But I'll preserve for the ages a fairly good piece by the Bully on going BK... in Sisters, no less.
The human side of bankruptcy
Financial disruption is personal for the millions who file for it
By Lily Raff / The Bulletin
Published: July 19. 2009 4:00AM PST
At 64, Jack Gulick is starting over.
He buys groceries with cash instead of credit. He no longer buys lattes from Starbucks. He and his wife, Laura, share one car instead of two. He is grateful for things he once took for granted, like having health insurance. He follows the financial news more closely.
For the Sisters resident, this is life, post-bankruptcy.
When a bankruptcy makes the news, it usually involves a large corporation — think General Motors or Lehman Brothers. But the vast majority of bankruptcies are not filed by companies at all. Of the 1.17 million bankruptcy cases filed in federal court last year, 1.07 million, or 92 percent, were filed by families or individuals.
Bankruptcy is a legal process that helps people and businesses eliminate debts or repay portions of their debts under protection of the court.
Non-corporate bankruptcies are usually mentioned as statistics or trends. But for the individuals who file, bankruptcy is personal. Really personal.
The Gulicks had been living near San Francisco when they bought a half-acre lot in Sisters in 1997.
“I was born and raised in Portland and my wife in California, so this was kind of a compromise, I guess,” Jack Gulick said. “We both loved it. We’d been coming here for years.”
In 2001, they sold their house in California and hired a Central Oregon builder to construct a 2,100-square-foot custom home on their lot. In June 2002, they moved in.
“It was our dream home … and our plan was to retire in it,” Gulick said.
The couple saw no reason not to. Gulick had a steady job as regional sales manager for a large electronics company, with 30 years of industry experience under his belt. He traveled, two or three weeks a month, throughout the 13 Western states. He earned a six-figure annual income including commissions.
Then a lingering health problem flared up. For about 10 years, one of the discs in Gulick’s neck had been slowly deteriorating. In late 2003, doctors recommended a disc fusion.
“They told me I had about a 50-50 chance that it might work (to stop the pain),” he said. “So I got the wrong side of the coin, so to speak.”
By 2007, Gulick was unable to lift more than 10 pounds. He couldn’t comfortably walk more than 100 yards at a time. He could no longer handle the grueling travel schedule his job required.
In December 2007, Gulick was laid off. His long-term disability insurance now provides him with 60 percent of his base salary. But Gulick’s base pay rate does not include sales commissions, which made up half of Gulick’s income.
“I’m actually getting 30 percent of my ordinary pay,” he said. “So … all of a sudden my income gets cut by 70 percent and it’s like, ‘Wow, there’s no way we can pay for this. We can’t pay for the house.’”
Unable to pay their mortgage, the couple moved out of their dream home and into a nearby rental. The home was foreclosed and will be sold at auction next month.
Even with their housing costs cut by more than half, the Gulicks’ finances buckled under growing debt. They sold one of their two cars at a loss, just to get rid of one monthly bill. Meanwhile their credit card balances, which included many of Gulick’s medical costs, ballooned.
“We took all the cost-cutting measures we could, but we still had a lot of credit card debt,” he said. “That’s really what sunk us. You miss one payment and your low-interest credit card goes from 6 or 7 percent up to 19 or even 24 percent.”
Gulick called a counseling service and was told that even with more drastic cuts in spending, he would need to earn about $900 more per month to qualify for any sort of debt consolidation program.
“Their advice,” Gulick said, “was to get a hold of a bankruptcy attorney.”
Credit fever
Last month, 94,085 Americans called a consumer credit counseling service. That’s a 36 percent increase over June 2008, when 69,431 Americans phoned for help.
Kate Williams is vice president of financial literacy for Money Management International, a private nonprofit that oversees 24 nonprofit consumer credit counseling agencies. Before a person may file for bankruptcy, he or she is legally required to seek a one-hour credit counseling session and receive a certificate of completion. These sessions make up about 45 percent of consumer credit counseling calls, according to Williams.
She went on to estimate that about 90 percent of callers’ most troublesome debts are carried on credit cards.
“Credit cards become, in some cases, a third source of income. Mom works, dad works and then we’ve got Mr. Visa at our house,” she said.
Psychological studies have shown that consumers don’t feel as responsible buying an item with a credit card as they do buying an item with cash, Williams said.
