admin on November 19th, 2008
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The top three US automakers and the head of the Auto Workers Union are testifying before congress in an effort to encourage a government bailout for their industry. The automakers are seeking a $25 billion government injection into the US auto industry. US automakers have suffered because of the economy crisis and decreased consumer spending, but have also lost a 10 percent market share over the last two years. If the government denies immediate assistance of $25 billion then the only alternative to these auto executives would be the protection of a chapter 11 bankruptcy.
Opinions have been mixed among lawmakers and the white house administration as to the use of any funds from the $700 billion economic bailout for the auto industry. Many believe the government should send a message to the business community that the government is not a safety net for failing industries, despite economic conditions. By filing bankruptcy, some economist believe US automakers may become financially leaner and more production efficient, just as US airlines experienced in previous financial downturns. Jobs will still be lost and debts restructured for repayment with an automaker bailout or bankruptcy.
The real concern is the auto industry affects those well beyond the Midwest. US automakers directly employs over 250,000 persons. However, they indirectly employ over 2.3 million through auto suppliers and manufacturers across the nation, which translates to 2 percent of the total US workforce. Additionally, many industries, such as insurance, banking and the media heavily rely on the revenues generated by their association with the US auto industry. In 2007, banks loaned $77 million to US automaker and the media collected $17 billion in marketing costs. The auto executives believe their failure will create a massive amount of job loss and increased foreclosures throughout the Midwest and South regions. Increase negative economic data will only send another horrific blow to an already crippled national economy. Whether the government steps in or not, the fact remains that the faltering automakers are predicting a fall from grace soon and there will be a mess so large that a governmental involvement is all but assured sooner or later.
admin on November 18th, 2008
Bankruptcies are on the rise as Americans adjust to dealing with record-high consumer debt, reduced credit and job losses. Generally through tight economic times, the American homeowner was able to tap home equity to manage finances. However, declining home values and the decreased ability to borrow money has many homeowners struggling to simply hold unto their homes. Many Americans, under financial stress, have managed their daily finances with high-interest and penalty-laden credit cards. This behavior, coupled with the historic financial times, has created an economic environment prone to increased bankruptcy filings.
The bankruptcy filing rate has increased on average 8 percent per month over the last two years. These filing statistics are split between chapter 7 and chapter 13 filing petitions and have grown by 34 percent over the last 12 months. The Chapter 7 bankruptcy provides the petitioner the ability to clear all consumer debts. Although the assets of the petitioner will be sold to pay any outstanding debt, the petitioner is able to receive a “fresh start” with their financial lives. The Chapter 13 bankruptcy will re-organize consumer debts to be repaid by the debtor and allow a homeowner to keep their home while repaying defaulted and delinquent debts. As the economy continues its downward spiral, the number of foreclosure notices continue to grow and more restrictive borrowing guidelines surface, the Americans consumer will be left with few choices outside of filing for bankruptcy.
admin on November 17th, 2008
Neighboring states, Pennsylvania and New Jersey, tell a different tale of the current national economic crisis. Although both states are dealing with their share of financial woes, New Jersey more than triples the monthly foreclosures of the Keystone state.
The national average of foreclosures is more than 250,000 notices per month resulting in an average 1 in every 452 homes receiving a foreclosure notice. New Jersey residents averages 1 in 700 homes in a defaulting loan crisis. Although New Jersey ranks eighth in the nation on monthly foreclosure notices, Nevada ranks number one with 1 out of every 74 home being affected by a defaulting mortgage loan. Pennsylvania is 30th on the state foreclosure rankings.
Over the last 12 months, the national foreclosure rate has increased by 25 percent, but the national month-to-month increase of foreclosures is 5 percent. New Jersey’s foreclosure rate is rising by 10 percent each month, but Pennsylvania has seen a drop in troubled homeowners by 4%. Many states have implemented legislative-backed freezes on foreclosures. This intervention by the government has brought a significant decrease to the foreclosure for the states enacting such legislation.
admin on November 17th, 2008
The online bankruptcy filing system in Delaware has come to a halt. Delaware is the premiere state in which to register corporations but corporate bankruptcies are at historic levels. An otherwise insignificant technical issue with the system has caused a real problem for the legal system in Delaware. The 24 hour online system is used to file proceedings in order to stop foreclosures and lawsuits. For 3 days the system was down, and officers of the court had to resort to the antiquated and time- inefficient paper filing system.
Delaware has experienced the most corporate filings in the last 18 months of the 50 states. Delaware claims 60% of all bankruptcy filings in the last year with the second highest bankruptcy filing coming from New York with 17%. Delaware has the largest amount of corporate Chapter 11 bankruptcy filings in the US and has worked feverishly to correct the online systems malfunctions.
admin on November 17th, 2008
The US economic crisis has reached the pockets of the world’s billionaires. The Yellowstone Club, based in Montana, is the exclusive vacation home to many of the world’s billionaires, including Bill Gates of Microsoft. However, being a favorite site of traveling billionaires couldn’t prevent the international resort from filing for Chapter 11 Bankruptcy. The resort has a nearly a half of billion dollars in debt and has found that spending cuts have struck even the financially fit.
Partly setting the stage for the financial woes of Yellowstone was a costly and drawn out divorce between the husband and wife owners in 2006. The suffering economy has garnered negative growth on Wall Street’s performance, reduced the net worth of many individuals and caused even the wealthy to restrict personal luxury expenditures.
