Payday loans have not put this woman on the street. This study indicates that there is in fact no clear correlation between using payday loans and facing financial calamity like bankruptcy. (Photo: flickr.com)

Human Ecology professors Ruth Berry and Karen Duncan of the University of Manitoba appear to have been ready to point the accusing finger at payday loans in Canada. Given supporting data, it appears they would have been happy to report that payday loans and bankruptcy were strongly connected in the Great White North. However, “The Importance of Payday Loans in Canadian Consumer Insolvency” does nothing of the sort because doing so would fly in the face of hard evidence. There is no clear correlation between bankruptcy and use of payday loans in Canada, according to the authors of this study. In fact, the overall financial well-being of payday loan customers appeared to be slightly more favorable than those surveyed who did not use payday loans.

Payday Loans in Urban Centers and Inner Cities

In much the same way that payday lending has grown across the American landscape, payday lenders have stepped in to serve people of the inner cities who have been abandoned by the traditional banking industry – all because there wasn’t enough money to be had. And yet the same banks are the ones who charge payday loan companies with exploiting the public. While it is true that interest rates (when annualized as APR) for payday loans are higher than some traditional bank loans, the ease and convenience of payday loans tends to trump the offerings of banks and credit unions who demand higher customer qualifications and force applicants through a maze of paperwork. Credit-constrained consumers who lack liquid assets continue to find payday loans infinitely useful.

Berry and Duncan Want to Find the Payday Loan-Insolvency Connection

In their quest for this grail, the authors obtain data from “the main industry players in the payday loan field in Canada,” namely National Money Mart Company, RentCash and Cash Money. They also reference the Canadian Payday Loan Association, which is the national industry association that represents at least 40 payday loan companies (including those mentioned above), and the Financial Consumer Agency of Canada through analysis of related studies.

Previous Studies Didn’t Find a Connection, Either

“Not much literature exists connecting the experience of payday loans with consumers filing for bankruptcy,” write the authors. Perhaps this is because there isn’t a real connection? One study they cite found that only one in 10 payday loan customers filed for bankruptcy following a payday loan. Other studies noted a similar percentage. Those respondents who were found to have multiple payday loans at the same time may have been more prone to bankruptcy, but this group was found to be a minority. Moderate usage – which represents the majority of payday loans – shows no clear correlation with bankruptcy filings. In fact, a study by Robert Mayer (”Payday Lending and Personal Bankruptcy,” 2004) showed that those who displayed such moderate use owed only 17 percent of net monthly income, which is hardly a bankruptcy-inducing situation.

More Findings that Break the Mold

• The authors’ data indicated that payday loan customers tended to hold less in the way of long-term loans that did those surveyed who did not use payday loans. Such loans were most often mortgage loans.
• Interestingly, those who filed for bankruptcy and had used payday loans carried “significantly less” short-term debt than those bankruptcy filers who had not filed for payday loans. Payday loan customers held a mean of $14,485 in debt for 2005 and $13,938 for 2006, while those who did not use payday loans showed a mean debt of $25,972 and $26,615 in those years.
• Insolvent consumers didn’t display any tendency toward being either male or female.
• Households surveyed who used payday loans tended to be smaller than those households who didn’t.

Data by City

Berry and Duncan analyzed data from a number of major Canadian cities. What they found tended to be consistent with what has been discussed thus far: that payday loans do not correlate directly to bankruptcy and that payday loan consumers tended to display greater financial well-being than those surveyed who had never used the short term loans. Here’s a sampling:

Vancouver: Bankruptcy households who used payday loans versus those who did not displayed a higher average income.

Calgary, Edmonton and Toronto: Payday loan users showed much less long-term debt.

Installment Loans: Yet Another Path to Avoiding Bankruptcy

Berry and Duncan freely admit that “bankrupts with payday loans are more likely to be employed and have higher incomes and lower debt-to-income ratios than other bankrupts.” This brings them to their burning question: “Do payday loans contribute to bankruptcy?” Numerous studies paint very different pictures regarding the average amount for payday loans. Since more of them point to relatively small figures, it seems unlikely that such amounts would contribute heavily to bankruptcy. And since many lenders offer installment loans as an option in the event that a consumer is unable to pay their payday loan on the maturity date, there is a built-in path leading away from default and bankruptcy.

There’s an Indictment in Here Somewhere

Despite the fact that they found that payday loan customers tended to be more financially healthy than those respondents who never used the product, Berry and Duncan continue to operate from the position that payday loans are some evil product that should be avoided at all costs. Such is not the case, truly. They fulfill a need that traditional banking has largely ignored. Oh, but if only “mainstream lenders provided more accessible services, and educational institutions and non-profit or government agencies gave more objective information about payday lenders in public service advertisements, perhaps these borrowers might attempt to access other lending options,” write the authors. They follow that statement with the false claim that payday lenders do not make their interest rates known to consumers. In America, payday loan companies are required by the Truth in Lending Act to make this information readily available to consumers.

Prescience and Payday Loan Law

If there were only a database in place that could record payday loan usage, then perhaps there would be fewer abuses. That’s what the authors suggest in their 2007 study, and it has come to pass in numerous U.S. states. “A model that might be considered for regulating the number of payday loans held by one individual is the Drug Program Information Database (DPIN) which connects Manitoba Health and all pharmacies in Manitoba to a central database,” they write in reference to a 2006 Manitoba Centre for Health Policy study. “This prevents duplication and double-doctoring by providing the dispensing pharmacy with real time information to show the patient’s drug profile and allows the pharmacist to deny filling a prescription, which is the same or similar to another recently prescribed.” This is quite similar to what we see with payday loan databases. Such inventions do tend to lean toward the nanny state frame of mind, but many lawmakers have insisted upon pushing it through.

Correlation Does Not Imply Causation

And in this case, the authors can’t even draw a correlation between payday loans and bankruptcy filings in Canada. Certainly, those who have filed for bankruptcy would be burdened by any additional debt (including payday loans), but that implies no correlation (let alone causation). “It is not possible to determine whether the loan is hastening the insolvent’s decision to file for bankruptcy,” write Berry and Duncan. I’d go further than that, based upon their findings. I’ll say what they appear unwilling to admit: that payday loans help more than they hurt when used moderately (as most are). Bankruptcy is frequently the result of a complex mixture of financial and social issues. Payday loans are no scapegoat.

Many people rely on nontraditional loans like payday loans, installment loans, and cash advances to make ends meet. Although there are some signs that the economy has reached its low and should be on an upswing shortly, many businesses are still in distress. The latest large corporation to feel the strain of the recession is the Six Flags amusement park company. The company recently filed for Chapter 11 bankruptcy protection, seeking to reorganize debt of $1.8 billion.

Business to continue as usual

According to Six Flags CEO Mark Shapiro, the bankruptcy filing won’t affect the operations of the company’s 20 theme parks located throughout the US, Mexico, and Canada. Although the company had a record year in 2008, bringing in over 25 million customers, its debt has become unmanageable. The debt is estimated to be near $2.4 billion, and the company can no longer sustain it.

Discounted prices may still break the average budget

Because of the recession many people have cut amusement parks and other entertainment out of the budget. Six Flags, like other theme parks, reduced its prices to gain customers, a tactic normally used on in slow seasons like early spring and late fall. Specials like $10 entry fees, discounts on food and drinks, and two-for-one fares are all being used at the parks. Sharpiro added, “We are trying to maintain the revenues we do have as we face a restructure of debt. Six Flags will extend all discounting possible to better serve customers who are feeling the recession’s limitation of their funds.”

