alternatives to bankruptcy

Colorado Forest Service works with sawmills to save timber industry

When a business fails to make a profit because consumers are not purchasing, we are not surprised when we hear that they are struggling to stay open. What about industries that do not rely solely on production and sales? Some industries rely on contracts that they bid upon and purchased. The businesses are obligated to remain in the contract and follow the terms.

The Colorado sawmill industry is filled with corporations that purchased timber contracts in 2000 when the economy was steady, stable and even booming. Many are now facing bankruptcy but looking for alternatives to filing. When the economy began to struggle and the timber market fell with it, the contracts simply became less than economically viable but the terms and conditions remained strict.

According to the Colorado Forest Service, default on the contracts could lead to serious consequences for the state of Colorado. The bark beetle epidemic has been coursing through the Rocky Mountain Region, killing trees and causing hazardous problems in the ecosystem. If the mills are forced to close, Colorado will not be able to keep up with the epidemic.

Representatives of the Forest Service announced this month that some of Colorado’s sawmills would be eligible for a mutual cancellation of contracts that are a serious financial liability.

“The forest product industry is struggling to stay in business,” said the acting Rocky Mountain Regional Forester. “Dead tress and trees at risk of beetle infestation across millions of acres in the Rocky Mountain Region pose risks to public safety, watersheds, critical infrastructure and create severe wildfire hazards…Ensuring a viable forest products industry is in the best interest of the Forest Service and the public.”

Representatives of the Forest Service announced this month that some of Colorado’s sawmills would be eligible for a mutual cancellation of contracts that are a serious financial liability. The plan is to review eligibility on a case-by-case basis, and those who cancel will not be penalized but will remain eligible to bid on future timber sales contracts.

Source: Summit County Voice, “Colorado’s struggling sawmills get some relief,” Bob Berwyn, Aug. 5, 2011

Increased medical marijuana fees have Colorado businesses fretting

Despite some public opinions, Colorado medical marijuana dispensary owners have struggled to make ends meet. The businesses must comply with a series of strict regulations and requirements that make selling legal marijuana less lucrative as one might think.

A recent Colorado Springs City Council decision has dispensary owners and operators in the area stressing over whether or not they will make it through to the next year. Several have even considered closing their doors as an alternative to filing for bankruptcy.

The unanimous decision by the council to raise fees on medical marijuana business operation by imposing a $2,200 charge is the first of several proposed charges that could follow. The council also discussed extraneous charges of $1,800 that dispensary owners would be forced to pay.

The fee hike has several medical marijuana advocates reeling as they say it is a direct attack on type of business which ironically provides a large amount of revenue for the state. “I think this new fee is ludicrous,” said the President of Coloradans for Cannabis Patient Rights. “These businesses are barely breaking even as it is.”

According to the Colorado advocate, if the businesses are forced to close or go into serious debt as a result of the decision, it could have an effect on the area’s economy. An effect, that she claimed, the city failed to consider in their deliberations.

City officials reported that the new Colorado industry is in a “precarious situation” due to the fact that marijuana is still illegal on the federal level. One council-member said that the city is still figuring out how to handle the industry at all. Operating the industry from the city’s end costs a lot of money, claimed the council-member in support of the increased fees.

Source: The Colorado Independent, “Colorado Springs jacks medical marijuana fees,” Beatrice Santa-Wood, 5 July 2011

Strategies to stop credit card debt from taking over your life

Credit card debt plagues many American families, individuals, and business owners drawing them down into serious financial trouble. Due to growing credit card bills and persistent creditors, people can lose their homes and small business owners may have to put their company up for sale.

Debt is a major issue here in Colorado and across the nation, but is not an inescapable problem. By taking the right steps and honestly assessing their financial situation, many people may find their credit card debt slowly disappearing even without resorting to more drastic measures such as bankruptcy.

Laura Rowley, an expert for Yahoo Finance, recently gave an interview in which she laid out a couple strategies that could help people with large amounts of credit card debt regain control over their payments. She stresses the importance of first focusing your efforts on paying off which ever bill has the highest interest rate.

