A blogger at iStockAnalyst posted  on August 12 a pretty thorough roundup showing that the tsunami of consumer bankruptcies is not limited to the “ugly Americans” of the USA but is indeed a global phenomenon. His main point is that the binge of the “credit party” is over, and as far it is goes, the post is a quick, representative look at nations and economies as seemingly diverse as Holland, Scotland, the U.K., and Canada–and it offers plenty of links to pertinent, recent headlines.

Nevertheless, these are all statistics, alarming, yes–but still a rather chilly dataset that do not uncork the hot odor of failure. For regardless of perceptions in the other beleaguered countries, in the bootstrap-yourself, Root Hog, or Die! psyche of most U.S. workers, the simple truth is that bankruptcy stinks. True, you can find many accounts across the Web saying something to the effect that there’s so many personal bankruptcy filings now that the mere fact of having a bankruptcy on your credit report does not carry the stigma that it once did. For instance, at this in-depth post from July 19 (”The Human Side of Bankruptcy: Financial Disruption is Personal for the Millions Who File for It”), consider this passage:

“Brian Hemphill is a lawyer in Bend who did not work for the Gulicks but who specializes in bankruptcy cases. He keeps a box of tissues on his desk because clients are often in tears. Many clients, he said, feel overwhelmed and ashamed.

“I tell them, it’s not a magic wand and it can’t cure everything,” he said. “It does have a lot of negatives to it, and people have to decide, do the positives of bankruptcy outweigh the negatives? But fundamentally, bankruptcy is there to help.”

Hemphill said the social stigma attached to bankruptcy has faded in recent years as it has become more common.

Donald Trump told the New York Daily News in 2004 — during his casino company’s second voyage through bankruptcy — that there’s no shame in it.”

And it’s also true that recent unemployment figures hint that overall job loss in the U.S. may be turning around. Neverthless, a very cruel trend is emerging that spells double trouble for job seekers: the increased use of background credit checks among prospective employers is headlined “Another Hurdle for the Jobless . . .” in this August 7 report from The New York Times.

Here’s the lead: “Digging out of debt keeps getting harder for the unemployed as more companies use detailed credit checks to screen job prospects.”

And here’s the meat and potatoes: “Once reserved for government jobs or payroll positions that could involve significant sums of money, credit checks are now fast, cheap and used for all manner of work. Employers, often winnowing a big pool of job applicants in days of nearly 10 percent unemployment, view the credit check as a valuable tool for assessing someone’s judgment.

“But job counselors worry that the practice of shunning those with poor credit may be unfair and trap the unemployed — who may be battling foreclosure, living off credit cards and confronting personal bankruptcy — in a financial death spiral: the worse their debts, the harder it is to get a job to pay them off.”

The article also cites a survey by the Society for Human Resource Management in reporting that “[m]ore than 40 percent of employers use credit checks at least sometimes. . . up from 25 percent in 1998,” adding that  career counselors contend that figure “has almost certainly risen today.”

Of course, anyone who’s ever run a business can sympathize with the effort to find the best employee: “Business executives say that they have an obligation to be diligent and to protect themselves from employees who may be unreliable, unwise or too susceptible to temptation to steal, and that credit checks are a help.”

But, see, right there? “unreliable,” “unwise” or propensity for theft–what has that got to do with a business decision to file bankruptcy? Where’s the two-way street? By that measure, who can do business with any of the bailout companies or the scores of businesses that have filed for bankruptcy protection?

As the article continues, “Credit counselors, worker advocates and the unemployed contend that a credit check is not always relevant to hiring decisions.

“ ‘There’s no relationship between being a personal trainer making $12 an hour’ and having a good credit history, said Janet L. Newcomb, a career counselor in Huntington Beach, Calif. ‘People are being turned down for jobs on the basis of things that really have nothing to do with qualifications.’ ”

Here’s an example: Say you’re an employer with a choice between:

1. a recent graduate, with no roots, who bounces from apartment to apartment, never cleaning up behind and simply walking away from the deposit, and
2. a 30s or 40s employee, with spouse and children, who’s fighting to save their home and therefore were forced to seek bankruptcy protection.