Consumer response

Many consumers see the Six Flag bankruptcy as another indication that the recession is not yet over. They believe more financial blows are to come. Economist Gary Lindall of Citigroup stats, “When you see industry giants having serious financial issues, it’s an indicator that individual problems could potentially still occur…people are taking notice of billion-dollar corporations’ actions and acting accordingly with their personal finances.”
Consumers are bracing themselves for more financial strain when it comes to dealing with everyday bills and expenses. Many qualifying customers are using payday loans, cash advances and installment loans as normal budgetary aids, rather than solely for emergency purposes. Analyst Dale Prichard of Smartmoney.com stated, “It used to be that nontraditional loans were looked at as an unusual choice and used for out-of-the-ordinary expenses. Research is showing that many Americans are looking to these types of funding every month as a way to cover their regular bills.”

New ways to balance the budget

The popularity of nontraditional loans is expected to grow exponentially in coming years as hard-hit consumers recover from the recession. Although there are some signs of an end to the current wave of economic problems, there are still a lot of financial issues to settle. For example, many homeowners are in the midst of mortgage modification programs and have yet to actually get used to their mortgage payments again. Because of changes in the credit industry, some people have to manage their finances without the credit cards they once relied on. Changes like these are making people wary of the future.

In the end . . .

As big corporations continue to struggle through the after effects of the recession, people are left to manage their finances with additional and nontraditional methods. Payday loans, installment loans, and cash advances are working their way into the regular consumer agenda, rather than being solely emergency options.

President Obama's plans for the Consumer Financial Protection Agency could mean that debt relief is closer than ever for the downtrodden. (Photo: flickr.com)

The recession has forced America to face some of its most deep-seated systematic financial troubles. One thing that has become clear is that unscrupulous mortgage lenders and credit card agencies have dined for far too long upon consumers who largely didn’t understand that they could hold out for something better. Foreclosure and bankruptcy have amplified the burden on consumers, courts and the economy as a whole tenfold, which makes the question of how debt relief should be handled a more pressing issue that it has been in decades.

Cornell and George Washington Law School Economics lecturer and former professor Dr. Neil Buchanan ponders in a recent FindLaw column entitled “Should Federal Agencies or Courts Protect Consumers in Financial Markets?” which side of the regulatory coin America needs most. Existing regulatory agencies are being given more extensive duties by the Obama administration in order to help make America’s financial markets safe and sound. At the same time, new agencies like the newly minted Consumer Financial Protection Agency appears to be on its way to receiving unprecedented powers. In theory, it will have the power to police how mortgage lenders, banks, credit card companies, payday lenders or any other consumer finance company interacts with consumers. It is Buchanan’s opinion that allowing regulatory agencies to protect consumers is the best route, as relying solely upon the courts wouldn’t be enough of a deterrent to keep suspect lenders from indulging in bad behavior. The ideal system would have both in place as a regulatory enforcement clearing house.

But Isn’t This Big Government Clogging the Market?

Some will surely feel that way. What I have seen from state governments is an overzealousness to regulate payday lending, to the point where it is impossible for such legitimate businesses to operate in some states. Mortgage lenders and credit card company supporters would likely have similar complaints, although the path of destruction their industries have carved is rather hard to ignore. Buchanan begins his argument by considering the “courts only” option. If it were possible t regulating a market in need of deep repair like the mortgage industry through simple enforcement of the law, that would be ideal. However, Buchanan doesn’t see that as being enough. Sometimes the courts might work in favor of the consumer and debt relief, but not often enough. Extreme circumstances would be required to convince most judges to see cause to invalidate a contract. The “non-elite” consumers, as Buchanan calls those most in need of debt relief, would not receive the help they need.

There is precedent here, but it could be a one in a million kind of thing. Buchanan points to a New York Times story where a judge ruled that a homeowner’s mortgage debt could be completely discharged during bankruptcy. This loop in legal convention happened due to a technicality: the mortgage company couldn’t prove it had the legal right to collect payments on the homeowner’s mortgage due to the fact that their mortgage had been repackaged and resold so many times that the paper trail had been lost. The mortgage company claimed this was “standard procedure” now, but the judge wouldn’t accept such shenanigans. Since the judge wasn’t exactly sure who was due the money, he decided he couldn’t compel the consumer to make mortgage payments to any one party.

“Saved by a Technicality” Won’t Work for Everyone

Buchanan rightly points out that not all judges will be as determined to call mortgage lenders’ bluff in such situations. “Standard procedure” should hold in most cases, meaning that homeowners would still be legally obligated to follow the terms of their mortgage contract. And mortgage lenders have certainly learned something from that case and are making sure all paperwork is in order. Once again, the deck will be stacked against consumers.

Don’t Depend Upon Courts for Debt Relief

Courts enforce the law. When a consumer enters into any legal contract with a lender, the terms of that contract are in most case subject to enforcement by law. Buchanan considers the vast majority of consumers to be “grossly mismatched” against mortgage and credit card companies. Mandatory arbitration clauses, hidden interest spike triggers and means of computing interest are always written in the best interests of the creditor. Consumers often agree to such contracts because they feel they don’t have any other choice. New regulatory agencies may be able to curtail abusive practices that are currently considered legal, but until that time officially arrives, there is too little hope that the average consumer will be able to fight back through the court system.

Courts Have Been Friendlier to Finance Companies

Families can go to court to attempt to prove that they shouldn’t have to pay under the terms of less than legal contract. However, Buchanan believes most judges will stick to enforcing contract language. In turn, the lending companies themselves are effectively using the court system to compel consumers to pay, even if it is through wage garnishment.

What about “Equitable Doctrines” for Debt Relief?

Hoping that lenders lose their paperwork isn’t a good strategy. That’s where “equitable doctrines” come into play. These can create situations where courts might be willing to set aside otherwise valid contracts because they feel that it there were unconscionable circumstances that placed the consumer under duress or undue influence to sign. Buchanan draws our attention to the “doctrine of unconscionability” itself, claiming that it works in two ways. First, in terms of procedure, there is the scenario where a contract was formed under suspicious circumstances. Second, there is the scenario where the substance of a contract is deemed grossly unfair. If both conditions are met, a contract like a mortgage, credit card agreement, etc, will not be enforced.

Too Good to Be True?

Perhaps it is. It all looks great on paper, says Buchanan, but debt relief is hard to come by via equitable doctrines. Only the most extreme cases are considered by courts, and for most people, having trouble paying a mortgage or credit card they signed up for won’t be enough to sway a judge. This raises the question in Buchanan’s mind as to whether courts should be compelled by stronger legislation to accept equitable doctrine arguments based on things like unconscionability. But as with any other action fought through courts, the cost would likely be prohibitive. Moreover, lenders would still be favored because “losing a contracts case legally cannot result in a company paying punitive damages,” writes Buchanan. “If you lose a contracts case, you merely pay what you would have paid anyway; and if you win, you are ahead. Thus, from the standpoint of repeat players, there is no reason not to abuse your customers (except to maintain goodwill, which many of the companies at issue here have already forfeited).” Then there are plenty of consumers who simply will not have the stomach to sue or be willing to accept a lesser settlement.

Calling on the Government for Debt Relief

Traditionally, the government has remained behind the scenes while consumers have pursued their right to take debt relief matters before the court system. As Buchanan suggests, however, this route has not often proved itself to be effective for the average consumer. In situations where genuine signs of abusive practices and unconscionable contracts are involved, new government agencies could take up the baton and make financial regulation more consumer-friendly.

“An agency can be empowered by Congress to order changes in behavior, changing business practices broadly and generally in order to level the playing field on which financial institutions and their customers do business,” says Buchanan. There could even be scenarios where lenders themselves could support agency regulation over the courts. “Out of control lawsuits” that financial institutions claim burden them unnecessarily would certainly be something lenders would be willing to leave behind so that a regulating agency can rule on matters. “But that hypothetical,” Buchanan writes, “ignores the financial industry’s real agenda, which is to fight to maintain both weak legal rules (allowing them to win in court) and weak-to-nonexistent agency regulation.”

Congress, Act Now

New agencies are about to spring forth from the executive branch to regulate the financial abuse of consumers through deceptive practices. Congress is in a perfect position to arm these agencies with more consumer-friendly laws that will make reasonable debt relief easier to attain. It’s that kind of consumer protection that Neil Buchanan and most concerned consumers are in search of as America looks to emerge from the darkness of the recession into the light of a stronger domestic America.