She offered two pieces of advice to people who want to avoid bankruptcy: Save for retirement and save for unforeseen expenses.
“Every worker today should be (saving for retirement) because we know we want to retire. Even though the market is just brutal to everyone right now, make it a habit,” she advised. “And … even if you can only set aside $25 a paycheck right now (into a savings account), it’s not going to grow fast, but the $600 or $700 that you save in 2009 may be the set of tires that you don’t have to put on a credit card in 2010.”
Try to cut expenses in little ways, she urged, by packing a lunch instead of going out, for example.
“Most families can cut out $85 to $100 a month. It’s not going to be easy, and it’s not going to be one particular thing, but it’s a lot of $2 and $3 and $5 and $8 things that add up,” she said.
Williams recommends that consumers keep track of their income and expenses on one sheet of paper. Most people, when asked how much debt they think they owe, underestimate it by 20 to 33 percent.
Gulick said it was shocking to see a comprehensive list of his debts.
“My wife had been admonishing me for years about going on a cash basis and getting rid of credit cards,” he said. “I just, I didn’t listen to the advice that I got.”
Deciding to file
Brian Hemphill is a lawyer in Bend who did not work for the Gulicks but who specializes in bankruptcy cases. He keeps a box of tissues on his desk because clients are often in tears. Many clients, he said, feel overwhelmed and ashamed.
“I tell them, it’s not a magic wand and it can’t cure everything,” he said. “It does have a lot of negatives to it, and people have to decide, do the positives of bankruptcy outweigh the negatives? But fundamentally, bankruptcy is there to help.”
Hemphill said the social stigma attached to bankruptcy has faded in recent years as it has become more common.
Donald Trump told the New York Daily News in 2004 — during his casino company’s second voyage through bankruptcy — that there’s no shame in it.
“It doesn’t matter,” he was quoted as saying. “It’s a modern day thing, a legal mechanism.”
Many others disagree. Dozens of Central Oregonians who filed bankruptcy in the last year declined to speak about their experiences for this article.
When Hemphill’s clients decide to file, he helps them determine which avenues of bankruptcy they qualify for. Most individuals consider Chapter 7 or Chapter 13 bankruptcy, both named for the section of federal code in which they are described. In Chapter 7, some of the debtor’s belongings may be sold. Debts are then forgiven or discharged.
In Chapter 13, a debtor works out a payment plan and agrees to dedicate future earnings toward paying off some or all of the debts.
Not everyone qualifies for both types of bankruptcy, but some people get to choose. In both types of bankruptcy, the person files in federal court and is assigned a trustee, who acts as a referee between the debtor and the creditors.
In Chapter 7 cases, the trustee helps decide which assets to sell. In Chapter 13 cases, the trustee helps create a fair, feasible repayment plan. In both, the trustee helps determine how much money each creditor gets.
In all cases, a bankruptcy judge has final say. Filers must appear in bankruptcy court at least once, but few Central Oregonians must trek to federal court in Portland. Instead, bankruptcy judges or trustees come to Bend several times a month, to hold hearings in classrooms at the National Guard Armory.
Just before Gulick filed for Chapter 7 bankruptcy, he paid for an appraisal of his furniture and belongings to see what they could fetch at an auction. If certain pieces had been particularly valuable, Gulick may have been required to sell them. But there are legal exemptions to protect people from having to sell basic necessities.
“They can’t sell off every single thing you own,” Hemphill said, “otherwise you’d be naked, living under a bridge.”
Chapter 13 cases usually go on for three to five years as the consumer pays back his or her debts. The trustee oversees the case throughout that time, collecting money from the consumer and adjusting the agreement if he or she loses a job.
When people emerge from bankruptcy, they often feel relieved that the debt is behind them. A discharge from bankruptcy court is a document confirming that the debts are closed.
Life after bankruptcy
Bankruptcy is not just for low-income consumers.
“Most people who file for bankruptcy never, ever could have imagined that they’d be in this situation,” said Paul Stednitz, a senior vice president and regional manager for Central Oregon at Liberty Bank.
Williams, of the credit counseling group, said the process is, in some ways, more difficult for consumers with high incomes.
“Some of them are paying for private schools, for example, so their kids end up having to change schools,” she said. “It just upends their lives.”
