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Friday, February 13th, 2009

Filing Bankruptcy FAQs: Get Your Bankruptcy Questions Answered

If you’re considering filing bankruptcy, you probably have many questions on your mind.

Take a look at these frequently asked questions about bankruptcy to learn the answers you may need to move forward.

  • Do I need a bankruptcy lawyer? Since the introduction of the new bankruptcy law in 2005 (BAPCPA, or the Bankruptcy Abuse Prevention and Consumer Protection Act), filing for bankruptcy has been much more difficult. Because you need to fill out vast amounts of paperwork, meet strict deadlines and file reams of paperwork with the court, you should consider working with a bankruptcy lawyer.
  • What is the automatic stay? The automatic stay is one of the most powerful protections bankruptcy offers. It works by preventing your creditors from taking any collection action against you and lasts throughout the duration of your bankruptcy case, as long as you adhere to the rules set up by the court.
  • Can bankruptcy prevent foreclosure? Foreclosure is considered a form of collection, so when you file for bankruptcy, foreclosure can be prevented by the automatic stay. Because Chapter 13 bankruptcy cases last for three to five years, you may be able to prevent the foreclosure of your home long enough to make other plans or catch up on your mortgage payments.
  • How do I know if bankruptcy is right for me? A bankruptcy lawyer can help you make this important decision, but you can help yourself by doing some research on your own. You can find lots of useful information on both Chapter 7 bankruptcy and Chapter 13 bankruptcy on Total Bankruptcy’s web site.
  • What are the bankruptcy laws in my state? Technically, bankruptcy is ruled at the federal level, so laws are the same across the country. Each state, though, has different Chapter 7 exemptions, which determine what property you can hang on to if you decide to file under Chapter 7 of the U.S. Bankruptcy Code. Check out your state bankruptcy laws.

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Posted in The Truth about Bankruptcy | 3 Comments »

Thursday, February 5th, 2009

Was 2008 the Year of the Bankruptcy?

Times are indeed tough—more than one million Americans filed Chapter 7 or Chapter 13 bankruptcy last year.

As the U.S. economy sunk, the number of Chapter 7 and Chapter 13 bankruptcies rose 33 percent, according to data from U.S. bankruptcy courts compiled by bankruptcy data firm, Automated Access to Court Electronic Records.

Bankruptcy data shows there were 819,115 personal bankruptcy filings in the U.S. during 2007.

In 2008, that number rose to 1,086,130. While the number of bankruptcy filings in 2008 falls far short of the record 2.1 filings in 2005, it’s still a significant increase.

The number of U.S. personal bankruptcies in 2008 was the highest since the new bankruptcy law went into effect.

The Reason for the 2005 “Bankruptcy Rush”

In 2005, many consumers raced to file Chapter 7 bankruptcy before the bankruptcy reform law took effect.

After BAPCPA took effect, it became more expensive to file bankruptcy and some people weren’t eligible to file Chapter 7, making Chapter 13 bankruptcy more appealing to some.

Some States Hit Harder Than Others

Although the number of bankruptcy filings increased everywhere, some areas of the country seemed to be hit harder by the recession.

The greatest increases in per capita bankruptcy filings were seen in Nevada, Delaware, California, Rhode Island and Florida, where the effects of the collapse of the housing market, mass layoffs and a generally poor economy were particularly pronounced.

For the second year in a row, Tennessee had the highest per capita rate of personal bankruptcy filings.

Texas saw an increase of only 1,500 more Chapter 7 and Chapter 13 bankruptcies, making it the state with the smallest increase in bankruptcy filings.

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Posted in Economic News: How Are We Doing? | Comments Off

Wednesday, January 21st, 2009

Keep Your New Year’s Resolution to Reduce Debt

Of all the 2009 New Year’s resolutions that were made a few weeks ago, many are likely to be forgotten in the upcoming months.

But if you made a New Year’s resolution to reduce debt in 2009 there are simple steps you can take to stay on track and reach your goal.

How to Reduce Debt in 2009

In order to be successful with your New Year’s resolution, you’ll need to clearly understand your financial circumstances.

Start by adding up your debts, establishing a budget and creating a timeline to paying off your debts.

Your plan may include eliminating extras and cutting out unnecessary spending. For some people, getting a second job could help save more money to chop down those bills.

Control Spending Habits

Millions of Americans rack up enormous amounts of debt by using credit cards to make purchases.

