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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 rebuilding finances after 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 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 | 25 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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Monday, September 21st, 2009

U.S. Poverty Up, Income Down from 2007

In a press release early this month, the U.S. Census Bureau reported statistics on income, poverty and health insurance in the United States. For the most part, the numbers are not especially surprising, considering the current recession. Here’s what the Bureau reported.

Income Levels

Income levels were reported as decreasing year-over-year in all demographics. The breakdown of income change by race and ethnic origin in American households:

  • Non-Hispanic white households: Decline of 2.6%, to $55,530 (reported as statistically significant)
  • Black households: Decline of 2.8%, to $34,218 (reported as not statistically significant)
  • Asian households: Decline of 4.4%, to $65,637 (reported as not statistically significant)
  • Hispanic households: Decline of 5.6%, to $37,913 (reported as statistically significant)

The difference between men’s and women’s earnings has also changed since 2007: women who work full time, year-round in 2008 reportedly earned only 77% of what their male counterparts do, down from 78% in 2007.

Poverty Levels

For the first time since 2004, the poverty rate in the United States increased in 2008 at a statistically significant level. The poverty rate of 13.2 percent is apparently the highest in the country since 1997.

  • The family poverty rate in 2008 was 10.3% (up from 9.8% in 2007), with 8.1 million families living in poverty (up from 7.6 million).
  • The married-couple poverty rate increased to 5.5% (up from 4.9% a year before) and 3.3 million people (up from 2.8 million).
  • Racially and by ethnic origin, poverty levels increased in all demographics except blacks, for whom the poverty rate remained unchanged statistically.

Health Insurance Coverage

While the number of uninsured Americans rose from 2007 to 2008, the percentage of the total population without health coverage remained at 15.4%.

  • In 2008, 46.3 million Americans were without health insurance (up from 45.7 million in 2007).
  • 255.1 million Americans did have health insurance in 2008 (up from 253.4 million in 2007).
  • Private health coverage dipped in 2008 from 202.0 million to 201.0 million.
  • 87.4 million were covered by government health insurance, up from 83.0 million a year before.

The growing rate of uninsured and government-insured Americans is a major concern cited by proponents for health care reform, as well as the rate of Americans filing bankruptcy due to unmanageable health care costs.

Additional Resources

Income, Poverty and Health Insurance Coverage in the United States: 2008 (PDF)

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Thursday, September 17th, 2009

Student Loan Debt: Can it be Forgiven?

Back in the good old days (that is, before the global economy took a nosedive), many states offered loan forgiveness programs for graduates who chose to work in public service once they got their degree.

Now, thanks to budget cuts and a lowered demand for student loans on the secondary market, many states have had to pare down their educational debt forgiveness programs.

How Do Your Loans Measure Up?

Federal student loans generally come from one of two sources: the Federal Family Education Loan Program (FFEL), which includes Stafford and PLUS loans, and the William D. Ford Federal Direct Loan Program.

Those with Direct Loans may qualify for more forgiveness programs, so if you have FFEL loans, you may want to consider consolidating your loans into one Direct Loan (the government websites above have details on how to do this).

Forgiveness for Members of the Armed Forces

  • Interest accrual freeze: If you’re on active duty during war, mobilization or a national emergency and have a Direct Loan from October 1, 2008 or after, you may qualify to have your interest frozen for up to five years. This would prevent the amount you owe on loans from growing while you serve.
  • Interest rate cap: If you join up after taking out a loan, you may qualify to have the interest you pay on that loan kept below a certain rate. Further, if you took out FFEL loans before August 18, 2008 and were an active service member at the time, you may qualify to have your interest rate capped at six percent.
  • More forgiveness for Perkins loans: While five years of military service has long qualified you for a 50 percent forgiveness of Perkins loans, new rules allow 100 percent of such loans to be excused after five years for those who have served at least a year as of August, 2009.

Forgiveness for Teachers

  • Multi-district workers: As long as you teach in economically disadvantaged areas (labeled as “Title I” in the No Child Left Behind Act), you should qualify for forgiveness of FFEL and Direct Loans. Now, educational workers who teach part-time at more than one district or school can also qualify.
  • Your subject matters: The amount of forgiveness you qualify for depends on what you teach. Those who become instructors in underserved areas (like high school math and science) can expect the government to cover more of their loans.

Forgiveness for Public Service

FinAid.org lists the “service” career paths you could choose to have your loans forgiven, but the relief won’t be immediate. In fact, you’ll probably need to make payments and work in the field for a decade before your remaining debt is wiped out.

Student Loans in Bankruptcy

Student loans are one of the most difficult types of debt to discharge in bankruptcy. Debtors must prove that the loan presents an undue hardship, such as an injury that prevents the type of work for which the degree was earned. Additionally, the debtor must have made a good faith effort to repay the loan prior to filing bankruptcy.

Additional Resources

No Child Left Behind: A Toolkit for Teachers (PDF)

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Sunday, September 13th, 2009

Federal Reserve Survey: Economy Stable or Improving

The results of the Federal Reserve’s Beige Book business survey, reported earlier this month, suggest that the U.S. economy has stabilized or begun improving.

This assessment comes from a survey of the 12 regional Federal Reserve Banks, 11 of which reported “signs of” an improved economic situation.

The Findings: Faint Praise?

