Archive for the ‘Finance 101: Secure Your Future’ Category

Detroit has reached a final settlement with its greatest opponent, bond insurer Syncora Guarantee Inc., this Monday, according to a lawyer for the city.

Under the deal, Syncora will recover roughly 14 percent of money owed, which they've long claimed totals more than $333 million. Syncora will receive two sets of notes from Detroit, a lease to control a tunnel to Canada, land near the tunnel, and the possibility of leasing and controlling a parking structure.

With this settlement, Syncora is fully exiting the Chapter 9 bankruptcy case , including any future appeals.

David Heiman of Jones Day, a lawyer for Detroit, said to U.S. Bankruptcy Judge Steven Rhodes in Monday’s hearing that both parties have “laid down their swords.”

While the agreement with Syncora is an important cleared hurdle for Detroit’s bankruptcy emergence, the city still faces creditor Financial Guaranty Insurance Co., who is seeking roughly $1.1 billion from the pension debt it insured.

On Monday, FGIC asked Judge Rhodes to suspend the trial until September 22 so the company can modify its approach in the wake of Syncora’s settlement. The trial is currently on hold since last week so Detroit and Syncora could finalize their deal.

Detroit’s Grand Bargain is centered around an estimated $816 in pension debt. FGIC may be held responsible for payment if investors end up taking losses.

The Grand Bargain aims to relieve $7 billion in liabilities while supporting state retirement arrangements from state and private contributors. Detroit has guaranteed it will not sell off any pieces from its art collection to pay back any debts.

Syncora apologized in a court filing Monday. The company has been a longtime adversary in the case and recently accused court appointed mediators of inappropriate conduct and conflict of interest.

Because of the apology, Rhodes has stated he will no longer sanction Syncora in its attorneys.

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Several months after filing for bankruptcy, Eastman Kodak Co., the iconic film company, says it has reached a bankruptcy settlement deal, according to a report from Reuters.

The company told sources this week that it will receive $895 million in financing from three Wall Street banks that have pledged to guide the camera company into its new business model.


Kodak Appears Ready to Exit Bankruptcy Court

According to reports, Kodak plans to leave bankruptcy court with a long term loan worth $695 million, courtesy of JP Morgan Chase, Bank of America, and Barclays.

In addition to the massive loan, Kodak will also receive an asset-based revolving credit line of $200 million from the three banks, sources report.

In addition to the extra funding from the banks, Kodak is also looking to sell intellectual property, such as patents on camera technology, for millions of dollars, and to sell 85 percent of the equity in the company.

And while the company is optimistic about its chances of gaining approval for the loans, and the sale of several assets, sources note that the deal must still be approved by the U.S. Bankruptcy Court in Manhattan.

If the deal is approved, Kodak plans to use the extra cash to pay off some of the loans that funded its bankruptcy, which shows just how complicated corporate bankruptcies can become.

But the company also plans to use the money to fund its business expenses. After it leaves bankruptcy court, which is expected to happen within the next few months, Kodak is looking to rebrand itself as a commercial imaging business, according to sources.

Shift in Technology Forced Kodak to File for Bankruptcy

While it looks to enter the field of commercial imaging, Kodak is entering a whole new realm, as it gained fame for allowing regular consumers to take and produce their own images.

But the rapid shift in digital technology over the past two decades made Polaroids obsolete, as Americans quickly turned to digital cameras for their photography needs.

When Kodak’s revenues started to shrink, it found itself unable to keep up with its high pension costs, which led to the decision to file for bankruptcy in January 2012, according to reports.

Kodak, however, remains hopeful for the future. If it is able to sell its rights, it will likely repay its most senior creditors, which would solve a number of problems.

And while the company has sold many of its assets already, it still has a wealth of assets to move in an effort to maintain its vitality.

Monday, March 25th, 2013

Is Forgiven Debt Taxable?

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It's tax time and you're getting ready to file your taxes. Have you had any debt forgiven this year? How much debt? Have you thought about how that affects your taxes?