She's found that silver lining amidst the dark clouds of the recession. It's a matter of effort and perspective. (Photo: picasaweb.google.com)

Millions of people around the world have fallen victim to the current recession. Business houses with international reputations have filed for bankruptcy and employees who were confident of their job security have been dismissed. While the experience of unemployment is common, the reactions of the unemployed vary widely. Unfortunately, many people allow their worlds to collapse around them once the job they have worked at for years has disappeared, and they add mental anguish to the financial sufferings that usually come with job loss. However, there are also those who lose their job and are able to take advantage of these unfortunate circumstances to make a new start in life. As with many other things in life, a great deal depends on whether you choose to view changes in circumstances as a personal disaster or a source of motivation. A search on Google for “starting a new business” turns up an incredible 70,000,000 hits, which surely indicates that despite the downturn, there is a healthy interest in new business opportunities.

Redundancy Can Lead to Something Much Better

Although the vast majority of people are upset when they are made redundant – unless they receive a generous early retirement package – some workers find a silver lining in the dark cloud of job loss. Redundancy sometimes furnishes an opportunity to make a welcome break with a “dead end” job and start enjoying life. For instance, employees who lost their positions working for large companies have found this event gave them the motivation to go ahead and set up their own businesses, and they have succeeded beyond expectations. Instead of having to fit into the schedule of somebody else’s business and being paid a fixed wage, they now find they can manage their own time and they feel their quality of life has consequently improved and their financial status advanced. Rather than allow the economic recession to wreck their lives they take advantage of it to realize their dreams. In some cases, unemployed people have also been able to transform a former hobby into a source of livelihood, or they have taken their professional skills and applied them in new fields such as teaching or consultancy. For example, www.gaebler.com describes how an applications consultant for a small software company took advantage of his redundancy to open his open business training other people to become consultants.

Environmental Side Benefits from Industrial Decline

Just as the recession has brought unforeseen benefits to some of the individuals affected, its impact on the life of nations has also revealed a positive side. A good example of how recession has led to an improvement in life quality comes from the North of England. This area is famous as the cradle of the Industrial Revolution, and it has suffered severely from a loss of jobs in traditional industries like textiles and coal mining over the last forty years. At the same time, the decline of industrial activity has been responsible for a dramatic improvement in the quality of the environment. The industrial sources of water and air pollution have been so dramatically reduced that fish have returned to rivers that have been biologically dead for over 150 years, and respiratory diseases have been much reduced by the cut in factory smoke emissions. The river Irwell in England is a classic example of a dead river that has returned to life as the polluting factories along its banks closed down. The people may now be poorer, but at the same time their environment is so much healthier.

Installment loans

Get access to cash through an installment loan today. Image from Picasa.

If you are one of the many people who are experiencing an unexpected financial emergency, an installment loan maybe just the right thing for you.  Installment loans are a simple way to get cash on hand quickly.  What exactly is an installment loan?  It is a short term loan. When you take out an installment loan you will have a set payment plan until the balance is paid off.

Benefit of Installment Loans for Those with Bad Credit

With the economy the way it is now, most everyone will need an installment loan at some point. In fact, many people are already receiving installment loans, and a lot of these people have bad credit. But how can somebody with bad credit receive an installment loan?

Installment Loans with No Credit Checks

In most cases, we do not require a credit check in order to approve someone for an installment loan.  Usually, whether a person has good or bad credit, when they apply for a loan they are concerned about the affect it will have on their credit.  Since most lenders usually will not do a credit check, you will avoid another inquiry of your credit and the installment loan will not appear on your credit report.

Installment Loans and Bankruptcy

Inquiring about bankruptcy is something we usually do not do when considering someone for an installment loan.  We do not use it as a qualifying factor.  If you have had a recent bankruptcy, do not let it stop you from applying with us online today.

Installment Loans and Identity Theft

While doing anything online, people are rightfully concerned about identity theft.  Many places that offer installment loans require things like your social security card, driver’s license, and state ID which they may fax, scan or e-mail to other locations.  Often times, they may even require to see proof of residency through a piece of mail.

This is usually unnecessary and can be frustrating when these items are not on hand.  When you apply online with us today, you can avoid all of these problems.  We do not require seeing any of your personal identification information.  Always look for a phone number to call and make sure you talk to someone before you apply for an installment loan.  This assures that the site you are using is safe.

Our Quick Installment Loans

When you receive an installment loan from us, the money is usually deposited into your account in as little as two hours and the money is available for spending right away.  What a change that is from other loan companies that make you wait several days to use the money that you need right now.

The best part of applying for an installment loan with us today is that we ask the minimum questions to get you set up with an installment loan.  This makes it possible for most everyone to complete our installment loan application in less than five minutes.

For Installment Loans APPLY HERE

Old Country Buffet filed for Chapter 11 in January 2008, but emerged with reduced debt in April 2009.

People say recession sparks innovation, creativity, responsibility, and all other sorts of optimistic-sounding things. It also causes failure, collapse, bankruptcy and all other sorts of apocalyptic-sounding things.

It also causes complications, such as leaving franchise owners to figure out how to deal when their parent company goes bankrupt. Sometimes the parent company manages to get back on its feet, and sometimes it shuts down. Either way, the franchise owner is still responsible for his or her store, and left with the decision of what to do when selling a tarnished brand.

CNN Money published a list of franchises that went bankrupt since the recession became official. Some came back and some didn’t.

Mrs. Fields Famous

The Mrs. Fields Famous brand, based in Salt Lake City, Utah, is the parent to 1,200 Mrs Fields Cookies and TCBY stores. Last August, the company filed for Chapter 11.

Lucky for the franchises,  which continued to operate throughout the bankruptcy proceedings, only a couple of months later,the company was on the road to recovery. I don’t know if they  used private money lenders or what, but it  managed to restructure its $196 million in debt down to $50 million.

Cork and Olive

Small Florida parent company Cork and Olive wasn’t so lucky. Cork and Olive, which was made of eight company stores and nine franchises, filed for bankruptcy in June 2008.

The company stores shut down, but the franchises are still soldiering on. CNN Money reports that “the franchisees meet regularly to discuss how to keep their brand alive without the parent company.”

Bennigan’s

Texas-based family dining restaurant Bennigan’s filed for Chapter 7 bankruptcy — that’s right, the bad kind — in July 2008. All of the corporate locations were shut down. CNN Money says:

Its 138 franchisees were left in PR hell, struggling to convince patrons that they were still open for business.

However, private equity firm Atalaya Capital company acquired the brand in October and reopened the corporate stores quickly, many of which are now operated as franchises.

Bally Total Fitness

This gym just can’t seem to catch a break. The nationwide franchise, based in Chicago, has filed for bankruptcy more than once. CNN Money reports:

It was a déjà vu for the health club chain in December 2008 when it filed for Chapter 11, a mere 14 months after emerging from its first Chapter 11 filing in July 2007. Just weeks ago, Bally signed an agreement to emerge from bankruptcy by restructuring the $1.5 billion in debt it had accrued and by granting 94% of the company’s equity to lenders such as J.P. Morgan.

Fatburger

This one gets a little complicated. Two subsidiaries of Fatburger Corp, Fatburger Restaurants in California and Fatburger Restaurants in Nevada, filed for bankruptcy in April. However, parent company Fatburger Corp. did not file for bankruptcy. Confusing matters more, that parent company, Fatburger Corp., is based in California.

Furthermore, Fatburger Restaurants in California and Fatburger Restaurants in Nevada accounted for 72 percent of Fatburger Corp’s total revenue. So what now? Good question. CNN says “The company’s 90 franchise owners are waiting to see what happens next.”

