Busey filed for Chapter 7 bankruptcy after incurring over $508,000 worth of debt. Most recently, he filed the bankruptcy documents pertaining to his assets and liabilities. The biggest debt Busey holds is $451,000 in unpaid state and federal taxes. In the paperwork, he listed $26,225 in assets, including guitars, 300 VHS tapes, five pairs of old shoes, and a broken pellet gun.
]]> Right now, Busey is earning just under $20,000 in monthly income, but that is not enough to cover living expenses for his family, including care for his infant son.Although Gary Busey is the brunt of a lot of jokes, his financial situation is serious. Additionally, Busey's financial predicament sheds light on the situation that thousands of Americans are in right now. Oftentimes, it is easy to think that celebrities are immune from everyday problems. This case proves that this is not necessarily true: celebrities are also susceptible to financial trouble.
It's unfortunate that so many people are in the same situation as Busey, but that does not mean their situations are hopeless. There is help for those who need it. If you are in a difficult financial situation, it might be helpful to contact an experienced bankruptcy professional to discuss your options. For some, Chapter 7 bankruptcy is a way to get a fresh start. With the right advice, those nearing bankruptcy can make it through their difficulties and work toward financial stability.
Source: Tulsa World, "Busey files bankruptcy with debts totaling $508,500," Rita Sherrow, Feb. 17, 2012
]]>The Consumer Financial Protection Bureau, which was created to help protect consumers from the questionable business practices used by banks that sparked the financial crisis, is proposing giving the agency broad powers to police debt collection and credit reporting companies. It would be an unprecedented level of federal oversight of businesses that have mostly only been subjected to state oversight.
]]> CFPB Director Richard Cordray said the new rule, which is expected to be enacted by July, would let Americans know the federal government is "standing beside" them.The bureau would have oversight over the approximately 175 largest debt collection companies, which all make more than $10 million a year. This accounts for about 66 percent of the industry. It would police credit-reporting companies that make more than $7 million, which account for approximately 90 percent of the business activity in the field.
The oversight is desperately needed, because a good credit score impacts a consumer's ability to obtain a mortgage, an auto loan or a credit card.
If successful, the CFPB's efforts will help borrowers across the country who are desperately in need of some form of debt relief, even if it's just making creditors back off to give a borrower time to make a repayment plan. And in the future, the bureau could start looking at check cashing businesses, payday lenders and student lenders, all of which have contributed to an explosion of personal debt in the United States.
Source: New York Times, "Collection and Credit Firms Facing Broad New Oversight," Ben Protess, Feb. 16, 2012
]]>How does the program work? Generally, a short sale is when a bank allows mortgage holders to sell their home for less than what they owe on the mortgage for it. Although the lender is looking out for their best interest, there is some sense of cooperation in the agreement. At that time, the lender provides the Internal Revenue Service with something called a "Form 1099-C" that shows the amount of debt that was forgiven or canceled.
]]> This act went into effect at the end of 2007. Before then, the canceled debt would still be considered taxable income and was becoming too much of a burden for already struggling homeowners to pay. That prompted legislatures to pass the law in order to help those in financial trouble.The law, which currently eliminates federal taxes for debt forgiven up to $2 million, has benefited homeowners since 2007 and has given them a higher chance at reaching debt relief. Thankfully, once the law expires, there are still some options for homeowners, one of which is bankruptcy. Homeowners might be able to avoid the tax by discharging their real estate debts in bankruptcy before a short sale or foreclosure happens. This move could help homeowners in Arizona find the sense of stability that would get them back on their feet financially.
Source: House Predictor, "Time Running Out for Short Sales," Mike Colpitts, Feb. 6, 2012
]]>Recently, the Federal Trade Commission (FTC) alleged that one of the country's biggest consumer-debt buyers was using deceptive practices to collect old debts, thus violating the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. They allegedly failed to tell consumers that their debts were too old to collect legally and provided inaccurate information to credit reporting agencies. On top of that, the FTC said the company didn't tell consumers that if they paid a part of the bill, it would extend the time limitations of collecting the debt.
]]> The settlement between the company and the government is still pending approval, but in it the company agreed to tell consumers that it cannot sue them for time-barred debts, even if they make a partial payment on the debt. There are several other stipulations, including that the company has to tell consumers in writing about a negative report before it places the debt on a consumer's credit report.Government officials say the settlement is a message to the debt-collection industry to get their practices straightened out and to address the lack of documentations that often results when old debts are passed from agency to agency. In order to help consumers, the FTC has put out a publications to inform consumers of their rights when it comes to old debts.
