Archive for June, 2012

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It’s bad enough not having a viable source of income, but a new report from CNN Money details that 43% of Americans go without cash for a week and 28% don’t have any emergency savings.

In an economy where the pennies must be pinched in order to survive, these numbers tell a dark tale of the American dream and how Americans are dealing with this near-recession environment.

Bankruptcy filings are becoming a commonplace solution to the nation's debt riddled citizens.

As bills become harder and harder to pay, people run out of options.

According to the CNN report, the amount of Americans who go without cash for a week may be in large part due to the increasingly popular debit card and credit card purchase option.

Many times, swiping the card instead of paying with cash causing Americans to fall further and further into debt and eventually file for bankruptcy.

Many consumers have turned to the ease of the Internet to purchase goods. Online retailers can obviously only take debit and credit card transactions because of the lack of brick and mortar retail shops.

A recent study has shown that people think twice when using cash versus swiping their debit card or credit card. Physically handing over cash is a mental barrier than many people have decided to forego.

Many retailers prefer you use cash because of the high fees involved when using a credit card machine to process the payments. A federal mandate was put in place to curb the high costs of operating a credit card machine but the fees remain.

Experts say that heading to an ATM before hitting the shops might give you some piece of mind when you’re at the counter ready to pay. Somehow those $100 heels don’t look so attractive when you have to fork over the bills.

Savings? What Savings?

The startling number that CNN Money reported about Americans and their lack of savings is a not-so-subtle reminder of the times we currently live in. With student loans, credit card debt, and foreclosures on the rise; it’s no wonder Americans don’t have the ability to save.

Emergency funds are an extremely important resource to have, according to the experts. The general rule of thumb is that you have enough for six months of expenses including mortgage payments and grocery money among the most important.

According to CNN, 49% of Americans don’t even have enough saved for three months of emergency survival.

As incomes become stagnant (or non existant), it becomes harder and harder for families to save. Experts suggest saving every extra pennies you can in case of emergency.

Although these numbers seem grim, overall savings is up from six years ago. According to the CNN report, 61% of Americans didn’t have enough savings to last three months in 2006.

Experts say the most important thing to think about is getting out of debt but others suggest that saving for an emergency situation is the most dire of needs.

Instead of cramming in that weekend road trip to the water park, consider making one in your own back yard. Experts warn that every penny spent is a potentially life-saving amount that could be put towards an emergency fund. No amount is too little to save.

Experts also warn that once it’s saved, act like it doesn’t exist. Dipping in to a savings account could mean disastrous results in the future.

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The past few years have been rough for the camera industry.

First, famed film company Kodak filed for bankruptcy protection after dismal sales and failing to capitalize on the digital trend that encompasses the camera business as of late.

According to the Washington Post, Ritz Camera & Image filed for Chapter 11 bankruptcy protection last week.

The filing marks the company’s second bankruptcy filing.

It was only three years ago that the company, founded in 1936, emerged from its last bankruptcy.

As physical retail shops lose ground to online shopping dynamos such as Amazon and EBay, it has become harder for retailers such as Ritz Camera to compete.

Although online shopping is one large component to Ritz’s slumping sales, there are many other variables that are continuing to cripple the camera and film industry.

For one, cell phone cameras have now become so advanced that people aren’t buying, or even using, stand-alone digital cameras.

Another nail in the coffin of the camera industry is the ease in which photos can be shared and printed. As printers and social media dominate society’s landscape, physical film and digital prints from retail stores have suffered tremendously.

Despite the grim outlook, sales at Ritz in May were up 20 percent. Unfortunately it was too little to late as the company decided to file for bankruptcy on Friday.

Ritz Camera & Image, as a part of the newly minted restructuring, plans to cut its 265 stores to 137 and chop its employee numbers in half; from 2,000 to 1,000, this according to the Washington Post.

According to the filing, the company has between $50 million and $100 million in liabilities and assets.

Ritz was a lucrative company specializing in selling cameras and processing film. As the years continued into the new millennium, the growing digital market of photography hit sales hard.

As recent as 2009, the company was in debt to the tune of $60 million.

Innovated, Adjust, or Get Left In The Dust

As the digital age continues to pave new ground in almost every industry imaginable, many companies are forced with tough decisions.

Some failed to recognize the shift in their respective industry and deemed the digital and technological boom as a fad, according to experts.

The camera and film industry was no different.

Some companies are at a crossroads in their history. Should they stick to the proven, profitable plan that may be obsolete in a few years, or should companies risk life and limb on new technologies that seem to be at the forefront of modern business?

It’s a tough call but, as the experts point out, the numbers don’t lie. Many consumers tell a tale through their spending (or lack thereof), and the consumers are sending a clear message.

Either companies become the change agents that dictate future success of their industry or fall by the wayside by sticking to time-honored traditions.

As technologies advance, experts warn that companies must advance at the same speed to keep up with the industry and competitors alike.

