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'Octomom' is in the midst of both bankruptcy and foreclosure

2012-05-14T19:58:42Z

In a previous Chapter 7 post, we shared how the notorious mother of 14, Nadya Suleman, is facing some serious financial hardships. The single mother of multiples is unemployed but owes a reported $1 million in debt to various parties. One of those parties who is supposedly owed money is the man who financed Suleman's purchase of his former home.

Last week, we indicated how Suleman is about to lose her home to foreclosure. Technically, the mortgage isn't hers; she and the former owner have a unique arrangement regarding the home's ownership and mortgage payments. The Orange County Register reports that Suleman basically rents the home from a man who is truly on the hook for making the monthly payments.

]]> The home's technical owner is frustrated with Suleman as a renter. Based on the reported details about her recent bankruptcy filing, she owes an estimated $30,000 toward the mortgage. That means that the mortgage owner has either had to fork out that amount in payments instead of his renter to keep the home or he risks damage to his credit.

He's apparently had enough of the stress of Suleman and the home and has been hoping that the home would be sold at auction. The recent scheduled auction, however, was stalled per the request of a foreclosure company.

This is a complex case with more questions than there seem to be answers at this point. What is obvious is that Suleman has some stressful legal and financial hoops to get through in order to get to the fresh start that she wants. It's looking like that fresh start could have to include a new place for her and her 14 children to live.

Source: The Orange County Register, "'Octomom' house sale delayed again," Michael Mello, May 7, 2012

Financial tips for college grads with debt, part 1

2012-05-11T21:05:40Z

A college education opens doors to career opportunities. That is the general point of going to school, right? Students want to prepare themselves to become qualified to get a job that can support them after graduation. Unfortunately, that positive outcome has become harder to reach for college graduates in the past several years.

Forbes reports that the average college student is carrying the heavy financial burden of $25,000 in student loan debt. That debt doesn't include the credit card debt that many students also accrue while trying to get through school. That debt stays with graduates for some time, and the following is the beginning of a list of tips to help graduates get by with their debt and their struggle to find work that will pay it off:

]]> A college degree is not an automatic pay raise

Graduating from college is a significant achievement that is worth celebrating. Maybe that means buying yourself a nice pair of shoes that you will wear to the job interviews that you will hopefully line up soon. But don't start spending money like a degree means the same thing as reaching total financial security. This is the time to begin the spending and saving habits that you will practice for life. Be frugal.

It's never too soon to plan for retirement

Even though you might be only 22 years old when you graduate from college, don't let the feeling of being young fool you out of retirement planning. As we mention in the previous tip, this time of your life marks the beginning of setting your financial habits, and one of those financial habits that can't start too soon is putting money toward retirement.

Many employers will match your contribution to a retirement account. If that option exists at your place of work and you reject the opportunity, you are essentially saying "no thanks" to free money. If might feel good in the short term to get more money from your paycheck by ignoring retirement, but putting money toward retirement should not be seen as losing money. It's saving for the future and taking advantage of an awesome employment benefit.

An upcoming post will continue the list of tips for college graduates who face not only an exciting time but a financially stressful time as well.

Source: Forbes, "12 Financial Tips For Debt-Burdened New Grads," Liz Davidson, May 9, 2012

Notorious mother of 14 files for Chapter 7 bankruptcy

2012-05-07T18:22:19Z

You might know her as the "Octomom," but Nadya Suleman is more than the woman who gave birth to eight kids. She is the mother of a total of 14 kids, and those numbers have worked against her financially.

Last week, reports indicated that Suleman filed for Chapter 7 bankruptcy. She claims that bankruptcy is a necessary step for her to get a fresh start for the sake of her and her many children. She says that she is as much as $1 million in debt.

]]> This isn't the most surprising bankruptcy announcement. Since Suleman gave birth to her children in January 2009 and hit the media limelight, the public has worried along with the mother of multiples how she could manage to provide for her many children. She was reportedly already living off of government assistance before the octuplets were born.

