Arizona Bankruptcy Attorney Blog

One thing about people in the United States: even though we're knee-deep in a depression, with bankruptcy cases to the right of us and the left of us, we're looking hard for the next business niche that promises brisk business.

On the one hand, it's made me a little nervous that Costco has been selling lots of survival food (did everyone get the memo but me?) to people who are concerned that our just-in-time inventory system is especially bad at handling disruptions.

But a recent news article told me that we would, as a country, go down swinging, and maybe even survive.

This story takes a moment for the set-up, but it's worth the wait.

See, the vast majority of folks in the United States are Christians of some flavor or another, according to the CIA Factbook. And Christians are either fairly much like each other in their beliefs (Catholics tend to believe in, well, Doctrine, right?) or very different from one another in their beliefs.

Remember, when people came to the United States, there were some places established to permit freedom to worship Jehovah in a particular way, and those places tended to have folks who all believed in similar ways.

Other places in the United States were settled by folks who had very little in the way of possessions, except their family Bible, and who didn't have a lot of ministers or priests with 'em, and religion in those areas developed in ways that were sometimes different (Snake Handlers are a relatively small percentage of Christians in the United States today, for instance) from mainstream Churches.

Putting it another way, there is a wide divergence of belief among Christians in the United States today.

Some believe, for instance, that folks will be lifted bodily into heaven, and that it will happen very soon.

That is a belief that has been a part of Christian belief for as long as Christians have existed; lately it's been called "The Rapture".

Many Christians work on the principle that it'll sneak up on us like a thief in the night, and we'll be called to Judgment at a point that we never expected. Because a lot of generations expected the Second Coming any day now, and some of those were disappointed.

But now a new industry has been established to serve the needs of a sub-population of Christians who believe that The Rapture is coming, and you ought not buy any long-playing albums, because you might be wasting your money!

That industry? Pet care by atheists, for Christians who expect to be bodily lifted up in the near future. After all, if Christians are going to be lifted up and away, their pets might stick around. And atheists, obviously, aren't going to be going home, because it's not their home! So they'll be around to take care of Fido, or Fluffy!

You gotta love the United States; this could not happen in China.

There is an interesting article about the rise and fall of the Icelandic Economy in the New York Times.

While the discussions of bankers getting rich and banks then failing are familiar, I was more interested in the life after bankruptcy aspect of the story.

And especially in the genetic and historical explanation of the brave men and beautiful women of Iceland; everybody named any variation of "Mick" will smile.

Small businesses file bankruptcy (or just close the doors, and let the owners file bankruptcy) for a lot of reasons.

The most common is under-capitalization, and the second is bad luck. Like the city deciding to tear up the street in front of your store for six months.

But high overhead makes any bad luck badder, because the business has a higher "burn rate".

Now, I just read an article suggesting that some small biz owners can now buy into an insurance package of the sort formerly available only to big business owners.

Maybe it's wonderful, maybe it's lousy.

And I don't get a commission for telling you about it.

But if it lowers overhead for some small businesses, and their employees stay working because the business owner didn't have to file a bankruptcy because of excessive overhead, that would make me happy.

This is my happy face.

See?

You know Zimbabwe, right?

It's the country that printed so much paper money that it became worthless.

But Zimbabwe was much more considerate than the Weimar Republic, which forced its citizens to use wheelbarrows to get money to the grocery store.

Zimbabwe issued bills of greater and greater denomination, and now has a 100 Trillion Dollar Bill!

Now, Zimbabwe has a new concern, and that concern is that U.S. money may become worthless because we're printing so much of it.

Hey, Zimbabwe oughta know, right?

And in a public statement, public officials in Zimbabwe have said that the "days of the U.S. dollar as the world's reserve currency are numbered."


 

Do you think?

  

A company that sold craft supplies to Walmart and Jo-Ann has filed bankruptcy: Westrim Crafts. 

Their sales had dropped from about $125,000,000 to $30,000,000 over a five-year period prior to the decision to file a Chapter 11 Bankruptcy.

