Bankruptcies set to break record

[SoCalDem]

http://www.indystar.com/print/articles/4/056397-7394-092.html

Bankruptcies set to break record
Filings in much of state may hit all-time high in '03

Bankruptcy types
• Chapter 7: Liquidation. Trustee collects assets of a debtor's estate and converts them to cash, then makes distribution to creditors.
• Chapter 13. Often preferable to Chapter 7, because it allows debtor to keep valuable assets such as a house. Involves a plan to repay creditors, usually over three to five years. Designed for debtors with a regular source of income.
• Chapter 11. Usually involves commercial entities. Allows a debtor to continue operating a business under a court-approved plan of reorganization.

Hazards of filing
• Filing remains on credit report for 10 years.
• Lower credit score makes it more difficult and expensive to obtain credit -- everything from car loans to mortgages to credit cards.
• Poor credit has other implications. Some employers review credit scores of applicants. Insurance companies may charge higher premiums. Landlords may consider you a higher risk.
• It can be pricey. Attorney fees usually cost a minimum of $500 to $1,000. Court filing fees may be hundreds of dollars.

Alternatives
• Credit counseling firms, such as the nonprofit Consumer Credit Counseling Service of Central Indiana, help with budgeting and in structuring a payment plan with creditors.
Source: Administrative Office of the U.S. Courts

 

By Chris O'Malley
[e-mail]
July 8, 2003
 
Residents across a large portion of Indiana filed for bankruptcy at a record pace during the first half of this year, and experts say the number of filings could reach an all-time high by year's end.

Filings by individuals in the Southern District of Indiana, which includes Indianapolis and the lower two-thirds of the state, numbered 17,074 on June 30, compared with 15,806 in the first half of 2002.

"That's a whisker over an 8 percent increase from last year," said John O'Neal, clerk of the U.S. District Bankruptcy Court for the Southern District. He projects that by year's end as many as 34,147 individuals will file, compared with 32,232 last year. That would be an all-time high for the district.

Midyear bankruptcy numbers elsewhere in the country were not yet available.

A string of recent layoffs may be pushing filings upward in the district, which recorded the eighth-highest number of bankruptcies nationwide in fiscal 2002.


....snip

[Jacobin]

1. Filings are at a national all time high also

http://www.abiworld.org/stats/1990nonbuschapter.html

Don't worry, the tax cuts will fix everything. :mad:

[teryang]

2. Yeah sure

It's real pricey: for $500 and cost you get rid of tens of thousands of dollars in debt you will probably never be able to pay off.

As for the other costs, within a year of his bankruptcy a friend of mine had a wallet filled with twenty new credit cards.

Credit counseling is bullshit for someone who is bankrupt.

[blondeatlast]

4. Don't be so damn quick to judge.

My husband and I declareed bankruptcy last year. Our TOTAL credit card debt was--$0. Yep, Zero/zilch/nada.

What happened to us is that I had a near heart attack. Of course we had insurance, or so we thought. Hubby paid his premiums to employer, employer pocketed the dough instead of sending it to the insurance company.

For whatever reason, when the hospital called to verify the insurance, they said of course I was covered. Whew, right? I had the surgery, my 4 yr old still had his mommy, I'm discharged, everyone is happy.

One year later, the hospital's collection dept. calls. "You need to find a way to settle this debt with us as soon as possible; the insurance is not coming through and has now refused to pay the claim."
Some discussion ensues, it turns out we owe well past 50, 000 dollars. Not the kind of cash we have lying around. Baisically, it was drastic action or being thrown out of our house.

Your "friend" is damn lucky. Through no fault of our own, we have no credit, a crappy, toilet-tank credit rating, and are living hand to mouth. The car breaks down, as it did two months ago? It used to be no problem--put it on the plastic, pay it off ASAP. Now we have to find the money. Dryer breaks (as it did last week)? Juggle the carefully planned budget again (including no vacation this year).

If you are willing to open your eyes, read this article:

http://www.commondreams.org/headlines/042700-03.htm

Sorry, friend, life just ain't that simple for working people.

On edit: typos.

[Robin Hood]

11. Sorry, friend, life just ain't that simple for working people.

Truer words have never been spoken.

[shrike]

14. sorry this happened to you

Something similar happened to me, though I came out of it with minimal damage. The company I worked for had fallen on hard times. One of the company V.P.'s let it slip to me that management had stopped paying insurance premiums even though the money was still being deducted from our checks. "But don't tell anybody," he said. I, of course, went into the office the next day and told EVERYONE. Things were so chaotic at that point they didn't even try to punish me. One of the girls had just had minor surgery and ended up stuck with a $1,200 hospital bill.

