America in Turmoil No Way Out; the 2005 Bankruptcies Overhaul Bill is Killing Americans & the Economy; Americans unload prized belongings to make ends meet:By Marc Chamot
Update: My good friend Mr. Unloadingzone posted on his blog more details about this story see below:
Wednesday, April 30, 2008 on
Beyond the massive losses of good paying factory jobs going abroad, mainly to China and Mexico Americans are stuck in a financial rut.
Good paying jobs no longer exists and as American families are slowly losing their jobs to foreigners and their salaries are being strimlined, they are stuck with their bills and debts that they can no longer pay.
With gasoline prices skyrocketing to new highs never seen before. And the inability to bankrupt themselves so they can restart with a clean financial slate to support themselves and their families.
How bad is it now for Americans?
Americans unload prized belongings to make ends meet
By ANNE D'INNOCENZIO, AP Business WriterTue Apr 29, 6:04 PM ET
The for-sale listings on the online hub Craigslist come with plaintive notices, like the one from the teenager in Georgia who said her mother lost her job and pleaded, "Please buy anything you can to help out."
Or the seller in Milwaukee who wrote in one post of needing to pay bills — and put a diamond engagement ring up for bids to do it.
Struggling with mounting debt and rising prices, faced with the toughest economic times since the early 1990s, Americans are selling prized possessions online and at flea markets at alarming rates.
To meet higher gas, food and prescription drug bills, they are selling off grandmother's dishes and their own belongings. Some of the household purging has been extremely painful — families forced to part with heirlooms.
"This is not about downsizing. It's about needing gas money," said Nancy Baughman, founder of eBizAuctions, an online auction service she runs out of her garage in Raleigh, N.C. One former affluent customer is now unemployed and had to unload Hermes leather jackets and Versace jeans and silk shirts.
At Craigslist, which has become a kind of online flea market for the world, the number of for-sale listings has soared 70 percent since last July. In March, the number of listings more than doubled to almost 15 million from the year-ago period.
Craigslist CEO Jeff Buckmaster acknowledged the increasing popularity of selling all sort of items on the Web, but said the rate of growth is "moving above the usual trend line." He said he was amazed at the desperate tone in some ads.
In Daleville, Ala., Ellona Bateman-Lee has turned to eBay and flea markets to empty her three-bedroom mobile home of DVDs, VCRs, stereos and televisions.
She said she needs the cash to help pay for soaring food and utility bills and mounting health care expenses since her husband, Bob, suffered an electric shock on the job as a dump truck driver in 2006 and is now disabled.
Among her most painful sales: her grandmother's teakettle. She sold it for $6 on eBay.
"My grandmother raised me, so it hurt," she said. "We've had bouts here and there, but we always got by. This time it's different."
Economists say it is difficult to compare the selling trend with other tough times because the Internet, only in wide use since the mid-1990s, has made it much easier to unload goods than, say, at pawn shops.
But clearly, cash-strapped people are selling their belongings at bargain prices, with a flood of listings for secondhand cars, clothing and furniture hitting the market in recent months, particularly since January.
Earlier this decade, people tapped their inflated home equity and credit cards to fuel a buying binge. Now, slumping home values and a credit crisis have sapped sources of cash.
Meanwhile, soaring gas and food prices haven't kept pace with meager wage growth. Gas prices have already hit $4 per gallon in some places, and that could become more widespread this summer. The weakening job market is another big worry.
Christine Hadley, a 53-year-old registered nurse from Reading, Pa., says she used to be "a clotheshorse," splurging on pricey Dooney & Bourke handbags. But her live-in boyfriend left last year, and she has had trouble finding a job.
Piles of unpaid bills forced her to sell more than 80 items, including the handbags, which went for more than $1,000 on a site called AuctionPal.com. Now, except for some artwork and threadbare furniture, her house is looking sparse.
"I need the money for essentials — to pay my bills and to eat," Hadley said.
At AuctionPal.com, which helps novices sell things online, for-sale listings rose 66 percent from February to March, much faster than the 25 percent to 30 percent average monthly pace since the company was formed in September, CEO Maureen Ellenberger said. She said she was surprised to see that most of her clients desperately needed to sell items to raise cash.