And that's a pretty steep drop!

  

So just which wonderful jobs can the class of 2011 look forward to snagging, so it can pay its student loans?

Yeah.

And that makes me sad. Because, in general, the Bankruptcy Code is not useful as a tool for discharging student loans.

It can be done, and I've done it for a few clients.

But you wouldn't want to be them. They had it rough!

p.s. I didn't add this sentence from the article about the most indebted class ever, and I should have: " The Collegiate Employment Research Institute estimates that the average salary for holders of new bachelor degrees will be $36,866 this year, down from $46,500 in 2009." That average conceals the fact that for many new graduates, there are simply no jobs at all. 

 

The bail-out of Greece has failed, and the suffering there mirrors the sort of job loss-induced, price-increase-fueled and mortgage foreclosure-related suffering here in the United States.

This is a bad sign for our future.

Greece was the 28th richest country in the world.

And I keep hoping that the collapse of Greece's economy is not a prediction for the United States in a year.

 

The Euro is weaker because the head of the International Monetary Fund is accused of "attempted rape, criminal sexual assault and unlawful imprisonment".

Now, I know I'm naive, but I'd think that a guy smart enough to run the IMF would also be smart enough to avoid imprisoning the maid.

But I guess I'm just old-fashioned.

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Enjoy reading about vastly expensive houses being purchased here in the United States!

By local folks?

Not so much.

Uh. Yes. Heck yes. Heck yes with exclamation points.

I know that hope springs eternal in the human breast, but it's a bad idea to leave any debt, of any sort, off of your bankruptcy petition and schedules. If a creditor doesn't get actual notice by the drop dead date, that creditor may well not be affected by your Bankruptcy Discharge Order.

And if all of your other debts have been discharged, there's more available to that creditor when he sues you and garnishes you and liens your house. And that doesn't count the debtor's exam, which is less fun than a root canal!

And "charged off" doesn't mean you won't be sued on that debt; it's just an internal accounting phrase used by banks, and it has some bearing on how much money a bank can loan. It has no bearing on whether the bank can, or will, sue you.

I ran into an article indicating that there are benefits to be had if you charge some kinds of transactions on your plastic.

Remember, though: don't charge things on your credit cards within 90 days of filing your bankruptcy. That's because of a presumption of non-dischargeability if you do!

Putting it another way, don't use your credit card within 90 days of the filing of your bankruptcy! Not only does it look bad, but you'll probably get to pay the charges within the 90 days back!

The practice of running up credit card amounts has been referred to as "loading up" by experienced bankruptcy lawyers for many, many years. Try to avoid it!

Why do banks want to lend money to consumers? Because banks make massive profits on those loans.

Right now, banks are interested in getting credit card money "on the street".  In fact, their willingness to make credit card loans is at a 17-year high.

Consumers, God bless 'em, don't appear to want to play that game this week.

Because the unholy trinity of job losses, foreclosures, and inflation have done a pretty good job of educating consumers that credit card debt is an anvil around their neck, especially when they want to think about retirement.

Besides, consumers are aware that the friendly banker turns into an unfriendly collection company, or a vicious law firm, faster than a blond turns into a werewolf on "True Blood".

The First Meeting of Creditors, or 341 Meeting, is a source of ceaseless anxiety for debtors in Phoenix, or Scottsdale, or Mesa, or Chandler, or anyplace else in Arizona.

While I have produced a short video that discusses all of the questions that are usually asked in a 341 Meeting by the Trustee, there is a topic that I've never addressed previously.

It is, what should I wear to my first meeting of creditors?

Some folks see an economic upturn when consumer borrowing increases during a depression.

My take is a little different than the analysis in this Bloomberg article: I believe that consumer borrowing is increasing because job creation is in the "would you like fries with that, sir?" category.

And after you've been making a hundred thousand a year as an engineer, and are now making minimum wage flipping burgers, you tend to borrow to cushion your lifestyle for a while before you realize that your unsecured debt is increasing, even though you're making minimum payments.

Forever.

