With the Holidays fast approaching, many people are facing the distasteful choice of either cutting back on what they give to their friends and families, or spending beyond their means and either going into debt or forgoing necessary payments (such as mortgage payments, bills, etc). A rash of irresponsible spending, while giving a quick superficial bump to the national economic numbers, would result in disaster in the coming months as it would likely lead directly to an increase in home foreclosures and chapter 13 bankruptcy in Long Island. Luckily for most of the country (excepting retailers), the Commerce Department reported a 1.8 percent drop in sales last month. This seems to be evidence that people are cutting back on spending, but it could have other causes.

 

The drop in monthly retail spending was the fifth consecutive one, and the longest extended period of falling sales since the Federal Government began keeping track of such numbers. This drop may have been due to consumers re-prioritizing how they spend their money, but it is more likely a result of less disposable income being available. The economy shed over 50,000 jobs last month, bringing the number of unemployed in our country nearer to six million than it has ever been.

 

While this news is clearly negative, it becomes even worse if two other facts are considered in conjunction with it. First, the government assumes that due to a constantly expanding workforce, 150,000 jobs must be created per month just to keep pace. A loss of 50,000 jobs, therefore, translates to a month in which 200,000 people are unable to find work. Second, people who are employed part time, underemployed, or who are employed for less than a living wage are not counted in these numbers. Many such people cannot keep up with bills and living expenses, let alone spend extra money for gifts, dinners, and other economic boosters. As the economy worsens, many workers will find their positions redefined, relegating them to the ranks of the working poor. These losses will not show up in unemployment figures, however, and so will be another unmeasured strain on the economy at large.

 

A weakening economy is an entity that fast becomes like a self-fulfilling prophecy. As jobs are lost discretionary spending decreases, which in turn strains retailers who then must cut more jobs, which further exacerbates the problem. With the prospect of the loss of the “big three” automakers looming, it is easy to see how fast things could get exponentially worse. While some may think it is their patriotic duty to go out and “shop ‘til they drop,” it is far wiser to ensure that you meet your major financial obligations before spending on luxuries. The number of people facing the prospect of unemployment, a decrease in wages or available hours to work, or other financial disaster is fast increasing, and no-one is immune. If you are in such a position as this and feeling increasingly desperate, then you should visit a local bankruptcy attorney to discuss your options. You may be able to improve your financial position and consequently your quality of life. 

 

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                  It’s no secret that the American economy runs almost entirely on the credit system.  It used to be that very savvy or wealthy people could simply shun the system, and pay cash for anything they needed- or simply make do with what they had.  But this is no longer the case.  Credit has come to control extremely important areas of our lives that are beyond the boundaries of money.  This has created a wide variety of problems that did not exist previously, but ones that nevertheless must be understood in order to rebuild credit after a time of crisis.  This is especially true after a bankruptcy.  And with the increasing numbers of Chapter 7 Bankruptcy filings in Nassau County each month, this means that a large number of people need to pay extra attention to their credit right now. 

 

                  Most Americans have heard the news that banks are tightening their lending practices.  While the end result of this will only mean struggles for every section of the economical food-chain, what it really means to you is that your credit is more important now than it ever has been.  If you have recently filed bankruptcy, your first financial task after your case is approved should be to begin repairing the damage to your credit.  Obtaining a secured loan or a secured credit card is one of the fastest ways to begin doing so.  Other methods might involve piggy-backing on a relative or loved one’s credit.  The faster you begin to rebuild, the better, because if you are like many New Yorkers, you may have lost your job in conjunction with your bankruptcy.  Thousands of jobs, especially in metropolitan areas, are now requiring extensive credit checks prior to employment.  If your credit is not up to par, then you are not considered up to par for the job. 

 

                  Perhaps the year has been exceptionally tumultuous for you, and you are now in the process of relocating.  Did you know that many apartment communities, suburban developments, or other types of housing (both public and private) can use your credit as determination of residency?  If you have collection accounts or any other items considered seriously delinquent appearing on your credit report, you will not be able to rent from these places.  What is worse is if you paid an application fee, they are usually non-refundable, even if you are not approved.  This is just another reason why rebuilding your credit after a bankruptcy is a vital part of your immediate future. 

 

                  In addition to all of the above scenarios, there is also the fact that you might need credit to actually buy things.  Perhaps your car has seen better days, and you need another.  Chances are that you probably will not be in a position to pay cash for a safe vehicle.  This means that your credit needs to be in the best condition possible, because although you can get a loan even with terrible credit, you’ll likely pay 18% interest or more.  If this is the case, you could end up paying double what the vehicle is worth over a three or four year loan. 