A high interest rate means the debt will continue to grow at an increasing speed the longer it remains unpaid. By paying off these bills first, consumers will save themselves a significant amount of money in the long run.

Rowley also advises people to create a “snowball” effect on their credit card payments. This means that, even after you successfully pay off your first card, continue writing a check for the same amount of money but simply add those payments to whatever you were already paying on your second card. If you have three or more cards to pay off, than continue to snowball your payments as each card’s bill is cleared.

Credit card debt can be intimidating due to the potentially life-changing consequences it can wreak upon your life. However, there are concrete steps which can be taken to address and hopefully eliminate debt. If these steps are not effective, it might be time to consider the protections offered under a bankruptcy filing.

Source: YNN, “Money Matters: Plan your attack on credit card debt.” Tara Lynn Wagner, 25 April 2011

Trouble for retailers: national companies risk financial crisis

It looks as though the struggle to stay afloat in these lean economic times is not over for many large retailers. As you’ve read recently on our blog, Borders, Ultimate Electronics, and Blockbuster have all filed for some form of bankruptcy since the beginning of the new year. As the recession continues and American consumers are forced to limit their spending, more retailers are at risk of joining this club due to falling profits and rising prices for energy and other basic resources.

Walletpop, a personal finance news site powered by AOL, recently released a list of retailers who are fighting to avoid financial disaster. The list includes a few familiar faces, but also highlights several struggling companies that have been largely overlooked by the media. According to the author, barring a drastic change in the economic climate, these businesses may be forced to file for bankruptcy during 2011 or search for bankruptcy alternatives.

The list includes several apparel retailers such as Talbots, American Apparel, and American Eagle Outfitters. BJ’s Wholesale Club was named in light of its failing efforts to compete with other boxstores such as Costco and Sam’s Club. RadioShack also joined the list, despite its recent image makeover.

Most of the retail companies highlighted on the list recently lost their chief financial officers, CEOs or other key executives. Many have also reworked their branding and reorganized their finances in hopes of streamlining operations and attracting new customers. However, the majority of these efforts have yet to yield significant results, and the businesses remain in financial danger.

Source: Wallet Pop, “Seven Retailers on the Financial Brink.” Laura Heller, 17 February 2011.

New Year Brings New Requirements for Chapter 7 Bankruptcy

New Years Day is a day for new resolutions and fresh starts after the mistakes of the past year have been forgotten or forgiven. While individuals across the nation make promises to themselves about changes they plan to make in their daily lives, the New Year is also a time for the federal government to make changes of their own.

This beginning of 2011 has been no different from the beginnings of years past, and the federal government has announced the new changes that were made to bankruptcy law. Specifically, changes were made to the rules governing the filing of personal bankruptcy under Chapter 7. These changes, in this economy, make it even more vital to seek out the assistance of an experienced bankruptcy attorney when considering the future of your financials.

Where a chapter 7 bankruptcy could generally discharge all personal debts through a liquidation of the assets owned by the debtor, the same individual may not even qualify for Chapter 7 if their income is high. Also, those who have already filed for bankruptcy must now wait at least eight years before doing so again. The changes may force individuals who once considered filing to seek alternatives to bankruptcy in order to lower their debt including creditor workouts that restructure previous payment plans.

Experienced attorneys remains abreast of new changes in the law and can help someone struggling with debt relief navigate the confusing rules and regulations that govern bankruptcy, and while creditors want to get paid, an attorney can make sure that repayment plans protect the individual’s interest and suit their needs.

Source: Mortgage11.com “New Bankruptcy Laws: Chapter 7 and Chapter 13 Bankruptcy Information” 1/4/11

Not So Happy New Year for Borders Books or Its Publishers

December 31, 2010, the day where people across the nation make all kinds of promises to themselves and others and have all the best intentions of keeping them. But, as most can attest to, on average New Year’s resolutions barely last through the month of January. It looks as though Borders bookstore is breaking a promise early this year.