This article suggests that a stay-at-home mom can simply whip up an idea and become a millionaire.

Sadly, the smart money bets otherwise.

But I look forward to a better economic climate, when starting a business requires less of a leap of faith.

Because small businesses in the United States hire locally, and that's a good thing. Big businesses continue their programs of outsourcing, and while that may be good for some folks somewhere, it's downright awful for all the people who went to college, got student loans, and then had their jobs shipped offshore to India and China.

And those folks have the privilege of filing a bankruptcy, but it seems unfair to me, and that bankruptcy will probably not scrape off the student loans that got them the education that got them the job that was outsourced to someplace-or-another. 

And remember this about small businesses: they tend to have a short life span, because running a small business is very hard work, and small business owners tend to burn out.

On the other hand, if you own a small business, you are highly unlikely to fire yourself!

 

Mother's should have their own bankruptcy Chapter, especially if they're raising a kid by themselves. It should be the loving, warm, supportive, easy and compassionate Bankruptcy Chapter. Which doesn't currently exist.

Some guys help with the fun part of having a baby, and then head for the tall timber, leaving the mom to take care of the resulting progeny. I get to file bankruptcy cases for those moms sometimes, and it often breaks my heart.

I try to avoid sobbing while they're actually in my office, because when the lawyer cries, the client tends to get anxious, you know? 

Now, some folks say that it takes a village to raise a kid.

At a minimum, it takes a mother.  A dad can sometimes fill in, but he has to work twice as hard, because guys can't multi-task (don't tell anybody; we're a little sensitive about it).

I hate it when a mother has to work, if she really wants to stay home with the bambino.

But a mother will do whatever it takes to take care of a kid, which is the only reason the human race survives.

And to all you mothers out there, God bless and keep you safe and happy, and may your burdens be light, and your rewards be great.

When I read an article about a nice guy in Reno who moved to Texas to find work, I'm reminded that unemployment in one part of the United States affects unemployment all over the United States.

That is, an unemployed construction guy in Arizona is competing with everybody in construction in Az. AND in Reno. And in Arkansas.

So when I tell you I want to see small businesses opening, and job creation, I'm talking all over the U.S.

Otherwise, it doesn't help Arizona.

It just means that consumers in the U.K. are paying attention!

When you get third-hand reports of secret meetings about world leaders fumbling with the economy of Europe, you recall that politicians are actors too ugly for television and not smart enough for radio, and just barely able to understand the problems they are tasked with fixing, or real smart guys who get ignored because they lack charisma.

Either way, the economy in Europe is in trouble. And real people on the street knows for miles ahead when economic trouble is brewing. Politicians try to spray-paint over economic problems, because they know they're in the same boat as the CEOs of publicly traded companies; if the company shows lousy earnings, they get the boot, and somebody else gets to try to fix the problem.

So when I read an article saying that European leaders are fighting "to contain a mounting sense of crisis" about the single currency, all I can think is that everybody knows that the damage is done, and we're all just waiting for the announcement.

One thing politicians of all sorts are good at is pretending that it's business as usual, and a lot of them probably have such short time-horizons that they believe it.

One other thing: I wouldn't want to live in Greece today. Other countries are currently deciding the economic fate of the ordinary working man in Greece, not the Greeks themselves.

And as the South found out after the American Civil War, it's a bad and unpleasant thing when somebody else controls your economic fate, especially if they don't like you. The Germans discovered the same thing after World War I, and World War II.

And I'm currently hoping that we won't get to discover that firsthand, here in the United States, but I'm fairly worried about our biggest creditor, Communist China.

