% of the U.S. Total GDP.
That’s $8,000 per person ($2.5 trillion), according to the Organisation for Economic Co-Operation and Development.
Check Out These Illustrations of Medical Bankruptcy:
More Changes to the Healthcare Bill May Come
In order to get enough votes to pass this bill last night, the House had to make certain changes to the bill and create a reconciliation bill. The Senate still has to vote on this reconciliation bill, so there may be some bill tweaking.
Stay tuned to Total Bankruptcy for more healthcare and medical bankruptcy news.
What Do You Think: Is the Healthcare Bill a Good Deal for Americans?
Tired of politicians and reporters telling you what’s best for you? Post a comment and share your thoughts.
Sources:
Organisation for Economic Co-Operation and Development
The U.S. Census Bureau, U.S. Population Projections
TheWhiteHouse.Gov: Health Reform by the Numbers.
Harvard Study: The American Journal of Medicine, August 2009 issue
BBC News: Obama Healthcare Reforms May Pay Off for Drug Firms, March 22, 2010
Reuters U.S. Edition: Factbox: Winners, losers in House Healthcare Bill, March 22, 2010
Associated Press: House Sends Health Care Overhaul Bill to Obama, March 22, 2010
CNN Health: How the Health Care Bill Could Affect You, March 22, 2010
The Christian Science Monitor: Health Care Reform Bill 101: What Does it Mean for Kids and Families? March 22, 2010.
Thursday, March 25th, 2010
Obama Sees Bankruptcy Drop in Health Reform Victory
This weekend, the U.S. House of Representatives passed a healthcare bill that could lead to substantial changes in the nation’s healthcare system. In an email to supporters sent Sunday evening (via Organizing for America), President Obama noted that the new regulations could prevent "families and businesses from plunging into bankruptcy."
So how is healthcare reform linked to personal bankruptcy filings?
The Tipping Point
Many Americans who file for bankruptcy don’t decide to do so over night; for many, it’s a drawn out and even painful process. Often, people wait until they have no choice but to file for bankruptcy, meaning that their savings and retirement funds are depleted and they have few other options.
Consider this:
- In 2001, a study found that medical costs contributed to 42.6 percent of all bankruptcy filings in the U.S.
- In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) took effect and tightened the requirements for those wishing to file for bankruptcy.
- In 2007, a new study showed the number of "medical bankruptcies" rose to a startling 62.1 percent.
Understanding "Medical Bankruptcy"
High medical bills alone may not force otherwise financially healthy individuals to file for bankruptcy. But, as the 2007 study points out, medical problems and expenses can harm individuals and families in a number of ways:
- Income loss: Injuries and illnesses that cause people to take significant time off work often mean significant pay loss as well, which can lead to unpaid bills of all stripes.
- High bills: The 2007 study indicates that, of those who were pushed into bankruptcy for medical reasons, a whopping 92 percent had bills that totaled more than $5,000 or 10 percent of their family’s pretax income.
- Loss of safety net: Even those who have enough money to cover medical bills are at risk: expensive procedures that drain savings accounts can set you up for financial disaster if any other financial roadblocks spring up.
- Limited future: Some injuries and illnesses leave permanent damage and can affect a person’s ability to find and keep work in the future, meaning that options for getting out of debt can be severely limited.
As the Obama Administration has pointed out, the introduction of more comprehensive healthcare coverage could eliminate or correct many of the problems currently linking medical expenses to bankruptcy filing.
To better understand how the healthcare reform might affect you and your family, check out this post.
Saturday, March 20th, 2010
Financial Keys to 2010
With credit scores, student loans, mortgages, credit card debt, car loans, bank accounts, retirement funds and everything else you have to worry about to keep up with your finances, it’s no wonder if you feel overwhelmed from time to time.
Luckily, the General Services Administration’s Office of Citizen Services publishes a Consumer Handbook for American citizens every year – and, as a taxpaying consumer in the U.S., the book is absolutely free to you. Order your copy at http://www.consumeraction.gov.
Financial Help at Your Fingertips
If you don't have the time to sort through everything in the 172-page book, here’s a brief look at what this year’s handbook offers:
- Sample complaint letter: The one-page template can serve as a guide when you feel moved to lodge a complaint against those you suspect of unfair or fraudulent practices.