Ask yourself one simple question: Who will be more highly motivated?

The problem is the reliance on the FICO score, in which bankruptcy is a big, long-lasting hit. As summarized in the following, while national leaders are looking at major reform, perhaps this whole credit score industry deserves a long-overdue examination: “Employers say it’s a good way of picking out possible red flags in an otherwise promising-looking employee. But this continued belief in the existing credit-check infrastructure seems stupidly pro-cyclical. In the boomtimes, everyone looked like a great credit risk. Now at this point, everyone looks suspect. Maybe it’s time to put some more though thought into how we measure an individual’s creditworthiness.”

Now, here’s another double-whammy, from the health-care arena. It’s the practice of rescision, in which insurance companies can drop policy holders in the hot grease of costly medical bills and simply deny to pay all claims. Merriam Webster online defines rescinding as:

1. “to take away: remove
2. “take back, cancel”

Here’s how a June 17 LA Times article describes the insurance company practice: “The committee investigation uncovered several rescission practices that one lawmaker called egregious, including targeting every policyholder diagnosed with leukemia, breast cancer and 1,400 other serious illnesses. Such investigations involve scouring the policyholder’s original application and years’ worth of medical and pharmacy records in search of any discrepancies.

” ‘These practices reveal that when an insurance company receives a claim for an expensive, life-saving treatment, some of them will look for a way — any way — to avoid having to pay for it,’ said [Rep. Bart Stupak (D-Mich.)] Stupak, chairman of the commerce committee’s Subcommittee on Oversight and Investigations.”

Here’s how it works. Insurance company contracts have anti-fraud provisions, such that applicants are not supposed to lie about known life-threatening conditions, for example, AIDS or cancer. If you lie, if you try to commit insurance fraud, you should be caught–and punished, for that matter.

But what unscrupulous companies do is use those provisions as loopholes, cutting people off who forget to list innocent items on the apps–or even for not listing conditions hidden in their medical records, unknown to them. Here’s some example from a repost of another LA Times article: “A Texas nurse said she lost her coverage, after she was diagnosed with aggressive breast cancer, for failing to disclose a visit to a dermatologist for acne.

The sister of an Illinois man who died of lymphoma said his policy was rescinded for the failure to report a possible aneurysm and gallstones that his physician noted in his chart but did not discuss with him.”

The practice of rescission “was largely hidden until three years ago, when The Times launched a series of stories disclosing that insurers routinely canceled the medical coverage of individual policyholders who required expensive medical care.”

Apparently, once the practice came to light, Congress got interested and held a hearing in June. From The Times’ coverage and the hearing testimony, a particularly nasty item came to light. Despite insurance execs’ denials of bonuses for employees who rescind thousands of policies, “[o]ne employee, for instance, received a perfect 5 for ‘exceptional performance’ on an evaluation that noted the employee’s role in dropping thousands of policyholders and avoiding nearly $10 million worth of medical care.”

The jaw-dropper in all this is the response of three insurance execs who testified at the hearing.

“Late in the hearing,  Stupak, the committee chairman, put the executives on the spot. Stupak asked each of them whether he would at least commit his company to immediately stop rescissions except where they could show ‘intentional fraud.’

“The answer from all three executives:

” ‘No.’ “

Then Rep. John Dingell (D-Mich.) tied the discussion to the need for health-care reform. He “said that a public insurance plan should be a part of any overhaul because it would force private companies to treat consumers fairly or risk losing them.

” ‘This is precisely why we need a public option,’ Dingell said.”

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Many of us can not wait for our leaders to fix the foreclosure/credit card/health system fiasco. Experts agree that if personal bankruptcy is your best option, the sooner you get counsel from a qualified attorney, the better. Here’s some online resources:

An overview from The New York Times.

An introduction to Chapter 7.

An introduction to Chapter 13.

In July the Federal Trade Commission (FTC) announced its latest effort to prosecute companies that practice mortgage modification scams. Code named “Operation Loan Lies,” the crackdown on predatory companies is in response to complaints from homeowners facing foreclosure.