Many people who go bankrupt lose their homes, although foreclosures — when banks reclaim homes whose owners fail to pay their mortgages — are often separate legal processes.
A bankruptcy remains on a credit report for seven to 10 years. But that doesn’t mean that a consumer is unable to obtain new loans.
“We have, at times, lent to people that have had bankruptcies,” said Stednitz of Liberty Bank.
Banks are usually notified when an account holder files for bankruptcy.
“People could have overdraft lines (of credit), for example. Almost everybody has some sort of line of credit attached to their bank account,” he explained. “And any sort of lending mechanism like that would trigger a bankruptcy filing to come to our bank.”
When a person with a past bankruptcy applies for credit, the loan officer looks closely at the details of the bankruptcy before making a decision, Stednitz said.
“In that person’s credit report, we can see all of the credit that was included in the bankruptcy,” he said. “And if we can’t see that, then we ask for a copy of the bankruptcy documents so that we can see it. Because some people will exclude items from a bankruptcy, so they might file for bankruptcy but stay (current) on some of their loans.”
Generally speaking, he said, a Chapter 13 bankruptcy looks more favorable than a Chapter 7 bankruptcy because it shows that the person or couple took some responsibility in repaying parts of loans.
“But there are times when people don’t have a choice. They have to file a Chapter 7,” Stednitz added. “They may have had a medical situation or an illness.”
Post-bankruptcy consumers can rebuild their credit with a secured credit card.
“It’s essentially a Visa card that’s issued with a savings account that is collateralizing the card,” Stednitz explained. “So if you have a $1,000 limit (on your card), you would have to have $1,200 in the savings account. It appears on the credit report as a regular credit card, so it’s a great way to rebuild credit. In fact, it’s hard to rebuild credit any other way.”
Experts agree that it is critical for a person who goes through bankruptcy to learn a lesson in the process.
Gulick said that for him, lessons were unavoidable.
“It’s really tough to go on a cash (only) basis; it takes more discipline than I ever thought,” he said. “But going through bankruptcy, you lose all your credit cards, and I’m not going to take any new ones out. So we live on cash only, and it’s a whole different experience. If you don’t have the money in the bank to do it with, you don’t do it. That goes from grocery shopping to taking a weekend away or anything that you want to do.”
Gulick has shared these lessons with his grown children to help them avoid his same fate.
“It’s been an education, and it’s been … very traumatic,” he said. “I wouldn’t say that I feel lucky in having gone through the experience but I will say this … it has been a great teacher. Unfortunately, I got taught pretty late in life.”
I linked to the print-version, since there's some good info there, including a graph for NW states of BK's per quarter since 2006.The Bully also gets another notch to The Good for printing this. A nice reprieve from their candy-apple bullshit.
A warning though: The douche-lawyer they quote in there is a big asshole. And a total dumbfuck. Believe me, I know.
OK, I'll print the other piece in the Bully, since it's pretty rare for them to have ANY decent pieces:
Few loans to rely on
Scarcity of money making it especially tough for startups, so many turn to private financing
By Andrew Moore / The Bulletin
Before Terri Cumbie opened Dudley’s Bookshop Cafe in downtown Bend in December, she applied for business loans, only to be turned down. She self-financed her store instead.
Terry Rhode is a Madras farmer who has started marketing safflower oil, a cooking oil derived from crushed safflower seeds he’s begun harvesting. He also recently applied for loans to build a pressing plant, but said he was turned down. He’s financing it himself, but the meager amount he can invest is making it harder to launch the business.
Sky Pinnick, owner of the new downtown Bend bar Velvet that opened last month, said he and two business partners put up all the funds to open the business, not once considering a bank loan.
“Why go through all the hassle if they are just going to turn it down?” he said.
The credit crunch that ushered in the recession still seems to have a stranglehold on people who want to start new businesses.
While banks are making small-business loans, they’re fewer than in the past. Throw in the lack of capital once available from credit cards or home equity, and many would-be entrepreneurs are left with either dashed dreams or a scramble to secure capital from family, friends or their own savings accounts.
Under more scrutiny
Dennis Lloyd, director of lender relations for the federal Small Business Administration in the Portland district, said the number of loans guaranteed by the SBA this year in the district — which includes Deschutes County — is down “considerably.”
