Archive for July, 2012

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Look around you; there are thousands upon thousands of advertisements, attention grabbers, and pleas to try and get you to save money. Many people blindly adhere to what they’re told and think they’re getting a deal, when in actuality, they’re hurting their finances, according to the experts.

Sometimes hurting them to the point of having to file for Chapter 7 bankruptcy to get them out of the never-ending debt cycle they found themselves in.

Recently, Yahoo Finance listed the 5 things that consumers do that hurt their bottom line when they think they are being frugal.

5 Ways You're Failing Being Frugal

The Free Façade

Free credit checks, free shipping, free premium cable package upgrades, etc. The list can continue on for miles with all the offers that are on the market today. But ask yourself this, are you truly getting a deal? The experts say, a resounding,  NO! Within these seemingly great deals are hidden costs that can come back and bite you in the rear end. One example is how online retailers entice the consumers by offering free shipping on offers over a certain amount. Usually that amount is more than what the customer wanted to purchase in the first place and they find themselves over spending to receive the now useless free shipping. Experts say, be weary of the free offers because they’re not truly free.

Coupon Clipper Conundrum

Experts say that coupons are best when used in moderation. Many factors go into finding deals with coupons and it often amounts to having to travel to different stores in order to fulfill the coupon’s rules. With gas prices being as high as they are, it might be more of a burden than a blockbuster deal. Also, it encourages over buying, which can lead to closets full of toilet paper and toothpaste that go to waste.

The Dollar Store Blues

While there are some great deals at these specialty “dollar stores”, experts say that most of what the store sells isn’t worth the price. Consumer reports found that some items might even be unsafe to purchase, such as electronic equipment and vitamin supplements. Buyer beware!

The Drive-Through Dollar Menu

Okay, many people agree that fast food is convenient and cheap, but the long term effects outweigh (pun intended) the short term benefits. The Cancer Project recently did a study that showed that a majority of the items on these menus are packed full of saturated fat, sodium and cholesterol. The report also showed that many of the food's ingredients were linked to an increased risk of cancer in the consumer.

The DIY Debacle

DIY, or “do it yourself”, trends have exploded over the years. While the concept is great, many projects do more harm than good to your finances. One tip the experts gave, changing your own oil will end up costing you more in the long run—hire a professional to handle the greasy stuff.

Bankruptcy is a hard time for anyone who has to go through it. For those with medical bills, encroaching financial troubles are an everyday concern.

In fact, is it reported that one of the main reasons why people file for Chapter 7 bankruptcy is because of medical bills. In this infographic, you’ll see exactly how many Americans are afflicted by debt from their medical expenses.


The Truth About Health-Related Bankruptcy

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Reasons for Declaring Medical Bankruptcy

  • Illness and medical bills accounted for 62.1% of all bankruptcies in 2007.
  • 40.3% of debtors suffered income loss as a result of an illness.

Reasons for Declaring Bankruptcy

Medical Bills Medical Problems of Self or Spouse
57.1% 32.1%
  • 40% of medical bill debtors had a lapse in insurance coverage sometime in the 2 years prior to filing, whereas less than 25% of debtors were actually uninsured when they filed for bankruptcy.
  • While 76% of households owe on medical bills, 47% have credit card debt as a result of medical expenses.
  • Of those who do not owe medical bills on a credit card, the average debt is $6,476.
  • Around 51% of families have attempted to reduce medical bills by:
    • Refusing or delaying a prescription refill - 33%
    • Skipping out on a medical test, follow up, or treatment - 36%
    • Not going to a doctor for a medical issue - 39%

Declaring Chapter 7

If you declare Chapter 7, you probably have problems with an unsecured debt, such as medical bills or credit cards.

You’re not alone.