- Corporate consumer office contact information: This section details how to get in touch with organizations and outfits designed specifically to help with whatever concerns or problems you have.
- Car manufacturers and resolution programs: Car questions? This section lists the digits for every manufacturer included in the handbook.
- State government resources: When you need information about local laws or other pertinent information specific to your state or region, this section is the place to turn: it has contact details for non-national government entities.
- Banking: Need help figuring out your account, opening a new account or adapting your saving strategy? Take a look at this section, where you’ll find information for State Banking Authorities.
- Insurance: Unsure where to turn for coverage? Unsure whether you need more insurance? Check out this section, which will give you contact options for State Insurance Regulators.
- Securities: Contact information for State Securities Administrators is offered here.
- Utilities: Need to know more about your utility bills and options for getting power and water in your home? This section lists State Utility Commissions and how to contact them. If you need utility bill debt relief, while this section may help, you may also want to consider bankruptcy.
- Federal agencies: Maybe you’re not sure whether there’s a government entity that can help with what ails you. Check out this section for listings.
- Better Business Bureaus: This section lists the BBBs you may need to contact with consumer complaints or concerns.
- Consumer organizations: Turn here to find out which groups are working to help you – and contact them to see how you can offer assistance.
- Trade Associations: This section offers listings for Trade and Professional Associations mentioned in the handbook.
For more tips about securing your financial future, visit The Debtress blog.
Friday, March 19th, 2010
Financial News This Week: More Consumer Protection
The FTC has recently settled several cases relevant to consumer protection and financial stability. Here’s a summary of those cases and how they may impact you.
LifeLock Pays $12 Million, Stops Deceptive Claims
Not long ago, LifeLock ran a campaign offering comprehensive protection against identity theft for consumers. However, the FTC reports that 35 states’ Attorneys General challenged those claims, since the protection LifeLock offered was less than stellar.
In its ads, LifeLock claimed that it:
- Guaranteed protection against identity thieves ever getting their hands on subscribers’ information
- Was the first company to offer such complete and comprehensive protection
- Stopped identity theft before it occurred
- Stored all personal data in encrypted electronic files
- Gave access to sensitive information only to secured individuals
- Used “highly secure” protection (physical, electronic and managerial) to prevent fraud
These services were offered for the price of $10 per month. Because these claims somewhat overstated the actual protection the company offered, many consumers lodged complaints and now LifeLock is prohibited from advertising services they can’t actually offer.
Refund Checks Coming to Victims of Health-Related Scams
The company Roex, Inc. reportedly sold a range of products, including infrared saunas and dietary supplements, which they claimed would cure or alleviate symptoms of numerous serious diseases.
But the results didn't match the advertisements, and the FTC has ordered the company to make payments to past customers. The average amount of the refund check is $500.
Consumers who bought products from Roex, Inc. should be on the lookout for these checks, mailed March 5, 2010, and deposit or cash them – they are not a scam. The FTC notes that 5,700 checks were mailed, with a total value near $3 million.
Credit Repair Scammers Settle with the FTC
An Illinois-based credit repair scammer has recently come to a cash settlement with the FTC for falsely indicating to consumers that it could remove negative entries on their credit reports, even if they were accurate and current, which violates federal laws. Some consumers who filed bankruptcy were targeted by the scam.
To avoid credit repair scams, keep in mind:
- Accuracy isn’t negotiable: Correct information on your credit report cannot be legally removed for seven years.
- Don’t pay upfront: If someone asks for money before performing a service, watch out.
- There’s no easy fix: Credit repair takes time and diligent effort. Shortcuts will only get you way off the track.
Thursday, March 18th, 2010
Debt Collectors Behaving Badly (And How to Make Them Stop)
Debt collectors in certain areas of the country have begun contacting debtors in more and more harassing ways, according to a recent article from WNEP in Pennsylvania.
This situation is troublesome not only because it can cause fear and embarrassment for debt collectors’ victims, but also because such techniques are illegal.
The Slimy Tactics Reported by Victims
While repeated phone calls from a bill collector may be irritating, some of the actions that are being attributed to collectors are downright appalling:
- Threats of jail time: Some debtors have reportedly been threatened with arrest—even with arrest at their place of employment.
- Insults: Sources indicate that some collectors have taken to belittling debtors about their level of education and their work ethic.
