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Tuesday, April 27th, 2010

Looking for Work? More Companies Looking to Hire, Survey Says

As the weather warms up around the country, a new survey shows the job market may be starting to thaw.

A survey by the National Association for Business Economics released yesterday revealed the most optimistic job outlook in several years.

Business leaders said they expect to lay off fewer employees and hire more new workers in the coming months.

The survey was conducted from Mar. 25 to April 10, and spanned business leaders and members of the NABE, said the Associated Press in their report. Some numbers from the survey:

  • 22 percent of companies said they planned to increase payrolls, up from just 13 percent in January.
  • 37 percent expected to add employees in the next six months.
  • 13 percent expected to lay off workers. From the same survey in January 28 percent of companies expected layoffs.
  • More than half saw stronger demand in their industry.

Add these up and the job market looks much better than it did just a few months ago. Big industries like finance, insurance and real estate all said they had plans to add more new hires in the next few months than they were in previous quarters. Meanwhile, a mere 3 percent of survey respondents predicted "significant" layoffs, and many companies reported having more merchandise and materials on hand than previous quarters.

So if you're among the unemployed or underemployed it may time to dust off the resume and give it a workout, because companies have plans to hire more workers soon. It's unclear how much of an immediate impact this could have on bankruptcy filing rates.

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Posted in Economic News: How Are We Doing? | No Comments »

Monday, April 26th, 2010

Proposed Bill Would Change Role of Student Loans in Bankruptcy

Student loans have become infamous for rarely being discharged in bankruptcy. However, before 2005, only government-backed student loans were protected—private student loans could be forgiven in bankruptcy.

The Chicago Defender reported that several U.S. lawmakers have proposed a piece of legislation that would allow bankruptcy courts to once again discharge student loans issued by private lenders.

The legislation, which is still in its earliest stages, would address what its sponsors (including Rep. Danny K. Davis, Sen. Sheldon Whitehouse, Sen. Dick Durbin, Rep. Steve Cohen and Sen. Al Franken) see as an unrealistic burden of debt many students have upon graduation.

Indeed, the statistics cited by the Defender and a press release from Senator Durbin’s office are eye opening:

  • Until the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) took effect in 2005, private student loans were treated like other loans in bankruptcy; now, they can only be discharged if a filer can show "undue hardship."
  • Congress recently ended a $6 billion subsidy to private student lenders, thus eliminating one advantage they had over other lenders. This student lending reform was signed into law as part of the health care reform legislation. The sponsoring legislators argue that the restoration of dischargeability will further level the playing fields.
  • Private student loans have increased in both popularity and cost in recent years, some coming with interest rates at and above 15 percent.

If the new bill becomes law, its sponsors contend, it will give students wishing to pursue higher education a certain peace of mind, as they will have the option of discharging the associated debts should they encounter unexpected financial hardship.

The Current Law

As it stands now, BAPCPA permits individuals who file for Chapter 7 bankruptcy protection to receive a full discharge of many unsecured debts (that is, filers are excused from paying these debts); however, some debts cannot be discharged in a Chapter 7 filing. These include:

  • Spousal support (alimony)
  • Child support
  • Student loans
  • Most tax debt

Supporters of the new bill apparently believe that student loans don't fall under the same category as the other non-dischargeable debts, as they do not contribute directly to someone's wellbeing.

But the bill will likely have obstacles to overcome in Congress. Opponents are likely to point out that making private student loans dischargeable in bankruptcy decreases lenders' security when issuing these loans and could lead to increased interest rates and fees to compensate for potential lost income.

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Posted in Bankruptcy News and Events | No Comments »

Saturday, April 24th, 2010

Bankruptcy Filers Fight Morality Stigma

Despite the vast body of research that indicates otherwise, many Americans still think of filing for bankruptcy as a sign of personal or moral weakness, rather than a needed safety net for people who truly cannot afford their bills.

An article from the Minneapolis Star-Tribune does an excellent job of addressing this common misconception about the protection bankruptcy offers. The writer was inspired to action, it seems, by a columnist from another publication who cited bankruptcy as proof of moral weakness.