Percent of Unemployed Debtors Falling Behind on Payments by Age

18 to 29 30 to 49 50 to 64 65 or older
22% 35% 19% 12%

Top Five States for Bankruptcies Per Capita in 2012

Position 1 2 3 4 5
State Tennessee Nevada Georgia Utah Alabama
% of Bankruptcies that were Chapter 7 52% 81% 53% 65% 44%
Filings Per 1,000 people 7.19 7.00 6.65 5.87 5.87
  • In 2011, over 1 million people filed for Chapter 7 bankruptcy.
  • Debtors filing Chapter 7 owed well over $348 million to unsecured creditors in 2011.
    • The average person owed $11,079 in unsecured funds.

Conclusion

Medical bills can add up quickly, especially if someone has continuous health problems that require constant treatment. If you are falling behind on your medical financial obligations, remember that you are not alone and there are many people struggling with this ongoing problem.

The Internet has ripped the price tag off of music. In seconds, web surfers can access millions of song on YouTube or an unlimited live stream with digital services such as Spotify.

With smartphone apps, free music is even available to-go. So, with free all-you-can-stream services, have people stopped paying for music? The numbers say yes.

The number of physical record stores dropped a whopping 77.4% between 2000 and 2010, and are expected to decline another 11.6% by 2016, according to The Wall Street Journal. Some local music shops and large national chains may have to file for bankruptcy.

In 2011, digital music sales surged 8% globally, accounting for $5.2 billion in legal downloads. More people may be listening to music, but physical album sales will continue to decline.


How the Internet Has Rocked the Music Industry

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How the Internet has Rocked the Music Industry

Online music downloads and streaming caused the traditional ways of buying and listening to music to suffer. But just how bad is it?

The Decline of the Record Store

Between 2000 and 2010 record store sales declined more than 76%.

  • It may be dropping another 77.4% by 2016.

Between 2000 and 2009, CD album sales declined by 50%.

Record stores were in IBISWorld’s list of 10 U.S. industries that were dead or dying fast.

Sign of the times:

  • In 2004, HMV—a company like Virgin, but based out of the UK—pulled out of the U.S. market.
  • In 2006, Tower Records closed all of its 89 U.S. stores. [5]
    • The company’s parent filed for Chapter 11 bankruptcy in early 2009.
  • In 2006, Sam Goody’s parent company filed for bankruptcy under Chapter 11.
  • In 2009, the last of the Virgin stores closed its doors.

In January 2012, digital music sales surpassed physical music sales for the first time ever. Digital sales made up 50.3% of all music sales.

In 2011:

  • Physical music sales = 5% down
  • Digital music sales = 8.4% up

From MP3s to Streaming

Originally, digital music was confined to the computer. MP3s were mainly distributed online. File-sharing services became popular, like Morpheus & Audiogalaxy

Then, Diamond Multimedia created the RIO, a digital audio player. Music became:

  • Portable
  • More affordable
  • Available with large selections

iTunes and the iPod both debuted in 2001 and allowed listeners to take their music on the go. The iTunes Store launched in 2003 and sold tracks for just 99 cents.

Spotify is now a very popular way to access music. Instead of storing music on a hard drive or MP3 player, users can stream songs.

  • 1 $0.99 iTunes purchase = 64 Spotify song listens

The MP3 player phenomenon and music streaming have allowed users to download and listen to individual songs instead of entire albums.

This marked a huge change in the music industry. In fact, from about 1999 to 2009:

  • Sales of full albums dropped 55% to less than 400 million.
  • Individual, digital track sales went from 0 to 1.2 billion.

The Old Lives On

Despite the growth in digital media, about 2,000 indie music stores still survive.
Some attribute this to the remaining popularity for vinyl.

  • In 2011, vinyl album sales increased by 39%.
  • So far in 2012, sales are up about 10%.

Vinyl remains relatively popular because it:

  • Causes feelings of nostalgia.
  • Provides quality sound.
  • Is actually tangible.

Conclusion

Even though the digital music revolution caused both independent and chain record stores to suffer, some retailers continue on with the help of avid supporters. Regardless of the growth and decline of music forms, there are pros and cons to every type, and only the future will tell what additional changes are to come.