- Cruel suggestions: Apparently, some debt collectors have gone so far as to suggest debtors commit suicide as a way to remedy their inability to repay their debts.
- Neighbor contacts: It seems some collectors have even ducked as low as contacting a person’s neighbors about debts owed.
Clearly, something is wrong here. Debt collectors are not legally allowed to get away with such actions, but unfortunately many consumers aren’t aware that they have rights protected by federal law.
Your Rights and Options
So what exactly are creditors forbidden from doing? Here’s a summary of what actions are prohibited by the Fair Debt Collection Practices Act:
- Harassing a debtor, her family or her friends
- Failing to follow up a phone call with written details about a debt within five days
- Contacting anyone besides the debtor or his lawyer about a debt
- Physically or verbally threatening a debtor
- Suggesting or implying that a debtor can be arrested when she legally cannot
- Lying about the amount of the debt owed
- Contacting the debtor directly when he has known legal representation
- Ignoring a debtor’s written denial of a debt
The collectors mentioned in the story above were breaking the law—but unless the debtors are aware of the laws protecting them, they’re not likely to take any action.
Halt Creditors with the Automatic Stay
If you’re facing aggressive behavior from a creditor, it may be time to consider working with a legal professional. One option for stopping creditor contacts is filing for bankruptcy, which will trigger an automatic stay that blocks all contact from creditors.
Tuesday, March 16th, 2010
Extended Stay Hopes to Pull Itself out of Bankruptcy
The hotel chain Extended Stay has been in the news lately, as its senior lenders and several financial firms attempt to pull it out of bankruptcy later in the year.
A $450 million injection of money into the company will, backers hope, be a sufficient component of a proposed plan to exit bankruptcy protection, the Wall Street Journal is reporting. Court papers in the bankruptcy case call on Paulson & Co. and Centerbridge Partners to provide the funds.
Paulson & Co. and Centerbridge Partners will invest $225 million into Extended Stay. This would represent a 22.5 percent stake in the struggling company. Additional money would come from a plan for Extended Stay to raise money via a rights offering. In this offering, the mortgage lenders that hold $4.1 billion in Extended Stay debt will have the chance, according to the Wall Street Journal, “to buy all the shares for an additional 22.5 percent stake plus warrants.”
These holders of Extended Stay mortgage debts will get new mortgage notes valued at $2.5 billion, and they will get a 55 percent stake in the company in the form of stock.
The details of this plan have come to light recently, following the investment agreements that Extended Stay made with the private firms.
Extended Stay filed for bankruptcy last June, following dropping occupancy in their hotels as a result of the difficult economy. The South Carolina-based company owns and maintains over 600 hotels, which are targeted at business travelers and mid-range hotel customers.
Two years ago, the Lightstone Group bought out the company from Blackstone Group LP for $8 billion. Under the new agreement, the entity that manages Extended Stay’s hotels will resign for these duties, in exchange for $30 million.
Following announcements of Extended Stay’s plan to get out of bankruptcy, a rival investor group made the announcement that its own plan would have been a better option than the one chosen.
Starwood Capital had been in the bidding to become the group investing the money in Extended Stay, though Paulson & Co. and Centerbridge Partners were chosen instead.
Now, the group is saying in court that it offered what it called a "binding offer" to sponsor the reorganization plan that Extended Stay will put in place. According to Starwood, it claims that its offer would provide "substantially greater" value to Extended Stay creditors, and that Extended Stay would have access to more cash than it will under the current plan.
Specific details of the Starwood offer were not filed in court. They did present their plan to object to Extended Stay’s current plan.
In January, Starwood claimed that it was being frozen out of the bid process. It said also that they were not getting the information that they needed to make a competitive bid, and that Centerbridge and Paulson were.
Starwood Capital led the restructuring and expansion of Starwood Hotels and Resorts Worldwide back in the 1990s. They cited this experience in the hotel management business to support their claim to investment rights in court.
Friday, March 12th, 2010
Supreme Court: Bankruptcy Law Doesn’t Violate Lawyers’ Rights
A case decided by the Supreme Court this week settles a question of attorneys' free speech rights raised by a Minnesota law firm concerned about restriction in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), according to the Washington Post.
Here are the pertinent details:
- The law states that bankruptcy lawyers are prohibited from advising clients to take on more debt before filing for bankruptcy. In theory, the restriction is meant to prevent advice that would lead to actions that might constitute fraud under U.S. bankruptcy laws.
