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In the News
Back on January 11, 2012, a news blog was posted on Bankrate.com by David McMillin about the FBI warning consumers to be careful about doing you banking online. It seems there is a group of criminals that has come up with a clever scam to steal your personal banking information from your computer or cell phone.
McMillin wrote: “In a new warning, the Federal Bureau of Investigation warns account holders of a new spam email scheme that involves a type of malware called “Gameover.” The scheme involves fake emails from the National Automated Clearing House Association, the Federal Reserve or the FDIC. These messages attempt to trick recipients into clicking on a link to resolve some type of issue with their accounts or a recent ACH transaction. Once you click on the link, Gameover takes over your computer, and thieves can steal usernames, passwords and your money.”
McMillin asks at the end of his blog, if you have had a scam experience, to make suggestions on how you think the problem should be handled.
Personal Experience
I recently had two attempts to takeover my computer, one of which caused my computer to crash, and the other caused me to rethink my security protection for the computer.
The first one was a worm that caused my computer to seize. The solution was to erase all my information, restore my computer to its factory condition and buy better anti-virus protection. I lost all the work I did not have backed up.
The second attempt came when I discovered someone currently had control of my computer. The scam artist changed my web pages directly in front of my eyes and moved my cursor at will. I immediately shut down my computer, and it then took me three days to redo my security protection. I changed all pass words, and I now use my computer as a user, while any changes made can only be done by my administrator.
What Scam Artists Can Do With Your Personal Information
Anyone who has had some type of virus or worm that has caused your computer to crash most likely has experienced some type of scam to find out personal information about you. Personal identity theft is one of the largest growing crimes in America, and the reasons to scam you through entering your computer to get personal information is endless.
By entering your computer, thieves can often get your name, address, telephone number, social security number, banking information, and business information, if you do business online. They can learn your passwords and user names once the get into your computer.
Obviously, once they get this information, they can obtain credit cards in your name, take money from your accounts if they get your banking information, set up phony businesses in your name, make out phony identifying documents like driver’s license and passports. The scam artists do not necessarily have to be from the United States to benefit most from thes type of scams.
My Suggestions for Using a Personal Computer
Because of my personal experience with someone trying to scam me, I no longer keep any personal information on my computer, and unless a site is encrypted and protected, I will not fill in the blanks with personal information, or use that particular web page. My computer name has no personal information, and my computer has no personal information anywhere in it. I no longer do my accounting or banking with an online computer. I have another computer that I keep my accounting and banking information in, but I ALWAYS use this computer offline, never hooking it up to the internet.
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Most bloggers will use celebrities and various other famous people to illustrate that bankruptcy does not always just happen to common people who make very little income, but it can happen to anyone. This blogger offers his opinion of the top five worst bankruptcies ever filed, in descending order.
#5 Worst Bankruptcy Ever Filed
Lydia Harris claimed 50% ownership investment in Death Row Records in a lawsuit in 2006 against co-founder Suge Knight who had a history of trouble with the law. Harris was awarded $107 million by the courts for her 50% stake in Death Row. Knight then filed for bankruptcy protection in the same year, and the bankruptcy court found he had only $11 in his bank accounts. Knight continues to have financial trouble to this day as well as trouble with the law. Whatever happened to Lydia Harris? I don’t know, but my guess is she is no longer investing in record companies.
#4 Worst Bankruptcy Ever Filed
Willie Nelson filed bankruptcy in 1990 after the IRS reportedly handed Willie a bill for $16.7 million for back taxes. The IRS seized most of his assets to help pay those charges. Didn’t Willie know that most IRS back taxes are exempt from bankruptcy discharge? While it is true some back taxes are non-exempt from discharge, the automatic stay ran out of time, and Willie is still hurting from the IRS, some 22 years later.
#3 Worst Bankruptcy Ever Filed
Lawrence Taylor was one of the greatest linebackers to play for in the National Football League, and he was one of the highest paid players in the NFL for 13 seasons. Nearing the end of his career and after, Taylor lost all of his money through the use of illegal drugs, gambling and bad investments. In 1998, Taylor was arrested for failing to pay child support and had to file bankruptcy. Didn’t Taylor know child support is also exempt from bankruptcy discharge? Could investing in a drug rehabilitating program been a better investment than a bankruptcy lawyer?