This infographic was provided by Total Bankruptcy.

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Feel buried under student loan debt? According to some new research, you're definitely not alone.

Americans have recently racked up over $150 billion in private student loan debt. That figure is part of the $1 trillion student loan debt that has recently surpassed credit card debt as the nation’s number one cause of debt.

A staggering figure to envision, and a terribly transparent sign of our economy as a whole, student debt might be justified reaching these numbers if jobs were available to pay off said debt, according to experts.

Despite the amount of student loan debt that Americans have accumulated, many are unable to pay back their loans due to the extremely tough job market and low wages many post-graduates are earning.

The difference between the federal student loan debt and the private loan debt is that students with private loans aren't privy to forbearance or flexible payment options as with federal loans.

Many private student loans were dished out like hot cakes before the housing market crashed the economy. Many of these were loaned for more than the borrower needed, causing a long-term financial headache for the student.

Since then, borrowers have learned from these mistakes and made it harder for students to borrow more money than is actually needed.

However, it may be too little too late according to some experts.

What’s Being Done?

Now a federal agency is asking Congress to look into bankruptcy as an option to wipe out student loan debt, according to The Wall Street Journal. As nice as that may seem, a consumer advocacy agency says that will do little for the majority of borrowers who find themselves under mounds of debt.

However, as it stands, student loans cannot be discharged through personal bankruptcy, including Chapter 7 and Chapter 13 bankruptcy, among any other forms of bankruptcy.

Some ease has been put on federal student loans as of late after Congress voted to extend the 3.4% rate on federal subsidized loans that otherwise would’ve reached over 6-7% if not agreed upon.

Both private lenders and the American government can garnish borrowers' wages if the loans are defaulted on. What many people don’t know is that the government can withhold federal tax returns for Americans who default on their loans as well.

According to The Wall Street Journal, nearly 850,000 private loans went into default status between 1998-2009. During that same time period, nearly 2.1 million federal loans went into default.

Although many people fall into bankruptcy after their student loans go into default status, a bankruptcy option for borrowers would be a bad option due to the amount that taxpayers would be on the hook for.

Private student loans used to be dischargeable under bankruptcy laws like any other consumer debt, but under a 2005 change in the bankruptcy code, private student loans can no longer be discharged unless borrowers can prove undue hardship which is the same case for government backed student loans.

As drastic and critical as a situation the student loan debt is, experts say that something must be done to ease the burden on the many Americans stifled with debt.

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When deciding to close a credit card, there are many options to consider. Some experts say that closing a credit card, in general, is a bad decision as it eliminates the amount of available credit on your credit score, among other harmful things.

Some people decide that the temptation of a credit card is too much to bear. Others believe the high interest rates aren’t worth the small perks when you purchase gas or groceries. Some even go into deep personal debt because of their credit cards, sometimes having to end up filing for bankruptcy.

Regardless of the reason of why you decide to close a credit card, experts say there are good ways to go about the process of closing it, and bad ways.

The Bad

Closing a long-standing account

When you close a credit card that has a long history of timely payments you may end up hurting your credit score. Lenders view people with shorter credit history as a risk factor.

Assuming a dormant account will automatically close

Lenders can keep your account and credit line open indefinitely, regardless of the amount of time it has been open. If you’re confused as to which accounts are active and which are closed, experts suggest contacting the issuer of the card or ordering your credit report to find out.

Consolidating cards

Closing other cards to put the balances all on only one other card can be detrimental to your credit score. If the balance exceeds 50% of the credit line, your score will take a hit.

Canceling to make a big purchase

If you’re in the market for a house, car, or boat you may want to think twice about closing any credit lines. Sometimes it’s only temporary but it could be a crucial drop in your score if you’re aiming for a low interest rate or mortgage rate.

Close too many

Experts say it’s better to close accounts one by one if you do decide to close your credit card accounts.