Overall, the report isn’t exactly parade-inspiring; in fact, the anecdotal evidence provided in it may only seem positive in comparison to the dreary numbers and figures we’ve grown accustomed to seeing. For example:

  • Retail sales were generally described as “flat,” which suggests a lack of growth – but no shrinking, either.
  • Labor markets were described as “weak.”
  • Gross Domestic Product (GDP) shrank by only one percent between April and June – a consoling number only when compared to its 6.4 percent decrease from January to March.

These are the so-called “positive” findings of the survey, which is perhaps more an indicator of how badly the U.S. economy has been doing for a while than anything else.

The Exceptions

The Federal Reserve of St. Louis was apparently the only district that did not declare outright improvement in the economy; rather, the St. Louis district noted that the pace of economic contraction “appears to be moderating.”

And not every economic sector showed even hints of recovery: the commercial real estate market is apparently still suffering “very low levels” of construction and continued weak demand for space.

What About Unemployment?

The economy’s gradual recovery is expected to be tough on those looking for work, according to the opinions of several economists. Many are predicting peaks in unemployment in the next few months and slow returns to pre-recession levels.

Indeed, the most recent release of data from the Bureau of Labor Statistics shows that job openings in the U.S. have dropped by 2.4 million, a 50 percent decrease since June 2007.

These numbers have remained fairly consistent for the past several months, and show no indications of drastically changing in the near future.

And of course, the number of Americans filing bankruptcy shows little sign of slowing down, with figures from August, 2009, slightly below July's high and well above last year bankruptcy rate.

Additional Resources

Federal Reserve: Summary of Commentary on Current Economic Conditions (PDF)
Bureau of Labor Statistics: Job Openings Report (9/9/09) (PDF)

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Friday, September 4th, 2009

High California Unemployment a sign of Economic Recovery?

Last week, the LA Times released an article pronouncing:

California unemployment hits post-World War II high. The rate jumped unexpectedly in July to 11.9% even as the national rate declined.

The purpose for this, it seems, is to inform the public of the rampant unemployment problem in the country’s largest state.

However, as in life, there is always a ‘yin’ to the ‘yang’.

High Unemployment Number, But is This the End of the Recession?

Explaining the positive side to this grossly negative numerical fright is Jerry Nickelsburg, a senior economist with the UCLA Anderson forecast:

Historically, unemployment rates continue to rise after the end of the recession. . .we're not creating enough jobs, we're losing jobs, and so that makes the unemployment rise. The importance of this is the reference to the ‘end of the recession’.

The Pain of Unemployment

If you ask the 35,800 California workers who lost their jobs last month (which is more than any other state) or the more than 760,000 residents who have lost their jobs in the last year--- the recession is far from over.

California has staggering average home prices, the nation’s highest cost-per-gallon of gas on average and is also notorious for their “sunshine taxes”. This only adds salt to the wounds of the unemployed.

California Losing Its Allure?

For so long California has been the Mecca for those searching for fame and fortune.
This began with the gold rush of 1849 and continued with the boom of the railroad, the rise of Hollywood fortunes and the blossoming of Silicon Valley.

The 16% unemployment rate won’t concave the mystique of California, but it’s worth noting that California is tied with Oregon for the fourth-highest unemployment rate in the nation, behind Michigan, Rhode Island and Nevada.

Some experts say the state is shedding jobs at a faster rate than the rest of the nation because of the prior dependence California had on their building/construction industry.

Whatever the reason, there are still large groups of unemployed workers in search of work.

We may see more Californians filing bankruptcy if this unemployment continues to rise.

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Thursday, September 3rd, 2009

Money from Government for Going Green? Can You Cash In?

The Cash for Clunkers program has ended with a bang.

Reports indicate that new car sales soared while the government was subsidizing them.

And, while many analysts predict that the boost will reverse in coming months, some people are looking for ways to apply the Cash for Clunkers concept to other industries.

Rebates for Buying Efficient Appliances

According to the Associated Press, part of the stimulus bill includes funds allocated for rebates for people who replace old appliances for more energy-efficient models.

Here are the details:

  • The process has just begun. Your state may not have officially started its rebate program yet, but it should be doing so soon. Apparently, the federal government was expected to begin providing funding to states in the last weeks of August.
  • Funding varies by state. Federal dollars provided for the program will reportedly be based on a state’s population, which means that it’s in your best interest to take action soon if you’d like a rebate.
  • This is more than a one-time savings. While the initial rebate may inspire some shoppers to choose energy efficient appliances, the financial savings will extend beyond the rebate. Energy efficient models tend to cost more upfront than their traditional counterparts, but they cost less to operate – Americans using Energy Star products reportedly saved about $19 billion on electric bills in 2008.

To find out whether your state is participating in the rebate program, consider contacting a local representative or visiting your state’s Web site.

Tax Breaks for Energy Star Appliances

In addition to the rebate program, the government has put in place a variety of all-the-time tax breaks for those who purchase super-efficient household gear.

As the site points out, even if the product you choose doesn’t qualify you for a tax break, you can cut your electric bills by buying products that are slightly more efficient than what you have now – one easy switch is switching from incandescent light bulbs to the more efficient fluorescent type.

Additional Resources
Residential Energy Efficiency Incentives (PDF)

Are you way behind on paying utility bills? You may want to consider filing bankruptcy. A local bankruptcy attorney can help you determine whether bankruptcy is the right option for you.

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