 

                  Be aware of these situations.  Remember that bankruptcy is a way to start clean again, which means that your credit rating will need immediate work if you expect it to improve.  And don’t forget- credit is not just about money anymore.  It’s simply too important to ignore.   

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          There has been a great deal of discussion over the past weeks of the changes that are coming to Washington and how they are going to affect the economy. Whether you are among those that believe that the incoming administration is going to accelerate our economic decline, or the apparent majority that believes we are turning the corner toward brighter days, the one point that everyone can agree on is that things are going to be different once Obama takes the oath of office in January. Rarely has an incoming president faced such an uphill climb toward economic health. Not since the Great Depression has the welfare of the country at large been in such peril during a transition between presidents, and that brings with it obvious challenges. Decisive action needs to be taken, and all indications are that Obama will act accordingly as soon as he takes office.

          Whether or not you agree with his ideology, his decisions are going to affect you. Millions of Americans are currently unemployed, facing bankruptcy, or are the apparent victims of skyrocketing foreclosure rates. As a result, the next administration will not only have to attempt to stop the hemorrhaging of jobs that is currently taking place, but also to create jobs to replace the ones already lost as well as the jobs needed to sustain a workforce that is growing at current rates.

          One very feasible idea would be for the Federal government to allocate funding for infrastructure improvement. After the Minneapolis bridge collapse it became painfully obvious that as a country we have been delinquent in the upkeep of our roads and bridges. As further example of this, just drive anywhere in Long Island and you will see a road that needs repaving, a sidewalk that is crumbling or a bridge that ought to be revamped. Funding a workforce to fix these problems would have a double impact- it would not only solve an ongoing problem, but would do so in a way that would directly stimulate the economy by creating jobs.

          Many people are also advocating for an economic stimulus package similar to the bailout that was handed to the major banks and investment firms in the immediate aftermath of the subprime fueled collapse. It is not unlikely that legislation will emerge that will be designed to help individuals who are facing economic hardship, such as foreclosure. There has already been extensive talk and innuendo of a package that could emerge from the legislature to come to the aid of people who are in danger of losing their homes. Whether or not such a bill emerges, it is important to have an educated advocate, such as an attorney who is experienced in dealing with foreclosure, on your side.

          While many people are hopeful that the Obama administration will bring a reprieve from the current economic turbulence, chances are that we still have a long way to go before the economy regains its prior stature. The most important thing that we can all do to make sure that things do not get worse is to continue to educate ourselves and be aware of the impact our personal decisions have on our family, our community, and our country as a whole. Make sure that you have the facts necessary to make sound decisions, and ask for help if you need it. If we all do our part, the coming economic transition will be much smoother. 

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                Recently, economic news from both Wall Street and Washington has become increasingly more dismaying. Officials are desperately working to quell fears that America is heading toward financial disaster. Some of the language that has been chosen by these officials, however, has been indicative of the opposite conclusion. For instance, one term that has been bandied about rather freely regarding the subprime mortgage crisis is “perfect storm.” Since the release of the hit movie of the same name, this term has been overused to hyperbolically describe nearly everything that has gone wrong. However, the term might still be useful in deconstructing the metaphor in order to predict where we possibly could be headed.

                The term “perfect storm” refers to a set of conditions that occur simultaneously in order to create the worst possible outcome. It originally was used to describe the Halloween Nor’easter that hit Atlantic Canada in 1991. The storm was the result of an unlucky confluence of weather events that, while individually would have been rather benign, resulted in the second most costly hurricane of that year. Like many powerful coastal storms, there was immediate damage and loss of life, and, while the storm was raging, widespread fear and panic occurred. People could only hunker down and wait for the storm to pass, all the while hoping for the best.

           After the storm, the people who were spared during the initial onslaught emerged to face the destruction that was left in the storm’s wake. The effects of the storm were widespread, and the building process was extremely costly and time consuming.  Bearing this in mind, reflect for a moment on Hurricane Katrina. It made landfall on New Orleans and the Gulf Coast in August of 2005 and caused incredible damage not only to the infrastructure of the region, but also to the inhabitants. Widespread disease and looting occurred even after meteorological calm returned to the region. The consequences of this storm were so appalling that some residents who were stranded in the aftermath expressed that they wished they had fallen victim to the fury of the actual storm itself. Even today, more than three years later, conditions in New Orleans are inexcusable: crime, poverty, and unemployment are rampant. While a storm can be terrifying as it is battering us, it is often the rubble left in its wake that is the hardest to cope with.            