Many people do not realize that forgiven debt is sometimes taxable income. Now, there are exceptions to every rule but it is important to look into if you had debt forgiven last year and what that could mean.

Certain types of forgiven debt are exempt from Federal taxes. Those include but may not be limited to:

Other forgiven debt, specifically if you saved over $600, may be considered taxable income according to the IRS. This must be claimed on your tax return, otherwise the IRS has grounds to come after you.

Credit and debt collectors are required to file 1099-C forms with the IRS for forgiven debts of $600 or more. Some collectors will send a copy of the form to their customer but it is not required that they do so.

The 1099-C is a very complicated form and it is important to double-check the form before submission to verify that all the information is correct.

The IRS is expected to get $6.5 million in debt forgiveness this year based on the 1099-C form.

If you're unsure of anything, contact a local professional as soon as possible.

Tuesday, March 5th, 2013

What Type of Online Shopper Are You?

Last year, the United States saw ecommerce spending jump to $194.3 billion, up 16.1% from $167.3 billion in 2010. The majority of these purchases were likely made on credit cards, and credit card debt is often cited as a reason why people file Chapter 7 and Chapter 13 bankruptcy.

Americans in general are definitely online shoppers, but which type of online shopper are you?


what's your online shopping style

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The Seeker

  • They’re on the lookout for specific items.
  • Know exactly what they want, and are ready to buy.
  • They’ll shop multiple stores until they find what they seek.

The Frugal Finder

  • They’re always on the lookout for the best deal.
  • They look for online coupon codes, sales, and free shipping promotions.
  • They’ll comparison shop among multiple online stores to get the most bang for their buck.

The Researcher

  • They have a goal in mind, but haven’t settled on a particular product or brand. Researchers browse with the intention of finding information until they decide on a product.
  • They take their time, reading product descriptions and reviews to gather as much information as possible before making a purchase.

The Window Shopper

  • The online equivalent to people who walk by a retail store without stopping.
  • They don’t really have a product or purpose in mind.
  • They could be looking to entertain themselves, or browsing to gather research for a future purchase.

The Mobiler

  • They love shopping online, but rarely find themselves sitting in front of their computer. Instead, they use smartphones or tablets to take care of all their online shopping needs.
  • They know what they want and where to get it. They make purchases with the app of their choice in just a few clicks.

The Hermit

  • They avoid traditional brick-and-mortar stores as often as possible.
  • They sign up for all the deals, newsletters and alerts to make sure they’re shopping at the right time and using the Internet to their fullest advantage.
  • Serious Hermits sign up for auto-refill programs to make sure they always have stock on hand.

Brought to you exclusively by Total Bankruptcy.

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Because higher income earners are less likely to qualify for Chapter 7 bankruptcy, Chapter 13 can provide a great alternative depending on your situation.

For example, let’s say you have $40K in credit card debt. As you continue to attempt to pay that off little by little, month by month, on your own, you’re racking up tons of additional dollars in interest. And the longer it takes you to pay it off, the more interest you’ll be paying.

By filing for Chapter 13 bankruptcy, you’ll essentially be freezing your credit card debt and cutting those interest payments off at the knees. Now, it is important to note that you will have to pay both attorney and trustee fees but those will be determined up front and, for the most part, included in your payment plan.

Your payment plan will be comprised of your total debt + attorney fee + trustee fee. Many attorneys will take a portion of their fee up front and put the remainder into your payment plan.

In our example, let’s say your attorney fee is $4K and the attorney requests $1K up front, the remaining $3K will go into your payment plan.

In regards to the trustee fee, that will be, at a maximum, 10% of your plan total (debt+attorney fee within the plan).

The maximum number of months per plan is 60 months.

It'll all break down like such for your plan total:

    Total Debt $40,000
    Attorney Fee $3,000
    Plan Total $43,000

Therefore your payment plan will look like:

    Plan Total $43,000
    Trustee Fee $4,300
    Total Payment $47,300

$47,300/60 (months) = ~$788/month

So, in 5 years, your $40K credit card debt will be paid off without having to deal with and worry about compounded interest.

