economy

Decline in Bankruptcy Filings?

It was widely reported today that bankruptcy filings are declining.  Laywers.com had a good overview of the data:

U.S. consumer bankruptcies continue to decline gradually but that doesn’t mean economic prosperity has returned to the economy, according to consumer bankruptcy lawyers.  U.S. consumer bankruptcy filings totaled 100,980 nationwide during November, a 12 percent decrease from the 114,587 total consumer filings recorded in November 2010, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC).
The November consumer filings also represented a 5 percent decrease from the 106,255 filings in October. Chapter 13 filings constituted 31 percent of all consumer cases in November, a slight decrease from October.

The question is why?

Consensus seems to focus on the fact that many people have become "judgment proof," meaning there are not assets or income for a creditor to take.  That will change if the economy gets better and more people will need bankruptcy protection.

Here is an interesting overview from NBKRC.

Bankruptcy filings fell slightly last month – down to 101,000 in November from 106,000 in October. The apparent decrease is slightly misleading, however, when we look at seasonal trends. Because November filings typically are quite low, this month’s filings actually increased 7% from October on a seasonally adjusted basis. Still, filings were down 12% from last November and filings to date this year are down 11% from the same time last year.

Nationwide, 2011 filings to date amount to about 5400 filings per million adults, or one in every 200.

California still has the fourth highest rate of filing in the nation.

Economic Snapshot

Bloomberg news today published a short, extremely interesting overview of the United States economy.  Here are the main points.

  • Net worth for households and non-profit groups decreased by $2.45 trillion
  • The value of household real estate decreased by $98.3 billion in the third quarter
  • The volume of outstanding home mortgages was $9.93 trillion at the end of the second quarter, the lowest since the end of 2006
  • The value of financial assets, including stocks and pension fund holdings, held by American households decreased by $2.78 trillion
  • Americans borrowed more to buy cars and other goods
  • Consumer spending had slowed through October

More information here.

Mansfield Cheney, PC
Outstanding bankruptcy lawyers in Ventura.

Banks "Quietly" Increasing Fees on Consumers: ABI

From the American Bankruptcy Institute.  Though banks appear profitable, and relatively unscathed by the financial crisis, they are "quietly" increasing fees.

Banks Quietly Ramping Up Costs to Consumers
Even as Bank of America and other major lenders back away from charging customers to use their debit cards, many banks have been quietly imposing other new fees, The New York Times reported yesterday. Facing a reaction from an angry public and heightened scrutiny from regulators, banks are turning to all sorts of fees that fly under the radar. "Banks tried the in-your-face fee with debit cards, and consumers said, 'enough,'" said Alex Matjanec, a co-founder of MyBankTracker.com. "What most people don't realize is that they have been adding new charges or taking fees that have always existed and increased them, or are making them harder to avoid." Banks are under intense pressure to make up an estimated $12 billion a year of income that vanished with the passage of rules curbing lucrative overdraft charges and lowering debit card swipe fees. In addition, banks are struggling to find attractive places to lend or invest all the deposits they hold, which poses another $8 billion drag. Banks would need to recoup, on average, between $15 and $20 per month from each depositor just to earn what they did in the past, according to an analysis by a financial consulting firm. Read more.
For help with Ventura and Oxnard Bankruptcy contact Mansfield Law Office.

Depressed Americans: The State of the Economy

I am reproducing another interesting update from the American Bankruptcy Institute:

ANALYSIS: AMERICANS REMAIN DEPRESSED DESPITE ECONOMIC GAINS

A rift is emerging between Americans' state of mind and the state of the economy, the Washington Post reported today. The economy is growing stronger, with the nation's gross domestic product growing at its fastest clip so far this year. The number of new people signing up for unemployment benefits has steadily declined, and consumer spending is rising. But by almost any measure, Americans remain unhappy. Consumer confidence has plunged to levels last seen during the financial crisis. A recent Nielsen poll found that nine out of 10 Americans believe the country is still in recession. "It's the hangover from the Great Recession," said James Russo, vice president of global consumer insights for Nielsen. "People feel the economy not at the macro level but at the micro level." This persistent pessimism has perplexed economists. Most of the time, our emotions and our actions move in tandem. But the gap between the two has widened since the financial crisis. Economists say something will have to give: Either Americans will perk up or, more worrisome, the recovery will conform to our low expectations. Lynn Franco, research director at the Conference Board, said consumers have been beaten down too long to be impressed by recent blips of economic good news. According to conventional theories, depressed consumers spend less money, slowing down economic growth and further eroding confidence in a vicious cycle of decline. Typically, our attitudes are merely reflections of major sectors of the economy, such as the job market or stock prices. But during changes in business cycles — from recession to recovery, for example — consumer confidence can provide a crucial nudge, said Mark Zandi, chief economist at Moodys.com. Read more.
Is the "recovery" a phantom recovery for many?  Does the data trumpeted by the media not reflect reality on the ground?

If you need help in bankruptcy, contact Ventura and Oxnard Bankruptcy Lawyer Andrew Mansfield.