For LiveDeal.com, a classifieds and business directory site, for-sale listings for January through March rose 10 percent from the previous year.
"We can definitely detect economic stress on the part of the consumer," said John Raven, the site's chief operating officer.
On Craigslist, Buckmaster said, three of the four fastest-growing for-sale categories are tied to gas — recreational vehicles like campers and trailers, cars and trucks, and boats.
Raven noted more and more listings for furniture, particularly in areas around Miami and Las Vegas and other regions hardest hit by the housing crisis.
Baughman, who runs eBizAuctions, said that over the past four months she's been working with mostly desperate sellers instead of mainly casual ones. Most are middle-class customers who can't pay their bills and now want to be paid up front for the items instead of waiting until they are sold, she said.
The trend may be hurting secondhand stores too. Donations to the Salvation Army were down 20 percent in the January-to-March period. George Hood, the charity's national community relations and development secretary, said that was probably partly because people were selling their belongings instead.
And secondhand buyers want better deals now as well, driving prices down. Secondhand merchandise online is going for 25 to 35 percent below what it commanded a year ago, estimated Brian Riley, senior analyst at research firm The TowerGroup.
"It won't hit the saturation point until the (economy) hits the bottom and right now, we don't know when that is," he said.
In Alabama, Bateman-Lee said that she only received $30 for her TV and $45 for her DVD player at a local flea market. She doesn't have too much left to sell, but she's going back to "sort through more things."
Her $30 water bill is due this week. http://news.yahoo.com/s/ap/20080429/ap_on_bi_ge/cashing_out_the_attic
Continued by Marc Chamot
The 2005 bankruptcy laws have put a shackle in debt obligations on Americans where these debts will linger with them for as long as the debts last or until they are paid in full. Which means to most debtors that owe money, no more lines of credit and no more moneys available to buy fine things and pump back into the economy.
People and professionals had warned the Republican Congress back around when this new bankruptcy laws were being proposed even before President George Bush signed it into law, that it was a bad idea, and it would cause undue damage to Americans in the future and they were absolutely right!
People are being forclosed in large numbers, credit card bills going unpaid. But regardless for as long that they are in the United States and carry a valid social security card number these debts will linger behind them for life. No matter where they work or how much they earn, they will run risks into garnishments of future wages to pay off these debts, mainly in homes and credit card companies that they no longer own or live in and credit cards that they don’t have.
The 2005 bankruptcy laws is another prime example on how politicians favored banks and big corporate interests over the populace, it’s another prime example on how Americans got the shaft again once again by these sorry politicians in office. And you also got to remember that the Republicans had the majority of the house and senate in the U.S. congress when they pushed for these laws to be passed.
It’s never been this bad for Americans in recent memory as it is now.
The gross decay and neglect for Americans within our political system is reaching alarming proportions where sooner or later Americans will revolt. It could come to a point of no return for many Americans.
If this keeps up a bloodless civil war could be looming not to far in the near future for America if the populace at large and their needs are still being ignored.
We need more than presidential candidates in promising big changes for Americans, we need the U.S. congress to step in line and take action to agressively work and help Americans! The 2005 bankruptcy laws also need to be repealed immediately!
Why is the new 2005 bankruptcy law going to hurt filers in the future? Posted from The Law.
New Bankruptcy Law Affects Debt Negotiation
Since my whole approach is about avoiding bankruptcy, I won't go into a detailed analysis of the provisions of the new law. But just to summarize, the net effect is that many (if not most) people seeking relief under Chapter 7 bankruptcy will be forced to file under the Chapter 13 version instead. In plain English, that means that most filers will be forced to pay back a portion of the debt over a 5-year schedule set by the court.
New Bankruptcy Law Affects Debt Negotiation
Since my whole approach is about avoiding bankruptcy, I won't go into a detailed analysis of the provisions of the new law. But just to summarize, the net effect is that many (if not most) people seeking relief under Chapter 7 bankruptcy will be forced to file under the Chapter 13 version instead. In plain English, that means that most filers will be forced to pay back a portion of the debt over a 5-year schedule set by the court.