One thing to take note of is your tax refund during this time. Your trustee will take any/all of your tax refunds so it is in your best interest to adjust your holdings so they yield little to no refund and you’re getting the maximum amount possible on a per paycheck basis.

To find out if you quality for Chapter 13 bankruptcy, speak with a local bankruptcy attorney.

Source: Janet A. Lawson, Bankruptcy Attorney

Wednesday, January 2nd, 2013

New Year, New Financial Outlook

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New Years Day 2013 came and went.  Many of us have made resolutions to try to better ourselves over the next twelve months.  Depending on where you need to focus, this can be an excellent opportunity to try and tighten up your financial outlook.  With a few small changes, you have the potential to gain a new level of financial security (and hopefully find a way to stave off calling a bankruptcy attorney).

  • Save a portion of every paycheck you earn- NO EXCEPTIONS

It sounds easy, take a small portion of every paycheck and set it aside for a rainy day.  If you can save $50 off each check, and you get paid by-weekly, you’ll have saved over $1,250 by the end of the year!  It’s a fair assumption that you won’t need to dip into your rainy day funds more than once every couple of years, so this can quickly add up to several thousands of dollars.  The only catch is, you need to do it every paycheck.  If you start to let this slip, you’ll lose the habit and have a drought stricken rainy day fund.

  • Eat a light, homemade lunch

This can help your wallet as well as your waist.  Snacking on fresh fruit and celery during the day is cheaper than buying greasy fast food, and better for you.  If you invest your time preparing a proportioned meal for lunch, you won’t have to worry about waiting in line during your precious lunch break.

  • Check your cell phone bill

There was a time where people were really concerned about how many minutes they have on their cell phone plans, but for many, that times has left.  With most carriers offering free cell to cell calls, and free nights and weekends (as well as the rise in texting), many people have an abundance of minutes left over each month.  Often times, you can do with less monthly minutes and save $10, $20 or even $30 a month.  This can really add up in the long term.

  • Pay off credit cards when you have the money

Millions of Americans are in some sort of credit card debt.  And while everyone wants to be free of it, many don’t take the time to look at how much they owe.  If you have a credit card where you are making minimum payments of $50 or $60, you may be able to pay off the balance.  Don’t just continue making payments, the longer you do that the more you pay in interest to the credit card companies.  If you can pinch pennies and wipe out an entire card, you can save yourself interest you have to pay the credit card company, and instead use your money to earn interest.

While there are dozens of great ways to sure up your finances this year, these few easy to follow tips can help save you big time.

Monday, December 24th, 2012

Save Money During the Holidays

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For many people, Thanksgiving starts the holiday gift giving season.  And while we have seen some improvement in the economy, for millions of Americans this time of year brings plenty of stress too.  When money is hard to come by, how can we save a few dollars while keeping everyone happy?

If you are buying for your kids, and they really want a video game system, consider getting them something retro.  Instead of shelling out hundreds of dollars for a new game system (not to mention the games, and internet subscriptions), you could consider getting your kids an older game system, like a Nintendo NES, or SEGA Genesis.  While these systems are a little harder to come by, they are still available and run much cheaper.

If you and your significant other are still contemplating gifts for each other, consider buying yourselves a present.  If you have a budget for each other’s gifts, let’s say $100, then why not buy one gift for the two of you for $100?  You treat yourselves to a nice date night, or, if your budget is a little higher, to a weekend trip somewhere.  If you get something for the two of you, then you could probably help save some money (of course, you still may want to consider getting a small side present, like flowers, to surprise your significant other).

And, while it may sound cold, really think about how much you spend on presents for the people you don’t see very often.  Do you really need to buy your second cousin a $75 sweater that they don’t want?  A few small presents that show you know what they like (specially picked out music, for example) may be much cheaper and more appreciate by them.

And that’s probably an important idea to follow for all of your gifts.  More money doesn’t mean a better present.  Instead of giving cash or a gift card, spend time thinking of a meaningful present.  Spending time deciding what to get someone can save you from spending a lot of money buying it later- and the odds are much better that they’ll like it too!