Today the government announced unemployment figures for June that are much worse than expected. Employers cut 467,000 jobs and the unemployment rate rose to 9.5%, the worst since 1983. Unemployment is a lagging indicator, so even after the economy begins to improve, the jobless rate is likely to rise for some time.

With no end in sight to rising unemployment and with foreclosure rates continuing to accelerate, people are turning in droves to bankruptcy. You may find it humiliating even to consider bankruptcy, let alone join that crowd in the courthouse corridor, waiting for your name to be called. But with an economic tsunami rolling over your home, job, and health insurance, it just may be your best course of action.

The time comes when it makes sense to give up the good fight

Many people — honorable to the bitter end — struggle much longer than they should to rein in unmanageable debt. By the time they give up, they’ve lost valuable assets that would have been protected in bankruptcy, which defeats the “fresh start” purpose of the law. If you are a candidate for bankruptcy, the best time to file may be when you’re on the losing track but still have assets worth protecting.

It’s true that a bankruptcy filing remains on your credit record for up to ten years and makes it difficult to obtain competitive interest rates on loans. Most bankruptcy debtors, however, already have badly damaged credit records by the time they file.  When you are faced with insurmountable debt, a compromised credit rating can be a small price to pay for the fresh start that only bankruptcy can afford.

Before you decide to file, consult an experienced bankruptcy attorney

Bankruptcy is a significant and complicated legal proceeding. There is nothing to prevent you from representing yourself in bankruptcy court, but it is not wise to do so. When you represent yourself, you are held to the same standards of knowledge and practice as a licensed attorney. Knowing exactly how to navigate the intricacies of the Bankruptcy Code and several other bodies of statutory and common law is essential to an effective discharge of debts.

It costs nothing to get an initial consultation with an experienced bankruptcy attorney practicing in your jurisdiction.  It is vital that you receive competent legal advice before deciding whether bankruptcy is the right choice for you.

Looking at the numbers, bankruptcy may not be such a tough choice

An Associated Press analysis for the first quarter of 2009 revealed that U.S. bankruptcy filings were up an astounding 46% from March of 2008 to March of 2009. The jump is an even more dramatic 81% since March of 2007.  Some economists predict that the situation will become even worse.

A little over four years ago Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act, also known as the 2005 Bankruptcy Amendment Act. Bankruptcy filings surged in the fall of 2005 to a record-shattering 2 million cases for the year as struggling consumers rushed to beat the implementation of the new law. In 2006, filings plummeted to 600,000. This year, bankruptcy filings are soaring again, and the predicted numbers for 2009 range between 1.5 and 1.6 million.

Elimination of debts in Chapter 7 may be an option even for higher incomes

The majority of bankruptcy debtors file under Chapter 7 which eliminates most (but not all) unsecured debts. When Congress enacted the 2005 Bankruptcy Amendment Act, it sought to restrict Chapter 7 filings by requiring debtors to pass a “means test” designed to weed out those who appear to have the ability to pay all or a portion of their debts under Chapter 13. Despite this hurdle, many people still qualify for Chapter 7 relief. Read Bankruptcy|What Should I Do?

The means test allows debtors to deduct certain expenses from their incomes. The greater the deductions, of course, the easier it is to qualify. Despite the congressional intent, the means test contains several variables that may enable people with higher incomes to qualify for Chapter 7. Debtors who own homes with mortgages may deduct the full amount of the mortgage. Having several children or dependants, multiple cars with loans or leases, high childcare and insurance expenses, and making large religious donations may also facilitate qualifying for Chapter 7.

Installment loans are remaining staples in budgeting as the economy struggles. One indicator of how the economy is doing can be seen by watching the auto industry. On average, Americans purchased 16 million cars yearly for the past decade. In 2009 the projection is that only 10 million will be sold. The big car manufacturers are all suffering. Here are some startling statistics on two auto manufacturers alone: Chrysler filed for bankruptcy and GM is cutting 2,600 dealers and eliminating or selling Pontiac, Hummer, Saturn and Saab. With these two industry giants struggling, it’s no wonder the American public is flailing for help through the economy.

There are some basic policies car manufacturers have to come to terms with should they turn their industry around.

1. In the past, car sales grew faster than the population. This is because urban sprawl brought the need for 2 vehicles per household. Now those numbers are evening out because the US can’t keep at that pace forever. It’s estimated there are 200 million drivers on the road and already 250 million cars in American driveways. It’s foolish to think that the sales of cars will remain the same, especially because of the disparity.
2. A lot of the past popularity with car sales can be attributed to the “keeping up with the Joneses” mentality. Urban sprawl also brought about competition between neighbors. With a driveway a few feet away, many urbanites wanted to have the same, or better, vehicle than people next to them. It’s foolish to think this will last, particularly in a recessive economy. People everywhere are in financial straits and a new car is the last thing they are looking to purchase.
3. The car business has been on a decline since the 60s. In particular the profit and loss statements of GM from 2005-2007 were all in the red. Most revenues come from lending, and not from manufacturing or sales of vehicles. It’s beneficial to take a good honest look at the numbers and realize that with the number of cars being manufactured, a loss is sure to be a reality sooner or later.

When industry giants are facing bankruptcy, it’s no wonder that the American public is under the same financial strains. Some consumers are relying on family loans, installment loans or credit cards to get them through to the next payday.

The future

So what does the auto industry’s future hold? No one knows for sure, but it seems like the cars that are truly holding on in sales are small, efficient cars and hybrids. People also are keeping their cars for longer periods of time. In 2000 people kept their cars on average for just 39 months. Recent years have shown that people are now keeping their vehicles for more than 50. Janice Ianne of Maplewood Minnesota stated, “We used to love buying a new car every two years, for both me and my husband. Now that’s a long-gone luxury we just can’t afford.” Ianne is not alone as most Americans are following suit, preferring to repair sturdy cars than purchase new ones.

Evolution

Hopefully the auto industry will move through an evolution where only the strongest survive and in the end, flourish. Until then, it’s up to the American people to continue their reliance on wise decision-making policies, additional funding such as installment loans, and each other for solace.

You probably won’t be surprised to hear that more complaints are lodged against debt collectors than any other kind of business. But the actual number of complaints filed may give you pause: according to the Federal Trade Commission, 78,838 people made formal complaints about debt collectors in 2008.

More and more consumers are falling behind on their bills and turning to online loans and cash advances to help stretch the budget between paydays. Naturally, the collections industry is working harder than ever to collect those unpaid debts.

And debt collectors aren’t just calling and mailing. They’re using technology like social networking sites and cell-phone texting to get people to pay.

Don’t make friends with debt collectors

A recent article on CNNMoney, describes an incident where a foreign debt collection company used a picture of an attractive woman to befriend a debtor on Facebook, the social networking site. Acting as a “faux friend” allows a debt collector to monitor your updates and keep tabs on anything you might mention online about your assets, finances, or purchases.

Read up on debt collection laws

There are strict federal laws about what debt collectors can and cannot do to try to collect debts. They must identify themselves as debt collectors. They cannot harass you or talk about your debt to anyone but you or your attorney. They cannot call before 8 a.m. or after 9 p.m. They cannot threaten to sue you if they don’t have any intention to do so. They cannot misrepresent the amount you owe.

Find out about statutes of limitation

In every state there are statutes of limitation prescribing time periods after which a creditor can no longer sue you to collect a debt. Applicable limitation periods vary from state to state, but are generally in the range of three to six years. When the limitation period passes, you still owe the debt, but the creditor can no longer sue you to collect it. The only actions that will erase your obligation to pay a debt are cancellation of the debt by the creditor, discharge of the debt in bankruptcy, or payment of the debt.

Get legal advice

Because you still owe the debt, debt collectors don’t have to stop trying to collect just because the time has passed for filing a lawsuit. They can no longer sue you, but short of a lawsuit they can still try to get you pay up. As a practical matter, they debt collectors will stop bothering you once the limitation period passes, but they don’t have to.

