What’s in your wallet? These huge credit card companies are plenty rich- it’s okay to file for bankruptcy!

Bank of America, Chase, Wells Fargo, Capital One, Citibank, Discover, American Express.  Recognize these guys?  You probably owe them money right now and I’m not talking about for your mortgage, car, or for some other secured asset.  I’m talking about credit cards.  What’s in your wallet?  Probably there is some credit card in there right now with one of these names on it and you are in debt.

If you check you will see that these are very large companies.  They have billions of dollars in assets and if you think about it is a very easy business to run.  Think of them like Joe Pesci in the movie “Casino”.  They get a little money and they “put it on the street”.  But you are the street.  They borrow money at a low-interest rate and lend it to you at a higher rate.  If you default or are just late on the payments then they will jack your interest rates and charge you all sorts of penalties.  They make a tremendous profit on you when you cannot pay them.

Remember they don’t have a plant with machinery where they make things or even an office where they give advice.  They just need a little small space where there is a phone with which they can call you twenty times a day when you don’t pay them.  Are you getting those calls now?  Most of us do and they call now not just when you are a month late or even a few weeks late but if you are a day late.  They seemed to have recently decreased the time they allow you to not pay them.

According to Wikipedia Bank of America is the largest financial services company in America and also the largest bank holding company.  It is the second largest bank in the country by market capitalization.  As of 2010 B of A is the fifth largest company in the U.S. by total revenue and the second largest non-oil company in the U.S. after Wal-Mart!

Wells Fargo is the fourth largest bank in the U.S. by assets but the second largest by market capitalization.  JP Morgan Chase has assets of $2 trillion.  Citigroup has the largest financial services network in the country and it has over 200 million customers.  Get the picture?  They are huge and they won’t miss your debts if you get them discharged in bankruptcy.  Most of the big banks received federal bailouts financed by your tax dollars when they ran into financial difficulty.

Where is your bailout?  Do you get a break when you get into financial difficulty?  These companies are the largest and richest companies in the world and they are deemed “too big to fail” and when they get into trouble they run to the federal government (that’s you) and they ask for and get a bailout so they can make more money.  Did you get a break?  A bailout?  Where can you go when you run into financial trouble?  How about they only call you ten times a day when you owe them money?

Forget about it.  It’s not going to happen.  You will get no breaks from these companies.  They only move one way and that is forward in collecting money from you.  They will call you, hound you, and harass you into paying them.  Your only way out is to file bankruptcy.

Bankruptcy stops the calls, the harassment, and relieves you of the liabilities for those debts.  It makes sense and is the only break you are going to get.

So don’t feel bad for these banks who are too big to fail.  They are the largest and richest entities in the world and they won’t miss your little debts when you file bankruptcy.  They will write it off as a loss on their corporate taxes.  Remember that most people have paid back all of the money they borrowed on their credit cards with interest before they file bankruptcy.  It’s just that the interest rates are so large that they have to keep paying indefinitely.

How long does it take to pay off a card if you make the minimum payment?  I don’t even know anymore but it used to be 30 or 40 years.  That is debt slavery.  Don’t let yourself be a slave!  File for bankruptcy if you have debts you cannot pay!

I am a San Diego bankruptcy attorney.  Please visit my website at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation on any bankruptcy or debt related issue at (619) 702-5015.  Call now for free credit report and analysis!

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

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Shadow inventory of foreclosed homes- could it mean we have shadow depression?

(See my currnet blog for an updateon foreclosures: http://bit.ly/JGU1dZ ).

There appears to be a definite “shadow market” of foreclosed homes that the banks are holding off the market.  They sometimes call this the “shadow inventory”

The banks are holding these homes off the market presumably to prevent a real estate crisis.  As I wrote before about this issue there is this huge reservoir of homes that the banks have foreclosed on and taken full possession of.  These homes are “shadow inventory” because the banks have kept them in the shadows and they have not listed these homes on the MLS for realtors to sell.