Later, when the company finally went under, I went to file for unemployment. The office refused to give it to me because they had no record of me working for the past few years. Turns out the company had withheld taxes from my check but never paid it to Uncle Sam. I brought in my income tax returns for the past five years and then unemployment was granted. And no, I was not liable for the tax bill.

Is it any wonder I have little regard for the business world?

[blondeatlast]

15. Holy freaking schist--you are kidding, right?!

Sheesh. Sick world, ain't it?

Welcome to DU!
:toast:

[teryang]

17. I'm working poor like everyone else

I think my point was misunderstood. I could be bankrupt at any time. All it takes is to lose your job for a while or get sick or disabled. When it happens I won't go to a credit counselor. I will discharge my debts in bankruptcy. This is what I recommend to those who find themselves in this situation.

I realize that it is not a pleasant experience but trying to pay for debts when you can't is worse. Your credit is just as ruined before the bankruptcy judgement as after it occurs.

As for my friend he has no intention of paying off his credit cards. Whether he away with it or not remains to be seen. It was not my intent to portray him as the typical borrower.

[teryang]

19. I am sorry too

...to hear of your misfortunes. But I'm afraid the import of my remarks have been misunderstood.

I am an advocate of Bankruptcy law. I believe it is essential to commerce, the liquidity of business, and the freedom and wellbeing of citizens in tough situations. I have recommended to others to pursue a chapter 7.

Bankruptcy is usually a matter of losing a job for a period or succumbing to illness or disability. There is no stigma attached to it for me, so I'm not making a judgement. I could just easily become bankrupt as anyone else. I am a working person and my wife is unemployed. A finite period after losing my job we would be bankrupt.

What I'm trying to say is that "debt counseling" in which amateurs advise persons to continue making payments when they are already insolvent is usually not in their interests. This is something that unsecured creditors recommend because they don't want their debts liquidated.

The consequences of bankruptcy inhere primarily in the state of having no insufficient liquidity rather than the bankruptcy proceedure. A "bad credit" rating is a bad credit rating. The benefits of the bankruptcy procedure outweigh the additional stigma that creditors attach to it. IMHO.

My point in bringing up my friend is that the consequences of bankruptcy are often exaggerated in attempt to induce insolvent debtors to prolong the agony with a payments schedule to creditors rather than liquidating their debt in its entirety. He was a poor financial example of the typical bankruptcy.

I apologize if my remarks offended any DU readers. They were not offered in that spirit.

[blondeatlast]

16. If your "friend" has all those cards; he may be in for a shock.

Yeah, I can get a credit card, if I'm willing to get a high finance rate on one (out of necessity, we are doing this, we don't want our carefully juggled budget to collapse from an unexpected). In fact, credit card companies were breaking down our door to offer us vinyl cash; but we knew the caveats (see below)

But what he better know and know good is: if he can't make it, he is in a deep pile of oozing schist. He can't file again for another 7 years. No matter what the situation is; if he gets in a desperate situation such as mine, he's gotta find the money somehow, period.

That is why at bankruptcy hearings there are sometimes people standing in public areas offering to give credit to those there for hearings. When we went to our hearing, there were 40 couples/families there. Not one of them took the bite--not one.

Dress it up any way you like; friend, the vast majority of bankruptcies are from unexpected and unavoidable expenses. I've offered two links already; I can cite dozens, even hundreds more.

Consumer's Union (Consumer Reports)
AARP
NAACP
Credit Counseling Bureau of America
NOW (this is becoming a serious concern for women, especially older women)
National Association of Consumer Bankruptcy Counselors

[DUreader]

3. Home forclosures were at a record high in pittsburgh june or may

prosperity is right around the corner

[izzie]

5. I saw a house on my income was to costly and hard to keep up

So I sold and built my self a mother-in-law apt even if I am not the mother in law, It was a good deal but what I am watching is this. I do not recall how many people are re-morg. homes and using money to live well. I think that is wrong. These people re-morg and then buy something. I saw one say we have no money and in next month buy, on credit, big ref. new suv,PC,and most likely more I have not seen. It is all very odd as I have a hard time making ends meet but I am retired and only work part times. Do these people know what they are doing? Or is it I come from another age and do not know what I am doing?I can not live any other way but I am not sure these people are making smart moves. I can not say a thing, for one reason I picked this way as I got a divorce and gave up a lot to live by my self and I look foolish to them, for doing that at my age.I think things are getting bad in someways but new building is still going on. I have read that this is what is keeping things going.

[IrateCitizen]

6. The economy is recovering. The economy is recovering. The economy...

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There. Feel better now?

[blondeatlast]

7. Great sig line, iratecitizen.

My mantra is: Anybody but Bush . . .

