Chapter 7 Bankruptcy is a legal way for an individual to get relief from debt. The Bankruptcy laws are Federal and the Chapter 7 refers to an actual Chapter 7 in the Federal code. Both the debtor and creditors meet with a Federal judge in a Federal court.

Chapter 7 bankruptcy is designed for the individual who has few assets. The goal of the Chapter 7 bankruptcy lawyer is to help the client keep as much property as possible so they can get a fresh start and still have some assets to help them.

If there is little equity in your home, you may be able to keep it, especially if you are still current on your mortgage payments. If you are not current, the mortgage company can insist they get the house back. For example, if you are current on the mortgage and the current market value on your house is $150,000 and you owe $145,000 you will probably be able to keep it.

If there is significant equity, say your house is valued at $150,000 and you owe $70,000 there is significant equity and the court can seize these assets to sell your house and pay off creditors. You will be given some of that money to start over but most will be taken by the Trustee and to be given to your creditors.

If you owe more on your car then it is currently valued, and you want to keep it, the process can also eliminate some of that debt and again, you have a better chance of negotiating if you are current on your payments. The dealership will most likely insist you pay them in full in cash for what the car is valued for, though. Or, you can also give the car back to the dealership and be free of the debt.

With the help of your Chapter 7 bankruptcy lawyer, an individual asks the court to wipe out most or all of their debt and most of their excess assets are relinquished to the Trustee who sells them to pay off the creditors. Since the Trustee gets paid out of the proceeds of the sale, often there is nothing left for the creditors.

Chapter 7 bankruptcies can not eliminate child support or alimony debt or money owed to the Federal government for taxes or take away your obligation to pay for a court ordered penalty.

If you live in Arizona, be sure to find the right Arizona bankruptcy attorney – and if you live in Nebraska, be sure to find the right nebraska bankruptcy lawyer – each state is different!

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A fake coup to solve our national debt consolidation problems??? Pretty funny. Or is it?

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• Creditors cannot increase the annual percentage rate (APR) during the first 12 months of opening up an account.
• Creditors are required to provide consumers with a 45-day advance notice of changes in rates and significant contract changes. Rates that change due to a change in the index that the rate is based on are excluded from this 45-day notice requirement.
• Promotional rates need to be in effect for at least six months from the beginning date of that promotion.
• Creditors need to provide a 30-day advance notice of an account closure.
• With certain exceptions, credit card issuers are prohibited from charging a finance charge based on the double billing cycle method.
• Creditors are prohibited from charging a fee on an outstanding credit card balance at the end of the billing period if the fee is attributed to the interest accrued on an outstanding balance that was fully repaid during that preceding billing period.

Read the full summary of provisions.

As of this blog post the President had not signed it but he has promised he will.

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Don’t use Fed as a ‘magical piggy bank’

He’s referring to the recent Federal spending splurge, bailouts, tax payer refunds, the housing bill… the list goes on. That giant sucking sound Ross Perot used to talk about is actually a giant crane sound lifting dollar bills off the money printing machine.

So, I looked for a suitable picture to represent the magical piggy bank – what would it look like? How fast does it spit out $100 bills I wonder. Do you have to press a button or is it running non stop? I wonder if there is a warranty on the motors. At the rate they’re spending money, you’d think you’d have to change the oil fast and what if they miss what happens. So… anyways, I wasn’t able to find a lot of pictures of piggy banks but here are some pictures of pigs I found. Suits the whole premise if you ask me.

This one can deliver cash to any government agency needing a quick ten billion:

photo credit: zappowbang

This one is a bit slow. However it can deliver up to $400 billion to the Presidents desk at a moments notice:

photo credit: zappowbang

This one is the stealth fighter version. It travels to the problem and regardless of the optimal solution spits out dollar bills (in $500 billion increments) until the problem is completely buried in cash. Then moves on to the next one. It also has the ability to come back to the original problem should it resurface. It then throws more money at it and re-buries it. The Chinese love this one – it keeps their reserves high.

photo credit: zappowbang

What’s this doing here? This is my piggy bank after paying taxes:

photo credit: ken +

Finally, this is the magical piggy bank Greenspan is talking about. It doesn’t listen to any taxpayer, only responds to signals by the President or Congress – both need not be present. It does special missions like bailing out companies, keeping social security solvent and stands ready to spill its guts out if Fannie and Freddie need cash.

photo credit: zappowbang

If you see any other suitable pictures of the magical piggy bank – do send them my way. I’d be curious to see what it looks like.

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Movie site: IOUSA

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“This is a systemic financial crisis, there is no end to it,” Nouriel Roubini, professor of economics and international business at New York University, told Bloomberg Television. “It’s a vicious circle between a contracting economy and greater credit and financial losses feeding on the economy.”