One of the worst aspects of the new bill is the use of IRS "allowable" expense schedules for determining your monthly budget. In other words, your actual living expense are thrown out the window in favor of the IRS standards (and we all know how generous the IRS can be!). So if your actual rent is $1,300 per month, and the IRS says it should be $1,045 for your county and state, that's TOUGH! The court will only allow the $1,045, period.
In short, people attempting to file bankruptcy after October 17, 2005 are in for an extremely rude awakening! Goodbye cell phones, cable TV, high-speed Internet access, movies, meals with the family, and anything else beyond the minimum allowable expenses as determined by the IRS and the courts.
So what makes me so certain that the banks will be as eager as ever to settle with consumers for 50 cents on the dollar or less? Simple. Two words: Stealth Bankruptcy. Hundreds of thousands of Americans are going to discover the new reality of this tough law, and they are going to forgo the court system of filing bankruptcy in lieu of what I call "stealth bankruptcy."
A stealth bankruptcy is when you move (with no forwarding address), change your phone number, and drop off the radar screen to live on an all-cash, no-credit basis. Many people already choose this path rather than deal with the invasion of privacy that comes with formal bankruptcy. After the new law goes into effect, more people than ever will take this approach. Besides the problem of stealth bankruptcy, there are other good reasons the banks will settle as they always have. Consider these points:
Full Story: http://www.thelaw.com/law-help-articles/bankruptcy/new-bankruptcy-law-affects-debt-negotiation.html
Full Story: http://www.thelaw.com/law-help-articles/bankruptcy/new-bankruptcy-law-affects-debt-negotiation.html
Tougher Bankruptcy laws now hurting Banks that pushed for them
http://www.bloomberg.com/apps/news?pid=20601109&sid=ar909uO1CqHw&refer=home
Bankruptcy reform written by the banks themselves is putting them in the red just a few years after they were written to protect 15-20% profit margins.
Bankruptcy Law Backfires as Foreclosures Offset Gains (Update1)
By Kathleen M. HowleyEnlarge Image/Details
Nov. 8 (Bloomberg) -- Washington Mutual Inc. got what it wanted in 2005: A revised bankruptcy code that no longer lets people walk away from credit card bills.
The largest U.S. savings and loan didn't count on a housing recession. The new bankruptcy laws are helping drive foreclosures to a record as homeowners default on mortgages and struggle to pay credit card debts that might have been wiped out under the old code, said Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank.
``Be careful what you wish for,'' Westbrook said. ``They wanted to make sure that people kept paying their credit cards, and what they're getting is more foreclosures.''
Washington Mutual, Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. spent $25 million in 2004 and 2005 lobbying for a legislative agenda that included changes in bankruptcy laws to protect credit card profits, according to the Center for Responsive Politics, a non-partisan Washington group that tracks political donations.
The banks are still paying for that decision. The surge in foreclosures has cut the value of securities backed by mortgages and led to more than $40 billion of writedowns for U.S. financial institutions. It also reached to the top echelons of the financial services industry.
Prince Exits
Citigroup Chief Executive Officer Charles O. ``Chuck'' Prince III stepped down this week after the country's biggest bank by assets said it may have $11 billion of writedowns on top of more than $6 billion in the third quarter. Stan O'Neal was ousted as CEO of Merrill Lynch & Co., the world's largest brokerage, after an $8.4 billion writedown. Both firms are based in New York.
Morgan Stanley, the second-biggest securities firm, said in a statement today that subprime losses will cut fourth-quarter earnings by $2.5 billion. The New York-based bank said it lost $3.7 billion in the two months through Oct. 31 as prices for securities linked with home loans to risky borrowers sank further than traders expected.
Even as losses have mounted, banks have seen their credit card businesses improve. The amount of money owed on U.S. credit cards with payments more than 30 days late fell to $7.04 billion in the second quarter from $8.37 billion two years earlier, according to data compiled by Federal Deposit Insurance Corp.
