McCaskill fires warning shot?

Although we covered the GAO study mentioned in the Times piece, we may have left out a nugget that the Times includes–well, even if we did mention it, it bears repeating, especially Sen. McCaskill’s parting shot:

Consumer watchdogs point to another reason customers wind up confused and upset: bogus marketing promises.

In April, the United States Government Accountability Office released a report drawing on undercover agents who posed as prospective customers at 20 debt settlement companies. According to the report, 17 of the 20 firms advised clients to stop paying their credit card bills. Some companies marketed their programs as if they had the imprimatur of the federal government, with one advertising itself as a “national debt relief stimulus plan.” Several claimed that 85 to 100 percent of their customers completed their programs.

“The vast majority of companies provided fraudulent and deceptive information,” said Gregory D. Kutz, managing director of forensic audits and special investigations at the G.A.O. in testimony before the Senate Commerce Committee during an April hearing.

At the same hearing, Senator Claire McCaskill, a Missouri Democrat, pressed Mr. Ansbach, the Usoba lobbyist, to explain why his organization refused to disclose its membership.

“The leadership in our trade group candidly was concerned that publishing a list of members ended up being a subpoena list,” Mr. Ansbach said.

“Probably a genuine concern,” Senator McCaskill replied.

Employment up or down–which is it?

Another point we made recently  (in our preceding post) had to do with confusion over interpretation of reported unemployment rates. A June 18 AP story in the  Times reinforces our point about the much ballyhooed recovery in general–and about our longstanding concern regarding confusion over the “official unemployment rate” in particular.

The hed reads: “Most State Jobless Rates Fall,” but the lede belies the headline: “Unemployment rates in a majority of states dropped in May. But the widespread declines were mainly because people gave up looking for work and were no longer counted.”

Here’s a subsequent graf about job gains: “Forty-one states and the District of Columbia saw a net increase in jobs. But that reflected national data showing a huge gain because of government hiring of temporary census workers.”

Senate stuck in filibuster mode

Also unchanged since last we posted is the Senate’s position on helping those unemployed who have reached the end of their benefits–with no significant change in the jobs picture. On June 19 the president reacted to yet another filibuster that creates roadblocks where instead we need an express lane.

In a MarketWatch.com report, Obama is quoted thusly: “”I was disappointed this week to see a dreary and familiar politics get in the way of our ability to move forward on a series of critical issues that have a direct impact on peoples’ lives.

“”Unfortunately, the Republican leadership in the Senate won’t even allow this legislation to come up for a vote.”

In other words, if filing for bankruptcy protection made sense last week, it also makes sense this week–nothing has changed, and nothing seems likely to change anytime soon.

Get informed

In that vein, here’s some tips to use when considering the benefits and drawbacks of bankruptcy protection.  Following are some highlights derived from a list at a June 6 Orlando Sentinel piece.

1. Review the many resources offered by the “official” Web sites of various federal and state agencies:
   • U.S. Department of Justice
   • American Bankruptcy Institute
   • United States Courts
   • Bankruptcy law, state-by-state
   • National Association of Consumer Bankruptcy Attorneys
2. Consider non-bankruptcy options such as consumer-credit counseling–but be sure to avoid the “debt-settlement” or “debt-repair” firms described in the GAO report.
3. Take informed action before using up all your savings or retirement funds.
4. This one is word-for-word from the Sentinel: “Don’t try to ‘game the system’ by running up credit-card charges for jewelry or other luxuries just before filing for bankruptcy — you’ll likely still be on the hook for such debt.”
5. This tip condenses three separate points from the list: Be aware that because of the financial crisis, waves of consumers are turning to the bankruptcy code for protection, and so bankruptcy law is “hot” right now; accordingly, you want to make sure you get trained, seasoned professional counsel; furthermore, such firms will often provide a free consultation to begin–this is your chance to evaluate the firm to avoid a “mill”-type operation.
6. Do not rely on creditors (credit-card companies, bill collectors, etc.) to tell the truth about the legal system or bankruptcy protection.

