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Tuesday, November 17th, 2009

Florida Residents Join to Keep Island Resort Afloat in Bankruptcy

On Amelia Island, a coastal community off of Florida's Atlantic coast, a group of local investors have joined up to save a prominent resort from going under.

Amelia Island Plantation is a 30-year-old destination resort for vacationers and conference-goers. Recently, the resort fell on hard financial times, as many businesses have during the recession.

Wages for employees were cut, and other local businesses who depended on resort customers saw their business dwindle.

But rather than watch a local landmark and business stimulant disappear, a group of 22 local investors signed an agreement to keep Amelia Island Plantation financially viable. The investor group is called Red Maple Investors. Every member of the group is also a homeowner on the island.

Structured Bankruptcy Protection

The agreement states that the Plantation resort will seek Chapter 11 bankruptcy protection, and restructure its debts and liabilities. During this process, the resort will continue to operate normally.

Red Maple Investors will provide financial and strategic support to help Amelia Island Plantation through this Chapter 11 restructuring process.

The group's members are hardly amateur investors, however. John Griswold, for example, is the president of Harbor Hotels, and has accrued more than 30 years of experience operating high-class hotels.

"Our investors believe in the potential for the long-term success of Amelia Island Plantation," Red Maple Investors founding member Robert C. Smith told First Coast News. "All of us in RMI want to protect this little paradise we have come to love. And, we are willing to put up our own money to assure its success far into the future."

Community Finances Tied Together

As would be expected on an island of that size, the financial impact of the resort extends to other community businesses as well. The 700 employees and the 240,000 yearly visitors to the resort help many area businesses.

One such business, Dub Mullis’s fruit stand up the road from the resort, struggled along with Amelia Island Plantation.

"My customers are a lot of people from the resort. A lot of workers, people who live there and also visitors to the island," Mullis said.

A decline in corporate bookings at the resort were one of the main reasons for its struggles. The drop in large-scale events meant millions of dollars in lost revenue as companies tightened their belts.

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Monday, November 9th, 2009

How Health Care Affects Filing Bankruptcy

Health care costs and filing bankruptcy rates are more closely related than you might think. Check out this chart that shows the skyrocketing costs of health. These costs could be driving many people to file bankruptcy.

Filing bankruptcy and the influence of medical care costs

Filing bankruptcy and the influence of medical care costs

Skyrocketing health care costs have many people considering filing bankruptcy.

Add this infographic to your site:

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Thursday, November 5th, 2009

Senate Passes Unemployment Extension Bill

Unemployed Americans will receive up to 20 additional weeks of unemployment benefits under a bill passed by the Senate this week, according to CNN.

The Senate voted 98-0 Wednesday to provide continued relief to the estimated 15 million Americans currently drawing unemployment benefits. The bill provides at least 14 additional weeks of benefits, and 20 weeks in those states where unemployment is 8.5% or greater.

The bill now moves to the House, which passed a similar bill in September providing up to 13 additional weeks of benefits. President Obama has shown support for extending unemployment benefits, and is expected to sign the bill.

In the Senate bill, benefits would be extended to those who exhaust their current benefits before December 31. Those whose benefits have already run out could reapply for additional benefits.

The additional unemployment would be funded by a supplemental unemployment tax on employers that would run through June 30, 2011.

7,000 Unemployed Lose Benefits each Day

CNN reports that 7,000 unemployed workers exhaust their benefits every day. And with just 3 million jobs for 15 million unemployed (a figure that doesn't include under-employed or those who've given up on looking), that rate isn't expected to slow soon—without help.

In September, the unemployment rate reached a 26-year high at 9.8%. October's unemployment rate, due out tomorrow, isn't expected to decline. Most experts expect unemployment to crest above 10% in 2010.

Unemployment and Bankruptcy

Unemployment is also closely tied with the bankruptcy filing rate. Personal bankruptcy filings reached a four-year high in October, with 135,914 consumer filings, according to the American Bankruptcy Institute. That total is the highest since the new bankruptcy law went into effect in October, 2005.

Update: The House passed the Senate's unemployment benefit extension bill Thursday afternoon with a vote of 403-12. President Obama is expected to sign the bill Friday.

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Friday, October 30th, 2009

Stalemate in Real Estate Sector has Increased Bankruptcy Filings

Guest Author: Peter Gomes

The real estate sector received a jolt when the sub-prime mortgage crisis eroded the US economy. The mortgage market was in doldrums and the upheaval so great that the government had to intervene with its series of mortgage bailout programs.

Consumers bankruptcy filings increased, and so did the number of foreclosures. Many Americans considering bankruptcy filing received more information on bankruptcy by connencting with a bankruptcy attorney.