In the same period, the dollar volume of repossessed homes owned by insured banks doubled to $4.2 billion, the federal agency said. New foreclosures rose to a record in the second quarter, led by defaults in subprime adjustable-rate mortgages, according to the Mortgage Bankers Association in Washington.
`Let the House Go'
People are putting their credit card payments ahead of their mortgages, said Richard Fairbank, chief executive officer of Capital One Financial Corp., the largest independent U.S. credit card issuer. Of customers who are at least three months late on their mortgage payments, 70 percent are current on their credit cards, he said.
``What we conclude is that people are saying, `Honey, let the house go,''' but keep the cards, Fairbank said Nov. 5 at a conference in New York sponsored by Lehman Brothers Holdings Inc.
The new bankruptcy code makes it harder for debtors to qualify for Chapter 7, the section that erases non-mortgage debt. It shifted people who get paychecks higher than the median income for their area to Chapter 13, giving them up to five years to pay off non-housing creditors.
No Help Left
The court-ordered payment plans fail to account for subprime loans with adjustable rates that can reset as often as every six months, said Henry Sommer, president of the National Association of Consumer Bankruptcy Attorneys. Two-thirds of debtors won't be able to complete their payback plans, according to the Center for Responsible Lending.
``We have people walking away from homes because they can't afford them even post bankruptcy,'' said Sommer, a Philadelphia- based bankruptcy attorney. ``Their mortgage rates are resetting at levels that are completely unaffordable, and there's nothing the bankruptcy process can do for them as it now stands.''
Four million subprime borrowers with limited or tainted credit histories will see their mortgage bills increase by an average 40 percent in the next 18 months, according to the National Association of Consumer Advocates in Washington. About 1.45 million of those will end up in foreclosure by the end of 2008, said Mark Zandi, chief economist at Moody's Economy.com, a research firm and unit of Moody's Corp. in New York.
Lenders began the process of seizing properties on 0.65 percent of U.S. mortgages in the second quarter, a record in a quarterly Mortgage Bankers study that goes back 35 years. The percentage of subprime borrowers making late payments increased to 14.82, a five-year high, from 13.77.
Bankruptcies Increase
Personal bankruptcies rose 48 percent to 391,105 in the first half of 2007 from a year earlier and Chapter 13 filings accounted for more than one-third of those, according to the American Bankruptcy Institute. In the first half of 2005, they were just 24 percent of the total.
Bad mortgages slashed Washington Mutual's profit by 72 percent in the third quarter from a year earlier, the Seattle-based thrift said Oct. 17. Income from credit card interest rose 8.8 percent to $689 million in the period, helping to offset a loss the bank warned on Oct. 5 would be 75 percent.
Washington Mutual shares tumbled the most in 20 years yesterday after New York Attorney General Andrew Cuomo said the thrift had pressured real estate appraisers to assign inflated values to properties. Its dividend yield fell to 11 percent and the company traded at 0.74 price-to-book value.
Citigroup's third-quarter earnings fell 57 percent on mortgage losses. Bank of America stopped so-called warehouse lending to mortgage brokers after its profit declined 32 percent in the same period.
`Unintended Consequence'
JPMorgan reported profit growth of 2.3 percent in the quarter, the smallest in more than two years, after reducing the value of leveraged loans and collateralized debt obligations, investment packages of mortgages, by $1.64 billion.
Washington Mutual spokeswoman Libby Hutchinson in Seattle, JPMorgan spokesman Thomas Kelly in New York and Bank of America spokesman Terry Francisco in Charlotte, North Carolina, declined to comment on the bankruptcy law.
``The law had an unintended consequence of taking away a relief valve that mortgage borrowers used to have,'' said Rod Dubitsky, head of asset-backed research for Credit Suisse Holdings USA Inc. in New York. ``It's bad for the mortgage borrowers and bad for subprime investors because it means more losses.''
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was the biggest overhaul to the code in more than a quarter of a century. The old law, the Bankruptcy Reform Act of 1978 that was signed by President Jimmy Carter, had loosened requirements for debt forgiveness.