If you are being hounded by collectors about old debts, it may be worth getting advice from an attorney who practices in your state. If the limitation periods have passed, telling a collector that you know they can no longer sue may be all it takes to make them go away.

Don’t jump into bankruptcy

Sometimes people file bankruptcy in order to get creditors to stop calling them. But this may be an unnecessary – not to mention expensive and complicated – reaction to pressure from debt collectors.

Before you think about filing bankruptcy, write letters to the debt collectors demanding that they cease contacting you. Send them by certified mail and pay for a return receipt so you know when they are received.

Once your letter is received, a debt collector can no longer contact you except to confirm that they won’t contact you anymore or to advise you that they are taking collection action against you.

Get Legal Advice

It’s usually not difficult to get a debt collector to stop contacting you. But remember: the fact that the collector has stopped contacting you doesn’t necessarily mean you don’t still owe the debt. On the other hand, don’t be shy about demanding that collectors leave you alone. Creditor-and-debtor law is rife with legal defenses and the fact that a collector is hounding you doesn’t necessarily mean that you owe the debt.

If you’re having problems with debt collectors and you have any doubt about whether you owe the debt or how much you owe, don’t just throw money at the collectors to get them to go away. Spend the money instead on good legal advice.

General Motors will sell Saturn to Penske Automotive Group, according to news reports. The deal is tentative so far, but Roger Penske of Penske Automotive Group has agreed to buy the struggling Saturn brand from bankrupt GM.

GM dealerships across the country are offering historically cheap loans as they are forced to shut down in the wake of the GM bankruptcy. Penske Automotive Group is the United States’ second-largest auto dealership group. Saturn was established as a subsidiary of GM in1985.

Saturn, Penske agreement

According to USA Today:

Penske’s Saturn will continue to receive GM-made vehicles for two years, and is looking for another manufacturer to make vehicles that will bear the Saturn brand, Free Press reporter Tim Higgins writes.

The New York Times reports that the amount Saturn will cost Penske Automotive Group has not been disclosed. The New York Times also says:

The move is the latest by G.M. to sell off assets as it reorganizes itself in bankruptcy. Saturn, which was part of G.M.’s bankruptcy filing on Monday, had drawn 16 bidders over a months long sales process, G.M. said earlier this week.

One more down

The sale of Saturn has been in the works for a while. Wikipedia says:

In US Congressional hearings on December 2, 2008, General Motors announced its intentions to focus on four core brands (Chevrolet, GMC, Buick, Cadillac), with the sale, consolidation, or closure of Saturn and the remaining brands (Pontiac, Hummer, and Saab).

GM has already entered an agreement with Chinese manufacturing company Sichuan Tenzhong regarding sale of the Hummer brand. Saab has been undergoing restructuring for several months and some interested parties have been named as potential buyers. However, GM has not yet reached a deal to sell the Saab brand.

A word from Saturn’s sponsors

The New York Times reports that Penske Automotive Group will acquire the Saturn brand along with the Saturn parts inventory and the right to sell vehicles through the Saturn dealership network.

“We have agreed upon a framework that we believe will build momentum for the Saturn brand,” Mr. Penske said in a statement. “Saturn has a passionate customer base and outstanding dealer network. For nearly 20 years Saturn has focused on treating the customer right. We share that philosophy, and we want to build on those strengths.”

Saturn’s initial cost to GM in the 1980s was about $5 billion.

More on Penske Automotive Group

Penske Automotive Group already represents more than 40 different brands. Wikipedia says:

PAG operates 253 retail automotive franchises, representing 40 different brands, and 40 collision repair centers. PAG is a member of the Fortune 500 and Russell 2000, and has approximately 15,000 employees. PAG has 152 franchises in 19 U.S. states, selling new and previously owned vehicles, finance, insurance products, replacement parts, and offers maintenance and repair services on all brands it represents. Outside the United States it has operations in Puerto Rico, Germany and 110 franchises in the United Kingdom via the Sytner Group.

I haven’t seen any reports on Penske Automotive Group’s current financial situation or changes in its stability because of the economy. In this case, I am assuming that no news is good news.

A quarter of Chrysler dealerships closing

United States automaker Chrysler says it will close 789 of its U.S. dealerships, which adds up to about a quarter of its total dealerships.

According to the Washington Post, Chrysler has 3,181 dealerships in the U.S.

Who will be hit hard

Toledo.com, a news outlet in Toledo, Ohio, says that 47 dealerships in Ohio, mostly in the northeastern part of the state, will close.

The Chrysler dealerships closing include Jeep and Dodge. Many Jeep, Dodge and Dodge Truck dealerships across the country will be shut down.

Check out a PDF of the list of all the dealerships that will close.

Does Chrysler need debt relief?

The dealership shutdowns are the result of Chrysler rushing to pare down business and cuts costs. Chrysler has already filed for bankruptcy protection and gotten $4 billion in federal installment loans.

Chrysler received bankruptcy protection April 30. Chrysler has been conducting a project called “Project Genesis” to determine which dealerships are the “most desirable,” according to The Washington Post. That helped the automaker determine which Chrysler dealerships are closing.

Project Genesis

The Washington Post says:

Over the past eight years, Chrysler consolidated its dealer network within the limits of existing contracts and rules, an effort that cost the company $216 million, Chrysler said. In recent months, the automaker has worked with its would-be owners — a coalition lead by Italian automaker Fiat — to “refine” the evaluation of dealers, Chrysler said.

Though Chrysler recently entered a partnership with Fiat, the automaker is working on reducing its dealership network to a more appropriate size as it works through restructuring following its bankruptcy filing.

More trouble in auto land

General Motors is making significant changes to its franchise agreements. According to the Washington Post:

At the same time, General Motors is telling 1,100 dealers that it will not renew their franchise agreements when they run out next year.

Yesterday, dealers from across the country flew into Washington to lobby lawmakers against closing large chunks of GM and Chrysler’s dealer networks.

War on recession?

The head of a large auto dealers’ association thinks that shutting down the dealerships is not a wise move.

“What we’re finding is fundamental misunderstanding of the automobile business and how it operates,” said Gerard Murphy, president of the Washington Area New Automobile Dealers Association. “People are looking at the automobile business like a Starbucks model, where it makes sense to divest yourself of locations.”

Murphy said dealers are driving revenue to the automakers, not taking it away.

“This is tantamount to divesting yourself of troops when you have a siege at the gates,” he said. “How does that help?”

History of an American automaker

According to Wikipedia, Chrysler was:

first organized as Chrysler Corporation in 1925. From 1998 to 2007, Chrysler and its subsidiaries were part of the German based DaimlerChrysler AG (now Daimler AG). … Under DaimlerChrysler, the company was named “DaimlerChrysler Motors Company LLC”, with its U.S. operations generally referred to as the “Chrysler Group”. On May 14, 2007, DaimlerChrysler announced the sale of 80.1% of Chrysler Group to American private equity firm Cerberus Capital Management, L.P., although Daimler continued to hold a 19.9% stake. This was when the company took on its current name. The deal was finalized on August 3, 2007.

A few days ago I got a $250 payday loan. Read I Saved Money with a Payday Loan and Payday Loan Payback. I didn’t like getting a payday loan, but I liked the alternatives even less. I don’t use credit cards and except for my car loan, I’d never had installment loans of any sort.

But one day I was stressed about paying my bills.  I wasn’t even thinking of a payday loan when I sort of absent-mindedly typed “cash advance” in my search bar.  Then I clicked on “Google Search” and I discovered a whole new world.

Just say “no” to successive loans.

The world of payday loans is not a place I want to visit regularly or often. I didn’t have to read very far before I realized that payday loans are the subject of strenuous, nationwide debate. I’m not too interested in the details — because I got what I wanted from a payday loan and I got right out — but my impression is that the problems stem from successive loans. And I can assure you that uninterrupted service is exactly what payday companies want to provide.

The minute I applied for a payday loan, I received an onslaught of emails from competitor companies offering me more loans. I also received emails from the company I used telling me that I could get bigger and less expensive loans if I kept getting more of them. At some point, after four or so payday loans, I would qualify for an installment loan.