The Obama Administration introduced a series of mortgage bailout programs to assist homeowners facing foreclosure. The program, known as the Making Home Affordable Plan, was expected to help as many as 7 million to 9 million homeowners. However, due to few limitations, the program has yet to help as many homeowners as anticipated.

There is a vicious cycle of debt that has led to the recession, which has affected consumer spending as well as investor sentiment.

In the easy-credit boom, people started using their credit cards even for making payments for grocery shopping and for utility bills. As employers went on a cost cutting and job cutting spree, it became difficult for consumers to make ends meet.

For consumers considering filing bankruptcy, it can be Chapter 7 bankruptcy or Chapter 13 bankruptcy. In Chapter 7 bankruptcy, a court-appointed trustee will liquidate your non-exempt assets so that the proceeds can help in paying off creditors. As per the new federal bankruptcy laws, certain changes have been introduced. The prominent ones are Means test and credit counseling.

If you are planning to file Chapter 7 bankruptcy, you have to find out if you qualify for the same by taking the Means test. Consumers also must take a credit counseling session prior to filing bankruptcy.

In case of Chapter 13 bankruptcy, you are given a repayment schedule according to which you are expected to make payments to your creditors.

In either bankruptcy chapter, there is one advantage of filing: an Automatic Stay or Order for Relief that prevents creditors from coming after you for their dues.

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Posted in Bankruptcy and the Economy | 9 Comments »

Wednesday, October 28th, 2009

GMAC May Get Third Bailout

GMAC Financial Services,the former financing arm of General Motors Corp., may be in talks with the U.S. Treasury to receive a third financial lifeline, according to the Wall Street Journal.

GMAC has received $12.5 billion in bailout funds since December, 2008, and could receive an additional $2.8 billion to $5.6 billion in a third injection.

As part of the initial bailout, GMAC, which finances three-fourths of General Motors car loans and provides mortgages, insurance and other services, transformed into a bank holding company, which enabled it to receive Treasury aid. After the May, 2009 bailout, the U.S. government became the majority shareholder in the company.

Because GMAC backs so many new auto loans, it plays a vital role in revitalizing the auto industry, in which the government has already invested $25 billion.

General Motors, which filed bankruptcy this year, began selling off its interest in GMAC in 2006. The automaker maintained a small interest in GMAC before transferring many of its assets to the "new GM" as part is its Chapter 11 filing.

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Tuesday, October 13th, 2009

High Unemployment Leading to Higher Job Competition

With unemployment teetering at 10% and many businesses reluctant to hire, it should come as little surprise that job competition is stiff. A new report by MSNBC shows just how stiff: there are currently 6.3 unemployed workers on average competing for each job opening.

According to the Department of Labor, job competition is up from 1.7 workers per opening in 2007, when the current recession began. DOL has been tracking job competition statistics since 2000.

Employers have cut a total of 7.2 million jobs since December, 2007, and while that rate is slowing, job creation is not expected to recover any time soon.

Many economists predict the unemployment rate to peak at 10% next year and remain at the current level throughout most of 2010, creating a difficult job climate for millions of competing unemployed Americans.

According to a September report by CNN, the federal stimulus has created or saved 1 million jobs, helping to stem the tide of unemployment.

Unemployment is a significant factor for many people filing bankruptcy. Those hardest hit by unemployment may soon find themselves with few other options to fight off mounting debts.

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Posted in Bankruptcy and the Economy | 3 Comments »

Friday, October 9th, 2009

Tax Credit for Hiring Proposed: How Would It Work?

A recent article in the New York Times suggests that various members of Congress and the Obama administration have begun considering a program that would provide tax credits to employers who take on new employees.

A version of the program was apparently most recently implemented in 1977, when unemployment was similarly elevated from an economic recession. The current plan is still in its proposal stages, but here are the basics of how it would work.

  • Employers would take on new staff members, or extend the hours of current employees. Jobs are often the last part of the economy to pick up after a recession, so the tax credit would initially stimulate hiring.
  • Employers receive a tax credit for the new hires. While the credit could take a variety of forms, it would essentially mean that employers were relieved in some way of their payroll taxes. Thus, hiring a new person would be less expensive than it would be otherwise.
  • Businesses bring on workers sooner rather than later. The intended effect of such a measure, naturally, is that employers begin hiring sooner than they would have otherwise, since they would in practice get new workers for a discount.

Some economists apparently think that, timed right, a tax break of this kind could stimulate hiring like few other measures.