Your best defense against these attacks is to know their tactics. When a company guarantees to modify your loan or stop the foreclosure after you pay up front, beware. You’ll likely lose more money yet still be faced with foreclosure.

While the scams originated in California, 25 federal and state agencies are now involved in combating this growing fraud.

While avoiding these scams, consider filing for bankruptcy as a legitimate, detailed alternative.  Your effort to reorganize your finances through Chapter 13 bankruptcy will stop a foreclosure for the period that you are in bankruptcy.

Unlike corporations, individuals like you can file for Chapter 13 of the bankruptcy code. This creates a bankruptcy estate which includes your property. A payment plan can be created which allows you to pay previous mortgage payments over time while still enabling you to meet your basic living expenses.

Not all individual cases qualify for Chapter 13, and credit limitations are created as a result of personal bankruptcy. Many states also have different rules regarding bankruptcy.

But a trusted bankruptcy attorney can evaluate your situation and serve as a legitimate advocate for your financial needs. They will be familiar with state laws regarding bankruptcy, ensuring that your actions to reduce your debt are compliant and effective.

The ultimate goal is to not only weather the financial storm, but create a detailed plan that best utilizes your finances moving forward. Quick-fix schemes will only put you further behind your payment obligations.

If you are faced with an impending foreclosure, don’t become the next victim of a mortgage modification scam. Contact a trusted local bankruptcy lawyer to explore your options.

Flush with a legislative victory, President Obama is scheduled to appear in Denver Feb. 17, when he will sign the $787 billion economic stimulus bill passed late in the day Feb. 13.  Hopeably, the bill’s passage on a Friday 13th won’t turn out to be a bad omen. That is, maybe some of the money and relief will actually reach people who need help this time–unlike the “bailout” funds that banks hoarded when the government made its little oopsie last fall and forgot to require even a minimum of loans targeted toward distressed homeowners.

After Tuesday’s signing at the Denver Museum of Nature & Science, the president leaves the Rockies for a Wednesday jaunt to Phoenix, where he’s expected to present his plan to stanch the hemorrhage of nationwide home foreclosures.

But Obama has a little public relations oopsie of his own: Part of the reason for the visits to Denver and Phoenix, according to a Chicago Tribune reporter, is “to refocus attention on ordinary people who might benefit from seeing the stimulus enacted.”

You know, slip out of the Beltway and mingle with the real folks… hunker down with the plebes… Well, apparently ordinary citizens got a shot at tickets to the Phoenix event, but the signing of the new bill is–according to the Denver museum–closed to the public. Posted at the museum’s Web site the day before the event, the explanation reads somewhat tersely: “This White House event is for invited guests only, and all tickets have been distributed. There are no remaining invitations.”

Oh, well, at least the hoedown for “Teachers, PTA members and school administrators” later that evening won’t get the kibosh: “Spring Educators Night scheduled for 5:30 p.m. on Tuesday evening will still go on as planned.” …whew!

Public relations gaffe aside, the event in Phoenix may well herald an historic shift in power. Since 1979, bankruptcy judges presiding over a Chapter 13 filing have not been able to modify mortgage terms on a primary residence. Astonishingly enough, using what lenders disparage as “cram down” powers, a judge can lower the amount owed on autos, boats, credit cards–and even a vacation home. But for decades, the mortgage-lending lobby has managed a white-knuckle death grip on the terms of primary residence loans.

Of course, such power is completely understandable. According to a Feb. 6 piece in the Mercury News, keeping the judges’ hands off the note, “allows lenders to foreclose on delinquent homeowners to force quick recovery of what they’re owed — part of the reason why foreclosures are so numerous.

“According to the mortgage industry data firm RealtyTrac, lenders filed for foreclosure on 2.3 million homes last year, up 81 percent from 2007 and 225 percent higher than the filing rate in 2006.”

The article posits a sea change that has been at least a couple of years in the making. “For the past two years, Democratic leaders in the House and Senate have been pushing for a change in the bankruptcy law to include principal residence loans on the list of debts that can be ‘judicially modified’ — crammed down — by the courts. They argued that banks and mortgage companies too often have been unwilling to offer delinquent borrowers serious modifications on loans because they have the option to pull the plug and foreclose.

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