Lobbying Effort
Financial companies began a coordinated lobbying campaign for bankruptcy reform in 1998 when the American Financial Services Association, a trade group representing credit card companies, joined the American Bankers Association to form the National Consumer Bankruptcy Coalition.
Campaign contributions from the coalition and its members totaled more than $8.2 million during the 2004 election that gave Bush his second term in office. Two-thirds of the donations were given to Republicans who supported the bankruptcy changes, according to the Center for Responsive Politics.
The group, later renamed the Coalition for Responsible Bankruptcy Laws, has since disbanded. Its members included Washington Mutual, JPMorgan, Bank of America, Citigroup, MasterCard Inc., and Morgan Stanley.
Ford Motor Co., General Motors and DaimlerChrysler also were members. They won provisions in the new code that changed the way car loans are treated in bankruptcy.
Reform the Reform
Congress may soon take action to ``reform the bankruptcy reform,'' Zandi said. The House Judiciary Committee is working on legislation to let bankruptcy judges restructure home loans by lowering interest rates and reducing mortgage balances to reflect current market value.
Banks including Washington Mutual, Citigroup and Wells Fargo & Co. sent a letter to the committee opposing the change, saying such restructurings should be done privately.
Countrywide Financial Corp., the largest U.S. lender, said last month that it will modify $16 billion worth of adjustable-rate mortgages. Washington Mutual said in April that it will spend $2 billion giving discounted rates to help customers with subprime loans refinance at better terms.
So far, most lenders have been reluctant to change loan agreements.
About 1 percent of mortgages that reset in January, April and July were modified, according to a Sept. 21 Moody's Investors Service report that surveyed 16 subprime lenders that account for 80 percent of the market.
Congress probably will approve at least a limited measure to permit loan modifications, said Westbrook, the University of Texas law professor.
``They are going to have to figure out some way to address the problem,'' Westbrook said. ``I don't think our economy or our consciences can handle the number of foreclosures we'll see if they do nothing.''
To contact the reporter on this story: Kathleen M. Howley in Boston atmailto:kmhowley@bloomberg.net Story: http://www.toledotalk.com/cgi-bin/tt.pl/article/6961/Tougher_Bankruptcy_laws_now_hurting_Banks_that_pushed_for_them
New bankruptcy law may hurt small businesses
Toledo Business Journal, Aug 01, 2005 by Reynolds, Susan
When President Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act into law on April 20, 2005, he said the new legislation would protect those that legitimately need help, prevent people from defrauding the system, make it fairer to creditors and debtors, and strengthen the nation's economy.
Bankruptcy filings cost business nearly $40 billion a year, according to a March 2001 US Chamber of Commerce press release. These unpaid bills wind up costing the average American family $400 a year as the increased cost of doing business is passed down to consumers in higher prices.
The new law was designed primarily to bring responsibility to consumer debt. Individual bankruptcies increased fivefold from 1980 to 2003, But it also changes the rules under which small and large businesses file for bankruptcy. Despite numerous highprofile Chapter 11 filings in recent years, many of them in the airline industry, total business filings decreased 19% from 1980 to 2003 and were down 13% for the 12 months ending 3/31/05 versus 3/31/04.
Full Story:
http://findarticles.com/p/articles/mi_qa5333/is_200508/ai_n21386214
My good friend Mr. Unloadingzone posted on his blog more details about this story:
Wednesday, April 30, 2008 on http://theunloadingzone.blogspot.com/
American's Crushed Due to New Bankruptcy Laws
An Introduction by Mr. Unloadingzone to an Incredible piece of writing by Marc Chamot:It used to be if your financial circumstances overwhelmed you, Americans had a chance to start over through bankruptcy. But in 2005, Congress and the Bush Administration sold out to the banking and credit card industry and overhauled the bankruptcy laws. Here's an example: a down-sized husband who can't find a job in today's market. His family has been living off their credit cards; using them to pay other bills. Amazingly, they qualify for a Chapter 7 bankruptcy which wipes away all unsecured debt....but they can't file. Read more: http://theunloadingzone.blogspot.com/


