It is enough financial stress for households with two working parents to figure out how to have children and afford their care. These days, both parents often need to work outside of the home to bring in enough money to support their family. Most families, however, do not have 14 kids' mouths to feed. And while families can usually find a way to afford daycare for their kids, affording daycare for 14 would be a near impossibility for almost anyone, especially an already struggling single parent like Suleman. She is currently unemployed.

Sources report that Suleman owes money for rent, water, cable, her kids' education and more. She is currently at risk of losing her home to foreclosure as well. An upcoming post will discuss that aspect of her financial struggles in more detail. Check back soon.

Source: CBS News, "'Octomom' files for bankruptcy, owes $30K in rent, up to $1M in debt," May 1, 2012

Foreclosure activity up in Orlando in 2012's first quarter

2012-05-04T19:29:22Z

Foreclosures can be very impactful on homeowners. Recently, the Orlando Business Journal reported on some statistics regarding foreclosure activity in the Orlando area in this year's first quarter. The statistics are from the real estate information company, RealtyTrac. The statistics indicate that foreclosure activity is on the rise in the Orlando area.

According to the statistics, in 2012's first quarter, 9,330 foreclosure filings were made in the Orlando metro area. This foreclosure filing total is 52.2 percent greater than the foreclosure filing total the Orlando metro area saw in 2011's first quarter. Thus, the Orlando metro area saw a substantial year-over-year rise in foreclosure activity in this year's first quarter. In fact, the increase the Orlando metro area saw reportedly is the largest year-over-year foreclosure filing increase any large metro area in the United States experienced in first quarter 2012.

]]> Foreclosure filings were also up in the Orlando metro area on a quarter-to-quarter basis, with the area's foreclosure filing total from first quarter 2012 being 7.8 percent higher than the area's total from 2011's fourth quarter.

The statistics also indicate that foreclosure activity in Orlando is high as compared to most other metro areas in the country. According to the statistics, when it comes to foreclosure activity, the Orlando metro area ranks 15^th among large metro areas in the United States.

Thus, the statistics indicate that mortgage troubles and foreclosures continue to plague many homeowners in the Orlando metro area. One wonders what is behind the current increase in foreclosure activity in this area and what impacts this increase and its causes have had on homeowners in the area. One also wonders if this trend of increased foreclosure activity will continue in 2012's next three quarters.

Source: Orlando Business Journal, "Metro Orlando notches 52% jump in 1Q foreclosures," Anjali Fluker, April 26, 2012

Will political action solve current student debt problems?

2012-04-28T14:00:00Z

Individuals facing bankruptcy proceedings seek financial relief where almost every type of personal debt is discharged, allowing people to gain a fresh start. For the many with student loan debt, however, a completely fresh start is out of the question.

In 2005, Congress passed a law lumping student loan payments in the sacrosanct category where other hard-to-get-rid-of financial obligations like criminal fees and child support reside. Making student loan debt untouchable works in favor of lenders and keeps many diligent Americans in financial trouble.

]]> Advocates for struggling borrowers balk at the current student loan setup. Some believe that the laws need changing to help a portion of the 37 million Americans with student loan debt get a fresh attempt at the American dream. The argument is that changing the law would lead to the least costly method for dealing with over-burdened student debt. But, despite a loud cry, little has been accomplished.

Recently, President Barack Obama suggested legislation to stop the looming doubling of student loan interest rates. This proposed change, however, would only help future student loan recipients. The Obama administration has enacted some protection for people unable to pay back federal loans through ideas like public-service forgiveness programs and income-based repayment plans.

According to The Associated Press, little evidence exists that changing the current law would decrease availability of private student loans. In fact, private student loans were reportedly on the rise before 2005, when they were still dischargeable. However, with the recent credit crunch, many potential borrowers do not qualify.

Though financial struggles within the home seem so personal, the reality is that any changes to legislation regarding lending or bankruptcy do have a larger affect on our country. This is an important but also a political matter that will be thoroughly debated before changes are implemented.