Because Communist China doesn't like the United States very much. Even after we gave 'em "most favored nation" status. The ingrates.

p.s. the hoo-rah about the Euro falling apart got a lot louder when an article in Spiegel Online addressed the possibility that Greece may pull out of the Eurozone and go back to good old-fashioned Drachmas. The secret meetings were in connection with figuring out a carrot of sorts to keep Greece in the Eurozone; and Germany owns the stick, which appears to be its role in all of human history.

p.p.s. what does this have to do with you? Well, if the Euro unwinds, and folks go back to Drachmas and Liras and God knows what else, that would be a little like U.S. States deciding that it's time to print their own money. At a minimum, figuring out the exchange rates would require supercomputers.

p.p.p.s. Now that I think about it, we may see something a little like the American Civil War in Europe, if countries try to escape the Euro, and are not permitted to escape. And that would be both bad, and very confusing. Who would I root for?

It's pretty surprising, but automobile expenses, including gasoline, were 14.5% of an average household's daily expenses (higher than groceries or utilities).

In 2010.

And Arizona residents are hardest-hit by increases in gasoline, except for folks who live in Connecticut. That's because we have a lotta trucks (we're a state of construction workers and cowboys, and we like pickups. That's just how it is.). And we own a lotta desert, which means a lot of driving to work; no way to get around it.

That's right; we're only number two. But with just a little more work, I know we can be number one!

And does anybody think that the percentage has gone up in 2011, with gas price increases?

Yeah, I see heads nodding in the audience.

I always get a kick out of non-prediction predictions.

Here's a nice article that sort of predicts gas prices dropping in summer. Or maybe not.

I say maybe not because of the bet-hedging language in the article.

But be your own judge!

And note from the article the comment that some hotels are offering discounts to offset high gas prices.

Keep your eyes on the hotels: those, along with restaurants, are some of the canaries in the mine.

And why am I talking a lot about gas prices and bankruptcy in the same article? Well, Arizona residents (hereinafter "debtors in bankruptcy cases") may be spending 20% of their net incomes on gasoline. We actually have wide open spaces here in Arizona. No kidding.

Of course, with gasoline prices so high, it may be easier for a close case to pass the means test!

It never ceases to amaze me how much credit card companies are doing to send me business.

Let's think about this for a minute; I'm a bankruptcy attorney in Arizona, and people of all sorts come to me when they reach the conclusion that their debt is overwhelming.

And now major banks announce that if you miss a payment, they'll run interest at 30% on your account. Forever.

Now, with unemployment at record levels, and inflation at 10%, and gas prices through the roof and rising, I'm impressed by the "let's pile on" mentality of the banks.

And it used to be that if a lawyer sent another lawyer a client, a small gift might change hands; a box of candy, or a box of cigars, or a bottle of scotch.

I just can't think what I should send to the banks as a "thank you" gift for sending me so many clients.

I know!

I'll find some of those valentine-shaped boxes of candy, and send those to the banks.

Because, after all, the banks are clearly in need of...a heart.

My prior posts about hotel bankruptcy cases may have been prophetic.

There's a nice analysis of the new employment figures at CNBC, written by Jeff Cox, a smart guy.

Here's a cheat sheet: unemployment figures are the same.

Go read it and weep.

Oh, yeah. Wages are up a whopping 1.7%.

If real inflation is 10%, how much of a pay cut did you get this year?

With some frequency, I get to talk to guys and gals who previously made a lot of money as a computer programmer or an engineer.

And they tell me that they were so highly thought of by their company that they were sent to India or China to train a group in that country.

And when they were finished with the training program, so was their employment.

So I am relieved to find that even though industries like engineering and computer programming are laying off workers right, left and sideways here in the United States, the industry of outsourcing is having a great year, according to the Wall Street Journal.

Ryan Franklin, reporting for an ABC Affiliate, tells us that oil prices have dropped, which is certainly true, and that gasoline prices continue to rise, which is also true.

Eventually, of course, oil prices will rise enough that we create alternatives to imported oil, but the suppliers are cagey little critters: as soon as it looks as though we're cranky enough to drill oil wells here in the United States again, or build nuclear plants or windmills or geothermal or solar panel the entire southwest, oil producers back off the price increases for oil for a bit.

And that little foxtrot makes me a little cranky, myself.

Especially when the oil prices drop, and gas prices keep rising!

Apparently, there is an industry that has grown up around pornography. It is now regulated, inspected and approved by the U.S. Government, which I find so odd that I don't have any words to apply to it.

