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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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The Future of 2012 Financial Prediction
According to recent news reports, some speculators are predicting the future of 2012 is going to be the year of bankruptcy. The speculators are looking to pick up bankrupt businesses for pennies on the dollar.
American and European Debt Crisis
What is driving the saliva to flow in these scavengers is the shakiness of the United States debt crisis. Risky companies that were able to borrow money from investors these past several years at unusually low interest rates will most likely get cut off when the crisis kicks into full gear.
The United States is already 15 trillion dollars in debt, and currently, the income taken in by the United States in taxes will not even pay the interest on the debt crisis. These facts will most assuredly drive interest rates up in the near future.
What will kick the bankruptcies into full gear is having to refinance the stressed bonds and the stocks of buyout debt coming due in 2012. Combine these facts with the previous three years of investments showing risk fatigue, and you have a recipe for defaults to follow.
Three Industries Heavily Leveraged
Some experts are predicting that the gaming industry, entertainment industry, and the oil services industry will be the most affected by the debt crisis and rising interest rates because they have been heavily leveraged industries. Some experts have suggested as much as 25% of the gaming, entertainment, and oil service’s debt will be coming due in 2012. If they cannot restructure or refinance their stocks and bonds, the end result will be bankruptcy for many of them.
If what these economic experts are saying is true, look for an even more sluggish economy in the United States in the future of 2012, because the past few years the gaming, entertainment and oil service industries have been the backbone of any type of good news concerning employment and company profit. A rash of bankruptcies within theses industries in 2012 might have another enormous affect on the overall employment health within the United States.
Individual American Worker Depends on Healthy Industry
More downturns in the already existing sluggish economy and the future of 2012 certainly may be looked back on as the year of bankruptcy. As industry sectors in the United States thrive so does the individual workers who support the industries, but when the industries begin to struggle with such things as default and bankruptcy, unemployment is always a result. Unemployment is one of the largest contributing factors for individuals to file for bankruptcy.
What You May Have to if the Industry You Work for Defaults in 2012
If you are dependent on the gaming, entertainment, or oil services industries for employment, or if you are dependent on any other industry that is heavily leveraged, the future of 2012 might be a time you will have to face making financial decisions concerning bankruptcy.
If you lose your job and get caught up in bankruptcy, bankruptcy laws can be very complicated. You will most likely need a bankruptcy lawyer to help answer any questions you might have on bankruptcy laws and how they apply in your particular situation. Contact a bankruptcy attorney in your area.
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United States Per Capita Bankruptcy Statistics
According to the National Research Center November 2011 bankruptcy filing report, Texas place on a list of six bankruptcy jurisdictions having filings that are the lowest per capita in the nation is “noteworthy.” Texas, with 2,570 bankruptcy filings per million adults is less than half the national average. Other notable entries include Washington D.C., Alaska, South Carolina, Vermont, and North Dakota.
On the other end of the spectrum, Nevada leads the nation per capita bankruptcies with 11,250 bankruptcy filings per one million adults. Georgia, Tennessee, Utah, and California follow close behind Nevada in per capita bankruptcies.
Per capita bankruptcies in general have been falling since 2010 with November 2011 slightly increasing with a holiday adjustment. “Nationwide, 2011 filings to date amount to about 5400 filings per million adults, or one in every 200.”
Texas Current Economy
Recent shed light on the Texas current economy shows that the recession has hit Texas as hard as most other states. Texas currently is reporting a $25 billion deficit in its budget for the next two years. Unemployment in Texas is lower than the national average, but it is not much better than New York which also enjoys per capita bankruptcies lower than the national average.
With the population of Texas increasing at a rapid rate due mostly because of its liberal land-use and zoning policies keeping housing cheap, Texas employment is still not keeping pace with the increase in population.
Texas overall has a lower cost of living than many of the harder hit states by the recession, but add into the mix Texas conservative policies on refusing to raise taxes, and you may want to think twice before moving to the Lone Star State. Texas ranks near the bottom in the nation for education spending per pupil, and it leads the nation with people without health insurance.
All of these facts may explain why Texas has lower per capita bankruptcies filed than most of the other states. The cost of living is much less, housing costs are much less, education is cheaper, and healthcare in some ways cheaper. With oil and gas produced in the state, the cost of energy is also cheaper.
Everything in Texas seems to be cheaper, but at what expense? Who and how will the budget deficit ever be paid? When the realization finally hits that Texas is not immune to the recessions of the national economy, will per capita bankruptcies eventually rise?
Texas liberal Bankruptcy Exemption Laws
If per capita bankruptcies do begin to rise in Texas when the budget deficit hits the fan, Texas enjoys one of the most liberal bankruptcy exemption laws of any state in the the union. Some people have often referred to Texas as a “Debtor’s State” because of those liberal bankruptcy laws.
Some of the Texas exemptions include: no limit on your homestead with property of 10 acres in town and up to 200 acres outside of town; up to $60,000 in personal property for a family; a variety of other exemptions; and garnishments are not allowed except by federal statutes.
Texas may be a leader with per capita bankruptcies being as low as they are in the state and with the cost of living being so low, but if you ever have to file for bankruptcy in Texas, it will still be wise to have a bankruptcy attorney to represent you.
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