#2 Worst Bankruptcy Ever Filed
Bud Post was the famous lottery winner who won a national lottery in 1988 worth $16.2 million. Bud then went on a spending spree buying almost anything in sight. Bud filed for bankruptcy protection in 1996, declaring later that winning the lottery had ruined his life. He died in 2006 with no money or possessions. Did filing bankruptcy really help?
#1 Worst Bankruptcy Ever Filed
Mike Tyson was one of the most written about boxers ever. He won the heavyweight boxing title at 20 years old, the youngest ever to do so. It is estimated he won over $300 million dollars in his professional career. Tyson’s lavish lifestyle cost him $400,000 a month during the decades of the 1980s and 1990s. Tyson filed for bankruptcy protection in 2003 listing debts of $27 million. After living such a lavish and expensive lifestyle and literally biting the ear that feeds you, Tyson gets my vote as the only famous person on this list who understood how to use bankruptcy in a timely manner. He lost my vote when I learned how he came about having to file bankruptcy. It just goes to show me that filing bankruptcy is the right of every American.
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In the News
A breaking Yahoo Sports news report has revealed that Allen Iverson, the Philadelphia 76ers basketball player who was an 11 time all-star in the NBA, has been ordered to pay over $860,000 for jewelry he recently bought, and he wasn’t able to cover the amount. He now is facing bankruptcy. All of this despite making $154 million during his professional career in the NBA that began in 1996.
A Georgia judge has reportedly ordered that Iverson’s bank accounts be garnished to pay for the jewelry. Some have suggested that Iverson has gone from a famous wealthy athlete to a deadbeat overnight. Deadbeat is often a term associated with people who file bankruptcy to protect their assets from creditors.
Filing a bankruptcy would immediately stop collection activities like garnishment of wages and bank accounts. Currently, there is no evidence Iverson has yet filed for bankruptcy.
Potential Causes for Iverson’s Financial Decline
According to an article placed on the Yahoo Sports website, “Iverson felt he owed his childhood friends from the old neighborhood because “They made me.” The feeling was, without them protecting him from the mean streets, he would have never made it to the NBA.”
Iverson is known to travel with one of the largest entourages accompanying a professional athlete. It is not unusual for professional athletes to have friends and families accompany them when they are at home or sometime on the road. Most of Iverson’s entourage is made up of his childhood friends.
According to Bill Lyon of the Philadelphia Inquirer, “Iverson has had as many as 50 people attend Sixers home games, and has also taken a hair stylist on the road with him. He likes to buy expensive jewelry for himself and his Mother, Ann Iverson.”
Iverson’s Potential Future
At the end of a great career, it is rumored Iverson may play outside the United States in order to make more money to cover his debts. According to the Yahoo Sports news article on Iverson, the Los Angeles Lakers may still have an interest in him. He would more likely make more money outside the United States, but only time will tell what he will do.
Whether or not filing for bankruptcy is in Iverson’s future will most likely depend on his success in staying active in basketball. Filing bankruptcy is an option for the basketball star to stop his garnishment and provide him enough time to reorganize his finances if he continues to work.
Statistics on NBA Players Going Broke
Many famous people including famous athletes have had to file for bankruptcy protection. According to an article posted on the Business Insider website, 60% of NBA players go broke within 5 years after their retirement.
Some suggest the players who go broke, most of which have not been used to handling the amount of money they make in the NBA, do so because they ultimately trust others to handle their new found wealth, or they lavishly spend money on their friends an family until the money is gone.
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It is no conundrum that debt is the single leading cause of bankruptcy in the United States, but who is it that holds all this debt?
For individuals experiencing bankruptcy in the United States, the debt held for most average Americans is held by credit card banks, mortgage banks, credit unions, and regular banks. When you obtain a debt that is federally backed, the federal government uses one of these types of banking institutions to loan you the money and guarantee the loan. Private loans in the United States, like some pay day loans or automobile manufacturer loans, can also be a part of a debt that ultimately will send you into bankruptcy.
American society as a whole is now in debt to almost the point of complete bankruptcy. The national debt is now over $15 trillion and rising, and it is not likely to be paid off because the United States annual tax revenue currently cannot pay off the interest on the national debt.