Source: The Associated Press, "Even after bankruptcy, trapped by student debt," Justin Pope, April 25, 2012

Why bankruptcy offered limited relief to struggling couple

2012-04-26T20:09:14Z

Families across the country are facing financial disasters that lead down the only path of choice, bankruptcy. It is a sad story repeated often. The Associated Press reports a tale of school teachers losing everything they worked long and hard to obtain.

That road toward Chapter 7 bankruptcy actually began during college days. A young, energetic woman attending school on a full athletic scholarship had to choose between playing collegiate softball and pursuing course studies that would not permit her to fulfill her team commitments. She chose school, lost the scholarship and took out student loans.

]]> Her husband took out loans to pay for a master's degree program believing additional education led the way to personal and financial success. It was possibly a good plan; yet, timing sometimes is a cruel and malevolent foe. A house was purchased at that very wrong time. Unforeseen medical bills struck. A pregnancy went wrong resulting in stillborn twins. The family faced not only personal trauma but were now devastated by school layoffs. They ultimately lost the house and a car.

So, filing for bankruptcy could give the couple a second chance, right? Unfortunately, the greater bulk of the couple's debt stemmed from outstanding private student loans not covered under current Chapter 7 bankruptcy laws. The story is sadly quite common since 37 million Americans owe $870 billion in student loan debt.

Look to a future post where student loans are discussed where action to combat its burden is revealed.

Source: The Associated Press, "Even after bankruptcy, trapped by student debt," Justin Pope, April 25, 2012

What happens to kids when homes are lost to foreclosure?

2012-04-23T18:29:11Z

Foreclosure and the mortgage lending industry are topics that of course we discuss every day but the general public discusses and thinks about as well. But those conversations about the foreclosure crisis, predatory lending and bad mortgages tend to focus on who is to blame and where things went wrong.

A recent report by First Focus takes a different view at the pertinent subject. The bipartisan group looks at the home foreclosure crisis in the U.S. and how it has affected children. The study sought to answer how many children are affected by home foreclosure and also how being forced to move from their home takes a toll on kids.

]]> How many kids have been affected by foreclosures?

More than 2 million kids have had to move from their homes due to foreclosure
On top of that, an estimated 3 million more kids could soon be added to that list because their parents' homes are currently at risk of being taken away due to delinquent loan payments
15 percent of kids in Florida have moved from homes or soon could due to foreclosure

First Focus takes its report beyond numbers. It's so easy to get wrapped up in statistics. In order to get a better grasp on the problems of foreclosure it is helpful to know the day-to-day consequence that losing a home has on a child. Kids reportedly can suffer from medical issues as a result of the stress, and they also suffer academically. Their test scores in math and reading go down.

A home is more than walls and a roof. It is a place where kids find a sense of safety, security and stability. Perhaps by putting children's faces to the foreclosure crisis the country can get closer to finding a long-lasting, reasonable solution to the problem.

Source: Chicago Sun-Times, "Study: Foreclosures take toll on kids," Julie Schmit, April 19, 2012

Foreclosure discrimination corrupts housing market

2012-04-20T16:56:48Z

Research has suggested for years that banks discriminated against minorities during the housing bubble. Now government officials are beginning to recognize that it did not stop there. When overwhelmed homeowners make the difficult choice to proceed with a foreclosure, banks reportedly continue taking advantages of minorities.

The Center for American Progress determines in 2009 that 14 banks had practiced predatory lending while enabling the real estate market crash. African Americans and Latinos were on average twice as likely to have unnecessarily high mortgage rates than Caucasians. Now the National Fair Housing Alliance (NFHA) finds recent, widespread discrimination in home foreclosure processes among six major banks in nine cities.

]]> One way banks supposedly discriminate seems to be in advancing the process to begin with. According to the Center for Responsible Learning, minority homeowners get foreclosed on at twice the rate of others because they are more frequently roped into high-risk loans. Then, according to the NFHA, banks fail to meet their obligations as new owners of the property when those homes are in minority communities. That makes the value of homes in those communities decrease, further disadvantaging minority groups.