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In late 2011 Saab, the Swedish automobile manufacturer, filed for bankruptcy after 61 years of business.

According to Reuters, a Chinese born-Swedish investor has agreed to purchase the stagnant car company in hopes to restructure the business model to produce electric automobiles.

The initial focus will be on the Chinese market, according to the report.

Saab was declared insolvent in 2011 with debts around $1.8 billion, according to Reuters.

Part of the debt was owed to the Swedish Debt Office.

Before Saab filed for bankruptcy, the General Motors owned car manufacturer was sold to Dutch group Spyker.

Despite a loyal customer base with admired vehicles, Saab struggled to keep up with its competitors for years.

The most recent purchase was part of a bidding process that saw Chinese group Zhejiang Youngman Lotus Automobile lose out on the sale to the aforementioned Chinese-Swedish investor.

The amount of the deal is undisclosed at this time.

Swedish media had previously reported that Youngman submitted a bid in early 2012 to the tune of around $280 million.

The new owner of the previously heralded car manufacturer stated that it will need roughly 200 employees to develop the first model, which is slated to be released sometime in 2013 or 2014.

The number of employees needed is drastically lower than the 3,500 employees that Saab previously employed.

However, according to Reuters, the number of employees will rise as the release date of the new vehicles approaches.

The aim is to build an electric car based on Saab’s 9-3 model that was previously engineered as an entirely gasoline based vehicle.

Among missing in the new deal are the rights to the 9-4x and the 9-5 models which are still owned by General Motors and therefore are not a part of the new ownership’s plans for Saab’s future endeavors.

Bankruptcy And The Bailout

In the lean years of 2008 and 2009 the auto industry was facing a crisis of epic proportions.

Seen as the cornerstone of American industry, the government backed a bailout program that kick started the industry back into its fighting form.

Among those lost in the cloud of smoke that was generated from the massive bailout were lesser known subsidiaries of American auto giants such as Saab’s relationship to General Motors.

The Swedish auto maker just couldn’t hack it in the newly volatile car industry and ultimately filed for bankruptcy.

Despite the drastic decline, experts iterate that there is a lesson to be learned from Saab.

That lesson; there’s life beyond bankruptcy and with Saab’s new venture, a particularly prosperous possibility.

Thursday, June 14th, 2012

How Real is an Economic Doomsday?

These days the economy and employment is a huge concern for many. Being unemployed is not an easy time for anyone and can lead to filing personal bankruptcy and maybe even losing your possessions.


Check out this informative infographic, to learn about the economy and how it stacks up in comparison to a much earlier America when unemployment wasn’t so common.

Click to Launch the How Real is an Economic Doomsday?

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How Real is an Economic Doomsday?

What Every American Should Know

The economy is at a pivotal point in the United States and employment is a concern for many. With the upcoming election, there are key factors that will influence your decisions to vote. In this infographic, you’ll learn a little about the economy and how it stacks up in comparison to a much earlier America when unemployment wasn’t so common.

Unemployment Yesterday and Today

  • There has always been an unemployment rate, but in 2012, the number of jobless Americans started flirting with the record high.
  • Average Time That People Are Unemployed Throughout History (in Weeks)

Unemployment Rates Throughout History

  • Back in 2006, it was estimated that 5 million Americans were hired every month.
    • Currently, an average of 3.5 million Americans are hired each month.
  • Low-income jobs now account for 41% of total employment.

Median Percentage Change of Pay by Education Level of Men and Women 25 years and older between 1979-2010

Everyday Expenses

  • Many fear the rise of gas prices, making miles per gallon an important consideration when buying a new car or keeping their old one.

Price Per Unleaded Regular Gallon (1976-Current)

  • As you can see, gas prices have changed drastically, but nothing has changed as drastically as the cost of food.

Monthly Cost of Food

Rough Cost of Inflation

  • The effects of inflation are hard to comprehend, but they have had detrimental effects on the U.S. economy.

Conclusion

It may not be the end of the economy as we know it, but unemployment and cost of living has certainly increased. It has been predicted—by Steve Forbes, editor-in-chief of the popular business magazine Forbes, no less—that the U.S. may be forced to step back into the realm of basing currency value from the price of gold.

Check out Total Bankruptcy for more information.

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While the fast-as-a-tortoise federal regulators continue ‘looking into’ overdraft fees, banks continue to increase the dollar amounts associated with going below the $0 mark.

Earlier in the month Fifth Third Bank announced that they will be raising their overdraft fees to as high as $37, making the bank the highest issuer of these types of fees out of any bank in the nation.

Previously, the bank’s overdraft fee was $33.

U.S. Bank also announced the raising of overdraft fees to $15 and $35, up from the previous $10 and $33 respectively, according to SmartMoney.com.