Source: Washington Post, "Have old debts? Read up on your rights," Michelle Singletary, Jan. 31, 2012
]]>In addition, the recession that followed the housing crisis meant that many homeowners lost their jobs or saw reduced or stagnant income. This led to many people scrambling for ways to pay bills and looking for debt relief. The number of homeowners who have fallen behind on mortgage payments stands at 3.5 million, while another 1.5 million have already begun foreclosure. The Federal Reserve believes that another 3.6 million foreclosures will occur in the coming years.
]]> An Arizona couple who were almost ready to retire encountered these crushing statistics when they were looking to sell their old home and move into something smaller. The housing bust hit Arizona particularly hard, and when they went to sell their home, once valued at $400,000, they found the value had plummeted to $200,000. The remaining balance on their mortgage was $260,000.The couple weighed their options and decided in the end to enter a strategic default, which means that they ceased to make payments on their old mortgage. While this choice does have its benefits, it also has its drawbacks, including a stiff hit to a person's credit score. Homeowners struggling to pay creditors should know that there are other options as well. Depending on whether homeowners want to keep their house, a loan modification or even bankruptcy can provide alternative routes out of debt problems. Each option involves complicated rules and consequences, so homeowners should contact an attorney experienced in these areas.
Source: Reuters, "What happens when you walk away from your home?" Chris Taylor, Jan. 27, 2012.
]]>The Arizona Attorney General's Office recently announced that Bank of America is beginning to react to investigations by reaching settlements with those facing foreclosure in exchange for silence.
]]> One documented settlement was with a borrower facing foreclosure after defaulting on $253,142 mortgage. The bank modified this loan to include a longer term and lower interest rate, in addition to payments for legal fees and removing any delinquent payments. In return for this settlement, the bank customer must not publicly criticize Bank of America in any way.Arizona officials have indicated that the bank's efforts to settle with customers will not stop their investigations. The banks will apparently allow the customers that have settlements to testify if they are subpoenaed in the ongoing probes. Additionally, the Arizona Attorney General's Office has said they will continue to pursue their own lawsuit if the terms of settlements in other ongoing multi-state lawsuits are not satisfactory.
The "non-disparagement" settlements are reportedly rather uncommon, bank attorneys say. Banks issuing these types of settlements do not have centralized records showing how many of these settlements have been reached. Most commonly the settlements are reached when the banks engaged unethical foreclosure and lending practices.
Foreclosure is undoubtedly a stressful experience for anyone going through the process. Families dealing with the loss of their home might consider exploring their options with the help of an experienced legal professional, especially if they believe have been treated unfairly by their mortgage lender. After all, there are ways to work toward rebuilding financial security in the wake of trouble.
Source: Business Week, "Bank of America Settlements Impede Fraud Probe, Arizona Says," Michael Hytha, Jan. 26, 2012
]]>Even though Kodak invented many digital imaging technologies, the company failed to adjust its business to the digital camera age. Kodak was founded in 1880 by George Eastman and the company rose to prominence after it established the consumer camera and film market. Challenges to its dominance began when Fujifilm introduced cheaper film products and by 2003 digital photography had changed the landscape of the industry so much that the company stopped investing in traditional film.
Kodak has only reported one full year of profit since 2004, and the company has attempted to restructure costs since 2008. Last July, Kodak hoped to raise funds by selling its digital imaging patents; a strategy implemented by Motorola Mobility that lead to Google's purchase of that company. But the attempt failed and after using up other resources Kodak filed for Chapter 11 bankruptcy.
]]> In bankruptcy Kodak hopes to shed hundreds of millions in pension obligations that could not be negotiated down outside of bankruptcy court. Kodak still hopes to generate cash by selling digital imaging patents and has also filed patent lawsuits to create revenue.Kodak currently has $5.1 billion in assets and almost $6.8 billion in debts.
Source: Dealbook, "Eastman Kodak files for bankruptcy," Michael J. De La Merced, Jan. 19, 2012
]]>That was the case for a Michigan couple who paid off $92,000 in credit card debt over a 5 ½ year period. The couple, Jerry and Sue Bailey, actually received an award from the National Foundation for Credit Counseling recognizing their success.
]]>Reuters reports that the number of bankruptcy claims traded fell from 1,352 in July to 891 in August. The total value of claims traded in August was $2.22 billion, down from $3.55 billion in July. The latter number was, according to claims trading platform SecondMarket, the highest value of bankruptcy claims traded so far this year.