The Good

Okay, we got through the nightmare mistakes that some people make. If you have decided to close some credit card accounts, there are ways that experts say you can go about it in a successful manner.

Closing cards you don’t use and that have high interest rates

If you feel you are likely to splurge with a credit card, then closing it might be a great idea. Also, experts say that the less cards that are open in your name, the less chance of identity theft happening.

Closing an account that still has a balance

If you’re looking to just pay the card off but can’t do so in a quick manner, asking the issuer to close the card while you pay down the balance might be the right option for you.

Have one primary card

Select a card that has great benefits and low interest. Paying it off each month can greatly improve your credit score.

Keep an account open

Creditors look for people who have accounts open and who are responsible with their money. It’s important to keep at least one card open to show that you can handle to challenge.

Destroy canceled cards

Running your card through a paper shredder is a great idea, according to experts, if the machine is capable of the task. Make sure you check before jamming your cards into your office’s paper shredder.

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The Midwestern part of our country is known for hospitality and hard workers. Now, the people of the Midwest are known for its good credit scores too.

Experian, the credit reporting agency, has analyzed the credit and debt habits of Americans and developed a list of the cities with the best overall credit scores.

Know a lot of people that have filed for bankruptcy because they’ve gone into debt? You might not live in one of these cities, but don’t fret. Experts say that regional statistics like the numbers that Experian has compiled only shows habits of large groups on people instead of individual trends, so if you’re left off the list don’t feel too bad.

Within the numbers lies valuable information about the state of our country and the citizens who live in a down economy. According to the data, the average credit score is 749 and the average debt is $24,542.

That may mean very little to someone who is struggling with debt much higher than the average American’s debt or facing a bottom of the barrel credit score, but it’s important to note the overall statistics so we can get a snapshot of what Americans are facing during these tough economic times, according to experts.

Without further adieu, the top 5 cities with the best credit scores across America in 2012 according to CNBC.

1. Wausau, Wisconsin

Four of the top 10 cities are within the state of Wisconsin, with Wausau being the top dog. Amazingly enough, Wausau wasn’t even on the list last year.

Credit Score: 789
Debt: $22,439
Number of Late Payments: 0.27
% Credit Available: 77.52
Number of Open Credit Cards: 1.71

2. Minneapolis, Minnesota

Last year Minneapolis topped this list. Keeping the Midwestern theme alive, they rank in at number 2.

Credit Score: 787
Debt: $24,994
Number of Late Payments: 0.26
% Credit Available: 73.45
Number of Open Credit Cards: 2.08

3. Madison, Wisconsin

Despite slipping from number 2 last year to number 3 this year, Madison, Wisconsin is still sporting healthy numbers. The second of the Wisconsin wonder cities ranks in at number 3.

Credit Score: 785
Debt: $23,533
Number of Late Payments: 0.27
% Credit Available: 75.90
Number of Open Credit Cards: 1.79

4. Cedar Rapids, Iowa

Also falling one spot this year is Cedar Rapids. However, just like the city that is one ahead of it, Cedar Rapids is showing very good numbers still.

Credit Score: 781
Debt: $23,628
Number of Late Payments: 0.32
% Credit Available: 76.57
Number of Open Credit Cards: 1.82

5. San Francisco, California

The only city to maintain it’s position from the previous year, San Francisco sports incredible numbers for such a big city that resides in a state that is amid a budget crisis and has one of the highest per property cost.

Credit Score: 781
Debt: $23,973
Number of Late Payments: 0.30
% Credit Available: 72.83
Number of Open Credit Cards: 2.02

While most consumers might be familiar with Chapter 7 bankruptcy, it's not the end-all, be-all of bankruptcy in the U.S.

While Chapter 7 bankruptcy forgives a majority of unsecured debt, the lesser-known chapter 13 bankruptcy allows a consumer to keep their assets and repay their debts over a three- to five-year period.