The value of the loans, however, is roughly the same.
From Jan. 1 through July 15, the SBA had guaranteed 21 loans in Deschutes County for $6.8 million, according to the SBA. For the same period last year, it guaranteed 34 loans for $6.7 million, and in the same period in 2007, it guaranteed 56 loans for $10.2 million.
Asked whether the decline in loans was due to fewer applications or more denials, SBA spokeswoman Sylvia Gercke said it was the latter.
“Because of the economic situation, making loans to small businesses is risky, so (banks) are preferring to monitor their existing portfolios rather than add new loans,” Gercke said. “I guess they are just being cautious.”
Paul Stednitz, a senior vice president for LibertyBank and the regional manager for Central Oregon, said banks are lending, but it has always been difficult for new businesses to secure startup financing — in the current recession, even more so.
Stednitz said there are some industries, such as restaurants, that banks rarely give new-business loans to because of high failure rates. But for other startups, the decision about whether to extend a business loan depends on the experience of the entrepreneur, the business plan and the viability of the idea.
“The economy hasn’t changed how we look at startups,” Stednitz said. “I think now we have to scrutinize collateral closer, cash flow, projected cash flow, what you’re selling — is it going to be able to sustain in this economy, because people aren’t buying things. You could have the greatest idea, but if no one’s buying … here we are as bankers trying to make these determinations and it’s not easy.”
A waiting game?
Money is tight, and that’s affecting the way new businesses are being launched, said Bill Saling, a volunteer with the Central Oregon chapter of SCORE, formerly known as the Service Corps of Retired Executives. Saling and local SCORE staff offer free advice to small-business owners.
“We’re already telling people early in the conversation that if they are saying they have to get lending from banks, not right now, I don’t care how good you are,” Saling said.
Saling said he is advising people interested in launching a new business to wait for the credit crunch to subside. He said prospective small-business owners should instead tie up all their loose ends and ensure they have a solid business plan so they can move quickly once credit normalizes.
Saling said it can be tempting to self-finance a business, but many would-be business owners miscalculate how much more money they will need.
“Not everybody is going to pay their bills on time, some people will stiff them, contractors change their terms, so all of those things without a cash reserve make it very difficult to survive,” Saling said.
Falling back on private funding
Stednitz said the loss of jobs is compounding the problem, as more people are forced to come up with creative business ideas to generate income. But with home equity no longer an option for most and retirement accounts battered by the stock market’s decline, those wanting to launch a business could find themselves in a pinch.
“The next fallback, unfortunately, it’s the credit card — and we would not recommend using a credit card to start a business,” Stednitz said.
What’s left is private money, he said.
Cumbie, at Dudley’s, tapped family, credit cards and a home equity line to open her store, she said. She also was frugal about the endeavor, furnishing her store with secondhand items and stocking inventory she collected for four years prior.
While initially disappointed she didn’t get a small-business loan, Cumbie wasn’t surprised, given the economy. In the end, she’s glad she didn’t get the loan.
“I think if I got a really big loan from a bank, the economy got worse after I opened, and it would have been really, really hard to make those loan payments,” Cumbie said. “I would have had to borrow more just to make the payments in addition to what I needed.”
These two pieces basically illustrate 2 sides of the same coin: Save Your Money.People who are liquid in the future will run the show. Being "INVESTED" (as I have been admonished for not doing so in this forum... often) is NOT what you want to be doing now.
Putting your money "At Risk" has worked just peachy for 3 decades, it's all many people have ever known in their adult life. Buy a house, buy stocks... if you did these 2 things to the fullest extent of your ability, you've done as well as could be expected.
This formula needs to be turned on it's head for the next 10-20 years. This is not going to be a short-term phenom.
In the first piece you read the guy had to sell his STUFF at a LOSS. The second woman could not get a nickel, and went to CC's & HELOC... and family, who almost certainly did the same. So basically she doesn't "own" the place, others do.
Folks, Cash Is King. True today, true in 2019. This will not be over soon.
It's especially true here. We are STILL 24% overvalued! STILL! The pain is not remotely over here, in some ways it hasn't even gotten going.