Instead of properly maintaining the homes they have taken away, as they should, banks let the homes get run down. When the homes lack maintenance and care they drag down property values for the whole community, as well as making the homes themselves harder to sell. So, instead of making reasonable efforts to sell them, banks just let foreclosure properties in minority neighborhoods sit. The NFHA found that three-fourths of Latino neighborhood homes in one city even lacked "For Sale" signs, opposed to less than a third in mainly White neighborhoods.

The foreclosure crisis and real estate market are threatening enough to the overall well-being of this country. People have been treated badly, but each person, whether they are of a minority group or not, deserves to be treated as badly or as well as the person next to him.

Source: The Huffington Post, "Discrimination Cited In Maintenance And Marketing Of Foreclosed Properties In Latino And African American Neighborhoods," April 7, 2012

Not even business students understand risk of credit card debt

2012-04-18T17:28:17Z

Since the economic downturn, one might think that more people are wary about using credit cards and using them wisely. More educational opportunities and articles are put out there on a regular basis, seeking to protect consumers from the traps and complexities of the banking system, including credit cards.

Fox Business reports the findings of a study called "Financial Literacy and Credit Cards: A Multi Campus Survey." The study researched college students' credit card use and their knowledge regarding their credit cards. Researchers hoped to get good news out of the survey, but it turns out that credit card debt will likely have to be another thing for graduates to deal with who will already have a hard time finding work and paying off college loan debt.

]]> Among various findings from the survey are the following points:

70 percent of college students have credit cards
Among those with cards, 70 percent of those students have multiple cards
Five out of six don't know the interest rates on their credit cards
90 percent of college students with credit cards have credit card debt from month to month

The survey also revealed that compared to a decade ago, significantly fewer students are paying off their credit card balances in full every month. Sources suggest the reason could simply be because of the economic times we are in. There are still as many things to pay for as before, but there is just less income to cover the payments every month.

While the numbers above are worrying enough, another point behind the campus survey is that the majority of students who were surveyed were majoring in business. They weren't students studying biology or Shakespeare. They are the exact students whom would be expected to understand the basics of money and business.

The survey makes it seem clear that more education needs to be provided to consumers, beginning at a young age and on, about the basics of and risks associated with credit cards. Though credit cards can be and are helpful tools, they can also be the very tools that chip away at one's dreams.

Source: Fox Business, "Survey: Students Fail the Credit Card Test," Martin Merzer, April 16, 2012

Bankruptcy forces rapper Young Buck to liquidate

2012-04-13T18:45:35Z

Rapper Young Buck is in Chapter 7 bankruptcy proceedings. Young Buck became famous and successful with the rise of major celebrity rapper 50 Cent and the group known as "G-unit," wherein Young Buck was a beloved member. Things have changed since the "G-Unit" heyday, namely Young Buck's success. He now finds himself facing the Chapter 7 bankruptcy process.

According to The Wall Street Journal, bankruptcy agents will facilitate the liquidation of Young Buck's assets, including all of the rappers intellectual property (or IP), which encompasses trademarks and copyrights, mastered editions of recordings, other compositions not yet published, all royalties and licenses and more.

]]> In order for the bankruptcy liquidation auction to actually take place in Nashville in May, a United States Bankruptcy Court in Tennessee must give his approval first. If it is approved, the auction -- likely to be conducted in an attorney's office in Nashville -- will attract all sorts of strategic buyers. Those in the music or advertising industries will likely see the ability to buy rights to Young Buck's success as a great opportunity.

Items like mastered copies of songs can -- under the right circumstances -- prove to be quite a profitable investment. They can be used, for example, in commercials, with the buyer of those rights profiting from any success connected to the IP that was originally another person's. It can seem quite harsh for a creative mind to be unable to prosper off his past work, but there is hope. Young Buck can create new work that will be protected from the agreements made under this bankruptcy process.

Source: The Wall Street Journal, "Young Buck Songs, Royalties on the Block," Jacqueline Palank, April 6, 2012

How not to use a credit card, part 2

2012-04-12T14:00:00Z

Our last post began a discussion of how to most responsibly use a credit card. Many Americans make mistakes when it comes to their card use and wind up on what feels like a treadmill of trying to keep up with their excessive credit card debt. And when they can't keep up, their credit scores take a big hit, affecting their lives in more ways than one.