- The question raised by the Minnesota law firm was one of free speech for lawyers. Apparently, the firm suggested that the aforementioned restriction amounted to an unconstitutional violation of the free speech rights of bankruptcy lawyers.
- The court decided that the law was not, in fact, unconstitutional, and that lawyers can give their clients any advice that does not promote defrauding the bankruptcy court.
The Broader Issue
While the law firm’s concern with free speech may seem piddling here, in the context of bankruptcy cases, it has merit. In some cases, as the WSJ article points out, taking on certain kinds of debt immediately before a bankruptcy filing could benefit both the filer and his or her creditors.
For example, refinancing a troublesome mortgage to better allow a debtor to make payments could benefit all parties. The Supreme Court Justices reportedly acknowledged the truth of this and agreed that taking on more debt can, at times, be the wisest decision for a potential bankruptcy filer.
But, the court noted, the law can be read to mean that bankruptcy lawyers are restricted only from giving their clients advice that would lead to bankruptcy fraud.
What Constitutes Bankruptcy Fraud?
Bankruptcy fraud is a serious matter – in fact, it can lead a court to throw out your case (and thus eliminate your chances at receiving a debt discharge) and earn you fines and jail time. This is one reason why working with a bankruptcy lawyer can be helpful.
Bankruptcy fraud includes:
- Filing incomplete or inaccurate information
- Attempting to pay a "favorite" creditor in full before filing for bankruptcy
- Failing to disclose assets or expected income
- Attempting to “give away” assets before filing
Thursday, March 11th, 2010
LifeLock Fined for Inappropriate Identity Theft Protection Claims
A company that made bold promises about its ability to protect against identity theft has settled with the Federal Trade Commission after the validity of its claims was questioned.
LifeLock is a company that protects customers' identities from theft, and alerts customers about identity theft security breaches, according to the company's web site. LifeLock will even help consumers if their identity is stolen, by canceling and replacing stolen cards and verifying information changes.
According to federal regulators, however, LifeLock has made claims about its ability to protect customers from identity theft that it cannot uphold, leading to an agreement for the company to pay $12 million in settlements.
CNNMoney is reporting that the fine will settle charges that LifeLock made deceptive claims about its identity theft protection abilities. $11 million of the fine will go to the FTC, while another $1 million will go to a group of attorneys general from around the country. According to the FTC, this is one of the largest joint settlements between the FTC and the states.
According to the chairman of the FTC, Jon Liebowitz, LifeLock claimed that it could protect consumers against identity theft completely, including all types of identity theft.
The protection it actually provided,
said the chairman, left enough holes that you could drive a truck through it.
LifeLock advertises its services in a brash manner, by displaying the social security number of the company's CEO, Todd Davis, on the side of a truck that drives around in public, as well as on national television commercials. This show of confidence is meant to publicize their $10 per month services that they claim will keep users safe from identity theft.
The case that the FTC made against LifeLock was that the company made "deceptive claims" about its protection services. Among these claims were that LifeLock could guarantee protection against identity theft, and that, according to CNNMoney, "it was the first company to prevent identity theft from occurring."
There are certain types of identity theft that LifeLock claimed it could protect against, and the FTC argued that these fraud alerts did not actually protect against one of the most common types of identity theft: the misuse of existing accounts.
There was also the charge that LifeLock claimed, falsely, to be able to prevent changes to customers' address listings that weren't authorized, and that it constantly monitored customer credit report activity.
The FTC also said that LifeLock made untrue statements about data security, claiming that sensitive data was only accessed on a "need-to-know" basis. According to the FTC, however, LifeLock collected social security numbers and credit card numbers on a routine basis.
Davis, the CEO of LifeLock, said of the settlement that he was pleased with it, and that it would help to establish the advertising standards for the identity theft protection industry. He went on to say that the activities in the FTC charges were from several years ago, and that LifeLock agreed to settle the case as a way to put the issues behind them.
We agreed to settle this matter,
he said, in order to quickly put this behind us so we can get back to doing what we do best—helping to protect our members from identity theft.
The future of LifeLock remains uncertain, with some analysts saying that bankruptcy may be its ultimate fate.
Tags: bankruptcy, bankruptcy demographics, filing bankruptcy
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