Phoenix Bankruptcy Law Blog

Earlier this month, you and your significant other may have sat down together at the kitchen table to formulate a financial plan for the New Year. However, you may have already encountered some level of frustration, feeling that perhaps debt relief and savings will remain unattainable as the weeks and months go by.

As it turns out, this is far from the truth. According to financial experts, there are a few basic steps that ordinary Americans can consider taking to help improve their financial situation in 2012 and beyond.

Some of the steps recommended by financial experts include:

Create a budget: Sit down and take a hard look at your expenses and your income. Determine how much you need to cover your basic expenses and how you can limit your spending.

Try lowering your interest rates: Contrary to popular belief, credit card companies may be amenable to lowering your interest rate (depending upon both company policy and your payment history). This can equal significant savings.

In our previous post, we discussed how the foreclosure rate here in Arizona and across the United States dropped significantly in 2011. Now, recently released statistics show that the number of Americans in need of some form of debt relief due to unmanageable credit card debt also dropped in 2011.

According to a recent report from the website CreditKarma.com, Americans reduced their average credit card debt by a whopping 11 percent in 2011. Specifically, the average amount of credit card debt for Americans in 2011 was $6,576 in 2011 as compared with $7,404 in 2010.

This continues a trend from 2010, in which credit card debt fell by seven percent.

What's behind this decline in credit card debt?

Credit Karma CEO Ken Lin indicates that a continuing decline in consumer confidence coupled with a continuing effort by banks/lenders to reduce credit limits and rein in lending practices contributed to the overall decline.

Last week, RealtyTrac released a somewhat positive report on the current state of the foreclosure crisis: In 2011, foreclosure activity in the United States declined by thirty four percent from the previous year.

According to the report, the number of homes that entered the foreclosure process was roughly 1.9 million, the lowest figures since the Great Recession began back in 2007. In addition, foreclosure filings - notices of default and auction notices - reached 586,133 in the fourth quarter of 2011, a 27 percent decrease from the fourth quarter of 2010.

RealtyTrac identified government investigations and the foreclosure freeze -- instituted by major mortgage lenders following revelations that they may have relied upon faulty procedures and/or deficient information to foreclose upon thousands of homes -- as one of the contributing factors for the decline in foreclosure/foreclosure filings.

Specifically, these lenders re-filed thousands of foreclosures in state court systems and reviewed pending cases for errors throughout all of 2011, creating a sizeable foreclosure backlog in the process.

"Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year," said Brandon Moore, RealtyTrac CEO.

As discussed in previous posts, there are many reasons why a person would need to seek some form of debt relief or consider filing for bankruptcy. In fact, many of these reasons -- prolonged illness, divorce, unemployment -- cannot be attributed to any type of irresponsible financial behavior by an individual. Accordingly, you would think/hope that people in these situations would not have their financial struggles held against them.

As it turns out, this is not always the case.

In fact, many employers across the country routinely examine the credit reports of job applicants as part of a behind-the-scenes background check.

"In the past only bank and financial institutions used credit checks," said Amber Yoo of Privacy Rights Clearinghouse, "But over the years it has evolved so that more and more employers are using it to predict character judgments on people."

Unfortunately, this means that a person with a negative credit report -- perhaps the result of something completely beyond their control -- may lose the chance to land a good job simply because an employer is choosing to view their credit report as predictor of job performance.

One of the primary advantages of either Chapter 7 or Chapter 13 bankruptcy is that otherwise crippling debts -- such as credit card debt -- can be eliminated. Accordingly, a person who files for either Chapter 7 or Chapter 13 under the United States Bankruptcy Code not only gets a fresh financial start, but also sees the door on debt collection efforts effectively closed.

Interestingly enough, one of the nation's larger banks is now facing claims that it has attempted to collect upon debts that were previously discharged in either Chapter 7 or Chapter 13 proceedings.

According to a recent report filed by a court-appointed auditor, Capital One -- the nation's 10th largest bank known for its "What's in Your Wallet" credit card campaign -- stands accused of trying to collect upon at least 15,500 "erroneous claims."

The investigation into Capital One began back in 2008 after a U.S. bankruptcy trustee in Massachusetts became suspicious when the company tried to collect upon a $5,542.50 debt that had been discharged in bankruptcy court 14 years earlier.

Now that the holidays have drawn to a close, many Americans are undoubtedly suffering from some sort of financial hangover. To illustrate, a recent survey by the American Research Group revealed that the average American consumer spent $646 on gifts during the holidays -- with much of this going directly onto credit cards. Fortunately, consumers in these scenarios do have some viable debt relief options.

Financial experts offer the following tips to consumers dealing with Christmas-related credit card debt.

Take stock of debt: Experts advise consumers to consider compiling a master list of all credit card debt accumulated over the holidays, including money spent on gifts, parties, decorations, etc. This is not only the first step in attempting to effectively manage Christmas-related credit card debt, but also a good way to gain insight into how much you usually spend during the holidays.

Create a payment plan: Using the aforementioned master list and a copy of your monthly budget, experts advise determining how much you can/need to set aside in order to pay down your Christmas-related credit card debt. It's important to keep in mind that it will be necessary to pay down more than just the minimum monthly payment in order to make real progress.

With the holiday season in full swing, television, radio and the internet are all brimming with advertisements announcing various sales. One product in particular that you are likely to encounter advertisements for is automobiles (perhaps showing a gleaming car adorned with a large red bow). While automakers may be offering fairly good deals, it's still very important to proceed cautiously before making any purchase - doing so may help prevent the need for debt relief assistance further down the road.

Interestingly, financial experts recommend that those consumers who are strongly considering purchasing an automobile, take the time to research outside financing before moving ahead.

While this may seem unnecessary given that many car dealerships offer their own financing, financial experts nevertheless advise that it could be well worth the time and research.

A recently published report by RealtyTrac revealed that the number of foreclosures in the United States declined yet again during the month of November.

According to the report, the total number of U.S. foreclosures during November 2011 was 224,394 -- a decrease of three percent from October 2011 and 14 percent from the same time last year.

RealtyTrac identified government investigations, increased judicial oversight and the foreclosure freeze - instituted by several mortgage lenders following revelations that they may have relied upon faulty procedures and/or deficient information to foreclose upon thousands of homes - as some of the contributing factors for the steady decline in foreclosure/foreclosure filings.

Interestingly enough, however, analysts have warned that this drop is likely only temporary and that foreclosure rates will likely start to climb well into 2012. Why? Many more foreclosure cases that mortgage lenders were forced to re-file in various state court systems will soon be approved, meaning the foreclosure backlog of over four million delinquent loans will slowly begin making their way through the pipeline.