The national debt of the United States comes from the federal government borrowing money by selling various investment securities that are backed only by the good faith in our government. These are not secured loans but have historically been low risk because of the financial stability the United States has enjoyed since the Great Depression. But now, bankruptcy looms for us all.
It might surprise you who holds the national debt of the United States. Here is a simple breakdown of the top 10 holders of our national debt.
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The Federal Reserve and other government holdings. The United States Government is the largest single holder of our debt at $6.328 trillion. Federal banks own $1.65 trillion in U.S. Treasury securities. Other government entities like the Medicare Trust Fund and the Social Security Trust Fund own the rest.
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China. $1.132 trillion of our debt is owned by a foreign country who has been our enemies in the past and recently exclaimed they did not understand unsecured risks.
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A large diverse group of investors. Private United States citizens, private businesses, public businesses, and a host of others in the diverse group, both foreign and domestic, have invested in savings bonds and other government securities. This group holds about $1.107 trillion of our national debt.
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Japan. One of the United States’ largest trade partners holds about $1.038 trillion of our debt.
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Pension Funds. This group includes mostly United States private and local government pension funds that have invested about $842.2 billion in our national debt.
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Mutual Funds. This group of investment holders currently manage about $653.5 billion in U.S. Treasury securities.
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State and Local Governments. Currently, the best estimate for this group of investors is about $484 billion.
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The United Kingdom. The United States biggest ally within the last two years has increased buying U.S. Debt by 8 times to a current $429.4 billion.
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Depository institutions. Commercial banks, savings banks, and credit unions now own about $285.4 billion of our national debt.
10. Insurance companies. Property-casualty and life insurance companies hold about $250.1 billion in Treasury securities
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Gross National Product Defined
Gross Domestic Product refers to the market value of all final goods and services produced within a country in a given period. When comparing Gross Domestic Product per capita around the world, the Gross Domestic Product can indicate the standard of living of all of the citizens of that country.
The United States Leads World in Financial Statistics
The United States in 2010 led the rest of the world in Gross Domestic Product at almost 1.5 times the size of its closest competitor, the People’s Republic of China. Considering Per capita Gross Domestic Product figures in 2010, the United States is slightly lower than the leader in that group, Hong Kong.
Not surprisingly, the United States leads in many negative statistics involving finances as well, like filing personal bankruptcy. There is not much statistical evidence to track all the countries around the world when it comes to filing bankruptcy. Many countries do not have bankruptcy laws in place, and the ones that do are not always reliable in reporting statistics to government entities let alone world institutions who track such. Nevertheless, because the United States does keep bankruptcy records, it leads the world in filing bankruptcy.
Bankruptcy Filings... (Photo credit: MyEyeSees)
The Financial Health and Wellness Within the United States
The United States is an open capitalistic system where bankruptcy statistics and the Gross Domestic Product are important pieces of doing business. Neither of these are necessarily a sign of the financial health and individual wellness within the country.
Recent financial news indicate more than 50% of the state governments in the United States are in financial trouble and bordering on bankruptcy. The Federal Government is not allowed to file bankruptcy. Municipalities across the United States, which are allowed to file for bankruptcy under federal bankruptcy law, have been filing bankruptcy these past few years in record numbers.
Likewise, despite Congress passing of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 which was enacted to make it harder for filing bankruptcy, individuals have been filing bankruptcy in record numbers the same few years.
No Solution in Sight
Despite the United States still currently having one of the highest standards of living in the world, most of the wealth within the United States has slowly been transferred to a small minority of the financially elite. More than 80% of the Citizens of the United States of America’s owns less than 20% of its wealth. 90% of the wage earners make less than 60% of the available income. That means that 10% of the financially elite make 40% of all the available income.
The United States is seventh in a list of nations with the richest people in the world. It is considered to be home to as many billionaires as there are in the rest of the world.
The United States may lead the world in Gross Domestic product, but the disparity between the financially elite and the rest of America’s working citizens might be one reason there is so many filing bankruptcy. There does not seem to be any solution to the problem in sight.
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Debt Collection in the News
Yesterday it was announced that one of the biggest debt collection firms in the United States, Asset Acceptanced, LLC was dished out a $2.5 million fine by the Federal Trade Commission for misleading consumers while trying to collect old debts. Asset Acceptance, LLC specializes in debt buying for the purpose of debt collection activity. In the opinion of this blogger, the actions of the FTC was a mere slap on the wrist for what it should have administered for these type of infractions.
