Total Bankruptcy

The tough outlook for the economy has made many consumers feel the ill effects and caused them to make many changes in their day-to-day life.  But according to new figures made available, via Bloomberg.com, many aren’t quite ready to give up the affluent lifestyles to which they have grown accustomed.

According to these statistics, U.S. consumer borrowing more than doubled what was forecast for the month of March.  Instead of the $6 billion that economists predicted for the month, consumer credit leapt to $15.3 billion.  Compare that to February, in which credit rose by $6.5 billion, and you’ll note the severity of the swerve upward.  It marks the last month in a quarter that saw consumer credit as a whole rise by $34 billion, the most since the first quarter of 2001, which was not coincidentally the last recession into which the U.S. entered.

Experts point to new, tightened lending standards for home-equity loans as one culprit—in addition to the general recession—that is causing consumers to turn to credit in credit cards and the like.  With home prices dropping and potential to drop many more percentage points in the upcoming months, perhaps this latest shock will force economists to adjust their predictions in the second quarter and beyond.

For more on credit and foreclosure, visit the articles section at Total Bankruptcy.

The San Jose Mercury News is reporting that local health officials are worried about the potential for disease epidemics like West Nile Virus carried by mosquitoes.  And where would mosquitoes carrying the deadly disease be likely to breed in record numbers?

The swimming pools of foreclosed homes.

A Santa Clara County official remarked "One of the first things to go bye-bye for a resident in foreclosure is pool maintenance. It's a drain on their resources."  To discover places where mosquitoes might breed, the county is flying a survey plane looking for telltale signs of pool neglect in homes without the county limits.

Santa Clara County had four reported cases of West Nile virus last year, though none so far this year.  And with record foreclosures hitting California, their concern is real and demonstrates how far the foreclosure crisis will impact the United States in ways that we haven't begun to see yet.

The U.S. Supreme Court approved amendments to the Federal Rules of Bankruptcy Procedure on April 23, which are generally speaking a rubber stamp on rules implemented by bankruptcy courts across the nation in August 2005 as a result of BAPCPA.

Congress must vote on approval of these measures in order to enact them as laws, and doing so would finalize the rules from their current provisional state.

You can read the Supreme Court decision here.

For more on the bankruptcy rules set in place by the BAPCPA, visit Total Bankruptcy's FAQ section.

After the mid-April House passage of a bill to address the shortage of student loans caused by the credit crunch, the Senate voted unanimously May 1st to pass a similar bill. According to the Wall Street Journal, Congress acted quickly to address the issue in time to help students applying for loans for the fall semester. President Bush has expressed support for the measure.

Both the Senate's version of the bill and the House's allow the government to temporarily buy more student loans to pump cash into the market. The two versions also allow students to borrower larger dollar amounts in federally-backed loans.

Experts expect the House to pass the amended version.

In order to stimulate the economy out of the current recession, Ben Bernanke and the Federal Reserve Board cut the federal funds rate once again, slashing another quarter percent off to bring the rate to 2.0%.

Of course, monthly reports published recently prove that the US is technically not in a recession—still, consumer confidence is low, and a little jump start may prove useful to spurring consumers to purchase loans once again.  (Unlike when they cut the rates six weeks ago, or last September...)

In the meantime, read Total Bankruptcy's handy guide to What the Interest Rate Cuts Mean for You.

Foreclosure statistics for the first quarter of 2008 were released today, and, as predicted, things are getting worse for the housing market.  Q1 of this year saw a 23% rise over foreclosure filings from Q4 2007, and a 112% rise over Q1 of 2007.

In raw numbers, around 650,000 homes have been repossessed, or 1 in every 194 households in America.  Some other frightening numbers from the CNN report linked above:

- foreclosures increased in 46 states and in 90 of the nation's 100 largest metro areas.

- previously "safe" areas saw massive foreclosure filings: Connecticut saw a 300% increase, while Massachusetts saw a 260% increase.

- the worst area for foreclosures is the Southwest, specifically California, Nevada and Arizona.  Foreclosure hit 1 of every 54 homes in Nevada, and 1 in 44 homes in Las Vegas.  Stockton, California remains the epicenter of the crisis, with 1 in 30 homes being foreclosed, with Riverside/San Bernardino coming in second with 1 in 38 homes.

The economic stimulus package passed by Congress should be rolling out in the coming weeks, now that income taxes have been filed. Here's when you can expect your rebate check:

For more information about the tax rebates, check out this article.

The House of Representatives heard testimony last week from Senators, credit card users, consumer advocates and members of the credit card industry on the Credit Cardholders' Bill of Rights, legislation proposed by Representative Carolyn Maloney (NY-14) to address abusive practices of the credit card industry and improve consumer protection.

A spokesman from the CFA and Representative Maloney both pointed to the credit card industry's remarkable ability to make vast profits in what it describes as a "risky" industry. Maloney hinted that the industry could save money by mailing fewer than five billion annual mail solicitations for credit cards, suggesting that interest rate hikes and late fees are only one way of making profit.

The COO of Citigroup's credit card division supported adoption of changes to credit card agreements proposed by the Federal Reserve. If adopted, the changes would amount to a baby step toward credit card reform.

To read the full testimony, follow this link.

Amidst concerns about student loan availability and affordability during the credit crunch, the House of Representatives has approved a measure that would allow the Department of Education to purchase federally guaranteed loans that lenders cannot sell to private lenders and also increase the amount of money that students can borrow.

Just yesterday, Bank of America was the latest in a long line of lenders who said that they will no longer make private student loans available as a result of the credit crunch and a lack of financial backing in such asset-based securities from investors.

According to estimates from the Education Department, nearly 7 million borrowers will require more than $68 billion in federal loans this academic year.

The government has declared April  "Financial Literacy Month," in an effort to address the growing problem of financial illiteracy among Americans. Financial experts, in fact, have attributed the devastating fallout from the subprime mortgage meltdown to a global lack of financial education.

Several Midwest states are sponsoring "Money Smart Week" from April 20-26. MSW consists of a series of classes offered to the public on everything from managing credit cards to saving and planning for college. For more information and to find programs near you, visit the Money Smart Week website.

Additionally, Total Bankruptcy has launched a new Financial Literacy section, where we will post articles addressing various issues of money management.

If you have questions or would like to see a certain issue addressed, feel free to post on this blog entry.