Credit was once so easy to get that many people felt as if they weren’t actually spending real money when they used plastic. As many of us can attest to, credit card debt can add up quickly.

Use credit cards only for emergencies and make it a habit to pay for purchases with cash. This will prevent overspending, reduce impulse buying and make you more aware of your spending habits.

Obvious Tip, But Necessary: Save Money!

In order to reduce debt, it’s important that you actively seek out ways to save money and eliminate cash leaks in your budget.

Even small savings in your budget can add up quickly. The money saved can be used to pay off your bills.

  • If you have both a landline and a cell phone, you might consider discontinuing the landline.
  • Pay credit card bills on time each month to avoid late fees and higher interest rates. It’s important to keep a close eye on bank statements, because many banks are raising interest rates without notice, even if you’ve never been late with a payment. It may be possible to transfer balances to lower interest accounts in order to save money.
  • Shop wisely and seek out the best deals on essential items.
  • Trim high grocery bills by buying generic products when possible and clipping coupons. If you’re able to shop at a supermarket that doubles coupons, the savings really add up.

[TIP: For more ideas on how save money, check out The Debtress blog.]

Too Deep in Debt? Chapter 7 Bankruptcy Eliminates Debt

If you've lost your job or are otherwise unable to pay your bills, you might consider Chapter 7 bankruptcy to eliminate debt.

By filing Chapter 7 bankruptcy, you may have unsecured debts like credit card, utility and medical bills discharged. This discharge can be a tremendous relief and may help you get a fresh start.

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Posted in Finance 101: Secure Your Future | Comments Off

Tuesday, January 20th, 2009

Did the New Bankruptcy Law Cause the Foreclosure Crisis?

When the U.S. housing market collapsed and foreclosures began to sweep the nation, many blamed predatory lenders, while others felt no sympathy for homeowners who took mortgages they couldn't afford.

There's been a lot of finger pointing and plenty of blame to go around as the economic recession deepens.

According to The Kansas City Star, three researchers at the Federal Reserve Bank of New York are now putting some of the blame on The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Did the New Bankruptcy Law Spawn the Foreclosure Crisis?

The 2005 bankruptcy act was pushed hard by the credit card industry and researchers argue that the law shifted risk from credit card lenders to mortgage lenders, thus spawning the foreclosure crisis.

Prior to the new bankruptcy law, debtors were able to have their unsecured debts discharged by filing Chapter 7 bankruptcy.

After debts such as credit cards and medical bills were erased, they could then apply their earnings to their mortgages.

With the new bankruptcy law came the means test, which excluded many debtors from filing Chapter 7 bankruptcy, which discharges unsecured debts, and forced them into Chapter 13 bankruptcy, which allows more time to catch up on debts but does not discharge debts.

Researchers argue that people who could have previously filed Chapter 7 bankruptcy and saved their homes are now more likely to face foreclosure.

New Bankruptcy Law Did Fuel Foreclosures: The Argument

Donald P. Morgan, a research officer at the New York Fed was the paper's lead author.

Morgan told The Kansas City Star that he was "99 percent confident" that the bankruptcy reform act of 2005 is a primary cause of the nationwide foreclosure crisis and free-falling home prices.

According to The National Association of Realtors, the average sale price of an existing home fell 12.3 percent, to $224,200, over the 12 months ending in November.

Morgan and the co-authors of the paper say that the tougher requirements imposed by the bankruptcy reform act have caused an increase in the number of homeowners who default on their mortgages or walk away from their homes rather than filing bankruptcy.

A group of academic experts studied 2007 bankruptcy data and found that debtors who have avoided filing bankruptcy in recent years seem to be ordinary people in financial distress and not the high-income debtors that the bankruptcy reform act was intended to exclude.

A growing number of experts say that families currently filing bankruptcy owe more debt than ever before and are simply unable to manage it all with their limited disposable income.

The Bankruptcy and Foreclosure Numbers

The Government Accountability Office reported that through the second quarter of 2008, more than 4 percent of mortgages were in foreclosure or more than 90 days past due.

This marks the highest reported levels of mortgage defaults in the 29 years that the Mortgage Bankers Association has been keeping such records.

Will Bankruptcy Legislation Help?

New legislation may be the key to slowing the rate of foreclosures.

The bankruptcy cram-down legislation, if signed into law, could help the mortgage crisis by giving borrowers more of an advantage and encouraging voluntary arrangements between borrowers and lenders.