JDB Industry Described
Debt collection companies who specialize in debt buying are often referred to as Junk Debt Buyers (JDB). They buy both newer and older debts from a wide range of creditors at pennies on the dollar. Debt buying companies range in size from a Mom and Pop operation to large corporations like Asset Acceptance, LLC, and they purchase portfolios of debts from creditors that can range in size from being a very small business operation to a large financial institution like a credit card bank.
Likewise, the portfolios bought by the debt buyers can range from a very small portfolio of debts to a very large portfolio. No one knows exactly how financially large the junk debt buying industry is in the United States, but some estimate it collects billions of dollars annually.
How the JDB Industry Works
Usually, a JDB bids on a portfolio from a creditor who has already spent time trying to collect on the portfolio’s debts. After the creditor has tried for a time to collect these debts, the creditors write the debts off for income tax purposes, then they put the debts up for bid on the JDB block.
Because of existing and complicated consumer laws the ownership of a debt can get very murky to say the least. Many creditors can assign the ownership of the debt because they have assignment clauses within the contracts they issue when the debt is first made. That means when it comes to collections of the debts, they or their assignments have a right to collect the debt.
Not all creditors have the right to assign your debt to another party, though. It all depends on the consumer laws the creditor is working within and the contract the creditor is working under.
Double Jeopardy?
After having written off the debt, the creditor reports his loss to the IRS and technically can send you a 1099 for the unpaid balance. The reason a creditor can do this is because the money you received not paid back can be viewed as income. The IRS sees the forgiveness of debt as income to you and can expect you to pay the income taxes on the write off.
If debt buying buys your written off debt, and you have somehow paid the taxes on the write off, is it placing you in double jeopardy for the debt buyer to now collect the debt in full?
Other JDB Trouble
Junk Debt Buyers like Asset Acceptance, LLC have been accused of abusing the Fair Collection Practices Act by not telling the debtors the debt they are trying to collect have passed the statute of limitations within their state jurisdiction. That is one of the reasons for the fine levied against Asset Acceptance, LLC yesterday.
Other alleged violations of junk debt buyers include filing lawsuits with no documentation, harassment, and a whole host of others. If you are currently being harassed by debt collectors, you may need the help of a lawyer.
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Terrell Owens is a famous athlete who set National Football League records and is in the all time top five for several receiving categories, including yards and touchdowns. Now, the famous athlete has recently received news coverage for joining the Texas based team, the Allen Wranglers, of the indoor Football League, of which he is one of the owners.
The most recent news covering the flamboyant star’s life happened just today when Yahoo Sports published a piece about the athlete being desperately close to bankruptcy. According to the article and based on the Owens’ profile in the magazine, Gentlemen’s Quarterly, “at 38 and out of football, he’s lonelier than ever, and running out of money. Owens comes across as wounded, broke and desperate. When people text him to ask where he is, he replies back: I’m in hell.”
Owens story is not unique amongst those who are called a famous athlete despite his having earned over 80 million dollars in his professional career. Consider these professional sports statistics reported from numerous news sources:
- By the time NFL players have been retired for two years, 78% of the former players have gone bankrupt or are under financial stress because of joblessness or divorce.
- Within five years of retirement, an estimated 60% of former NBA players are broke.
- MLB franchises and its players have been riddled with bankruptcies throughout Major League Baseball’s illustrious history.
There has always been speculation as to why these high dollar franchises and athletes so often go belly up with their high dollar incomes, but for the most part, the players entering the draft get rich quick receiving more money than many of them have ever seen or even heard of in their lives. None are not born with the knowledge of economics, and many do not know how to handle such money. They and their parents often are dependent on total strangers to help them manage the money. Strangers often take full advantage of both athletes and parent’s vulnerability.
Owens shared with the news media the reason he lost all of his millions was because of bad financial advice and poor investments. He admits he was too trusting, and the wrong people he trusted failed in their promises to take care of him financially.
Mismanagement of funds or income is always one of the leading causes of bankruptcy. It doesn’t matter whether you make millions or live off a shoestring. If you cannot manage a budget, make relative safe investments through diversity, and discipline yourself to live within your means, you will eventually and most likely go bankrupt.
