Saturday, April 3, 2010

Bankrutpcy Filings Up

In the New York Times it was reported by Duff Wilson on Friday, April 20th, 2010 that there was a "Sharp Increase in Personal Bankruptcies" in March.

They seemed to be surprised. Why?

This is the perfect storm - high unemployment, real estate bubble bursts, banks out for every dime they can squeeze, medical bills soaring - what did they think would happen?


158,000 bankruptcy fillings in March
6,900 a day
35% increase from February 2010

Chapter 7's have increased to 73% from 62% a few years ago, signaling that people are in even worse financial shape than ever. They cant even qualify for Chapter 13 Bankruptcy despite the government's attempts to hurt EVERYONE possible into a 13!

The big problem: Joblessness

Even if people get back to work, they used credit cards to pay for living expenses during their unemployment - credit card debt that history shows they will never be able to pay back. Most cards run interest at 29% plus "fees".

The next wave of bankruptcy is coming soon.

The impact will be greater. "Fewer people are trying to same their homes" said University of Iowa law professor and bankruptcy expert Katherine M. Porter. "They realize their payments are not affordable" and just cannot make the payments.

Regardless of what the public might think, bankruptcy cannot lower the 1st Mortgage Payments.

Monday, March 15, 2010

Bank of America? Bank of Fees!

Last week was an unprecedented blow for freedom for the American consumer. The Courts are finally starting to deal with the allegations of fee creating by some of the largets banks in America.

Anyone who has ever had an account with these banks knows they play with deposits and withdrawals to create fees.

In a huge suit, Miami Federal judges denied a Motion to Dismiss by a number of banks in which they are accussed of having excessive and abusive overdraft fees. This will pave the way for a class action law suit, wherein the power of a group will rival the power of the big banking institutions. There is a great article about the suit in the South Florida Business Journal.

Bank of America then announced that they are no longer charging these a feel good attempt to throw people off the scent.

Thursday, March 4, 2010

Short Sales touted as new solution - Watch Out!

Short Sales! Many people in debt work tirelessly to create a short sale. 7 of 10 never close, says Florida Real Estate Attorney Michael Hirsch.

Even CNN today hopped on the bandwagon of so called "Short Sales" as the new answer to the mortgage foreclosure and debt crisis. Clark Howard reported this morning that Banks are now looking to streamline the process and approvals for short sales. That's good for the consumer, right?


Very wrong.

It is important to understand the public perception of what a "short sale" actually is. People in financial trouble have an even scarier notion. The popular understanding in the public is that a short sale is:
  1. the sale of real estate
  2. at fair market value
  3. by the Owner
  4. with permission from the Bank (mortgage holder)

The problem is the next myth that most of the public and definitely the person in financial trouble tend to believe:

5. that absolves the Owner of any further liability

6. and helps your credit rating

Most people believe if they short sale the property they are free of the debt surrounding the house. Not necessarily. You really have to have a competent attorney read all the paperwork. Most short sales leave you on the hook for the deficiency, that is the balance of the note after the proceeds of the sale is applied to the note.

Another issue is that often the Bank "forgives" the balance, and you receive a for 1099 for the balance of the loan not paid. That means taxes may be due.

Further, the short sale may not affect your credit at all. There is little evidence that the failure to make payments, followed by a sale in which the balance is not paid is any worse than filing bankruptcy.

Short sales are NOT the panacea that everyone is proclaiming. Banks are merely trying to mitigate their up front losses on a sale, but don't be fooled into thinking you are guaranteed to walk away with no further debt or obligation.

Think twice and read the documents 3 times!

And go see a great attorney!