(mis)Leading myths about bankruptcy

In fact, misinformation is so common that certain “myths” about bankruptcy have arisen, a sort of urban legend. This attorney’s page answers each of the following myths, none of which is true:

1. Bankruptcy relief is no longer available (False: the 2005 “reform” act changed some things, but protection is still available for those who need it.)
2. You can’t file bankruptcy if you have a job (False: In fact, reliable income is a necessity to service a Chapter 13 filing.)
3. Medical bills can’t be discharged in bankruptcy (False: medical debt can be addressed, as can credit-card debt, and even personal loans.)
4. Chapter 13 plans require repayment in full of debt (False: unsecured creditors may receive payments that total 100 per cent of the debt–or zero per cent–each case is different, depending on the unique variables.)
5. People who file bankruptcy can’t get credit for 10 years (False: Although true that bankruptcy will remain on credit reports for up to ten years, many people’s finances are in such disarray that receiving bankruptcy protection can be the start of improving one’s credit score.)
6. You lose everything you own in bankruptcy (False: a small percentage of filers will liquidate a significant amount of assets, but exemptions provide for retaining “tools of the trade” and more–most filings result in little to no loss of assets, and some assets can’t be touched.)
7. Bankruptcy is a sign of personal or moral failure (False: The bankruptcy code is designed to offer a restart, a second chance, for those who have been devastated by events beyond their control such as job loss or medical emergency. See a “typical profile,” based on research by Elizabeth Warren.
8. Bankruptcy costs our society too much (False: This myth is directly traceable to a credit-industry lobbyist.)
9. There is a minimum amount of debt required to file bankruptcy (False: No minimum is necessary.)
10. Married couples must file together (False: Confusion arises most often because of states with community property laws–although it may be in a couple’s best interest for both spouses to file, each can file separately, or not all. This is best decided in conjunction with a trained, experienced bankruptcy attorney.)

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The bankruptcy reform act of 2005 increased the complexity of the law, but if you are overwhelmed by debt, filing for bankruptcy protection may be your most pragmatic alternative. If you are facing foreclosure of your home (sometimes referred to as your “primary residence,” as opposed to a second home, or “vacation home”), bankruptcy protection may be your best route to saving the home. If you are struggling with medical bills, you may be in a special category for setting debt aside, and if you have problems with credit-card debt, you should be aware that some of those laws have changed recently, too. Whatever you do, before making major, life-changing financial decisions, consider consulting a trained, experience attorney. For bankruptcy basics, please see:

Principles of bankruptcy

Basics of bankruptcy

Introduction to Chapter 7

Introduction to Chapter 13

Although few would argue that workers (and their decreased spending power) benefit when hard-strapped businesses close their doors, others believe the nation will be better served by letting marginal companies jump off the Darwinian cliff. Regardless of the various opinions, it’s tough to argue with the numbers that are emerging.

Citing a new report, Associated Press economics writer Jeannine Aversa says that a “new survey by the National Association for Business Economics depicts the worst business conditions in the U.S. since the report’s inception in 1982.” In a Jan. 26 article carried by several papers (here’s one), Aversa says that 39 “percent of NABE’s forecasters predicted job reductions through attrition or ‘significant’ layoffs over the next six months, up from 32 percent in the previous survey in October. Around 45 percent in the current survey anticipated no change in hiring plans, while roughly 17 percent thought hiring would increase.”

Calling the recession a “job killer” that experts believe will continue into 2009, she writes: “The economy lost 2.6 million jobs last year, the most since 1945. The unemployment rate jumped to 7.2 percent in December, the highest in 16 years, and is expected to keep climbing.”

Companies showing up in the latest round of layoffs announced Jan. 26 ranged from presumed leaders to those widely known to be in trouble. Sprint Nextel, recognized as the nation’s third-largest wireless carrier, announced cuts of 8,000 jobs (as well as severe cutbacks for remaining workers) while construction-equipment giant Caterpillar says it’s letting go of 20,000 employees.

Pharmaceutical titan Pfizer Inc. also is whacking 8,000 jobs–even though, as Aversa notes, its plan to buy competitor drugmaker Wyeth in a $68 billion deal is going forward, full-steam ahead. Top-ranked home improvement retailer HomeDepot is jettisoning 7,000 jobs, and the bailout-linked General Motors Corp. says it’s cutting 2,000 jobs at plants in Michigan and Ohio, following temporary shutdowns in January of plants across North America.

Quoted in an Indiana newspaper, a Chapter 7 Bankruptcy Court Trustee for the Hammond federal court says the increases in personal bankruptcy filings in that state are in “direct correlation to how bad the economy is, real estate market is and about jobs in general.

“It’s like a log jam broke lose, and now it’s steamrolling,” said Kenneth Manning.

He goes on to compare current Chapter 7 filers with those from previous years. Manning, also an attorney, is quoted as saying that in years past, most who turned to Chapter 7 were “plain stupid, irresponsible or had large uninsured medical costs.”

But now, he says, “People filing Chapter 7 now are those people who lost their jobs and those who were making a $80,000 gross salary a couple of years [ago] and half that now.”