What does all of this have to do with our current financial situation?
Assuming that the subprime mortgage crisis was (or is) in fact a “perfect storm”, it means that after the visible bank closures and the initial wave of bankruptcies and foreclosures, we still have a long way to go. The aftermath of this financial hurricane will not be contained to the banks that owned the risky (and now valueless) mortgages, nor to the people that invested heavily in an inflated stock market. Every one of us will be forced to deal with the destructive wake of this financial crisis.           

Even in relatively affluent areas the situation is grim. Unemployment, bankruptcy, and foreclosures in Suffolk County have risen immensely from October 2007 to October 2008, and this trend throughout the country is either comparable or far worse. The initial shock to the economy will reverberate for years. The preliminary losses will, due to basic economic principles, continue to multiply. Furthermore, a lack of credit from banks stifles job creation, which slows spending, which in turn causes businesses to cut back. This downward spiral is self-perpetuating, and needs to be actively broken. We can all contribute to this by making wise decisions regarding our financial situations and especially our credit. If you do not fully understand what you ought to do to help not only yourself, but also the economy at large, consult an attorney who is experienced in matters relating to credit, bankruptcy, or foreclosure. It cannot eliminate the fact that the initial storm occurred, but it can help staunch the bleeding and speed the rebuilding process of our storm-damaged economy.    –

 

 

Unemployment Statistics Not Encouraging

               The Bureau of Labor Statistics recently released their unemployment figures for the past month, and to anyone but the unrealistically optimistic or the completely oblivious, the news was not comforting. While unemployment rates alone do not strictly define the health of an economy, they are an important matrix. An ailing economy does not tend to spur job growth, and a suffering economy can quickly purge huge numbers of jobs and, as a direct consequence, leave a wake of unemployed workers and their resulting bankruptcies from inner city Los Angeles to the affluent suburbs in Suffolk County, Long Island. As the relative health of our economy directly affects employment, so too do employment statistics serve to help measure or diagnose an economy as a whole.                  

The statistics released recently cannot help but be a sobering reminder of the state we are in. In the last week, new applications for unemployment insurance or jobless benefits leaped to a high not seen in sixteen years. Not since July of 1992 have new claims increased so dramatically in one week, and that was when the country was on its way out of a tough and relatively protracted recession. The fact that we are seeing similar numbers now, at what is presumably the beginning of our troubles, is disheartening.  

While week-to-week statistical spikes make for dramatic news bulletins and headlines, they are not always as accurate a measure as numbers gathered over a longer time span. Unfortunately, the four-week average for new jobless benefit claims rose 506,500: a twenty-five year high. Additionally, the number of unemployed workers who continued to claim benefits was over four million, a number unmatched since 1982, when the United States was in the depths of arguably the worst recession since the Great Depression. Making matters worse (or at least more uncomfortable) is the fact that every president since Kennedy has redefined unemployment to boost their economic growth figures. Factor in the folks who have been purged through redefinition of “unemployed,” and the rates could be twice as high.                  

Throw into the mix the fact that the “Big Three” automakers are teetering on the brink of collapse (which, depending on who you ask, could result in up to 50 million more lost jobs), and the picture becomes even more grim. While lawmakers debate the merits of a “bailout” of these companies, the people who work for the automakers are bracing for the worst. They are cutting spending as if they are already unemployed, and this decreased influx of cash cascades throughout the entire economy. This in turn creates a situation where more jobs are cut, (and none are created) so that companies can keep their proverbial heads above water.                  

The resulting economic picture is dismaying, to say the least, and unfortunately we have not seen the worst of it. As people continue to struggle and the unemployment rate rises, so too will bankruptcy rates rise. Businesses will continue to fail at faster rates, and more people will become part of the growing pool of the statistically unemployed. The odds of having to take drastic financial measures are increasing, and it is important to make educated decisions and not act desperately when confronted with seemingly intractable financial stress. If you are in a situation (as millions of others in our country currently are) where you are debating declaring bankruptcy or a similar measure, be sure to first contact a knowledgeable bankruptcy attorney such as those found in Nassau County, who can guide you through these tempestuous financial waters.   –