His response includes these important facts about bankruptcy that reinforce its role in the U.S. economic system:

  • Medical costs contribute to many bankruptcy filings. In fact, a study conducted in 2007 (link below) found that more than 60 percent of Americans who file for bankruptcy do so because of excessive medical bills. This is no surprise to anyone who has had difficulty getting health coverage or being able to afford insurance.
  • Job loss and divorce play a huge role. Along with medical costs, these two factors account for the vast majority (about 90 percent) of all bankruptcy filings. And, if the current economy has done anything, it has reminded us how devastating job loss can be.
  • People who file really need help. The article notes that the average Chapter 7 bankruptcy filer has an income of only $20,000 per year, which isn’t exactly a lot of money, and can easily disappear when an unexpected financial burden hits.
  • Credit card companies are not your friends. Many people who file for bankruptcy have some or all of their unsecured debt discharged by the court—this debt often includes credit card bills. And, with high interest rates, fines and fees that these companies rake in, it’s hard to feel sorry for their loss of income.

The bottom line here is that bankruptcy exists to protect those who truly need its protections. Without it, the American economy would likely not flourish with as much innovation as it does today—thanks to the security that bankruptcy provides, entrepreneurs can take risks that they might not otherwise have.

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Posted in The Truth about Bankruptcy | No Comments »

Thursday, April 22nd, 2010

On Earth Day, Go Green to Save Green

In honor of Earth Day, the Fair Trade Commission (FTC) has posted on its web site a variety of >suggestions for improving your home's energy efficiency (and potentially decreasing the amount of money you pay for utilities).

Here's a summary of some of those suggestions—visit the site for more!

In the Kitchen

  • Move your refrigerator away from the stove, dishwasher or any other heat sources (like radiators). To keep the coolness inside, make sure door seals are airtight.
  • Wash only full loads in your dishwasher and clothes washer. Be careful not to overload, though, which can strain appliances and leave stuff dirty.
  • Cook with pots and pans that fit your burners and keep lids on whenever possible to trap heat.
  • Set your water heater to 120 degrees. Some come preset to 140, which can cost extra cash!

In the Utility Room

  • Keep utilities in top shape by setting up regular checkup dates. Be sure to have your air conditioner and heating system inspected annually to save on potentially costly repairs.
  • Get a professional to inspect the airflow in your house. Having leaks sealed can help minimize lost energy and save you money in the long run.
  • Replace air filters, seal fireplace flues if you don’t use them, hang curtains on windows and tend to holes around pipes to make sure hot or cold air isn't leaking from your house.
  • Go digital with your thermostat so you can arrange to have one temperature when nobody's home and another when you are.
  • Try ceiling fans to better circulate air during the summer and help reduce the amount of money you have to spend on air conditioning.

For Your Car

  • Drive smart and save . Staying within the speed limit, braking gently and using the kind of gas your manufacturer recommends can help you maximize your mileage.
  • Maintain your vehicle. Regular oil changes, filter replacements and air-pressure checks can help keep your car on the road for a long time.
  • Leave the car home if you can walk, cycle, carpool or take public transit. You’ll be doing a favor for the planet, your health and your car's lifespan.

If You're Buying

If you're in the market for new appliances, windows, vehicles or a new house, keep in mind that many energy-efficient options are now available and can save you money in tax rebates and lowered energy costs in the long term, so consider buying a "green" edition of what you need.

Additional Resources

For more tips on saving money and eliminating debt, check out The Debtress blog.

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Posted in Finance 101: Secure Your Future | No Comments »

Saturday, April 17th, 2010

This Week in the Economy

The week of the nation’s tax filing deadline saw some important financial news. Here’s a summary of what happened and what it might mean for you.

Recession’s End Unclear

The Business Cycle Dating Committee of the National Bureau of Economic Research, the group responsible for determining official start and end dates for recessions based on analysis of various economic indicators, announced this week that it cannot yet declare an end to the recession.