Remember, when I was growing up, there were no advertisements at all for naughty movies in the newspapers, and if there was a movie ad that was spicy, all the guys in 8th Grade knew about it.

And over the years, standards shifted, first slowly, then very quickly. "I don't give a damn" was shocking in its day, and it has been replaced on television with words once only muttered by sailors.

And certainly not used in polite company. At this point, any old action movie has a remarkable range of vocabulary.

Now, any industry generates additional economic activity. For instance, if you produce table legs, you also produce sawdust, and if there's enough of the by-product to make the process economically feasible, that sawdust may fuel another business, like making wax logs for fireplaces.

The Pornography Industry, which now has its own Academy Award-type events, also spawned a clinic that did one thing in particular; it tested performers (I believe the politically correct word would be "workers") on a monthly basis, to monitor their sexual health between shooting sessions.

It has now closed, suggesting that litigation in California knows no favorites, and that no business is immune to the Litigation Tsunami and tax and regulation explosion that has caused business to flee the Golden State with such enthusiasm; the article discussing the closure of the clinic in the Los Angeles Times quoted Diane Duke as saying that the closure was financial in nature, by the way.

Apparently, there was a website that addressed the HIV status of the performers on a database.

That website is now dark.

It appears to me that if business ventures that fed off of pornography are unable to continue to operate, this is probably a depression, not a recession.

I have previously discussed the closure of bars, strip clubs, legalized brothels,  and other business enterprises that would have seemed depression-proof only recently, prior to their failures.

If you have a business that sells ordinary sorts of goods and services (say, a hair salon) you probably ought not be surprised that your gross income has dropped in half.

Because if even naughty movies, booze, topless joints, and gambling establishments are having trouble competing for a spare buck during this economic downturn, you shouldn't feel bad that your poor little hair salon is suffering.

You didn't do anything wrong; you were just standing still when you got run over by a depression.

When people decide to file a bankruptcy, they usually stop paying their credit cards prior to filing.

That makes sense, because if the credit card debt is going to be discharged, paying on it prior to filing just reduces the money available to buy baby formula for junior. Or to pay your bankruptcy lawyer.

But wait! Banks that don't get paid have a cute pet trick: they reach into your account at their bank and grab money.

Other creditors have to sue you and get a judgment, but a bank that is holding your money has a pretty good hostage; it's called "your money".

So some people who are contemplating bankruptcy in Arizona open a new bank account for the period prior to filing, while they're waiting to pass the means test.

And why does a bank have rights that other creditors don't have?

Well, there are two reasons: one is that banks have very, very good lobbyists in Washington.

And one is that you signed a ONE HUNDRED AND ELEVEN PAGE AGREEMENT just to open your checking account. 

Has anybody ever read that agreement?

Really?

A recent caller told Sean that he had been contemplating suicide because of his financial problems.

The only reason I mention this issue is that it crops up from time to time.

Ladies and Gentlemen, this is only money. And debt. And stuff.

I admit that a bankruptcy is a pain in the behind, but so is a root canal. And that didn't kill you, did it?

So relax out there, as best you can.

I'll do the best I can to make this process bearable.

You won't like it while it's happening, kinda like a knee replacement.

But then the pain goes away, and you know you made the right decision.

There's an international poker community.

Who knew?

And that community is about to lose big.

And that's because certain indicted corporations have no cash flow, and no prospects, partly because of the indictment against them.

Now, I had no idea that Madeira Fjord in Norway represented Blanca Gaming of Antigua, because the only poker I play is on Facebook. But if you're a lawyer, representing online poker companies in Norway sounds like an interesting way to spend the day, unless they pay you in chips that are now worthless.

The one thing I know about poker, from my extensive experience with Zynga Poker (which involves exactly zero real money) is that sometimes you win, and sometimes you lose.

That's true in life as well as in poker.

And apparently, those who won big with Blanca Gaming of Antigua and UB and Absolute Poker won exactly one thing.