Borders is the second largest, nationwide bookstore chains in America second only to Barnes & Noble, but Borders Group Inc. announced on Thursday, December 30, that they would not be keeping all of the payment promises they made to their publishers. The company reported that they would delay making payments to several of their publishers. A spokesperson with the company said “there can be no assurance” that the refinancing plans the company has drawn up will prove to be successful. The announcement has made stockholders, business investors and their loyal consumers wonder if filing for bankruptcy protection is somewhere in the near future.

As an alternative to bankruptcy, the company plans to negotiate with their creditors, publishers who supply the company with books prior to receiving payment for them, for a creditor workout that would restructure payment arrangements.

Many of their publishers may be willing to work with the retailer because their success could depend on the future of Borders Group Inc. Borders bookstores helped exponentially grow the interest in and success of graphic novels. If Borders stores shut down, many of those smaller publishers could also find themselves in financial trouble.

Source: BleedingCool.com “Borders Delay Payments to Publishers – Is Bankruptcy Imminent?” Rich Johnston 12/31/10

Temporary Employment Working for Individuals and Businesses: Part 2

Last week we covered the topic of temporary employment and how businesses are using it to save costs while attempting to recoup business. We talked about how temporary employment can be great for the business, but it appears that temporary employment has helped individuals who have already seriously considered filing for bankruptcy.

Temporary jobs now represent 22 percent of all private sector job gains, a percentage statistic that does not include seasonal retail positions or even temporary workers that businesses have hired directly instead of using an actual temporary agency. With an unemployment rate that is historically one of the highest, a lot of people are finding that any job can be hard to get. As businesses turn to temporary positions as a fix, individuals are finding more jobs to for which they can apply. With the increase in temporary positions, individuals are also finding that employers are willing to increase hourly pay for some of the positions which can help them supplement having to purchase health care on their own.

The temporary-to-hire positions that are being offered during this economy provide much more of a steady income to individuals than temporary positions in the past. They also come with the possibility of full-time employee positions and act as a “foot in the door” to that company. Employers are more likely to hire someone that they have already trained in a position and a person they know can do the job. Many of the temporary workers can be converted to employees when the business has the funding to do so.

Temp-to-hire for many positions has almost become the new “path into the occupation” as the director of the Center for Urban Economic Development at the University of Illinois-Chicago stated.

Source: CT Now “Temp Jobs Carry Weight Of Employment Recovery” Mara Lee 11/28/10

Temporary Employment Working for Individuals and Businesses: Part 1

Most people are sick of hearing about the recession, the negative economy, the unemployment rate and the increased levels of bankruptcy filing whether it is for individuals or businesses that cannot make it in their current financial state. A lot of businesses are turning to temporary employment to fill their production needs while trying to keep overhead costs down, and individuals are accepting those positions in record numbers.

In September of 2010, approximately 24,000 temporary jobs were added to the private sector, that number had significantly increased in only a month. By the end of October 2010, 35,000 total temporary jobs had been added.

Businesses continue to struggle during this economy and many have turned to temporary employment as a solution. The company does not have to subsidize health care for temporary employees and the overall cost of employing them is much lower than a full-time employee, yet they often still get the benefit of the 40-hour work week.

Businesses also get to “try-out” employees before officially hiring them as an employee. Interviews are designed to weed out the employees who may not be able to work effectively in the position but a person’s true abilities, attitude and aptitude for the job cannot truly be measured until they begin. The new wave of “temp-to-hire” positions allows employers to simply end a contract when a worker is “not working” within the position instead of going through the costly process of firing them. When temporary positions in the past have meant that the worker is there temporarily, business owners are finding that the people applying for the temporary positions during this economy have more of a permanent mindset.

While temporary position hiring can act as an alternative to bankruptcy for a business that may find themselves in need of more workers to fill positions but a small, strict budget, a temporary position in this economy can also benefit the individuals applying. We’ll see how in next week’s posting.