The first couple of tips regarding credit card use are to know when your bills are due, pay them on time and don't pay the minimum amount. Those suggestions are just a couple of many, but if someone were to newly adopt just one of the several Fox Business tips, they could save themselves money, stress and points on their credit rating. Here are some more pieces of credit card advice:

]]> Co-sign at your own risk

If someone wouldn't be approved for a credit card on his or her own and you agree to co-sign on the credit card, you might as well look at that situation as you having taken on another credit card of your own. You might have an agreement with your child or other loved one that he or she will make the monthly payments on the card, but a verbal agreement won't save you if your family member fails to pay. You will be stuck with the balance and held accountable for any late payments. Therefore, don't take co-signing lightly or feel bad refusing someone to do so.

Be choosy

You will want to compare different credit cards, their benefits, fees and their interest rates before choosing one. And even if you think you can handle it, having a lot of different credit cards can be a bad thing. Applying for many credit cards at once will damage your credit score.

Don't let fear wreck your credit

With all of the advice and warnings that come with credit cards and credit card debt, it can seem like the smartest thing to do to just avoid credit cards entirely. But as we have mentioned in the past, a credit card is a convenience that, if used responsibly, will create a solid credit score for a person and open up doors to opportunity.

So while you might decide to limit your credit card use, don't cut up and cancel all of your credit cards. Just reevaluate your credit habits and use any anxiety you have regarding them to make better decisions starting today.

Source: Fox Business, "Seven Worst Credit Card Habits," Karen Haywood Queen, April 11, 2012

How not to use a credit card, part 1

2012-04-11T16:50:59Z

Credit cards can be helpful tools for an individual or couple. They can allow you to make a purchase and gain benefits connected to your particular credit card. A benefit that any responsible credit card user gains is a healthy credit score, which opens doors for those who want to take out loans, rent or even be considered for certain jobs.

But note the term "responsible" above. If you are irresponsible when using a credit card, you can build up credit card debt and a low credit score. Both of those risks put you and your family in stressful circumstances and limit the possibilities that are out there for you. Fox Business provides a list of credit card habits to avoid.

]]> This is one of two posts that will outline the important advice:

Prioritize your pile

It's amazing that with the many emails we get every day that we still get the handful of paper mail we do. It's easy to empty the mailbox just to throw our mail on a messy counter. But amid the junk mail you likely get every day are credit card bills. Read your statements and keep them in a special place where you will remember to pay them in time. Paying a bill late not only will cost you in late fees, but it can up the interest rate of your credit card.

Don't be a minimalist

If you use a credit card simply because you want to make big purchases that you can't afford currently, then you have a card for the wrong reason. You ideally want to be able to pay off the full credit card bill when it's due. While you might be a minimalist when it comes to style, you don't want to be a minimalist when it comes to paying your credit card bill. If that is your credit use style, then you will spend more money in the long run than what your purchases actually cost due to interest.

Our next post will continue this list of tips. Keep in mind that these tips are in no way meant to cast judgment on anyone who's struggling with debt. But these are just the basic rules of thumb when it comes to avoiding crippling credit card debt. There are times of desperation where families must rely on credit, and then there are those who end up with more credit card debt than they intended due to unexpected employment, medical or other hardships.

Source: Fox Business, "Seven Worst Credit Card Habits," Karen Haywood Queen, April 11, 2012

Homeowners seeing little foreclosure relief in 2012

2012-04-06T15:08:45Z

Home ownership is a large part of the American Dream; however, the current housing crisis is making many rethink that dream. The housing crisis is hardly new, and neither is the reality of foreclosure. But as pressure increased on major banks in 2011 after the "robo-signing" scandal, many had hoped that things would turn around in 2012 after many homeowners were found to be facing foreclosure without any individual reviewing their individual circumstances. Unfortunately, the numbers still don't look good and for more homeowners foreclosure remains imminent.