To my knowledge up to the date of this posting, Owens has not filed for bankruptcy protection. Instead, he has selected to invest his talents and time in a new business adventure with the Allen Wranglers. I offer Owens my best wishes for success in his new adventure.
All of us who work and seek the American Dream in the United States, in my opinion, have a Constitutional right to the pursuit of happiness as long as they are not breaking any laws.
You are no different than Owens or any other rich and famous person. It is your Constitutional right to file for bankruptcy protection when you go broke, but the knowledge of filing bankruptcy is no more born in us than knowing how to handle our economics. Therefore, you need the advice of a bankruptcy lawyer before you file.
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The Protest
In light of Wikipedia, Google, Modzilla Firefox, and many other leading free spirited activist’s protest yesterday over the United States Congress passing a censorship law that would regulate the internet, I feel I would be irresponsible as a legal content blogger on bankruptcy law not to address the philosophical issues raised by the protest, and how the subject of the potential tyranny of censorship might apply to bankruptcy as well.
The Tyranny of Censorship
To quote Wikipedia, “Censorship is the suppression of speech or other public communication which may be considered objectionable, harmful, sensitive, or inconvenient to the general body of people as determined by a government, media outlet, or other controlling body. Tyranny refers to a despotically ruled state or society.”
Even though the vote by Congress on proposed law is a political issue, the significance of the issue should make dialog on the topic philosophical. Changing how America addresses its independence made possible by revolution from despotic rule should transcend politics.
Very few would not argue that the cutting edge for American independence evolved from individuals standing up for their rights to the formal passing of the Bill of Rights. The Bill of Rights separates us as Americans from all other societies in a philosophical way. By the passing of individual rights, we said as a society that we can govern ourselves by cooperating within a nation as individuals, not as self serving collective groups.
No group within our society has the right to undermine the Bill of Rights, regardless of their perceived intention. That includes our political representatives and their lobbying counterparts. Collectivism is the emphasis on collective rather than the individual action or identity. This recent attempt to undermine the individual right of free speech on the internet should be construed as a collectivist attempt to censor what certain individuals might think and say to defend their individual rights.
If Congress wants to suppress the masses by limiting its use of the free speech forum of the internet, all the controlling body has to do is pass a law that circumvents the Bill of Rights. To allow Congress to pass a law circumventing the Bill of Rights, in itself, might be construed by many as allowing Congress to practice a form of tyranny.
How the Tyranny of Censorship can Relate to Bankruptcy
How all of this censorship talk relates to bankruptcy comes from my reading a blog by a debtor who filed a Chapter 7. He claimed to be castigated by his fellow Americans for exercising his Constitutional right to file for bankruptcy protection and rebuild his credit. One of the bloggers called him a “thief.” This rhetoric should have been expected from a group whose self interest is epitomized by the name of their website, fatwallet.com.
If we allow every self interested group to control what each and every one of us say and think through censorship, and that includes any loosed tongued censorship through the use of rhetoric, we have lost any regards for individualism in America. That especially goes for bankruptcy discussions on the internet.
No one has to feel like they have to go to debtors prison because a group of self serving tyrants says they need need to. To the contrary, the Constitution guarantees your individual rights whether any particular group of despots thinks so or not.
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A Former Student’s Personal Story
A former student at the Art Institutes, a school listed under the Education Management Corporation which is currently being sued by the Federal Government for fraud, recently posted a personal bankruptcy story on a website about how a scam of a private student loan bankrupt her.
The former student wrote, “I am currently $80,000 in debt and still have no diploma. I was misled when enrolling at the school about graduation, employment rates, credit transferability and quality of the school itself. I am now stuck with debt that there is no way I will be able to pay off. I am a single mom, a full time student at a different college now, and I feel victimized.”
How Our Bankruptcy System Contributes to the Scam of Our Students
From the thousands of testimonies you can read on the internet, this former student’s story is just one amongst many stories stories about how a private student loan scam is now common, and the students are the victims. The United States Bankruptcy System and laws contribute to this scam that victimizes our college students.
In 2005, Congress passed new bankruptcy laws under the Bankruptcy Abuse Prevention and Consumer Protection Act that added private student loans to discharge exemption status in bankruptcy cases. That means anyone who gets a private student loan can no longer have the loan discharged during any bankruptcy proceeding. In addition, the new laws provide a risk free loan for the lender.