President Bush reminds us that the system is “basically sound”:

WASHINGTON (AP) – President Bush urged lawmakers on Tuesday to move quickly in putting into force legislation designed to help prop up mortgage giants Fannie Mae and Freddie Mac while declaring the nation’s financial system to be “basically sound.”

My thoughts?

Well – I don’t think the government should move too quickly on the Fannie and Freddie bailouts. I don’t trust them to get it right this quickly. Too many variables, too many unknowns. Take a deep breath, try to really understand what the best solution is to this problem. The last thing you want to do is panic. At the end of the day it’s investors who are losing money right now – and that’s the game they play, and the government can come in at anytime in the future with a more sensible plan and rescue the market. I just want to caution against hastily put together plans.

Late afternoon update (4:12PM):

Fed Chairman testifies on the Hill (Marketwatch):

Fed uneasy about inflation, growth, Bernanke says

But he also spoke candidly about the weak economy and fragile financial markets. “The possibility of higher energy prices, tighter credit conditions, and a still-deeper contraction in housing markets all represent significant downside risks to the outlook for growth,” Bernanke said.

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Take a look at this chart:

This is not what I would have expected. Democrats lowering the budget deficits and Republicans increasing it for the most part? Are we being misled here then? Do the parties have a branding issue? This is how the authors explain it:

Though the picture so far is of the Republicans as the party of austerity and the Democrats as the party of stimulus, there’s a surprise when it comes to changes in the federal deficit: Republicans are more liberal with the red ink than Dems. On average, a Republican in the White House has meant a shift of –1.9% of GDP in the government’s budget balance (i.e., towards smaller surpluses or bigger deficits), while a Dem has meant a 1.5% improvement in the budget position (or 1.8%, if you start in 1949, thereby omitting the huge World War II deficit). And in this case, the average is a faithful representation of the distribution, with only one Democrat in the minus column and only one Republican in the plus.

Some of this reflects different tax policies, with Reagan and Bush 43 cutting, and Clinton raising income taxes. But it also reflects the partisan difference in GDP growth.

Read the whole thing. Certainly makes you think, doesn’t it?

Hat tip: The Big Picture

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Okay.

Take a deep breath.

Aaaaaaaaahhhhhhhhhhh!

Now. Here are some of the details of the $300,000,000,000.00 mortgage rescue plan currently being “debated” in the Senate. From the Dallas Morning News:

They would receive a refundable tax credit of up to $8,000, or 10 percent of the home value, on purchases of unoccupied housing.

As part of a regulatory overhaul of Fannie Mae and Freddie Mac, the mortgage finance giants, the bill would permanently increase to $625,000, from $417,000, the limit on loans they can purchase from lenders in expensive housing markets. That would make it easier for borrowers in those areas to obtain mortgages at discounted rates.

Later on in the same peice it says:

The Senate bill would provide $150 million to expand counseling for borrowers to prevent foreclosure and establish stricter lender disclosure rules to make plain the maximum monthly payment for an adjustable rate loan.

The bill also establishes an Affordable Housing Trust Fund, to be financed by $500 million to $900 million in fees from Fannie Mae and Freddie Mac. Initially, the trust fund would cover any expenses related to the foreclosure rescue plan, meeting a demand by Senate Republicans that taxpayers not pay for the program.

Under the refinancing plan, only borrowers seeking to remain in their primary home would be eligible, shutting out real estate speculators and owners of vacation homes. And lenders would first have to agree to cut the principal balance of loans to roughly 85 percent of each property’s current value, a substantial loss in many housing markets.

Arizona Mortgage Team has a great post with all the details too.

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Full story “Housing rescue plan passes key Senate test“.

My opinion:

Just to put things in perspective, I thought I’d put the faces of the folks who’ll be stuck with the bill:

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The United States has been an affluent nation since its founding. But the country was, by an large, not corrupted by wealth. For centuries, it remained industrious, ambitious and frugal.

Over the past 30 years, much of that has been shredded. The social norms and institutions that encouraged frugality and spending what you earn have been undermined. The institutions that encourage debt and living for the moment have been strengthened. The country’s moral guardians are forever looking for decadence out of Hollywood and reality TV. But the most rampant decadence today is financial decadence, the trampling of decent norms about how to use and harness money.

I think the bubble economy we’ve seen the past few years bears this point out beautifully. To consider that the US economy has been through two huge bubbles since I graduated from college in 1997 is quite staggering. The first being the dot com bubble and the second is of course the housing (mortgage) one.

The explosion in personal consumer debt and the growing economic disparity cannot be good things for the long term health of the economy. I also think that the borrow and spend mentality that has overtaken the entire country starting from the President all the way down to teenagers applying for credit cards must be rectified at some point if this country to continue to be a wealthy nation. Otherwise it will go the way of Argentina in the late 1990s.

I found Brooks column very thoughtful and

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