Bragging rights to a pretty neat story at the bar: "No kidding, there I was; I had just won a million dollars playing poker, and then I got it...error message 404!"

p.s. and remember, kiddies, if you're in Vegas and you are tap city, DO NOT sign a marker for money to keep playing. Unless you pay the marker, you will be prosecuted as though you had signed a hot check. And, yes, Vegas will extradite you to stand trial in that lovely place, and you can contemplate your errors playing Monopoly with your cellmates for many long years. 

Apparently, once somebody finds a great way to shear a sheep, that shearing technique travels fast.

At this point, the world champion credit card users are in Korea, partly because of tax breaks associated with credit card use (note: if both the banks and the government are pushing credit card usage, what's a poor boy to do?).

Scottsdale clubbers, previously the world champion credit card spenders, have vowed to re-take their crown, but analysts are skeptical: "Scottsdale borrowers, even nearing bankruptcy, don't have the requisite toughness of spirit to beat the Korean People at their own game!"

And yeah, I was kidding in the above paragraph: Scottsdale clubbers can outspend anybody on the planet, including Koreans with credit cards, any day of the week. Even nearing bankruptcy. And you know I'm right.

But back to our story. Commentators in Korea are justifiably worried at so much credit being given to folks who have poor credit histories:

“Card debt is increasing at a rapid rate without a safety net in place to protect low-income citizens from household loans,” said Yoo Byung-gyu of the Hyundai Research Institute. “This could destabilize our economy.”

Putting it another way, another giant Jenga tower of debt is being built in Korea, and when it falls down, bad consequences will occur.

Is this the real #1 mistake that people make about bankruptcy in AZ?

Well, yeah, I think it probably is the single worst common bankruptcy mistake that most people make; mind you, there are plenty of other mistakes, but some of those can be fixed in one way or another.

And here is bankruptcy boo-boo numero uno: a lot of wonderful, responsible, stand-up folks spend the entire amount they have in their retirement accounts, both 401(k) and IRA, in a futile attempt to drain their ocean of debt.

And then, when they've dumped all the value that would have been saved if they had talked to me sooner, they decide they might as well file a bankruptcy.

Now, am I going to be mean to them about that? Of course not!

They were trying to do the right thing! 

They are more to be pitied than censured.

 

I get a kick out of reading that Portugal, which I understand is a very nice country, is about to get a "bail-out" from the rest of the European Union. 

The politicians who begged for the deal praised it to the skies, and their opponents expressed reservations and concerns.

But the business of bailouts is an interesting one; has your bank, for instance, offered you a bailout?

Yeah.

I didn't think so.

p.s. my guess is that if you live in Portugal, you won't get any "bail-out" money, but you'll be told to tighten your belt. I'm not sure why things seem to happen that way, but they often do, don't they?

Are there good reasons to file Chapter 11 Bankruptcy Cases?

Sometimes.

They tend to be quite expensive, and they are fairly time-consuming, and nationally, the statistics for successful Chapter 11 Bankruptcy Cases are disheartening.

But they are strong medicine, and if you need to file a Chapter 11, you need to file one.

And like penicillin, it'll either kill you or cure you.

Realty Executives, Inc., according to the news story in The Arizona Republic, had lease issues.

And Jan Buchholz, in the Phoenix Business Blog, noted that a lot of money was owed to creditors in addition to landlords.

Including at least one very, very loving and supportive law firm.

You a programmer?

Used to program mainframes, or design programs for satellites, or for Apache Helicopter Attack Systems?

Well, there's a bundle of jobs for you again. More than 3,800 of 'em.

Programming iPhones. And Androids. And similar smartphones of various descriptions.

Go get 'em, and good luck!

 

If you go to THELAW.TV, you get to watch a lot of bankruptcy videos.

And they have this to recommend them: they're short!

I've seen Airline Chapter 11 Cases, up close and personal.

They tend to be very large, and they're fairly high-impact cases, because they're big employers in the areas around their hubs.