These new risk free loans along with the protection of a bankruptcy discharge exemption encouraged the private student loan sector to expand. With expansion of the new easy loans, problems of scams and corruption rose just as fast. In 2007, New York State Attorney General, Andrew Cuomo, made an investigation into anti-competitive relationships between colleges and private student loan lenders. Many universities were expected of steering student borrowers to their preferred lenders. The students incurred higher interest rates and the university financial staffs who steered the students were allegedly offered monetary kickbacks from the lenders. These accusations are still under investigation.
Former Law Changes Also Contribute to the Problem
In 1978, the Supreme Court made a ruling that would change the face of how banks reasonably dealt with credit card interest. Since then, this move has affected the foundation of how banks charge interest in general. Basically, the ruling undermined existing state usury laws, especially concerning loans in default. Banks now feel the freedom to be more bold in what they charge lenders in interest after default on a loan, penalties and fees. The laws in this area have become circumvented with other existing laws so the average person cannot understand which is which.
What Might be Done About the Problem
Probably the only thing you can do about this particular problem is to elect someone who will change bankruptcy laws. The New York Times recently published an article endorsing the return of bankruptcy protection for private student loans. The elimination of the exemption to discharge is one way of forcing the scam artists to the table.
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As a society, we cannot function without laws to provide a level playing field for all of us so we may avoid scam. If you have been victimized by scam and are now bankrupt, find a bankruptcy attorney today.
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Sears, An American Staple
Sears, Roebuck, and Co., one of America’s retail staples since 1893, may be in financial trouble according to recent news articles. Once touted as a place a consumer could save with a motto like “Shop at Sears and Save,” Sears was bought out by the Kmart corporation in 2005 in a merger.
Sears Merger in Financial Trouble
The idea behind the merger was for Kmart to be able to compete with Wal-Mart Stores Inc. and Macy’s. According to an article recently posted in The Columbus Dispatch, the new merger has had “18 consecutive quarters of declining sales…While Sears Holdings Corp. shares soared in the first few months after the merger, they’ve fallen 55 percent in 2011 alone…On Tuesday, Sears reported that same-store sales fell 5.2 percent in the eight weeks that ended Sunday (December 25, 2011)…Sears employed 312,000 people as of January, down from 355,000 in June 2006, according to data compiled by Bloomberg.”
According to the news reports, Sears, under the guidance of Kmart executives, has tried one strategy after another in trying to compete, but so far, the current economy has shot down everything the company has tried. The round of the latest closings is affecting about 5000 employees’ jobs.
Poor Economy Blamed for Sears Downturn
The store that started “The Good Life at a Great Price” campaign in 1999 is reeling under an economy that currently doesn’t care about a good life or a great price. Strangely enough, Sears bad news comes at a time that bankruptcy filings, a sign of poor economic times, are currently declining. Bankruptcies are down overall about 8% from fiscal year 2010 through fiscal year 2011. According to an American Bankruptcy Institute executive, “The drop in consumer filings throughout the year reflects the continued deleveraging of the US consumer after years of expanding consumer debt.”
Meaning to Average Consumer
So, what does all this mean to the average wage earner in the United States? One things is for certain, until American business staples like Sears stabilize, more job losses are going to occur than the economy can replace. With job losses and a negative replacement of jobs with equal value, bankruptcies are going to once again soar.
No one knows for certain how deep the underlying factors, like consumer debt, really are in the United States. The tightening of available money for credit, or deleveraging as some call it, is businesses’ normal response to such economic recessions we have been currently experiencing.
One problem may be that the response by our government and business has been too little and too late. Interest rates have been superficially low, and with the United States debt growing to the point we can no longer pay even the interest on the debt instruments, the United States will soon have a hard time borrowing money at anything but higher interest rates. These higher rates will be passed down to the average consumer and drive the economy.
Unfortunately, business staples like Sears, facing added costs through higher interest rates, may also be facing more store closings and employee layoffs if things do not quickly change. With additional employee layoffs and store closings across America, bankruptcies will, just as unfortunately, begin to rise also. So, where does the spiral stop? Your guess is as good as mine.
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