The final tip to help you avoid filing bankruptcy is, most obviously, to spend within your limits.  Everyone is aware that times are tough.  And anyone that you are buying gifts for would rather you spend a little less, as opposed to burying yourself in more debt.

Times are tough for everyone, and no one is going to judge you if you spend a little less this year than you did ten years ago.  And if, on the off chance, someone does judge you for the amount of money you spent on them, then they probably weren’t worth the present in the first place.

Thursday, December 13th, 2012

Doomsday Events That Never Happened

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Doomsday myths have propagated the world for centuries, and yet we’re still here.

With December 21, 2012 quickly approaching, preppers from near and far are busy preparing for the worst, and spending hundreds of thousands dollars doing it.

Halley's Comet: 1910

When astronomers discovered the Earth would pass through the tail of Halley’s comet that year, mass hysteria ensued thanks to tabloids.

Many thought a poisonous gas would penetrate the atmosphere and end the world. Entrepreneurs capitalized on the craze, selling products that would protect people from a gas that never materialized.

December 21, 1954

Housewife Dorothy Martin founded a cult known as the Seekers. She informed her followers aliens from another planet, Clarion, were sending her messages that indicated massive apocalyptic flooding would begin on December 21, 1954.

She and her cult followers gathered to await a spaceship to be “rescued” from the supposed cataclysmic danger. When nothing happened, she maintained the group had convinced the “God of Earth” to spare the planet, but the cult disbanded shortly after.

Nostradamus: July 1999

The 16th-century French astrologer and physician is well known for his predictions.

Many of them have been tied to historic events, but Nostradamus’ prediction that a “king of terror” would come from the sky and destroy the planet in July 1999 was false. Many believed he was referring to a meteor, but nothing happened at all.

Y2K: December 31, 1999/January 1, 2000

Many believed computers programmed with two-digit years rather than four would revert to 1900 rather than rolling over to 2000 at the start of the year.

While there was some panic (such as a CNN report of a milk shortage due to failing farm equipment), and even warnings of nuclear war as a result of the programming error, the hysteria didn’t reach the expected level.

Harold Camping

Harold Camping is a famous for his failed doomsday predictions going back to 1978. In 2011 alone, he had two failed predictions: May 21, 2011 and October 21, 2011.

His May 2011 predictions drew a lot of media attention, thanks to billboards and mass advertising. He gained a large following of people, many of whom drained their life savings to prepare for the return of Christ. When his May prediction failed, he claimed his math was off and changed the date to October 2011, a date that was also uneventful.

December 21, 2012: Why it Won’t Be the End

There are many reasons why the world won’t end in just a few weeks. The Mayans believed the Earth runs in cycles. December 21, 2012 marks the end of a cycle, and a re-birth. As time renews, so does the world. Some say a breaking away of the continents will destroy the world this year, but scientists say any shift in continents will be subtle, and not drastic enough to end civilization.

Some say the galactic alignment that only occurs once every 26,000 years spells doom for our planet.

National Aeronautics and Space Administration (NASA) experts say there’s nothing out of the ordinary about the alignment we’ll be entering. A planetary alignment occurs with every winter solstice, which happens on or around December 21st each year.

Others maintain a “planet X” is on its way to colliding with Earth and will cause mass destruction. NASA says there’s no object out there. Still others claim solar activity will end the world, but once again, NASA experts say solar flares are not following the typical 11-year cycle, and therefore aren’t expected to make any impact in 2012.

Rather than risking bankruptcy preparing for the end of the world, it is far wiser to prepare financially for personal disasters such as job loss and illness.

Friday, November 9th, 2012

Are You Financially Prepared?

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Hurricane Sandy caused havoc and devastation for millions of people in the US recently.  It has left many wondering if they would be financially prepared to handle such an emergency.  Times like this can be important points of reflections and preparation for future trouble.

In June, the Chicago Sun Times ran an article with important tips to build a financial emergency nest.