If an agreement cannot be reached between the borrower and the lender, bankruptcy judges would be given the power to alter the terms of the mortgage.

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Posted in Home Foreclosure | 1 Comment »

Friday, January 16th, 2009

Creditors Scramble to Get What They Can From Debtors

Faced with the deep recession and more consumers filing bankruptcy, banks and lenders are feeling the squeeze.

Not only are many consumers backed into corners with unmanageable debt and few options, debt collectors are realizing that their options are limited too.

Many people are simply unable to repay their debts--and as the old saying goes, you can't get blood from a stone.

According to a recent article in The New York Times, lenders and debt collectors are now scrambling to get what they can from borrowers, even if it means forgiving a portion of the debts.

Some creditors are now accepting greatly reduced payments, allowing debtors to clear the debt.

This new wave of debt forgiveness has nothing to do with charity and is not an act of kindness.

Creditors are reacting to the devastating economy and working with debtors may keep them from losing everything.

Creditors Know of Chapter 7 Bankruptcy

Make no mistake; lenders are fully aware that if a debtor files Chapter 7 bankruptcy, many debts could be completely discharged.

As the recession deepens and more Americans are losing their jobs in mass layoffs, banks and credit card companies are preparing for more defaults in 2009. As a result, these creditors are competing for payment.

While some companies are scaling back consumer credit lines and hiking up fees, others are giving customers more leeway.

The New York Times reports that Bank of America said in 2008 it waived late fees, lowered interest charges and, in some cases, reduced loan balances for more than 700,000 credit card holders.

American Express and Chase Card Services are reportedly working with customers too, and the Times reported that every major credit card lender is giving debt collectors more options to help distressed debtors.

Debt collectors are also feeling the squeeze, as they are generally paid based on the amount of money they are able to recover. The number of borrowers who are receiving payment extensions has reportedly doubled in recent months and deals to forgive 20 to 70 percent of credit card debts are becoming common.

Just a few years ago, banks and credit card companies were far less likely to work with debtors. However, as the number of people filing bankruptcy grows so does the amount of bad debt that credit card companies are forced to write off. This has forced many creditors to change their debt collection strategies.

Creditors realize that consumers now have fewer options to pay off debts.

Debtors who may have used equity in their homes to pay off debts in the past no longer have home equity.

As costs of food and fuel have soared and many consumers have lost their jobs, savings have been depleted and filing bankruptcy becomes the only option.

So, if you have outstanding debt, consider giving your lender a call a having a chat. Perhaps you could pay off that account for less than you think.

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Posted in Your Credit Score | Comments Off

Tuesday, January 13th, 2009

By the Numbers: 1,064,927 Consumer Bankruptcies in ‘08 … Number Likely to Climb in ‘09

Last year overall consumer bankruptcy filing topped 1,064,927, according to the National Bankruptcy Research Center. This number is up 33 percent from 2007, when 801,840 people filed.

Numbers are expected to continue to climb this year as the recession weighs on consumer’s wallets and more people turn to filing bankruptcy.

“Consumers are under great financial stress, with no immediate end in sight,” said Samuel Gerdano, American Bankruptcy Institute’s executive director, in a news release. “We expect the upward spike in personal bankruptcies to continue in 2009.”

Mass layoffs and business bankruptcies haven’t helped the matter. With hundreds of thousands of people losing their income every month, Chapter 7 bankruptcy has become an appealing option for many.

And, as people struggle to keep up with daily living expenses and mounting debt, some have turned to filing Chapter 13 bankruptcy to stop foreclosure/repossession proceedings and to get set on a debt-repayment plan.

Stay tuned to Total Bankruptcy for economic news that matters to the people.

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Posted in Economic News: How Are We Doing? | 1 Comment »

Thursday, October 30th, 2008

America’s Credit Card Defaults Increasing

The Washington Post reports that Americans are increasingly unable to pay off their credit card debt, which forces banks to not only lend to fewer people, but to also stockpile cash to guard against future losses.

Recent Federal Reserve data shows that the rate of credit cards defaulting increased 54 percent in the second quarter of 2008 from the same period a year ago.

Capital One recently announced that that their clients’ default and delinquency rates are climbing, especially in the credit card and auto loan departments.

It further reported that 6.34 of its credit card loans went into default in September, which was up from 5.96 percent of newly defaulted loans in August. It expects defaults will rise up to 7 percent of loans going bad each month.