Source: CT Now “Temp Jobs Carry Weight Of Employment Recovery” Mara Lee 11/28/10

Colorado Based, Top Five Yellow Pages Publisher Files Chapter 11 Bankruptcy

Technology may be to blame for yet another bankruptcy filing. As more and more people have access to the internet, they are able to look up necessary information by simply typing a couple words in a search box instead of having to rifle through hundreds of pages of a Yellow Pages directory. With the simple click of a mouse, they can access businesses, maps, directions to and from any location, store hours, phone numbers, menus and product lists in a matter of seconds. Using a phone book just does not seem as practical anymore.

As the use of hard copy phone directories decreases, so do the production requirements for printing the directories. Local Insight, the company based in Denver, Colorado, has consistently been one of the top five largest United States publishers of the directories but has chosen to file for Chapter 11 bankruptcy in order to reorganize their business to meet the technological demand and to find ways to increase revenue through online advertising.

Local Insight is the publisher of more than 870 directories. Documents filed with the bankruptcy court listed their assets and liabilities as ranging somewhere between $500 million and $1 billion. In 2009, the company lost almost $11.5 million but was able to decrease that amount to approximately only $9.2 million during the same period in 2010. Despite the decreased losses, the company’s revenue dropped to $266 million, an 8.3 percent decline and the company was forced to file with the court after alternatives to bankruptcy were no longer available to them.

Source: BankruptcyHome.com “Yellow page publisher files for bankruptcy” Eric Sanderson 11/18/10

Health Care Costs Contribute to Continued Rise in Elder Bankruptcy

In a prior post, Credit Card Debt Leads to Increased Elder Bankruptcy, we highlighted credit card debt as a contributing factor in the increased numbers of American seniors filing for bankruptcy protection, but it is not the only culprit. Health care costs seem to be a significant contributing factor as well.

In a University of Michigan Law School study, Professor John Pottow found that in the pre-recession years from 1991 to 2007, the percentage of people in the 64 to 74 year range filing for bankruptcy increased by 178 percent. With the increase in unemployment and other costs associated with the recession, the rate is continuing to grow.

The Center for Retirement Research at Boston College has also focused on elder bankruptcy and health care as a factor. According to the center, a typical married couple should plan to spend around $197,000 in uninsured health costs, and that figure does not include any long-term nursing care costs.

Health care costs are not a separate issue from the credit card debt that factors into bankruptcy as many seniors pay for the excessive health care costs with their credit cards with high interest rates. There are alternatives to bankruptcy that can be utilized to help prevent building debt that could lead to filing for bankruptcy as your last option. A larger number of aging individuals have begun to purchase long-term insurance care to spread out the monetary costs and avoid extensive nursing home care expenses. Medigap policies have also been purchased which place a cap on the out-of-pocket expenses.

Source: Reuters.com “Health costs fuel rise in bankruptcy among elderly” Mark Miller 11/8/10

Recent Colorado Grads Prepare to Repay Student-Loan Debt

This past May, young adults shook hands with professors, held up their diplomas and threw their hats on college campuses across Colorado. Graduates from Colorado College, University of Denver, Colorado State University and many more entered the world with high hopes and big dreams. However, graduates from May of 2010 have entered the job market at a time when the economy is in a recession and unemployment rates are high.

A large percentage of those recent graduates had taken out student loans to fund their education, and their 6 month grace period ends at some point this month with the first payment due in December. Some graduates have prepared for the debt, some are unaware of just how much they owe or how large their payments will be and some simply do not have a job to pay for the debt. Graduates who may be unable to pay for their outstanding debt do not have to fear bankruptcy. There are many alternatives to bankruptcy including stretch-out repayment terms, varied repayment plans and even the option of a subsequent deferral period.