Overdraft fees occur when an account holder spends more money than is in their account. The bank honors the payment but charges a fee, which can reach to almost $40 per overdraft.

New regulations have seemingly only spurred the onslaught of higher fees, according to experts.

According to SmartMoney, the median overdraft fee rose 5.4% from 2010 to 2011 to $29.

The figure is up 11.5% from 2009.

Some customers have reportedly gone into debt after multiple overdraft charges have compiled on their checking accounts.

Some banks send delinquent accounts to collection agencies in the hopes of getting back some of the lost funds.

That can affect your credit score as well as put some people into bankruptcy if these fees are sandwiched between late mortgage payments or medical bills.

Finding New Revenue Streams

Banks are dependent on fees associated with accounts, specifically overdraft fees, to turn a profit, according to experts.

In 2011 alone, banks generated $31.6 billion (that’s billion with a ‘B’).

In 2009 it was even higher, reaching the $37.1 billion mark before regulations were put in place to curb the often outrageously large fees, according to SmartMoney.

The regulations, dubbed Regulation E, went into affect in 2010 and prohibited banks from charging for overdrafts unless customers opted for coverage.

Additionally, measures were put in place to lower the amount charged to vendors who use credit card and debit card machines for transactions.

Those measures were estimated to have lost banks $6.6 billion per year in revenue.

The Consumer Financial Protection Bureau was created in part to shield consumers from excessive banking fees.

The CFPB has launched an ongoing investigation into checking account overdrafts and is currently requesting consumer comments.

According to experts, overdraft fees can be astronomical; sometimes reaching three to ten times the transaction per day.

A customer who pays a $100 overdraft fee after two weeks would incur the equivalent of a 900% to 3,000% annual percentage rate, the highest credit banks extend to customers, according to SmartMoney.

Experts are pointing to the federal regulations as the reason why the fees are reaching the highest levels ever seen. Banks are hard pressed to find new revenue streams and are taxing customers to make up for the shortcomings associated with the regulations.

In response, Fifth Third Bank and U.S. Bank say that not all customers will be charged the new fees for over-drafting. If the amount over-drafted is under $5 and $9 respectively, the customer will not be charged.

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Former NFL running back Jamal Lewis, a vital part of the 2001 Super Bowl Champion Ravens, has filed for Chapter 11 bankruptcy, according to the Baltimore Sun.

Lewis was the 5th overall pick in the 2000 draft and is the Baltimore Ravens all-time leading rusher.

He is one of only five players in the NFL to rush for more than 2,000 yards in a season. Lewis rushed for 2,066 yards in 2003.

According to bankruptcy documents in Georgia, Lewis has assets of around $14.5 million and owes creditors about $10.5 million.

The documents also state that Lewis claims to be self-employed and pulls in nearly $35,000 a month in income.

Among the ex-NFL player’s assets that are listed are five homes, a 401k valued at $500,000, ownership in a water park in Ohio valued at $6 million, and a Super Bowl ring worth $17,500.

According to the records, Lewis is expected to have the funds necessary to pay his unsecured creditors.

Creditors listed in the court documents include a lien from Bank of America for $947,876, Mercedes-Benz for $113,000, and Chrysler for $15,000.

According to NBC Sports, Lewis chose the “non-Chapter 7 route with good reason”, stating that due to his net worth’s large amount ($4 million more than what he owes) he chose the Chapter 11 process instead.

TMZ, the website that first reported the bankruptcy filing, states that by filing Chapter 11 Lewis can keep most of what he has while negotiating and reduced and extended payments to each of his creditors.

Despite a very healthy net worth, the problem lies in liquidity of funds.

With nearly $14 million tied up in ‘things’, Jamal Lewis cannot pay his bills.

Bankruptcy Booming For Pro Ballers

It seems as if the trend of multimillion dollar athletes filing for bankruptcy has continued.

Fellow ex-NFL star Warren Sapp filed for Chapter 7 bankruptcy earlier this year.

Other notable athletes who’ve recently filed for bankruptcy include Allen Iverson, Terrell Owens, Dennis Rodman, Antoine Walker and Lenny Dykstra.

To the average American, seeing wealthy athletes and celebrities who have squandered large fortunes can be frustrating to see. Many are dumbfounded about the logistics of blowing millions of dollars only to end up in bankruptcy court.

However, experts say there may be some reasons why this trend seems to ring true for a number of star athletes.

For one, these athletes enter the professional world of sports at a very young age (typically around 18 years old). You can only imagine what it must be like to receive a check for millions of dollars at that age.

Money management is something that young athletes may have never been privy to and when a financial windfall hits, the athlete is unsure of how to secure a long-term fortune.

Experts also say that many of the athletes who fall on tough times after obtaining large amounts of wealth often become prone to spending on luxury items.

Despite the trend of celebrity bankruptcy, the writing is on the wall and experts say that young athletes and celebrity figures should consult their peers before lavishly spending their wealth away.