Foreclosure Warnings and Repossessions Increase in October

The American Bankruptcy Institute brings alarming news by way of its daily update.  The ABI summary of the Wall Street Journal article is below.
RealtyTrac: Lenders Stepped Up Foreclosure Warnings, Repossessions in October
More U.S. homes entered the foreclosure process in October than in the previous month, with Florida, Pennsylvania and Indiana registering among the largest monthly increases, new data show, The Washington Post reported today. Some 77,733 properties received an initial default notice last month, up 10 percent from September, foreclosure listing firm RealtyTrac Inc. said Thursday. The number of homes scheduled to be auctioned or repossessed by lenders also posted monthly increases. All told, notices of default, scheduled auctions and bank repossessions hit a seven-month high in October. The numbers are further evidence foreclosure activity is picking up. The rate that homeowners were 60 or more days late on their mortgage payment rose in the June-to-September period for the first time since the last three months of 2009, according to TransUnion. The credit reporting agency said 5.88 percent of homeowners missed two or more payments, an early sign of possible foreclosure. That was up from 5.82 percent in the second quarter of 2011. Read more (free subscription required).

Mansfield Law Office is here to help if you are caught in this increase in foreclosures in Ventura County.

Just Released: Central District of California Bankruptcy Filings Increase 0.9% for Third Highest Increase in Nation

In a report otherwise trumpeting a decline in bankruptcies, the American Bankruptcy Institute reports that the Central District of California, which includes Ventura, Oxnard, Santa Paula, Camarillo,and surrounding communities saw a 0.9% increase in filings.

Bloomber Businessweek, for example, carried the headline:

Bankruptcies Fall 8% in Fiscal 2011 on Lower Debt, ABI Says

 For help with bankruptcy contact Oxnard Bankruptcy Lawyer Andrew S. Mansfield.

Fed: Consumer Credit Use Up in September

It appears that the increased "recovery" in the last month is due to more borrowing.  I remain skeptical whether that is a path to recovery given the pain credit use has inflicted on so many.  Will this type of increase lead to increased filings for bankruptcy protection down the road?  From the American Bankruptcy Institute:
Fed: Consumer Credit Use Up in September
Consumer credit grew by $7.39 billion in September after falling a revised $9.68 billion in August, boosted by a category that includes student and new-car loans, a Federal Reserve report on Monday showed, Reuters reported yesterday. Revolving credit, which mostly measures credit-card use, fell $627.1 million—a third straight monthly decline after drops of $2.26 billion in August and $3.40 billion in July. Non-revolving credit, which includes auto loans, rose $8.01 billion in September after a revised $7.42 billion decrease in August. Analysts said the rise in non-revolving credit partly reflected an accounting change seen since mid-2010 that stems from health care reform and student lending having moved away from banks and toward direct lending from the federal government. The broad trend in revolving credit over the past three years has been toward reducing credit card use as consumers seek to pay down debt, or deleverage. In the 36 months since September 2008, revolving credit has risen in just four months and has been paid down in 32 of those months. Read more.
For help with your Ventura bankruptcy, contact http://www.venturadebtlaw.com

U.S. Wealth Gap Between Young and Old Is Widest Ever

From the ABI.

U.S. Wealth Gap Between Young and Old Is Widest Ever
The wealth gap between younger and older Americans has stretched to the widest on record, worsened by a prolonged economic downturn that has wiped out job opportunities for young adults and saddled them with housing and college debt, The Associated Press reported today. The typical U.S. household headed by a person age 65 or older has a net worth 47 times greater than a household headed by someone under 35, according to census data released Monday. This wealth gap is now more than double what it was in 2005 and nearly five times the 10-to-1 disparity a quarter-century ago, after adjusting for inflation. The analysis reflects the impact of the economic downturn, which has hit young adults particularly hard. The report, coming out before the Nov. 23 deadline for a special congressional committee to propose $1.2 trillion in budget cuts over 10 years, casts a spotlight on a government safety net that has buoyed older Americans on Social Security and Medicare amid wider cuts to education and other programs, including cash assistance for poor families. Read more.
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Analysis from the New York Times: Double Dip Recession Could Be Much Worse than First

The American Bankruptcy Institute sent the following summary of a New York Times article this morning:

If the economy falls back into recession, as many economists are now warning, the bloodletting could be a lot more painful than the last time around, the New York Times reported today. "It would be disastrous if we entered into a recession at this stage, given that we haven’t yet made up for the last recession," said Conrad DeQuadros, senior economist at RDQ Economics. When the last downturn hit, the credit bubble left Americans with lots of fat to cut, but a new one would force families to cut from the bone. Making things worse, policymakers used most of the economic tools at their disposal to combat the last recession and now have few options available. "There is no approachable precedent, at least in the postwar era, for what happens when an economy with 9 percent unemployment falls back into recession," said Nigel Gault, chief U.S. economist at IHS Global Insight. "The one precedent you might consider is 1937, when there was also a premature withdrawal of fiscal stimulus, and the economy fell into another recession more painful than the first." There is at least one factor, though, that could make a second downturn feel milder than the first: corporate profits, according to the experts. Corporate profits are at record highs and, adjusted for inflation, were 22 percent greater in the first quarter of this year than they were in the last quarter of 2007.