Bankruptcy and Potential Drawbacks

Naturally, the new-hire tax credit is by no means a guaranteed solution to the problem of unemployment. Among its flaws, some critics point to the following:

  • Potential employer exploitation: Some employers could take advantage of the “discount employees” they’d get by hiring while the tax credit was effective and firing the employees as soon as the savings ended.
  • Potential aid for dying companies: Another drawback could be that the credit would end up supporting companies that are in the process of going out of business, are not sustainable, or are at risk of filing bankruptcy; and that the jobs in those businesses would end before very long.

Again, this potential economic stimulant is still in its very early stages, so check this blog for updates as more information becomes available.

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Tuesday, October 6th, 2009

Survey: Shoppers of All Income Levels Cutting Back

A recent survey conducted by IBM found that Americans are trimming their spending in this recession, no matter how much income they pull in each year. Here’s a look at how people are saving and how to make similar cuts work for you.

Saving Strategies at the Supermarket

  • Shopping around: 49% of respondents have apparently begun hitting multiple stores to get the best deals on food products. This strategy can be effective, especially if you currently rely on costly convenience stores for the basics. But beware of driving too far for a bargain – your time and gas are valuable, too.
  • Buying less: More than half (52%) of those surveyed noted that they now buy less at the grocery store. If you choose to follow this strategy, be sure you cut back on expensive items you don’t need and food you end up tossing rather than eating. And don’t buy so little you’ll be hungry all the time – grocery store prices are much lower than those at restaurants and fast-food joints.
  • Looking for new foods: Among those making $20 thousand or less per year, 45% admitted to turning to foods that kept them full for longer periods of time. This can be doubly effective, since many foods that meet this criterion (such as oatmeal, lentils, rice, beans and potatoes) are generally inexpensive as well.
  • Trimming luxury brands: A significant number of those surveyed (34%) mentioned opting for less-expensive versions of health care and beauty products, rather than sacrificing them altogether. This can be very effective, especially if you compare ingredient lists to make sure you’re getting exactly what you want before you buy it.

Frugality Beyond the Recession?

Perhaps surprisingly, a majority of respondents indicated that they will be continuing some or all of their money-saving strategies once the recession ends – 60% said they’d keep exploring various grocery stores for bargains.

This is perhaps the wisest move of all.

And, based on a study conducted by AlixPartners earlier this year, the frugal future of Americans may be more than an optimistic hope.

In fact, the group’s study suggested that our country’s spending levels after the recession will be at only 86% of what they were before the stock market collapsed.

That may be bad news for some industries, but those dealing with debt, job loss or filing bankruptcy, every little bit helps.

Additional Resources

Government Consumer Expenditure Survey Booklet (2005 – 2009) (PDF)

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Friday, September 25th, 2009

Filing Bankruptcy & Foreclosure in America 2009

Check out this infographic on filing bankruptcy & foreclosure:

Bankruptcy and Foreclosure Rates for The U.S. in 2009

Bankruptcy and Foreclosure Rates for The U.S. in 2009

Check out filing bankruptcy and foreclosure statistics by state.
Startling statistics about filing bankruptcy and foreclosure in America this year:

  • A foreclosure action is taken every 10 seconds. There were 1,528,364 total foreclosure actions taken in the first half of 2009.
  • An individual files bankruptcy every 22 seconds There were 699,104 total personal bankruptcy filings in the first half of 2009.
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Posted in Bankruptcy and the Economy, Mortgage Foreclosure | 16 Comments »

Wednesday, September 23rd, 2009

10 Companies that Could Face Bankruptcy

Last week, Yahoo Finance had an interesting article about 10 big companies with troubled finances.

Citing a report by Audit Integrity, an independent corporate accounting researcher, these 10 publicly traded companies had the highest probability of declaring bankruptcy. Like many of their American customers, these companies may be seeing less income coming in and debts that just won't shrink. On the list:

  • Hertz: financing a fleet of new models while consumers cut travel and spending.
  • Sprint Nextel: phone customers are fleeing for rival carriers with more popular "smart phone" models.
  • Macy's: customers are shying away from higher-end department stores in favor of more affordable shopping.
  • CBS: TV advertising dollars aren't what they used to be, and CBS's difficulty may be a sign that other broadcasters could lose their footing as well.

Whether or not any of these companies end up filing bankruptcy remains to be seen. Signs of economic recovery could find investors sighing with relief.

Corporate Bankruptcy Chapters

Like consumers, businesses typically have two options when filing bankruptcy: Chapter 7 bankruptcy and Chapter 11 bankruptcy.

Chapter 7 corporate bankruptcy works like chapter 7 personal bankruptcy, in which assets are sold, or liquidated, to repay creditors.

Chapter 11 bankruptcy is similar to chapter 13 for consumers, in which corporation enter a structured plan to repay creditors over time.

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