Don’t get mired in the habit.

It is beyond dispute that payday loan companies are motivated to get borrowers securely mired in the payday-loan habit. A few days before my next payday at work, when my loan was scheduled to be paid by an automatic deduction from my checking account, I started getting emails from my lender telling me that I could get another payday loan “the moment” that my first one was paid.  All I needed to do was “log in and click the Apply Now button.”  My supplier was at the ready — I wouldn’t even have to dry out between doses.

I understand how people could get trapped in this stubborn payday-loan cycle. But what I don’t understand is why they would get the first payday loan unless they were certain they could pay it back without getting even farther behind. In other words, I don’t understand why people would make their situations worse by getting loans they know they can’t pay back and that will cause them to need ever-increasing doses.

Let them fight their own battle.

I don’t know what the solution is for people who need money but cannot solve their problems with a single online cash advance. Perhaps they would be better served by a debt-relief program or bankruptcy. And no doubt the proper comeuppance for payday loan companies who knowingly dole out these ever-increasing doses is borrowers who can’t repay their debts and borrowers who discharge them in bankruptcy.  Obviously, given the payday loan companies’ immoderate finance charges, these are premeditated losses.

Make sure you know exactly how you’re going to get out.

I’m not saying I wouldn’t do it again. I would. I was happy to get that payday loan, but I was even happier to pay it back. If someone takes the first payday-loan dose without figuring out whether it will lead to an increased dose, I say the risks they take are fair play.  But if payday loan companies encourage these addictions – and I now know for certain that they do – and then can’t collect from their borrowers, I say that’s fair play, too.

Lots of people are struggling with money right now. Sometimes all it takes is a quick payday loan to clear a financial hurdle. But when you’re overwhelmed with debt, a short-term loan may only make matters worse. If you think you’re a candidate for some kind of debt-relief program, read about your options in What Should I Do? | Debt Relief Options.

There are many reputable and reliable debt-relief companies that really do help people get their debts under control. But before you enter into any kind of a debt payment plan, a few of words of common sense and caution are in order.

Do some simple research.

Before you enter into any kind of debt-relief plan, take a few simple steps to find out whether the company is trustworthy. Check for complaints filed with the Better Business Bureau, your state Attorney General, and other consumer protection agencies. You can expect to see some consumer complaints, but the majority of them should be resolved.
If you are considering debt settlement, make sure the company is a member of The Association of Settlement Companies (TASC). TASC is an independent trade association involved in clarifying and improving rules governing the debt-settlement industry.

Understand the fees and payments.

Make sure you understand the fees you will be charged by the company and the exact details about how your debt-plan payments will be applied. Don’t agree to fees that seem unreasonable and don’t settle for vague explanations about how your debt-plan payments will be applied.

Don’t agree to payments that seem too high.

Don’t enter into any kind of debt-relief payment plan unless you are reasonably confident that you will be able to make the required payments. If you fail to make the payments, your creditors will be entitled to collect accrued interest and penalties at the original contract rates. If you are unable to complete your plan, you may end up owing more than you did when you started, your credit may be harmed even further, and your only remaining option may be a Chapter 7 bankruptcy. For more information about bankruptcy, read What Should I Do? | Bankruptcy.

Understand what happens when you stop paying your creditors.

When you enter into a debt management or debt settlement program, the company will instruct you to stop paying your creditors. When this happens make sure that the payments you make to the start company are applied to your debts immediately.

If you are working with a debt settlement company, it is sometimes necessary to stop paying your creditors and allow your accounts to become delinquent. This is because most creditors will not accept payment plans unless your accounts are seriously behind on your payments. When you stop making payments – even though your purpose is to get a payment plan accepted – your creditors will report late and missed payments to the credit bureaus. This issue can be unavoidable; but make sure you understand and accept the consequences.

Understand what happens to your credit report.

Be aware that, at least initially, any type of debt relief (other than a debt consolidation loan) can result in negative information on your credit report. However, if you are deeply in debt and especially if you are behind on payments, your report may contain negative information and your credit score may be very low already. Improving your income-to-debt ratio by finding a manageable way to pay your debts can be the first step toward cleaning up and improving your credit.

Don’t believe promises to remove negative credit information.

Be cautious of any company that promises to remove accurate but negative information from your credit history. No debt management or debt settlement company has this ability. Any company can ask your creditors to remove such notations from your report, but no creditor is obligated to do so.

Get it in writing.

Don’t make a commitment with any company based solely on a phone conversation or an email exchange. Request a written copy of the terms and conditions of the agreement before you commit and especially before you make any payments. If you can’t get the terms in writing or if the terms aren’t reasonable, move on.

The installment loan could be the answer to a small business’ financial woes. In today’s economy everyone is feeling the cash crunch. With unemployment rates at an all time high and the housing market crashing, businesses are hard-pressed to bring in customers. Whether or not funds come in, debt needs to be paid. An installment loan can help businesses by extending cash when it’s needed. It is worth a look when the end of the month is looming and break-even points are nowhere to be seen. A simple application process and speedy review are both selling points of the installment loan. Sometimes it is the most viable option to save businesses from defaulting on payments.

The economy and a real estate giant

On April 16th, the second-largest U.S. mall owner, General Growth Properties Inc, filed bankruptcy, making this the largest real estate failure in economic history. The company is trying to refinance their debts, and more than 200 retail malls throughout the U.S. are involved in the mess. When a business conglomerate as large as General Growth Properties Inc. takes a fall, it affects a lot of other entities in the market, such as the employees, creditors and financial institutions.

Who is General Growth Properties Inc.?

General Growth Properties Inc. has been a staple in the American economy since 1954, when two brothers joined together to build a shopping center in Cedar Rapids, Iowa. From that time, they began buying buildings and malls and expanding their property empire in the retail market. During the real estate boom, the company aggressively bought properties with the intent of being the biggest retail corporation in the U.S. The acquisition of new properties created wealth, but also meant that the company was increasing their debt. Roll-over financing for businesses is common, but when lenders stopped extending funds last fall, General Growth was left without an option to pay its debts. Chief Executive Adam Metz stated, “We have worked tirelessly…to address our maturing debts, the collapse of the credit markets has made it impossible for us to refinance maturing debt outside of Chapter 11.”

The economy and the average business

If long-standing retail giants are feeling the economic strain, then small businesses are in the same precarious positions. Installment loans can sometimes save a business from missing payments and damaging their credit. As the unemployment rate grows, more and more Americans are holding tight to their money and putting spending on hold. Even people with jobs are being cautious about where their money is going and looking for the best deals. This puts many retailers in danger of closing if budgets are consistently not met.

Unfortunately, in past years companies were more than willing to lend money to businesses for various reasons. Because the economy took a drastic turn in mid-2008, those same businesses were left with huge debts and nowhere to roll it over to. Short of filing bankruptcy, retail outlets have to find ways of maneuvering the murky waters of a grim economy.

Installment loans as the small business answer

Because of the growing popularity of installment loans, the process for applying has been simplified. Lenders are willing to take applicants’ information and do the best they can to help them out of financial struggles. If large corporations are filing bankruptcy, small businesses also need some drastic measures to make ends meet and pay down debt. Until the bailout and other governmental solutions trickle down to the small business, they are going to have to continue to budget limited funds wisely.

You know what you’ve gotten yourself into. Your debts are very real, and it will take effort and negotiation moxie to get your finances to a better place. Now begin to “Repair Your Credit!” CLICK HERE if you missed part four of this article. If you don’t keep up, your credit cards will come alive at night and nibble at your fingers. No credit repair in the world can replace a good set of digits.

***

First, negotiating down your debt will not immediately enable you to finish paying off what you owe and walk away with a spotless credit rating. Your credit score will be negatively affected for a period of seven to ten years before the black marks finally drop off your credit report.