The press release indicates that, though many economic indicators have improved in recent months (including subprime mortgage defaults and retail sales), it is still too early to say whether or not the recession has officially ended.

Interestingly, though, one member of the committee disagreed with the committee’s final decision and issued a memo indicating as much, citing the following two indicators as primary reasons why he believes the recession has already ended:

  • Real Gross Domestic Product (GDP), which measures the market value of all goods and services produced inside a country in a given year, has reportedly improved since June of 2009, from what’s called the “trough;” and
  • Real Gross Domestic Income (GDI) has also apparently improved, though not for so long a period – the memo indicates it started its upswing in the final quarter of 2009.

He also notes that the economy’s recovery should not surprise anyone, suggesting that, because we “fell” so hard, our “bounce” back should be swift and forceful.

Unemployment Benefits Extension in Congress

Though some economic indicators may be on the upslope, unemployment still hovers close to 10 percent, meaning that millions of American families may not feel the recession’s end for a while.

But there may be hope for such families: a report from the New York Times notes that the Senate has voted 60 – 40 in favor of extending unemployment benefits to out-of-work Americans.

The measure, should it pass both houses of Congress and get signed into law, would apparently cost somewhere in the neighborhood of $18 billion, which seems to be a point of contention for many Senate Republicans.

Unemployment is often considered a strong indicator of bankruptcy filings, so keeping an eye on the unemployment numbers can be a good prediction of Americans filing bankruptcy.

The (Higher) Future of Taxes

Newsweek reported this week that, thanks to serious budget deficits at the federal level and an aging American populace, there’s a good chance taxes will increase – even sharply – in coming years.

While this may not seem like the best news, take this year to enjoy your current tax level!

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Thursday, April 15th, 2010

SEC Proposes Tighter Regulation of Asset-Backed Securities

The Securities and Exchange Commission (SEC) announced that it has proposed new rules to govern the field of bonds backed by consumer loans, perhaps best known in its incarnation of mortgage-backed securities sold during the subprime housing boom.

Background: What They Are, How They Work

So, what might this mean for borrowers and investors? Here’s a little background on asset-backed securities and what they do.

  • Consumer loans: When you and other ordinary Americans take out mortgages and other loans, you go through a bank or other lender. When the loan is originated, that lender "holds your debt."
  • Loan bundling: It has become common practice to "bundle" consumer loans (especially mortgages), which means to lump them together to sell off to investors. But, rather than selling off easy-to-trace sections of the bundle, many banks sell off sections composed of various loans. These sections are the securities.
  • Asset backed securities: Because the securities theoretically earn money when consumers make payments on their loans, they’re known as "asset-backed securities."
  • Bond ratings: During the subprime boom, credit agencies gave various asset-backed securities risk evaluations to help guide investors: high-risk securities had the potential to yield more money, but with a greater risk of consumers not paying. Lower-risk securities offered a lower earning potential, but with more security for investors.

Naturally, the system works well assuming everyone does what they’re supposed to: banks issue loans consumers can afford, credit agencies give honest ratings, consumers make regular payments, etc.

But, as we know from the collapse of the subprime market, that’s not necessarily how the system works in practice. That collapse has had wide-spread effects, from bankruptcy filings to unemployment.

The Proposed Rules

The SEC’s proposed changes would essentially take out the role of the credit agencies. Rather than have credit agencies rate loans, bond issuers themselves would be required to:

  • Keep larger portions of loans on their books, thus giving them an increased stake
  • Provide regular reports on the exact loans that compose a bond
  • Guarantee the risk level of their products

If these changes pass, it’s expected that they’ll help prevent a repeat of many of the problems that caused the subprime bubble to expand and burst.

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Posted in Your Credit Score | No Comments »

Tuesday, April 13th, 2010

April is Financial Literacy Month

For the last decade or so, the United States has recognized April as the country's financial literacy month, as part of ongoing efforts to increase financial awareness and knowledge about the basics of handling money and credit among all Americans.

In honor of this, here are some great online resources that might help you progress on your way to financial stability.