As recent graduates begin to prepare for their repayment period, they should understand what their options for repayment are. The traditional repayment plan for student loans is a 10-year level payment plan. This plan has the highest beginning monthly payment, but you pay the least amount of interest. Graduates may also choose a graduated payment that begins with 3 years of small payments, but then after those three years increases to a much higher amount. Interest-only and income-based repayment plans afford the cheapest monthly payments but result in an overall repayment that is greater than other plans.

Graduates with more than $30,000 of student-loan debt can extend their repayment period from 10 years to 25 years. If a graduate finds himself or herself in significant financial hardship, they may also be able to qualify for a forbearance or additional deferment. Some professions even allow early forgiveness. Regardless of your situation, repayment of student-loans can be difficult or frustrating and seeking assistance or advice is always an option.

Source: The Wall Street Journal “It’s payback time for student-loan borrowers” Marla Brill 11/10/10

Hollywood’s Controversial Couple “Speidi” Not Immune From Economy

Heidi Montag and Spencer Pratt are two of Hollywood’s most controversial couples. They were made famous by their appearances on the popular MTV show “The Hills,” and became known as “Speidi” by fans and critics alike. They were made famous by the television show which ran for six seasons and ended in May of 2010, but they have made news headlines for their tumultuous relationship that was filled with break-ups, make-ups, divorce filings and motions for dismissal of divorce proceedings. They have made news for their media production attempts and her plastic surgery events.

Speidi has made the news again, but this time for financial complications. According to new media reports, the couple has considered that they may be forced to file for bankruptcy as a result of lavish spending and the inability to obtain employment.

“We were immature, worrying too much about the famous part instead of the actual business part,” Spencer Pratt commented to a Life and Style Magazine reporter. “In hindsight, we shouldn’t have spent any of our money. We should have been low-key and saved.” The couple had spent nearly $10 million dollars on expensive items since their recent experience with fame. They purchased lavish homes, cars, private jets and plastic surgery. The couple also owes approximately $2 million to the federal government in taxes.

Spencer Pratt filed for unemployment after he was unable to find work in Hollywood, and the couple reportedly plans to move into his parent’s guesthouse in an attempt to find an alternative to bankruptcy, but they have already begun discussing their situation with bankruptcy attorneys.

Source: Bankruptcy Home “‘The Hills’ couple may file for bankruptcy” Kristen MacBeth 11/3/10

Credit Card Debt Leads to Increased Elder Bankruptcy

New research shows that the recent increase in the amount of older debtors filing for bankruptcy may be a product of “the times” and not because of uncontrolled spending or predatory practices. A study conducted by the University of Michigan Law School looked at rising bankruptcy rates and focused specifically on elderly bankruptcy. The conclusion: Credit card debt is to blame for the increase.

In 1991, 2.1 percent of those that filed for bankruptcy were 65 or older. That number has more than tripled since then, and as of 2007 debtors 65 and older account for approximately 7 percent of all bankruptcy filings. Two thirds of all seniors who filed for bankruptcy cited credit cards as their reasons for filing according to Consumer Bankruptcy Project data.

Professor John A. E. Pottow of the University of Michigan and researcher for the project said that the spending habits of the elderly claiming bankruptcy paralleled those of the younger generations. They did not show signs of “uncontrolled spending,” but instead Pottow discovered that seniors were less likely to ask for monetary help from friends and family members. His data showed that 68.7 percent of debtors younger than 65 had sought financial assistance from those close to them as an attempted alternative to bankruptcy while only 35.2 percent of seniors sought to do so. In fact, the research showed that seniors willingness to lend to their children contributed to their financial woes. 

Pottow also noted that fewer seniors were knowledgeable about the possibility of working with credit card companies to find possible workouts before filing for bankruptcy. The marketing schemes of major credit card companies may not be a major cause, he said. He also ponders whether or not the new federal laws regulating credit card practices and disclosures will make a difference for the elderly. He fears that many will not care about heightened interest rates once they have already made the assumption that they would not be alive to see the effects.  

Source: Forbes “Credit Card Debt Blamed For Surge In Elder Bankruptcy” Janet Novack 10/12/10