Therefore, you must take careful consideration of your future financial plans. If you are already defaulting on payments, your credit is already blemished. Late payments of 30, 60, and 90 days have already been reported to the credit bureaus and will hurt your FICO score for at least 36 months before they disappear.

The big question for you then would be, “is it worth it?” Depending on your debt load, it may be.

Bankruptcy may be your best option

Another thing to consider if you have chosen to negotiate your debt down is how much will you still owe once the debt is renegotiated. It hasn’t gone away; you still owe. How long will it take to pay off the new balance?

Whatever debt is forgiven during the negotiations is looked at as “phantom income” by the IRS. Sounds spooky, but it’s true. You could be looking at a large tax bill for your “forgiveness.” In some cases, this could even change your tax bracket, which could be a disadvantage depending upon your situation. Surely you want to avoid an IRS bill that you can’t pay. If you get in trouble with them, little things like debt consolidation and credit repair will be the least of your worries. Audits, court hearings and jail time are as painful as they sound. And the people in the joint are very real, not phantoms…

Not fun, but sometimes necessary

Also, if the amount of the renegotiated balance you owe on your credit card debt is 50 percent or more of your yearly income, it may be just better to claim bankruptcy. This is not something to take lightly. But the fact is this: your credit is going to be marred for years. If it will take longer than 7 to 10 years to pay off your renegotiated balances, then bankruptcy may be your best option. It will disappear from your credit report in the same amount of time. The only difference is that you won’t be burdened by all the debt while you’re waiting and working to repair your credit.

Bankruptcy is not fun to think about, but it may be the best thing you can do for both yourself and your family. Once it’s done, you will be building your credit again from scratch. Learn from your past mistakes and move on. Then CLICK HERE for the next chapter in “Repair Your Credit.”

Bankruptcy filings by retailers, newspapers, casinos, and racetracks have become commonplace. According to the Ottawa Citizen, filings in the first quarter of 2009 were 78 per cent higher than the same period in 2008 and three times higher than in 2007.

So take heart! If a simple payday loan will tide you over, you really can beat the big business bust.

April

Shopping Malls

General Growth Properties Inc., the second largest mall owner in the U.S. One of the biggest real estate failures in U.S. history and one of the largest non-financial companies to succumb to the economic crisis, the Chicago-based giant has been unable to refinance its maturing debt. Filed April 16.

March

Cable

St. Louis-based Charter Communications, the nation’s fourth-largest cable operator. The company, controlled by Microsoft co-founder Paul Allen,hopes to reduce its debt by $8 billion. Filed March 27.

Resorts

Greenbrier Hotel Corp, owner of the posh four-star Greenbrier resort, which has housed numerous presidents and royalty in West Virginia. The company lost its five-star rating in 2000 and has since spent millions to expand its offerings and attract younger visitors. Filed March 19.

Newspapers

Sun-Times Media Group, the Chicago-based parent company of The Chicago-Sun Times and operator of 59 newspapers. The company has no bank debt but owes $608 million in back taxes and penalties. Filed March 13.

Racetracks

Magna Entertainment, one of the largest horse racetrack operators in the US and owner of the Pimlico racetrack, host of the Preakness race. The company’s debt and negative cash flow require it to sell off assets. Internet entrepreneur and Thoroughbred owner Halsey Minor is offering to purchase the company’s properties. Filed March 5.

Motor Homes

Oregon-based Monaco Coach, maker of the Holiday Rambler. Despite cost-cutting measures, the company – along with rest the RV industry — has been decimated by weak consumer confidence, tight credit markets, and record high fuel prices. Filed March 5.

February

More Newspapers

Philadelphia Newspapers, parent company the Philadelphia Inquirer and Philadelphia Daily News. The same conditions that have devastated the broadcast industry — advertising downturn, rising newsprint costs, and the migration of readers to the Internet — caused the company to default on loans last year. Filed February 22.

Casinos

Donald Trump’s casino group Trump Entertainment Resorts, owner and operator of several Atlantic City casino hotels, including the Trump Taj Mahal, Trump Plaza and Trump Marina. The company filed just days after founder Donald Trump quit the board, saying he disagreed with the bondholders’ rejection of his buyout offer. This is the company’s third bankruptcy filing. Filed February 17.

Batteries, Shavers, Pet Care

Atlanta-based Spectrum Brands, maker of Rayovac batteries, Remington shavers, Spectracide lawn-care products, and Nature’s Miracle pet care products. The company was delisted from the New York Stock Exchange in January and its stock values dropped to just over a penny per share. Filed February 3.

January

The President’s Clothes

Chicago-based clothier Hartmarx, the largest maker of men’s tailored clothing in the U.S. The company’s clients include President Obama, who wore Hartmarx creations at the Democratic National Convention in Denver, on election night in Chicago, and at his inauguration. Filed January 23.

Restaurants

ARG Enterprises, owner of Black Angus Steakhouse restaurants. The company is just one in a long string of bankruptcy filings by sit-down restaurants hard hit by the deepening recession. Filed January 15.

Department Stores

Gottschalks, a Fresno-based retailer with department and specialty clothing stores in California, Washington, Alaska, Oregon, Nevada, and Idaho. The 58-store chain is liquidating and closing its doors. Filed  January 14.

AIG

Previously, I wrote about the Fortune 500 companies whose stocks performed well last year. If you want to see returns on your stock investments, look into dollar stores, food wholesalers and other types of discount retail. However, this article is about which companies lost the most money last year.

Fortune 500 compiled a list of companies that lost the most money in 2008. Here are the top five.

1. American International Group

AIG has been all over the news, and for good reason. Besides taking multiple government bailouts and then handing out bonuses to company executives, AIG lost more money than any other Fortune 500 company. The gargantuan insurance company lost nearly $100 billion in 2008. Fortune Magazine says:

The New York-based insurance company that spawned an out-of-control London derivatives dealership is now a $170 billion (and counting) headache for the American taxpayer.

Most of AIG’s losses were due to contracts created to pay off holders of mortgage-backed securities if the personal loans that backed them defaulted. Lesson learned? I hope. This company is going to need some serious credit repair.

2. Fannie Mae

This partially government-owned entity bought or guaranteed approximately 20 million personal loan mortgages with money it borrowed at very low rates. According to Fortune:

As the delinquency rate on the single-family home loans it guarantees more than doubled last year, the company was taken over by Treasury, which is now using it to absorb an endless stream of housing market losses. Last year Fannie lost a staggering $30 billion on its mortgage guarantees alone.

Long story short, Fannie Mae lost $58.7 billion in 2008. Not surprisingly, its brother company is next on the list.

3. Freddie Mac

Though Freddie Mac is considerably smaller than Fannie Mae, it came close to losing the same amount of money, with more than $50 billion. Freddie jumped on the bad-loan-backed security band wagon and suffered $16 billion in realized and unrealized losses.

Freddie borrowed $14 billion from the government, and it has asked for another $31 billion.

4. General Motors

It should come as no surprise that GM is fourth on this list of big-time money losers in 2008. Rumors have been flying that this automaker will soon file bankruptcy. GM lost about $31 billion in 2008. It has gotten government bailouts as well, to the tune of $13.4 billion.

GM is struggling to fight an 11 percent drop in sales. It has released several new fuel-efficient and hybrid cars to try to increase profits.

5. Citigroup

Rounding out the top five Fortune 500 companies that  lost the most money in 2008 is Citigroup, parent company to Citibank. The huge financial conglomerate lost $27.7 billion. Citigroup lost money in every quarter in 2008. Subprime mortgages cost the group $14 billion.

The government now holds a 36 percent stake in the company, and Citigroup surprised everyone when it turned things around in the first quarter of 2009. It pulled in a profit for the first time in more than a year, mostly because of its investment banking division.

Opportunity rich, cash poor, deeply in debt

New college graduates are opportunity rich. But most are unemployed and so cash poor they can’t even get a small payday loan.  Many are up to their ears in debt before opportunity begins to materialize.