]]> In bankruptcy claims trading, creditors sell their claims against bankruptcy companies to a buyer for cash, and the buyer later collects on the claim in the bankruptcy process, hoping to earn a profit. Oftentimes the buyers are hedge fund managers.A large reason for the decreased numbers was a decline in activity with respect to the Lehman Brother Holding Inc bankruptcy. Lehman's bankruptcy is considered to be the biggest bankruptcy in U.S. history. Sources said the number of Lehman claims traded in August was 205, valued at $1.3 billion. In July the number was 782, valued at $3.4 billion. Lehman will likely not be repaying creditors until early 2012.
August saw large claims trading with respect to Bear Island Paper Co, Lehman Brothers Inc and CMR Mortgage Fund II LLC. Claims worth over $20,000 were traded against each of these companies. Sources said there was also active trading of claims against Perkins & Marie Callender, Nebraska Book Co, W.R. Grace Co and Nortel Networks Inc.
Source: Reuters, "Bankruptcy claims trading slows in August," Sep 21, 2011.
]]>Obviously, foreclosure can take place regardless of whether bankruptcy has been filed. All that is required for foreclosure is missing your mortgage payments. As far as the foreclosure process itself, it varies from state to state. The two basic approach, though, are judicial and non-judicial.
]]> In a judicial foreclosure process, a court handles the foreclosure. Generally, the borrower receives a complaint telling them they are past due on their mortgage payments and reminding them of the lender's lien against the property and their ability to foreclose. If the lender has a valid complaint, the court will issue a judgment against the borrower and an order permitting the lender to sell the property at a sheriff's sale. At the public auction, any party may bid and purchase the property.In a non-judicial foreclosure process, statutes govern the procedure, which varies from state to state. Generally speaking, the lender will send the homeowner a letter letting them know they are in default. If no action is taken, the notice is filed with a local county recorder's office. After an established time period, the lender then issues of notice of sale. The property is then sold at a public auction. Again, anybody may bid on and purchase the property.
Many choose to file for bankruptcy to avoid foreclosure. Because bankruptcy puts an "automatic stay" on foreclosure, creditors are prevented from collecting their debts for a certain time. Filing for a Chapter 13 bankruptcy can prevent foreclosure altogether, since it gives the homeowner to get current on their mortgage payments. That isn't necessarily an easy thing to do, but it is possible.
Chapter 7 bankruptcy will allow an underwater homeowner stave off foreclosure, allowing them to save money, cancel debt and cancel tax liability on some property loans, but it will not cancel the foreclosure itself.
Individuals facing foreclosure should not indiscriminately file bankruptcy. It is wise to speak with an attorney to determine you options.
Source: Fox Business, "Skip Bankruptcy with Foreclosure?," Justin Harelik, Sep 20, 2011.
]]>The possibility of converting can be a relief to those who begin with a Chapter 13 bankruptcy and find themselves months into the process and unable to keep up payments. Converting to Chapter 7 allows such individuals to transition from a repayment plan to a liquidation plan.
]]> Folks may initially file for Chapter 13 bankruptcy because they have too high a household income to qualify for Chapter 7, or because they want to protect an asset that wouldn't receive protection in Chapter 7 bankruptcy. Chapter 13 bankruptcy does have the advantage of allowing filers to keep their property and to make court-supervised repayments on their debt. That takes place over a three to five year period.As an individual progresses through a Chapter 13 repayment plan, though, their circumstances can change. They may go through an expensive divorce, lose their job, decide they don't need their home anymore, qualify for a loan modification and have their monthly mortgage payments reduced, or fall ill with a costly disease or condition.
Chapter 7 allows the filer to discharge their debt by liquidated nonexempt property and distributing the proceeds to their creditors. As far as exempt property, federal law delineates certain exemptions and many states have established their own as well.
Filers who are unable to qualify for Chapter 7 bankruptcy should periodically review their financial status to determine whether they may qualify for a conversion to Chapter 7. Doing so will allow you and the court to ensure you are on the best path out of debt.
Source: Fox Business, "Convert From Ch. 13 to Ch. 7 in Bankruptcy?," Justin Harelik, Sep 13, 2011.
]]>One interesting thing about the study is that not only individuals with college degrees have been affected by the increase in bankruptcy filings, but also individuals with associate and graduate degrees. Individuals holding only a high school diploma, on the other hand, filed for increasingly fewer bankruptcies over the course of the study.