JPMorgan Chase reported that the number of their credit cards in default status rose 45 percent in the third quarter compared to the same time last year. The company also predicts that default rates will continue to rise to total 7 percent of credit card loans going bad each month by 2009.

Are You In Credit Card Trouble?

Are you having trouble making ends meet, much less paying off your credit card debt? Did you know that Chapter 7 bankruptcy can eliminate unsecured debt like credit card debt?

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Posted in Your Credit Score | Comments Off

Monday, September 29th, 2008

House Passes Bill Delivering Blow to Credit Card Industry, High-Five to Consumers

Last week, the House of Representatives passed the Credit Cardholders Bill of Rights Act by a vote of 312-112.

The bill restricts the credit card industry from continuing practices that inflate late-payments penalties.

Among other new rules, the bill requires that credit card companies give at least 45 days notice to consumers before their interest rates increase and they must stop double-cycle billing.

The bill comes at a time when TransUnion, a leading credit-reporting agency, recently reported that the percentage of people late on their credit card payments has risen in the second quarter from the same time last year.

It also reported that the average debt per credit card holder rose 8.6 percent.

For the quarter ending June 30, 1.04 percent of credit card holders were delinquent at least 90 days on one or more of their credit cards (compared with .91 percent of consumers for the second quarter from the same time last year).

The White House opposed the bill, saying it would ultimately result in higher interest rates for Americans, but it didn’t go as far as threatening to veto it.

Republican opponents said the Federal Reserve is already planning new regulations that would address the issues proponents of the bill are concerned with.

Carolyn Maloney (D-NY), the chief sponsor of the bill and the House Financing Services Financial Institutions Subcommittee chairperson, said much of the language in the bill copies the Fed’s proposed regulations.

The bill now heads to the Senate, where it’s already facing mixed reviews.

Did you know...

...That Chapter 7 bankruptcy was designed to eliminate credit card debt?

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Posted in Your Credit Score | 2 Comments »

Tuesday, August 12th, 2008

Consumer Credit Explodes in June, Further Proving Consumer Claims Unfounded

Last week, we at Total Bankruptcy expressed doubt about the reports from a consumer survey suggesting that consumers were cutting back on using credit cards recently.

Respondents in the Javelin Strategy & Research online survey reported buying goods from stores such as Target and Wal-Mart and not eating out at restaurants as much as they previously had.

37 percent reported that they were using their credit cards less.

But in the article, we looked at data from the Federal Reserve that amply demonstrated that while the amount of outstanding revolving credit had decreased in April, increases in May suggested that consumers were back to buying with credit.

Of course, trying to maintain their pre-recession standards of living might cause many individuals to turn to credit for staples, such as gas and groceries.

Now, the Federal Reserve numbers from June have been released, proving our skepticism to be founded.

As the Washington Post reports, consumer credit rose by a whopping $14.33 billion, with revolving credit accounting for $5.49 billion, or a 6.8 percent rate of increase.

In fact, the overall number is the fastest expansion of credit in seven months.

Perhaps asking consumers whether or not they're using credit to buy luxury items is misguided: instead, it would be interesting to see how many consumers used credit cards to buy gas, groceries, school supplies, and a host of other basic necessities.

The numbers suggest it's becoming more and more common as the economic downturn wears on.

P.S. Did you know that Chapter 7 bankruptcy was designed to eliminate credit card bills?

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Posted in Economic News: How Are We Doing?, Your Credit Score | Comments Off

Tuesday, April 22nd, 2008

House Hears Testimony on Excessive Credit Card Fees

The House of Representatives heard testimony last week from Senators, credit card users, consumer advocates and members of the credit card industry on the Credit Cardholders' Bill of Rights, legislation proposed by Representative Carolyn Maloney (NY-14) to address abusive practices of the credit card industry and improve consumer protection.

A spokesman from the CFA and Representative Maloney both pointed to the credit card industry's remarkable ability to make vast profits in what it describes as a "risky" industry.

Maloney hinted that the industry could save money by mailing fewer than five billion annual mail solicitations for credit cards, suggesting that interest rate hikes and late fees are only one way of making profit.

The COO of Citigroup's credit card division supported adoption of changes to credit card agreements proposed by the Federal Reserve.

If adopted, the changes would amount to a baby step toward credit card reform.

Psstt... did you know that Chapter 7 bankruptcy was designed to eliminate credit card debt?

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Posted in Your Credit Score | Comments Off

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