But when it comes to student loan repayment, lenders know who their borrowers are. If you’re worried about your student loans, the first thing you should do is call the Default Prevention Department of American Education Services (1-800-328-0355). They can help you even if you haven’t missed a payment yet.

Repayment options to meet your needs

There are several alternative payment programs for student loans. Depending on how far behind you are in your payments, you may be able to stretch them out over a longer period and structure them to increase as your income increases. You can also defer payments of principal for a period of time.

You can sometimes obtain a forbearance with reduced payments, an extended repayment time, or a temporary cessation of payments until your career and financial circumstances improve. If you have several student loans, you can consolidate them into one loan and spread the payments over a longer period of time at a lower interest rate. In some circumstances, you may even be entitled to forgiveness of a portion of your debt.

The bad news: Debt-relief and student loans don’t mix.

Debt-relief programs

Student loans generally cannot be included in debt consolidation, management, or settlement programs. (To learn more, read What Should I Do? | Debt-Relief Options.) If you have student loans and are considering debt-relief options, chances are you will have to deal with them separately from your other unsecured debts.

Bankruptcy and the hardship test

Get legal advice

Discharging student loans in bankruptcy is neither easy nor likely. Student loans cannot be discharged unless you prove that repaying the loans would create a substantial hardship. Absent such a showing, the best that bankruptcy can do is make it easier for you to pay your student loans by eliminating some of your other debts.

If you have student loans and are considering bankruptcy, you should get legal advice from an experienced bankruptcy attorney. To learn more about bankruptcy, read What Should I Do? | Bankruptcy.

Hardship is a tough standard

Hardship for purposes of discharging a student loan is very difficult to prove. Many courts require proof that you would be unable to maintain a minimal standard of living if forced to repay your loans, that this state of affairs is not likely to change, and that you made a good faith effort to pay the loans before you filed bankruptcy.

The hardship standard applies no matter how old your student loans are. It applies to privately funded loans as well as loans funded and guaranteed by the federal government or nonprofit institutions

Chapter 13 may offer some benefits

Get legal advice

A Chapter 13 debt adjustment bankruptcy may offer some additional benefits where student loans are concerned. If you think you are a candidate for bankruptcy, you should discuss your student loan issues with an experienced bankruptcy attorney.

What Chapter 13 can and cannot do

Filing a Chapter 13 bankruptcy can stop collection actions, and allow you to cure defaults and start paying your student loans in an orderly manner. If you have accounting issues, you might be able to obtain a binding judicial determination of what is rightfully owed. In exceptional circumstances, you may be able to challenge the enforceability of a student loan debt.

Remember . . .

Absent substantial hardship, student loans cannot be discharged in bankruptcy. Even after your other debts have been discharged, you will still owe any balances remaining on your student loans.

You may be facing insurmountable debt, the danger of losing your home or car, and continual harassment from debt collectors. Your struggles may be compounded by divorce, the loss of a job, uninsured medical expenses, or a combination of unexpected events. If you are in extreme financial distress, a quick payday loan clearly is not going to go the distance. But you know you need to do something.

Is bankruptcy the answer?

The two most common types of bankruptcy for individuals are Chapter 7 (where you can get rid of certain types of debts altogether) and Chapter 13 (where you can pay all or, more frequently, a portion of your debts according to a court-approved payment plan). To file under Chapter 7, your average monthly income for the six months immediately preceding the bankruptcy filing must not exceed the median income in your state. Alternatively, you may file under Chapter 7 if your income is insufficient (after subtracting certain expenses for basic necessities) to repay any part of your debts.

Ask an attorney

Determining whether you are a candidate for bankruptcy and whether filing for bankruptcy would be in your best interest requires in-depth legal analysis. Before you make a decision, be sure to get legal advice from an experienced and reputable bankruptcy attorney.

Chapter 7 debt liquidation

A Chapter 7 bankruptcy allows you to get rid of certain types of unsecured debts while keeping your exempt property. In many cases, you can keep all your property. Among the kinds of unsecured debts you may include are credit card balances, personal loans, debts remaining from repossessed property, utility bills, and medical bills. In some cases, you also may be able to discharge old income and property tax debts. Chapter 7 bankruptcy may be an effective alternative if you own little property and have an unmanageable amount of debt. Unemployment, unexpected medical expenses, and divorce are some of the things that can precipitate a Chapter 7 bankruptcy.

Chapter 13 debt adjustment

If you do not qualify for Chapter 7 and you have a regular income, you may be able to file a Chapter 13 bankruptcy. Chapter 13 involves a three- to five-year court-approved payment plan to pay your debts, or a percentage thereof, in an affordable manner. Chapter 13 may be an option if you are behind on your car or house payments and want to avoid a repossession or foreclosure. Or it may provide a manageable way to pay debts that you cannot get rid of in bankruptcy, such as taxes, child support arrearages, and divorce debts. Chapter 13 may also allow you to keep valuable assets that you would have to surrender under Chapter 7.

Life after bankruptcy

Although bankruptcy is designed to give you a fresh start on  finances, it will have a negative impact on your credit rating and can remain on your credit report for up to ten years. But if you are a candidate for bankruptcy, you are probably deeply in debt and behind on your  payments. As a result, your credit score is probably very low already. Improving your income-to-debt ratio by reducing your debt load can be the first step toward improving your score. Even if you have a perfect payment history, if you have more debts than you can pay using your income, you will have a poor credit rating and bankruptcy may actually be a positive turning point in your credit history.

If bankruptcy isn’t for you, read about other options in What Should I Do | Debt-Relief Options.

As General Motors faces the possibility of bankruptcy, the company says there may be a nine-week GM shutdown starting as soon as next month.

The automaker might close down several plants for nine weeks. An overabundance of inventory plus typically slow summer sales are causing GM to consider ceasing production for a couple of months.

Not very hush hush

Sources who have talked to newspapers regarding the imminent GM shutdown has asked to remain anonymous because GM workers haven’t been told about the shutdown yet.

Thousands of workers will be laid off if the GM shutdown goes through. however, the employees won’t miss out on much pay. The United Auto Workers union is required to make up most of the difference in salary between GM paychecks and unemployment insurance. So for the nine weeks that production is halted GM workers should be able to get by without payday loans or credit cards.

Summer slowdown

Usually GM shuts down most of its plants for about two weeks during the summer. Plants stop operating in between switching over to building new models. The GM shutdown this year would occur around the same time, it would just be longer.

Outside GM

GM is hoping that an extended shutdown will help reduce the growing stockpile of vehicles it has at the moment. However, auto parts makers could stand to lose a lot of critical revenue if the country’s largest automaker ceases production for nine weeks.

“It’s one of those things we’ve been dreading for a long time,” said Jim Gillette, director of financial services at auto-industry consultant CSM Worldwide in Grand Rapids. “It’s as bad as its ever been.”

Deadlines and debt

GM has taken out $13.4 billion in government loans so far. Furthermore, it owes a $1 billion payment to go toward its $28 billion debt, due by June 1. The company has said it’s not sure it will be able to make that payment.

Self-fulfilling prophecy

Along with the news of the upcoming $1 billion due, rumors began flying about the company possibly filing for bankruptcy. One analyst believes the low sales that causing rumors of the GM shutdown are partially caused by the bankruptcy rumors.

Tom Libby, an independent Detroit-area auto industry analyst, says he thinks the company’s sales are declining because customers are concerned that GM will file for bankruptcy. He also views the possibility of a shutdown as a bad sign.

“They must be forecasting a sales level that is low enough between now and the summer that they see their inventories building,” he said. “It’s sort of an ominous comment on what they see for the industry.”

Avoiding bankruptcy

GM CEO Fritz Henderson recognizes that the company must undergo a financial restructuring, but says he would prefer to do it out of court. Nevertheless, the company has already prearranged a bankruptcy.

The government has said it will guarantee GM and Chrysler warranties during any restructuring.