The article explains that in “a Chapter 7 liquidation bankruptcy, filers must give up their nonexempt assets, but they can walk away from their unsecured debts and start over with a virtual ‘clean slate.’ However, filers must continue to pay secured creditors, including those for home or car loans, if they want to retain those assets.”

The problem, Manning says, is that the job losses, cutbacks and smaller wages for those who do find new jobs comes with strikingly poor timing, when “at the same time, the real estate market has flattened out.”

Manning indicated that during all his 25 years as a bankruptcy court trustee, “2008 was the first time in his career when many filers didn’t try to keep their homes.” The reason, the article summarizes, is because “[h]ome values have dropped so much that filers can’t sell their homes for enough money to pay off their mortgages and still get the amount of their equity out of the sale.”

One of the worst — but increasingly problematic — alternatives is depending on so-called “foreclosure rescue companies” who turn out to be swindlers.

Although such scams have been around for years, experts and authorities from New York to Hawaii are warning homeowners to exercise great caution as the numbers of U.S. foreclosures continue in record numbers.

In Texas, Attorney General Greg Abbott and state Sen. Craig Estes (R-Wichita Falls)  on Dec. 10 announced new legislation that targets  what Abbott calls “unscrupulous operators [who] are scheming to profiteer at homeowners’ expense.”

“Too many scam artists attempt to target homeowners with large fees and the false promise that they could help Texans avoid foreclosure on their homes,” said Abbott. “The legislation that Senator Estes and I encourage the Legislature to pass would give the Office of the Attorney General increased authority to crack down on these unlawful foreclosure rescue scams.”

The Federal Trade Commission not only lists many proactive steps for homeowners facing foreclosure and but also describes three common patterns of foreclosure-rescue scams:

• The foreclosure prevention specialist: The “specialist” really is a phony counselor who charges outrageous fees in exchange for making a few phone calls or completing some paperwork that a homeowner could easily do for himself. None of the actions results in saving the home. This scam gives homeowners a false sense of hope, delays them from seeking qualified help, and exposes their personal financial information to a fraudster.
• The lease/buy back: Homeowners are deceived into signing over the deed to their home to a scam artist who tells them they will be able to remain in the house as a renter and eventually buy it back. Usually, the terms of this scheme are so demanding that the buy-back becomes impossible, the homeowner gets evicted, and the “rescuer” walks off with most or all of the equity.
• The bait-and-switch: Homeowners think they are signing documents to bring the mortgage current. Instead, they are signing over the deed to their home. Homeowners usually don’t know they’ve been scammed until they get an eviction notice.

In November, the Honolulu Advertiser ran an Associated Press story describing another variant of the rescue scam, one in which homeowners were allegedly bilked to the tune of more than $300,000 by the offer of “bogus foreclosure rescue bonds.”

In those cases, according to the Advertiser, “homeowners were charged between $2,500 and $10,000 to attend seminars or counseling sessions on avoiding foreclosure. They were told they would receive bonds worth $1 million that could be used to pay off the outstanding balance of the mortgage.”

As you might imagine,  no mortgages were paid off. And the scheme in Hawaii included an aspect common to almost every state where the schemes have been reported:  the fake mortgage counselors “told their clients to ignore letters from banks that threaten foreclosure because they were monitoring the situation and would respond on their behalf.”

Authorities in every state advise homeowners facing foreclosure to contact the offices of the various Attorneys General, their local HUD agencies, or both. Falling victim to these swindlers may not only cost money that could be better spent on a new arrangement with lenders or an orderly bankruptcy proceeding but also could further degrade homeowners’ credit ratings–all without doing anything to reduce the threat of foreclosure.

Some homeowners who face foreclosure can save their homes by filing bankruptcy. If a homeowner feels that they can make up their back payments in a few years, then Chapter 13 bankruptcy can stop the foreclosure process and help them keep their home.

Loosing your family’s home can have long-lasting impacts on you and your loved ones. Having a stable home is key to feeling safe and secure. Losing a home to foreclosure can lead to uncertainty and doubt.

A bankruptcy attorney from BankruptcyCorner.com can explain to you how filing bankruptcy will stop your creditors from foreclosing on your home. The lawyer will show you what options you have under bankruptcy law to protect your assets and clear your unsecured debt in order to secure a future for your family.

Seeking the help of an attorney is not admitting failure. Anyone can find themselves in a bad situation financially. An experienced bankruptcy lawyer knows how to safeguard your assets and save them for your family’s future.