[blondeatlast]

8. Read this and weep

(snip)
Why are so many older Americans in bankruptcy court? In a nationwide survey of families filing for bankruptcy in 1999, debtors gave a number of reasons for their filings, often identifying several overlapping problems.

Job Loss The most frequently listed reason older Americans give for their filings is job loss. Older Americans are hit hard by job losses.

Nearly two-thirds (62.1 percent) of all Americans aged 50 and older explained their bankruptcies in terms of a job problem. The bankruptcy files are replete with stories of store managers who, after a merger, became clerks, and full-time employees who were downsized into independent contractors--without benefits, and, in some months, without income. When someone who has worked for thirty years loses a job at age 54, the economic consequences can be catastrophic.


Among debtors aged 65 and older_those who supposedly have reached retirement age_more than a third (34.4 percent) explained that losing a job had made the difference between being economic viability and financial collapse. The loss of part-time jobs_even work at fast food restaurants and mall kiosks_left some of these "retired" Americans unable to meet their basic living expenses.

Medical Expenses Medical problems are not far behind job loss in sending middle-aged and elderly Americans in bankruptcy.

More than half (53.0 percent) of all debtors aged 50 and older reported that a medical problem pushed them into bankruptcy. For many, the explanation centered on medical bills that were beyond their financial ability to repay. For some, the medical bills were those of other family members, such as adult children not yet in jobs that provided health benefits.

Bankruptcy data show that the promised safety net of Medicare is incomplete. Among bankrupt debtors in the 65-and-older age group_presumably beneficiaries of Medicare_half (50.8 percent) explained that medical debts precipitated their financial collapse.

Some debtors illustrated that there is a connection between job problems and medical problems. Some described health problems, such as high blood pressure problems or failing eyesight, that prevented them from continuing the part-time jobs that they had held since retiring from full-time work. Without that extra income, they could not survive economically. The combination of job loss and medical problems combined to account for three-quarters of the filings of those aged 65 and older.

(all emphasis mine)

(snip)

http://nacba.com/older_americans.html

[Gringo]

9. Bankruptcies & foreclosures also set records during Clinton's tenure

During the speculative credit binge of the late 90's, when everybody I knew believed there was such a thing as a "New Economy", and that they would become millionaires overnight with a small investment in the right IPO. All the skyrocketing tech stocks of companies who had never turned a profit were the all the rage, and tha average household savings rate fell below zero for the first time, with average household debt skyrocketing.

And all my admonitions that this was a speculative bubble, that the economy was fundamentally unstable were met by scoffs. I guess there's just no stopping a bubble.

At any rate, not to defend Bush (whom I despise) or denigrate Clinton (whom I liked very much), people could see this economic mess coming back in 1998, and I'm personally surprised that it hasn't been worse. That being said, Bush's stewardship of the federal budget has been disastrous. There are billions missing that haven't been accounted for - I wish heads would roll, but they never do...

[SoCalDem]

10. Middle to low incomes have been losing ground since the 70's

Compared to the actual costy of living, people are making LESS than they did back then and yet it's costing way more to live now..:(

Unless you are "genetically" rich or are a very savvy(lucky) investor, you better hope you hit the lottery :)

[hatrack]

12. What now? Gandalf Greenspan's fresh out of magic

Home foreclosures hit an all-time high nationally in the first quarter of 2003, and a recent article on real estate sector activity (sorry, don't have the link on hand at the moment) showed that between 60 and 65% of all action in the second quarter was refinancing, not the purchase of homes or other property.

Low interest rates have served to stuff the Strasbourg goose of real estate with tens of thousands of marginal mortgage holders - people who in times of higher interest rates wouldn't even be thinking of purchasing a home. They're beginning to slip off the side of the bubble and with the employment outlook continuing to, well, SUCK, many of them will have no way back into solvency. And any further marginal lowering of interest rates at this point would be so small as to make not much of a difference in the near to medium term.

So much for the "robust" housing sector.

[SoCalDem]

13. My son and his wife bought their house last year

and have refinanced it at least 4 times already as the rates went down..

But then they have a $435,000.00 house so every percentage point is vital ..

We are too lazy to refi ours and I would just love to walk away from it, myself :) Too much house and property values have actually gone down where we live..:(.. We took out a second some years ago, and we are upside down on it.. :(:(

[9215]

18. The cycle

Economy booms people buy houses, cars, etc. make payments--money to the banks.

Then the economy busts and people turn their property over to the banks. The banks then resell the property and start the cycle over again.

Question: During a foreclosure or repo why isn't the lender required to only claim the amount owed and be disallowed from repossession until the buyer is reimbursed for sunk costs?