After a spate of airline cases, Congress tinkered with the Bankruptcy Code to make it easier for lenders to get their ways in those cases.

Which means that if people continue to get the lousy service, lousy food, lousy prices, lousy legroom, and the near-sex experience of a TSA "pat down" or the near-Japanese Reactor experience of a full-body x-ray, they just might opt to use Skype.com Video Conferencing instead of flying.

That doesn't sound like much in the way of economic importance, but if flying becomes adequately expensive and unpleasant, that means that hotels will get to file Chapter 11 Cases. And resorts. And restaurants. And retail shops that cater to tourists.

But wait!

Did I say Chapter 11?

Given the perfect storm of unpleasant flying, a depression, rising inflation, rising food prices, and rising gas prices, hotels and their friends may wind up in Chapter 7 Cases, instead.

And that would be very bad, indeed.

It's not easy being nude!

Apparently, most nudist resorts have been subsisting on folks who were born...a long time ago.

And now there's a desperate movement to recruit new, young, less saggy nudists.

And although nudism has always talked about "freedom", one resort gave the younger nudists plastic wristbands, so they could get access to the no-geriatric-nudists-allowed parts of the resort.

Does that make the geriatric nudists less free? Just sayin'!

I also have to think that nudism is so yesterday, it must be difficult to interest a younger generation in the freedom embodied in nudity, which was once a massive cultural taboo in the United States.

But with scenes on television shows like "True Blood" that I can only describe as "very realistic", I wonder if nudism is kinda like folk music.

Yeah, it was sort of a breath of fresh air, back in the day.

But after watching what the dwarf does with all those ladies in "Game of Thrones", does anybody really see nudism as a cutting-edge cultural phenom anymore?

I always like a happy ending to a story.

Especially a story that starts, "Once upon a time there was a Bankruptcy, and..."

Good advice from Pamela Yip. My favorite line from the article?

"The ideal situation for retirement is to enter it debt-free."

And easy to say.

But it's not so easy to deal with credit card debt, which sneaked up on most folks when they were "rich"; that is, when they had a hundred thousand to a million dollars in equity in their houses, and they were congratulating themselves on the wise planning they did to make them rich.

Fast forward to today, and the credit card debt that was a mere inconvenience before is now a rope tied to an anvil, dragging them deeper into dark waters.

After all, when their house had a million in equity, it was easy to think about retirement, because dealing with a hundred thousand dollars in credit card debt was simple; pay minimums, and then when the house sells, pay off everything, sock away the rest, and it's Margaritas in both hands time, and Jimmy Buffet playing by the pool!

That plan didn't work so well, what with the bursting of the consumer real estate bubble and all.

And working a few more years probably won't make retirement possible, because of the second mortgage on the underwater house (yeah, they'll sue you in Arizona) AND the hundred thousand in credit card debt.

And working is also not a good alternative if you got fired just before you qualified for your retirement benefits (I hate it when I hear that story), or if the company that employed you simply went out of business.

The alternative that Pamela Yip forgot, if credit card debt is overwhelming, and the second and third mortgages are huge, and retirement is sneaking up at a dead run, is probably bankruptcy.

The only good news about bankruptcy right now, after the 2005 Amendments to the Code, is that retirement vehicles like 401(k)s and IRAs are generally pretty safe, as long as you didn't dump three hundred thousand dollars in them the day before you filed your bankruptcy.

Because that would get a bankruptcy trustee's attention in Arizona.

 

I have often said it is better to be lucky than smart; I know an awful lot of smart folks who did all the right things and still got bad results. Like medical doctors and lawyers who invested in real property.

Volcanoes, earthquakes, tornadoes, and hurricanes fall primarily in the "unlucky" category. It's not like you can buy "hurricane rods", the way you can buy lightning rods.

Now, Jefferson County, which had severe economic problems prior to the hurricane, is hurting bad.

So will it give rise to the biggest municipal bankruptcy in the history of the United States?

At this point, that probably depends on how lucky Jefferson County is from this point forward.

And praying for everybody in Jefferson County probably couldn't do any harm.