The Wall Street Journal recently did a story on this shadow inventory.  In that story they cite a study done by real estate consulting firm in Irvine California.  They estimate that there are 4.7 million homes in this unreported market which amounts to a 10 month supply of homes but the number could rise to as many as 5.6 million homes.  Some of the worst cities have a 20 month shadow supply of unlisted and unsold homes.

Analysts at Standard & Poor’s report that the largest backlog of shadow inventory exists in New York city followed by Miami.  Standard & Poor’s estimates that the time it will take to clear this inventory is up 18% over the first 6 months of 2010.

There is certainly a lot of homes in the “shadows” and this is a serious problem.  This is why some realtors are predicting that this foreclosure/housing crisis will be with us for 5 to 10 years.   The Irvine report also estimates that this shadow inventory will stay at elevated levels until 2016!

The report says that sales of distressed homes will rise to 40% of all home sales through 2012 and that real estate prices will continue to fall by 8% to 11% through 2012!  They also predict that if the economy worsens or if interest rates rise then housing prices will decline further and for longer.  According to the report distressed home sales will peak at 2.3 million homes next year.  So we haven’t reached the peak yet and it will get worse.

Worse than that a friend of mine was at a real estate conference recently attended by a president of a big bank.  The bank president denied the existence of a shadow inventory.  If the banks don’t want to admit that there is a shadow inventory and it is well-known enough for consulting firms and the Wall Street Journal to write about then what are they trying to hide and why?

Can we not take the truth?  It seems to me as I have written about many times that we are currently in a depression.  I don’t expect that anyone in government or the banks (who are now very closely tied to the government) will admit it.  They obviously have no problem lying about the shadow inventory of homes so it seems unlikely that we would ge the truth about how deep this economic crisis is.

I’m sure they will tell us when it’s all over.

I am a bankruptcy attorney in San Diego.  For further help please visit my website at www.farquharlaw.com.

What do the election results mean for bankruptcy and foreclosure?

The reality of our political situation is that no matter what you think of any political party, the democrats are in general friendlier to debtors.  I am not a democrat or a liberal but I say this because it is just the way it is.

So if you are in debt the democrats will probably pass more laws that will help you (years ago Hillary Clinton put forth legislation to make student loans dischargeable in bankruptcy).  With the Republican takeover therefore there will probably not be as much relief  for debtors as there would be if democrats stayed in power.

For instance the writing down of mortgages to the value of the homes is being proposed by a democrat.  This is being sponsored by the democratic senator from Rhode Island and it will probably not happen now because the dems lost the house.  Neither will a foreclosure moratorium.  A halting to all foreclosures has been called for but it is unlikely top pass with republicans controlling the house of representatives.  Republicans are more likely to want to see the foreclosures happen.

But that does not mean that republicans are more in bed with big banks.  They just believe in personal responsibility and that if you can’t afford a mortgage then you should go out of your house.  For many of my clients this is my advice and I point out to them how it’s probably cheaper to rent than to make their high payments for an upside down house.  But for others I advise them to try to get a modification and stay in the home because they are attached to the home or they have made major improvements to it.

The republicans will be faced with the emergency of an increasing number of these foreclosures and they may be forced to take more drastic action than they would otherwise take due to seriousness of the problem.

Remember too that bankruptcy is still going to be always available and it is unlikely to change.  The law was majorly overhauled in 2005 and will probably be only tweaked now.  That 2005 bankruptcy law and the means test that it created is considered unfriendly to debtors.  If your income is too high then you are forced into a chapter 13.

Vice president Biden voted for that 2005 change to the bankruptcy law along with many other democrats so it was not just republicans who supported it.  But bankruptcy is still available and its often the most sensible solution for people who do not have too much income but they do have a lot of debts they cannot pay.

So there is unlikely to be a foreclosure freeze now or a mortgage write down but there may be some other relief coming for debtors if both parties can work together.

I am a bankruptcy lawyer in San Diego.  If you need more help please visit my website at www.farquharlaw.com.