Money 101: Learn the Basics

CNNMoney.com has a section devoted to explaining the basics of money management. This section is divided into 23 "lessons," each of which offers tips for navigating the world of money and credit. The first lesson, called "Setting Priorities," includes these pointers:

  • Limit your goals. Remember that you don't have to realize all your financial dreams. Focus on what's most important in the next few years.
  • Prepare for conflicts. When two goals conflict with each other or you come up against roadblocks, remember that working through rough patches is the only way they'll get solved.
  • Start now and be patient. Improving your finances takes time, so the sooner you start, the better. But don't be discouraged if you don't see results right away.
  • Stay flexible. Revisit your goals often and ask for input from family members to make sure your goals are still reasonable for your current life situation.

Uncle Sam's Guide to Your Finances

The federal government has also dedicated a couple of web sites to consumer information about money matters. At www.MyMoney.gov, you can check out a variety of resources, including:

  • Basic information about financial matters like budgeting, credit, investing and buying a home
  • Calculators and other hands-on tools for helping you understand where you stand financially
  • Consumer alerts about common scams and fraudulent behavior to watch out for
  • News updates about consumer finance related issues

Additionally, the Federal Citizen Information Center offers a wealth of information about employment, consumer products, general consumer assistance, health information and more.

Both sites provide great starting points to anyone interested in learning about consumer rights and opportunities from the government's perspective.

The Circle of Financial Life

Lastly, 360 Degrees of Financial Literacy (360financialliteracy.org) offers guidance on financial matters for people of all ages and from all walks of life. Whether you're wondering about your special concerns based on your age, your gender, your job or your family life, this web site has resources for you.

For personal finance tips throughout the year, check out The Debtress blog.

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Sunday, April 11th, 2010

Bankruptcy Filings at Post-2005 High

Bankruptcy filings among American individuals and businesses rose to record levels in March of this year, according to a report by Reuters. Here’s a look at the numbers and what they mean for bankruptcy in the U.S.

  • 158,141 bankruptcy petitions were filed in the U.S. during March, 2010, according to numbers released by Automated Access to Court Electronic Records (AACER).
  • This number represents a 35 percent increase from February, 2010, and a 20 percent increase from March, 2009.
  • Prior to March, the most filings during a single month since the implementation of the new bankruptcy law in 2005 occurred in October 2009, when 133,393 cases were filed.
  • Of the total cases filed, 149,979 bankruptcy petitions were from individuals and 8,162 petitions were from businesses.
  • Nearly three-quarters of all petitions filed were under Chapter 7 of the U.S. Bankruptcy code; the remainder were mostly Chapter 13 cases, with a few Chapter 11 cases as well.

These numbers are significant for a number of reasons.

BAPCPA and Filing for Bankruptcy

The nation’s bankruptcy laws were overhauled in 2005 with the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). Because the law was expected to make bankruptcy protection more difficult to get, filings soared just before the law passed as people sought protection under the old law.

In 2005, a record year for bankruptcy filings, 2.08 million cases were filed, with both individuals and businesses filing at higher rates than usual.

After the late-2005 rush to file, there was a lull, but in the years following, filings have increased steadily. Last year, 1.47 million bankruptcy cases were filed in the States, the highest since the law’s passage, and March’s numbers suggest that this year could have an even higher number.

Morals of the Story

The lessons here are important:

  • You’re not alone: Many people delay filing for bankruptcy because of the stigma associated with it. These figures clearly show that significant numbers of Americans are struggling with debt.
  • Bankruptcy isn’t out of reach: Many people feared that, with the BAPCPA laws in place, qualifying for bankruptcy protection would be almost impossible. Again, millions of Americans have been helped since the new law took effect, showing that much of the fear was unfounded.
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Friday, April 9th, 2010

Life and Credit after Bankruptcy

One of the most enduring myths about filing for bankruptcy is that it "ruins your credit" for ten years. While many myths about bankruptcy are misleading, this is one that needs to be debunked, once and for all.

