With each passing day, a new realization for at least two American automakers is that of an inevitable bankruptcy filing.  Is that really a big surprise to anyone, though?  In a post several months ago, the big question was who these automakers thought would be buying new cars in this economy.  Massive lay-offs, skyrocketing personal bankruptcies and foreclosures are all repercussions of the recession we’re neck deep in and with no real light at the end of the tunnel.  When the “Big 3″ approached the government for bailout money several months ago, many knew it most likely wouldn’t end well.  Today’s news regarding both GM and Chrysler is proof of no ‘happily ever after’.

So where did the billions of dollars go?  The one big question that hasn’t been answered is whether or not this will be included in the bankruptcy filings.  Because of the parameters defined when the money was

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released, it’s difficult to categorize it in such a way that would determine if it’s even eligible for inclusion in a Chapter 11 bankruptcy.  But where was it spent?  Who received it?  And for a group of people who were running some of the largest companies in America, how could they have been so wrong about their insistence that it would be the cure-all for all that ailed them in these tough economic times?  Surely they knew there wouldn’t be a customer base in a position to purchase new automobiles.  The numbers don’t lie.  Each month reveals alarming numbers of newly unemployed people, company closings and other economic nightmares.

And what happens when people lose their jobs?  Their credit ratings start slipping.  This only serves as yet another obstacle that would prevent someone from buying a new car or truck.  This latest development has left many feeling as though they’ve been kicked in the teeth.  Unfortunately, the odds of other companies in different sectors who were recipients of some of the bailout funds will most likely find themselves facing the same fate.

If these automaker’s bankruptcies do come full circle, maybe they’ll find themselves next to others and lawyers in courtrooms who were forced into personal bankruptcies.  They’ll be able to see first hand how difficult it is for many who didn’t have the luxury of sweet talking a committee of politicians into releasing billions of dollars to pay the bills.

Twelve percent is the number of American homeowners who are facing foreclosure right this minute.  Now, though, the House has approved a plan that would allow options for lowering payments and/or interest rates through bankruptcy.  It now must survive a tough beating from the Senate.  Not surprising, voting fell along party lines with the vast majority of Republicans vehemently opposing this bill. 

Bankruptcy courts have long since had the authority to modify loan terms for automobiles and even student loans.  It’s now this much closer to being able to modify home mortgages, including interest rate changes without the approval of banks or mortgage companies.  Many say this will be a great incentive for these same banks and mortgage companies to negotiate with homeowners before their loans are flagged for foreclosure. 

Still, there are those who are convinced this will overwhelm bankruptcy courts by hopeless homeowners who have no more options.  Further, it’s been suggested this will ultimately raise interest rates for new home purchases as a way to offset the forced lowering of interest rates by the courts. 

Another interesting facet of this proposal allows bankruptcy judges to determine if homeowners were victims of aggressive and perhaps illegal mortgage companies’ tactics.  It’s believed the bill itself will have many subprime mortgage companies scrambling to extend modified agreements with current homeowners to avoid the scrutiny of a bankruptcy court. 

Of course, there are always those peculiar happenings that leave us wondering about the motives of some of the politicians who sponsor or support these bills.  CitiGroup has already made a deal with a group of Democrats that will allow it to bypass some of the rules, should this be passed into law.  CitiGroup has agreed to begin enacting this yet-to-be-passed law with some restrictions and far less input from bankruptcy judges.  Another motive of some politicians includes inclusion of only subprime mortgage companies, which means the bigger lenders such as Wells Fargo, CitiGroup and even Wachovia will be exempt from the law altogether.

Ah, but then there’s yet another angle.  The scrutiny this bill will set into motion, should it be passed into law, will include repercussions for those who knowingly lied on their mortgage applications.  Many, during the height of the subprime golden days, were allowed to “state” their income with absolutely no verification by employers; the same rules applied to their bank balances as well.  With no verification from their banks, potential homeowners “stated” their bank balances.  With 100% financing offered the vast majority of the time, most subprime loans required no down-payments either. 

Clearly this bill has the potential to uncover a lot of less than honest deals.  The Senate is expected to vote in the coming months.

For the fifth time in a year, Southern California is reeling from a mass suicide/murder of those feeling as though there’s no way out from job losses, foreclosures and other financial problems.  A couple, both who just lost their jobs as technicians at a hospital, felt there was no other way and chose to end their lives, as well as the lives of their five children.

In the five page suicide note, Ervin Lupoe justified the murders of his children by asking, “Why leave the children to a stranger?”  He said that this plan was made by both he and his wife.  He then faxed the note to a television station in Los Angeles.  The station called police immediately but Lupoe had already called 911 to report he’d just returned home and found the bodies of his entire family.  It was then he committed suicide with a revolver.  His children included two sets of twins, two boys who were two and two girls who were five, as well as an eight year old girl.  The couple had removed the children from school last week and told the school official the family was relocating to Kansas in search of employment.

When the police arrived this morning, they said the smell of gunpowder was still in the air.  They released a statement urging people who are facing tough economic times to consider other alternatives and reiterated money problems are always temporary and always have other solutions.

In a peculiar final sentence in the fax, Lupoe writes, “Oh Lord, my God, is there no hope for a widow’s son?”

This is yet another sad and tragic reminder of how money, or the lack of it, affects every aspect of our daily lives.  The stress of losing a job, or in this case, both sources of income, and having five little ones to feed, was so overwhelming as to resort to such a final act.