For a full breakdown of the ways Americans are calling it quits on debt, see the infographic below:

a snapshot of bankruptcy in america

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You hear about major companies filing for bankruptcy, but what is the bankruptcy landscape really like?

How have people and businesses been holding up?

Here's a look at the general status of bankruptcy in this country.

Which type is filed the most?

Chapter 7 Debt Discharge: Allows trustee to sell debtors non-exempt assets so the debts can be repaid as much as possible. All other eligible debts that can't be paid for through liquidation are wiped away. For companies, business operations would have to cases. Corporations, partnerships, and individual people are eligible.

Chapter 13 Repayment Plan: Debtor can keep his or her assets. A 3 to 5 year repayment plan is worked out. Individual people are eligible.

Other: A well-known chapter in this category is Chapter 11. Similar to Chapter 13, but mainly for businesses. Reorganization plan is established to help pay creditors. Businesses and some individuals are eligible.

How many are filed?

In 2011, there were about 1.4 million bankruptcy filings.

Filings fell almost 12% from 2010 to 2011.

Declines were seen in both Chapter 7 and Chapter 13 bankruptcies.

When thinking about bankruptcy, remember that there are different ways to file depending upon a person or company's situation.

For more information on the state of personal bankruptcies in the United States, check out our report on the demographics behind bankruptcy filers.

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Stockton, California appears to be in some deep financial trouble.

According to The Los Angeles Times, Stockton has filed for bankruptcy.

The northern California city, with a population of just under 300,000, is the largest U.S. city to file bankruptcy, according to The Wall Street Journal.

Last week the city filed for Chapter 9 bankruptcy after rising labor costs and expensive civic projects caused them to go into serious debt.

However, Stockton is not alone in this long economic battle. According to Reuters, nearly 90,000 U.S. cities, towns & municipalities are still struggling to recover from the housing market crash that has crippled the nation and effectively sent the U.S. economy into a recession like state.

Some notable cities that are facing the same fate as Stockton are Providence, RI., Scranton, PA., Camden, NJ., and last but not least Detroit, MI.

Most of the cities on the cusp of financial collapse have deteriorating, stagnant industries and have seen a particularly rough housing market in the wake of the financial collapse of 2008.

Experts say that it is rare that a city of Stockton’s size fails to the point of bankruptcy, but it goes to show the state of the economy Americans currently find themselves in.

Previously, Alabama’s Jefferson County, which is home to Birmingham, filed the largest ever-municipal bankruptcy, totaling $4.32 billion.

As of the date of the filing, Stockton had a $26 million dollar budget deficit and failed to develop an emergency budget that would have slashed employee health and retirement benefits.

Another area of government that gets affected by diminishing funds is infrastructure. Experts warn that if roads and sidewalks become bad, the city doesn’t have the money to repair what could be a dangerous hazard.

Factors working against Stockton are its crime problem and foreclosure rate. Stockton currently ranks second in the nation in violent crime and currently has the second highest foreclosure in the country.

The difficult nature of bankruptcy for struggling cities is that getting out of debt is only half the battle. According to experts, cities must not only recover the money that was mishandled, but also retain capital while maintaining residents and businesses that will rejuvenate the city.

The bad news for the people of Stockton, California is that Chapter 9 is seen as a last resort, according to bankruptcy experts. It goes to show that the city has exhausted all of its options regarding avoiding bankruptcy.

The hardest hit residents of Stockton are city workers and retirees who will see benefits and pensions slashed due to the bankruptcy filing Thursday, according to the Washington Post.

The very benefits and pensions that will be cut may have very well been the open would that led to the constant bleeding of funds that got Stockton where it is today, bankruptcy court.

Although Stockton has seen nearly $90 million in deficits over the last three years, experts say that filing for Chapter 9 bankruptcy will eventually get the city on the right course, as long as they make the right moves after filing.

One bright spot; Orange County California filed for bankruptcy protection in the early 90’s and is currently a AA- rating by Standard & Poor credit agency.

The message? There is hope.