One of the first things to understand is that there is no secret trick, or “magic wand” as the article calls it, that will fill your bank account with money.

A good tip is to take a very small portion of each paycheck and set it aside in a traditional savings account.  It’s not the sexy thing to do any more, and it sure won’t earn you a lot of interest, but it is easily accessible and highly liquid funds.  You have the ability to dip into it when you need it, and the security of having it in the bank.

If you don’t think you have the discipline to save a portion of you income, you can have your employer withhold more from your income in your taxes.  It is essentially an interest free loan to the government, but you’ll get a nice surprise around tax season.

The main benefit to having the government withhold more of your income is to never be caught owing the IRS any money.  The biggest drawback is the frequency of the payout.  You only get it once a year, and you can’t easily dip into it when an emergency happens.  That being said, it does help you once a year, and you could use it as a great start to a savings account.

When it comes to savings, a little bit saved at regular intervals can really add up.  Don’t get overwhelmed with how long it will take to save up a reasonable sum.  Instead, focus on the little steps.  Even if you only put $10 a week aside, you’ll have over $500 at the end of a year.

And with an emergency fund, you (hopefully) won’t need to dip into it every year.  It doesn’t take much to see how minor contributions every week, without fail, for a couple years, can build up into a very respectable reserve that you can dip into when a crisis occurs.

Hurricane Sandy has affected many people, and millions will have to take some time off of work.  Wage earners will not be able to earn their money, and hopefully, if it happens to you, you can now be prepared.  An emergency fund doesn’t need to be your retirement nest egg, but if it can help get you through a tough time it has done its job.

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Kelly Kraft is a former TV news reporter and spokeswoman for Illinois Governor Pat Quinn.  She is a journalism and political science graduate from Indiana University.  She is also Governor Quinn’s pick to be the executive director of the Illinois Sports Facilities Authority.  Despite her qualifications, Kraft is sparking an intense debate; she also filed for bankruptcy in 2009.

According to reports, when Kraft was working in media relations for the state of Illinois she filed for bankruptcy protection.  Kraft had more than $102,000 in credit card debt.

Governor Quinn is now attempting to put her in charge of a multi-million dollar budget.  Her appointment is opposed by many, most notably, Chicago Mayor Rahm Emanuel.

This leaves Kraft squarely in the middle of a political battle.

Mayor Emanuel has not cited her bankruptcy as a factor for his opposition.  Instead, the mayor claims that Kraft has a lack of experience for such a prestigious position.

“That board and that staff is the thin blue line protecting the taxpayers of the city of Chicago from paying, in case there’s something’s mismanaged… And I think we should find the best-qualified people for that, which is why I- given the board I inherited- replaced them, put in place a whole new board with backgrounds in financial management, and expect the staff to meet that standard.”

According to other reports, Governor Quinn, “has accused Emanuel of ‘character assassination’ against both himself and Kraft, accusing the mayor’s office of leaking information that Kraft declared for personal bankruptcy in 2009.”

While Kraft’s fate is left to the politicians, it does bring an interesting question to the forefront: Should Kraft’s bankruptcy factor into her appointment?

Eric Zorn, journalist for the Chicago Tribune, broaches this topic in a recent opinion article.  His overall assessment? No, her personal finances shouldn't be an indicator on her professional abilities.

“[M]essy personal finances and attentiveness to job duties aren't necessarily or even usually related; that many lives are compartmentalized and bankruptcy shouldn't be held against her,” wrote Zorn.

Zorn has it right.

Many would argue that a personal bankruptcy shows evidence that Zorn is bad with finances and, therefore, shouldn't be trusted with a major state budget.

Without knowing more of the details of her situation, there shouldn't be an automatic presumption that her personal finances are evidence of poor budgeting.  There is no background into why she filed bankruptcy or what factors lead to that decision.

Bankruptcy is a tool available to all of us.  For thousands of Americans a year, bankruptcy is the smartest financial decision they can make.  Kraft made a decision three years ago to file bankruptcy, but she shouldn't be punished now because of it.