We won't fall 24%, and that'll be it. We'll cut RIGHT THROUGH THAT, and keep going down. Then we'll just sit there, at dead-ass bottom.
THAT is when you break the piggy bank, and begin a slow, methodical process of accumulating stuff CHEAP.
What'd you pay for Pegasus, Dunc? $5K? That there is what I'm talkin' 'bout.
Things won't just be cheap, they will be ridiculous. All the current-day knife-catchers will have bloody, perforated hands, and will just want out. Soooooooo many people think they are catching the bottom now. Folks, that shit will not happen until the first digit in your age advance 1 or 2 digits... the second digit will stay the same.
This blog will be LONG GONE when it's time to buy in Bend. There ain't a chance in hell I can write this fucking thing for 2 decades. Neither will you have The Bully available to Ring The Bell... it'll be long gone.
Folks, they'll be GIVING shit away. I know this seems impossible, because things NOW are STILL so fucking (relatively) expensive. That's because we are still in the BEGINNING STAGES of working off a speculative bubble the like of which will nevere be seen again... EVER.
So assets are still ridiculously expensive. Compared to what they will be. At the end, cars, homes and small businesses will be given away practically. Big Assets, previously the domain of credit providers, will have to go for Cash Prices. And cash will be Damn Scarce. Scarcer than it is now. Lots.
OK, I'll end with some Great News!!! We are finally Number One!
Oregon homeless figure tops nation
Jobless rate still high; shelter worries about coming winter
By Amy Easley, KTVZ.COM
Oregon has the highest proportion of homeless people in the nation, according to a new report issued by the U.S. Department of Housing and Urban Development.
The study reveals more than one-half of 1 percent of Oregonians were homeless last year.
Chris Clouart, executive director at Bend's Bethlehem Inn, blames the troubled economy for high numbers. "We've seen a definite increase in need for beds," Clouart said Monday.
"We've seen a need in single individuals and families, and it all has to do with the fact that the economy is in such bad shape."
While all of Central Oregon's roughly 2,200 homeless may not be living on the streets due to financial hardships, the recession certainly hasn't helped.
Oregon's unemployment rate hovered at 12.2 percent in June - essentially unchanged from the previous month but more than double the jobless rate at this time a year ago, the state reported Monday.
The seasonally adjusted unemployment rate remained well above the U.S. rate of 9.5 percent, as Oregon's recession-bound economy shed another 7,200 jobs last month.
In all, there were 241,000 Oregonians on the unemployment rolls in June, compared with 114,000 jobless a year ago. Bill Seidel, says with all the competition, begging is the only job he can get.
"I wish something would happen with this economy so I could get into a place and wouldn't have to do this," he told me.
Others, like 17-year-old Haze O'Riley, chose to live on the streets, saying it's the only life they know, but admit it has its hardships.
"What I've seen in Portland, I saw about 400 or 500 kids my age and younger living on the streets," the teen said. " It's not a pretty sight, with drugs, fighting and hunger." Homeless shelters say during the summer months, the number of homeless is manageable, as more people opt to camp outside.
Staff at the Bethlehem Inn say the trouble will come this fall. "What we're hoping doesn't happen, but what will probably happen, is that when the weather starts turning cold this fall, we're going to see ourselves inundated,"
Clouart said. It's a problem with no easy solution. Because in this recession, no area is out of the woods yet.
Jam yesterday, and jam tomorrow, BUT NEVER jam today. ie, Don't worry about the homeless today, cuz their frozen corpses don't line China Hat Rd.
The homeless kid in Portland had what I thought was the most unsettling quote:
"What I've seen in Portland, I saw about 400 or 500 kids my age and younger living on the streets," the teen said. " It's not a pretty sight, with drugs, fighting and hunger."
WTF is going to come of this? 'Course the Bully won't print that essentially Bend has this same problem, because to do so would admit that we're facing some sort of Lord of the Flies-Escape From New York scenario.
Finally, I was walking downtown yesterday and I guess it was the first time I've seen that Tetherow's Sales Office in Franklin Crossing is closed. When did this happen? I tried searching the Bully, but didn't find it.
Life on the 'Berg: 90% of what happens is never seen.
hbm, will you ever let me grab your huge stick shift?
Dunc, please tell me about Pegasus backorders... it makes me so HOT!
Woof. This chick is HOT.