]]> The bankruptcy findings mesh well with data recently released by the Department of Education, which also indicate that students and college grads are increasingly struggling because of the economy. According to the agency, the rate of students defaulting on loans in the 2009-2010 fiscal year increased to 8.8 percent from 7 percent during the last fiscal year.That rate is even higher among students graduating from for-profit colleges. In that group, 15 percent defaulted on student loans within the first two years of graduating. That number increase from 11.6 to 15 percent between 2006 and 2010.
The study also looked at bankruptcy rates by race. According to the study, Asian-Americans took the hardest hit, with bankruptcy rates increasing from 2.1 percent in 2006 to 8.7 percent in 2010. African-Americans saw a decrease in bankruptcy filings, going from 15.4 percent to 11.3 percent between 2006 and 2010. Bankruptcy rates among Whites and Native Americans were about the same during the same period.
Source: All Headline News, "Study: Growing number of college grads filing for bankruptcy protection," Vittorio Hernandez, Sep 13, 2011.
]]>The study looked at 50,000 consumers between 2006 and 2010, with an eye toward tracking the financial well-being of debtors since the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act. The study found that both unemployed and higher earning Americans have experienced an increase in bankruptcy filings. In 2006, the year the study began, around 5.5 percent of participating debtors earned in excess of $60,000 per year. That number was over 9 percent higher, though, by 2010.
]]> The findings are a confirmation for what many of us already know: times have gotten tough, and everybody has been affected. According to Leslie Linfield, the Institute's founder and executive director, a large factor behind the shift in filings is the lagging economy, which has forced more college educated and higher income earners into difficult financial situations.As we have pointed out on this blog in the past, medical debt is generally seen as the biggest reason people cite for filing for bankruptcy. According to the Institute's study, Overextension of credit, reduction in income, and losing a job have increasingly become the biggest reasons people file for bankruptcy. Explanations which have decreased between 2006 and 2010 are unexpected expenses, death of a family member, illness and injury.
In our next post, we'll keep looking at the results of this study.
Source: All Headline News, "Study: Growing number of college grads filing for bankruptcy protection," Vittorio Hernandez, Sep 13, 2011.
]]>In addition to correcting any reporting errors and paying your bills on time, it is also important to think about how you will approach credit after a bankruptcy. Many consumers ended up filing for bankruptcy with large debt loads and want to avoid it altogether after the process is through. Taking a cautious yet friendlier approach to credit, however, will get you further quicker.
]]> It is worth keeping in mind that bankruptcy will affect your ability to obtain a good credit card. You should still be able to qualify for one or another offer, but you may be facing cards with higher rates and steep fees. One option after bankruptcy is to look into obtaining a secured credit card. These cards require a deposit which serves as a line of credit, and allow you to take small steps toward improving your credit. If you use a secured credit card, try to avoid ones with high fees. Also check and see whether the card issuer reports to any of the credit bureaus.Unsecured credit cards are another option, though one that should be approached with due caution. Some of these cards have high rates without any annual fees. These can be helpful as long as purchases are paid off in a timely fashion. After a card has been used awhile, you may qualify for a decrease in interest rate or you may be able to apply for another card with more optimal terms.
In any case, using credit carefully is a great way to quickly repair credit. Even if it contributed to your bankruptcy, it can help get you back up on your feet.
Source: creditcards.com, "5 ways to rebuild credit after bankruptcy," Tamara E. Holmes, Sep. 1, 2011.
]]>After bankruptcy is through, there begins the task of rebuilding one's credit. This can be a difficult time in some ways, but the good news is that, with a little discipline, your credit may begin to improve as soon as one year from the date of filing. What can you do to speed up the process of repairing your credit? Here we'll give some tips.
]]> After the bankruptcy process is complete, the first thing you should do is look at your credit report and ensure that it is accurate. You should be sure that all debts discharged in bankruptcy have a zero balance on your report. If they don't, contact the creditor or creditors, as well as the credit reporting agency.Probably the most basic thing you can do to improve your credit score is to pay your bills in a timely manner. One thing to keep in mind is that bankruptcy will not wipe out all your previous debt, even if you go through Chapter 7 bankruptcy. Some debts, like student loans, child support, and sometimes mortgages, cannot be discharged in bankruptcy.
Among your bills, be especially sure to pay your rent on time. Experian, one of the four major credit reporting agencies, announced earlier this year that it would begin including rental histories in consumer credit profiles in order to better reflect the consumer's situation. You should check with your rental company's leasing office to see whether they report your payments.
We will continue looking at this issue in our next post.
Source: creditcards.com, "5 ways to rebuild credit after bankruptcy," Tamara E. Holmes, Sep. 1, 2011.
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