A recent article from the New York Daily News examines the question of exactly what happens to a person's credit after a bankruptcy filing. In it, bankruptcy attorney and President of Total Bankruptcy Kevin Chern explains why filing for bankruptcy does not mean permanently sabotaging your finances.

Bankruptcy and Your Credit

Here are some key points to keep in mind about how filing for bankruptcy will affect your credit:

  • Your credit before bankruptcy: Most people who need bankruptcy protection don’t have great credit to begin with—their debt-to-credit ratios tend to be high, and that’s a key risk indicator to many potential lenders. In fact, the financial difficulties that lead people to bankruptcy filings are incredibly detrimental to credit ratings.
  • Your credit after bankruptcy: When you receive your bankruptcy discharge, your discharged debts should be removed from your credit history, meaning they no longer hold you down. True, evidence of your bankruptcy filing stays on your credit report for 10 years, but its impact diminishes with time (a single bankruptcy filing should not "ruin" your credit for a decade).
  • Overall credit health matters: Credit reports work because they combine various financial indicators to provide potential lenders with a snapshot of someone’s financial life. Someone who has filed for bankruptcy and stayed ahead of her debts since then will likely seem more attractive than someone who has not filed for bankruptcy but has delinquencies and defaults sullying his credit.

Getting Loans Again

The Daily News notes that most personal bankruptcy filers can expect to start getting credit card solicitations in the mail within two years of filing for bankruptcy—in other words, credit becomes available far before the ten-year doomsday benchmark commonly repeated.

But remember: it may be best to wait a while after a bankruptcy filing before applying for credit cards again, because the first offers may come with very unattractive interest rates or fee schedules.

For a more in-depth exploration of improving credit after filing for personal bankruptcy, check out these credit-rebuilding tips and this four-step method for regaining financial stability in your post-bankruptcy life.

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Thursday, April 8th, 2010

Bankruptcy Judge Identifies Triggers for Filers

What leads people to file bankruptcy? A recent article from the Idaho State Journal offers an interesting peek into the mind of a U.S. bankruptcy judge and a refreshing reminder about the causes of bankruptcy.

Why Americans File for Bankruptcy

U.S. Bankruptcy Court Judge Jim Pappas explained how bankruptcy protection is one of pillars of the U.S. economic system: the promise of a fresh financial start for those who get into more debt than they can handle encourages the sort of entrepreneurship that makes America what it is.

Pappas went on to identify three factors that he has reportedly found contribute to the majority of bankruptcy cases he sees in his court:

  • Medical bills: Medical catastrophes can bankrupt even those who have medical insurance—having too little insurance can be just as problematic as having none at all when astronomical medical expenses enter the picture. Plus, lost work hours and/or the lost ability to perform many jobs leaves some people without a chance to recover from a financial setback.
  • Job loss: As millions of Americans have learned in the last year, getting laid off or having your hours or pay cut can seriously strain your finances. For people who don’t have a tidy emergency fund in place, job loss often throws finances into turmoil—without steady income, people risk defaulting on credit cards, home loans, car payments and student loans. This can lead to stress, foreclosure and repossession—for many, bankruptcy is the only available remedy.
  • Family problems: Divorce can be expensive, and single parenting isn’t much easier. Apparently, the majority of single filers Judge Pappas sees are women, often strained financially by their obligation as the primary caretaker for their children.

Why the Bankruptcy System Works

One point mentioned in the article bears repeating: the judge mentions that bankruptcy still has a bad reputation in this country as being for “deadbeats” and people who are interested in “gaming the system.”

But, according to anecdotal evidence and statistics from the U.S. government, nothing could be further from the truth. In fact, only an estimated one to three percent of bankruptcy filings are fraudulent—meaning that between 97 and 99 percent of bankruptcy filers are truly in need of financial protection.

If you’re struggling financially—whether because of one of the factors mentioned above of for another reason—you may want to consider whether filing bankruptcy is the right choice for you. Often, taking action earlier rather than later gives filers the most options for financial recovery.
Find a Bankruptcy Lawyer Near You

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