With the foreclosures many banks watched themselves closer for a while and in some areas foreclosure rates went down slightly, but in some areas foreclosure has continued to be on the rise. According to a Reuters report, one watchdog group, 4closurefraud.org has discovered a large rise in March 2012 foreclosures by major banks in Palm Beach County, Florida. Even though they have yet to rise as high as 2010 figures, foreclosures have gone up as much as seven times where they were a year ago.

]]> While, originally, subprime rates were often blamed for the crisis, hard economic times seem to be what is fueling this next wave of foreclosures. Job loss and other unexpected expenses have made it hard for many people to keep their mortgages afloat. Many are simply trying to buy time, hoping the economy will get better and they will somehow be able to crunch the numbers and get everything to work.

Of course, while some claim a turnaround is coming it doesn't happen overnight, and keeping the banks honest and preventing as many foreclosures is of prime importance. Knowing that someone is there to keep you up to speed on your legal rights can help you ride out the storm until the winds change for good.

Source: Reuters, "Americans brace for next foreclosure wave," Nick Carey, April 4, 2012

Bank fails to cut the cord on debt, gets fined

2012-04-02T19:58:56Z

Filing for bankruptcy is rarely a first choice of anyone who is facing financial difficulty, but one of many reasons why someone might take that step is to stop creditor harassment. When someone files for bankruptcy one of the first things that is supposed to happen is that creditor harassment is supposed to stop.

Even when the bankruptcy case is still pending, banks and other debtors are forbidden from contacting the people that owe them money and asking them to settle their debt. But in some cases, the phone keeps ringing. And for a former Bank of America client, the phone rang an additional 38 times.

]]> It's hard to tell why the calls kept coming. Maybe the name of the person didn't get deleted from their list for some reason, or maybe they just thought they could get a few bucks before the bankruptcy went through. But whether Bank of America was negligent or intentionally failing to comply with the terms of a bankruptcy case, courts determined that the creditor harassment they continued to inflict was clearly wrong. In the end they were forced to pay a fine that could certainly help the plaintiff pay a few bills.

If you've made the leap to file for bankruptcy, and are still facing creditor harassment, you can fight back and win. No matter how you feel about a pending bankruptcy, or how big the pockets of your creditors might be, you don't have to sit back and tolerate bullying. The protocol behind bankruptcy is set up how it is for a reason, and a good bankruptcy attorney will help see that everyone complies with the rules.

Source: The Huffington Post, "BofA Allegedly Called Debtor 38 Times After He Filed For Bankruptcy," Alexander Eichler, March 30, 2012

Not all debt necessarily dies with its borrower

2012-03-29T14:00:00Z

Generally speaking, debt isn't passed on; it dies with the person who borrowed money. If your father dies and leaves behind a condo that is $50,000 underwater, for instance, you might not be able to keep the condo, but you won't inherit the debt.

Be that as it may, there are exceptions to this rule that can leave a surviving family member struggling with credit card debt or mortgage payments on a home that they can't afford. It varies from state to state, but in general, the executor of your will is going to try to do whatever they can to settle the debt, and what they can't sell is written off as a loss.

]]> Here are the big exceptions in most states that can leave someone with inherited debt: Agreeing to work as a guarantor or co-signing for a loan. In these instances, the debt is usually transferred over to the surviving individual.

If you have assets which exceed your debts, then your inheritors are paid the difference. So $40,000 in debt and a $100,000 home would essentially give your children and loved ones $60,000 to inherit. Passing on $50,000 in debt and $40,000 in assets might result in nothing for the inheritors, but no debt, either, assuming that none of them were co-signers or guarantors on those debts.

It's important to understand the rules in your state and speak with a Florida attorney if you need to make any arrangements. The last thing you want is for your children or spouse to inherit your debt instead of your assets. Getting debt taken care of in life is preferable, but at the very least, keeping your survivors in the clear is a priority.

Source: CNBC, "Who Inherits Your Debt?" Shelly K. Schwartz, March 16, 2012