After falling over 37% in 2006, bankruptcy filings are on the rise again, despite the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.  In 2008, filings rose, completely offsetting the decline in 2006.  A year-end total of 1,045,000 is the highest number of filings since 2005.  This is a clear indication of how many are finding other solutions.  Not only that, but businesses that are filing bankruptcies are on the rise as well.  There were over one million business bankruptcies in 2008 filed by Corporations and their lawyers.

Could a bankruptcy filing prevented the death of this entire family?  It’s difficult to understand the mindset of a family annihilator, or in this case, two family annihilators, but if job losses were the root of this couple’s desperation, one can’t help but wonder why other options weren’t considered.  Bankruptcy certainly isn’t the perfect solution, but neither was the solution they chose.

Imagine you’re a small business owner who hires a contractor to knock out a wall or two, do a bit of remodeling and a few other minor alterations. You contract for $80,000 and pay half upfront to the contractor. You’re living the American dream - you are your own boss, your business is successful to the point of needing an expansion and you’ve found the formula for success. And then the contractor drops off the face of the earth. He never shows up long enough to drive a single nail into a 2×4. So suddenly, you’re out nearly forty grand, you have the same floor plan as before you hired him and your only option is to shove him through the court system. He’s found guilty of larceny and is ordered to repay the money. He pays part of the restitution, but not before he files bankruptcy. Bankruptcy laws are designed to halt any creditor who pursues you while you are in these proceedings. Since the store owner was technically a creditor, he was required to halt any proceedings to recover his money. The only problem was that he never received notice. The crook, knowing he had filed bankruptcy, coordinated his bankruptcy proceedings to coincide with the criminal case. So the now-convicted criminal filed a complaint with the bankruptcy court that basically accused the store owner of refusing a court order to halt any efforts for repayment.

The bankruptcy judge, who had yet to hear the store owner’s side of the story, ruled that it was in violation and ordered no further efforts to be made towards collecting the stolen money. Worse, the store owner was ordered to pay the criminal’s legal fees.

In a show of good faith, the store owner had attempted to have the judge hear his side of the story via telephone (they were in separate states by this time) since he is the sole caretaker of his elderly parents and quite frankly, his cash was a bit low since someone robbed him - ok, “robbed” is my word. But it’s appropriate. The judge quickly declined that option.

As if a weak economy, sudden cash flow problem due to theft and sick and elderly parents weren’t enough, this store owner just received another kick in the teeth, this time courtesy of a judge who has an odd interpretation of the law. The devil’s in the details - and once it was determined this thief brilliantly coordinated the two court proceedings to coincide, it should’ve resulted in a more severe punishment for having wasted the time of two courts, instead of his being rewarded for bad behavior.

We’ve all seen the news the past few days of how the economy is in big trouble and for the first time in a long time, it’s not the oil companies in the crosshairs.

Lehman Brothers and AIG are the two players who seem to be responsible for the breaking news emails. It’s difficult, at best, to understand why our sympathies should be directed to those at the top of the food chain. I’ve no idea either. I happen to believe in karma and maybe it’s time for another round of tumbles from these high pedestals.

But since it appears homeowners, especially those with the misfortune of having an adjustable rate mortgage or have what’s referred to as a “subprime mortgage”, will feel the pain in short order - we all know the trickle down effect of how the American economy works, maybe it’s time for a reminder of the fact they’re not alone.

Those in this category appear to be most at risk for foreclosure or bankruptcy proceedings. What generally happens is a potential homeowner, who sees an ad promising 100% approval for applicants, will apply for a mortgage. His credit history is the single most important factor in this entire process. If his credit is less than stellar, as most histories are, he might be offered a higher rate on an ARM. He gets a crash course of what that means and realizes it boils down to higher monthly payments and for two or three years, a consistent monthly payment. After the twenty four months (or thirty six months) elapse, the bank has the option to adjust his monthly payments, with little or no warning, to reflect whatever state the economy is in. What’s not as well known as it should be is that at this point, provided the homeowner has taken advantage of the tax incentives and has managed to improve his credit scores, is the option to refinance into a fixed (read: consistent) rate. Many do, but many don’t. It’s those who don’t refinance and stay in this unpredictable cycle of not knowing what their mortgage payments will be who are most at risk for foreclosure or bankruptcy. Foreclosure is to a homeowner what Ike was to Galveston. These homeowners usually lose their homes, or for those who file bankruptcy, they do have the option to keep their homes. The stress involved with financial uncertainty, the fear of foreclosure and/or bankruptcy prevents an objective plan of action, including thorough research into options that may not have even been considered. As I’ve mentioned before, there are many programs available to assist struggling homeowners. Everything from providing low interest loans to bring mortgages current, to assisting homeowners in their efforts to work with their mortgage companies to renegotiate a payment plan for the arrears - these are all options and are available with few or no restrictions.

It’s important to realize the attorney you sat down with at the loan closing is a title attorney and his job was to ensure the title had no liens and was otherwise clean and transferrable. You might have noticed he most likely came in long enough to ensure your competency and ability to understand what you were signing, and then had everything signed, and at that point, he certified there were no liens on your new home. But he did that at the request of the mortgage company. A title attorney’s major contribution to this entire process was the title search that was conducted while the paperwork was being processed and routed.

If you’re facing bankruptcy, and are certain there’s no other way, it’s important to find a lawyer who is experienced in these proceedings, is sensitive to the emotions people experience once they realize this is their only option and who will be available to answer your questions during the entire process. It’s also important to realize that as traumatic as it feels now, the future can offer a better financial outlook and it’s up to you to build upon that future - and know that in the whole scheme of things, when you look back on your life, you’ll see it as unfortunate, but not the end of the world and moving forward is the common denominator in each of our lives.

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