Another Chance for Bankruptcy Filers

Due to the financial crisis which resulted in a credit freeze and implementation of the $700 billion dollar bailout many Americans will feel the burden regarding their existing credit card accounts or when applying for new lines of credit or credit cards.

Well, thanks to several Americans who were fed up with the inaccuracies reported by the credit bureaus a recent court ruling which occurred due to a class action lawsuit that was filed against the 3 major credit bureaus, Experian, Equifax and TransUnion stated that Experian, Equifax and TransUnion violated the Fair Credit Reporting Act (FCRA) by failing to maintain accurate records related to Chapter 7 bankruptcies.

The court ruling required the 3 major credit bureaus, Experian, Equifax and TransUnion to change their reporting system by October 1, 2008 and remove old debts that were included in bankruptcies. This is a HUGE victory for many Americans who had low credit scores and were unable to get approved for loans or credit cards due to: old debts still being reported as open, old debt reported with balances, reported with an "active" status or as a collection account. Accounts included in a Chapter 7 bankruptcy will now be reported with a zero balance and with a closed status.

Based on the credit ruling the 3 credit bureaus will have to clean up credit files for approximately 6-10 million consumers who have filed for Chapter 7 bankruptcy.

Many consumers have been impacted because late accounts were reported to collection agencies that ignored the fact that the accounts were included in a Chapter 7 bankruptcy. As a result, the accounts are reported multiple times as delinquent. Each occurrence of the delinquent or unpaid account lowers a consumer's credit score.

Consumers who filed Chapter 7 bankruptcy that has already been discharged will have to request a new credit report after October 1, 2008 to see if their credit report has been updated by going to the annualcreditreport.com website or by calling 877-322-8228.

If you still find errors on your credit report due to a bankruptcy, file a dispute with the credit bureau reporting the inaccurate information. You can file a dispute online which is faster and usually takes 2 weeks for a response or you can file by mail which takes 30 to 45 days for a response.

Government Bailout Plan Funding Continues

On Friday, the U.S. government started to inject capital into some banks by helping to finance a $5.2 billion takeover of National City Corp bank by PNC valued at $2.33 per share.

The Treasury Department plans to provide funds for 20-22 additional lenders as part of its next phase of a $250 billion bank recapitalization program. The Treasury Department has already committed approximately $125 million to 9 of the country's largest banks in exchange for preferred bank shares.

The Treasury Department has also decided to let banks announce the government assistance plans which will be staggered instead of the Treasury providing a complete list of bank recipients to ease investors.

Regions Financial Corp, First Horizon National Corp, PNC, Valley National Bancorp Capital One Financial Corp and SunTrust Banks will also receive government funding.

The Treasury Department is also determining how to give assistance to insurers under its Troubled Asset Relief Program (TARP) also known as the Paulson Proposal which became law on October 3, 2008. The program is run by the Treasury Department's newly formed Office of Financial Stability Department. The TARP has 7 components:
1) Mortgage-backed securities purchase program which identifies which troubled assets to purchase, who to buy them from and how to buy them.

2) Whole loan purchase program which will work with bank regulators to identify which types of loans to purchase first, how to determine their value and how to buy them.

3) Insurance program which will determine how to insure mortgage-backed securities and whole loans (residential mortgage loan that is owed by one company sold to one or more investors who pays the seller a servicing fee).

4) Equity purchase program is a standardized voluntary program to purchase equity in a various financial institutions to encourage participation from healthy financial institutions.

5) Homeownership preservation consists of programs that purchase mortgages and mortgage-backed securities to help homeowners stay in their homes.

6) Executive compensation is a law defined requirements regarding executive compensation for firms that participate in the TARP.

7) Compliance is a law that establishes oversight and compliance structures, including establishing an Oversight Board, on-site participation of the General Accounting Office and the creation of a Special Inspector General, with strict reporting requirements.

The Power Players in the Financial Crisis

A total of fifteen banks have closed across the country this year not including other financial institutions such as AIG, Merrill Lynch and others. Americans are frantic about the safety of their money in banks and investment accounts. Many Americans have closed their bank accounts due to the current financial crisis and bank failures.

Luckily for the rest of the country all Americans have not taken their money out of the banks because the entire banking system would fail. In life there are always ups and downs. Right now individuals and the country are experiencing a huge down. Several people, companies and other entities had a role in the current financial crisis the country is experiencing. No one person or entity is to blame; however several entities can be identified as contributing or having a role in the current financial crisis. The following is a list of the power players in the current financial crisis.

1. AIG – bailed out by the Federal Government who will get an 80% stake in the company
2. Bank of America – bought Merrill Lynch in September 2008 and purchased Countrywide
3. Bear Sterns – bought by JP Morgan
4. Citigroup – tried to buy Wachovia
5. Countrywide – bought by Bank of America
6. Fannie Mae – taken over by the government
7. Freddie Mac - taken over by the government
8. Federal Reserve – passed 700 billion dollar bailout plan to boost the economy
9. Goldman Sachs – now regulated by the Federal Reserve and is able to access the it's emergency loan program
10. IndyMac – seized by the FDIC in July 2008
11. Lehman Brothers – filed for bankruptcy in 2008
12. Merrill Lynch – bought by Bank of America
13. Morgan Stanley – Federal Reserve allowed the bank to change its status to allow it to provide commercial banking products and services
14. Wachovia – purchased by Wells Fargo
15. Wells Fargo – bought Wachovia after Citigroup announced it would buy Wachovia's banking business

To ensure you make it through the current financial crisis which will probably continue until the end of 2009 or early 2010 - follow these 3 tips:

1. Keep your money in the bank. It not the timing of the market, it's the time in the market. Although you may have lost money in your savings or investment account, if you wait it out, you will gain back the money lost, however, it will take time. You can consult a financial advisor to see what options are available to you to protect your remaining money from additional losses.

2. Don't make decisions based on emotions. Don't make any drastic changes based on the recent news story, an article in the newspaper or something you heard someone say. Write down your concerns and do research, try to find and talk to others who have been through financial crises such as the Depression or a war. Wait a few days and develop some if-then scenarios and develop a plan to deal with those situations. Talk to a financial counselor or advisor about your concerns and options on how to implement your plan.

3. Change your spending habits. Now is the time to make changes in your spending habits. Find small ways to cut back on spending and reduce expenses. Start saving or save more than usual to create an emergency fund to cover bills for at least 3 to 6 months which will help when unexpected situations or expenses arise.

Financial Predictions

Here is a list of my predictions for 2008 and 2009. These are just for fun. Let's see if any of them come true.

2008/2009 Predictions

1. Gas prices will fail below $2.50 by election day and rise again after the election
2. Housing prices will continue to fall through the middle of 2009
3. The Federal Reserve will reduce interest rates at least once more by the end of the year
4. Americans will continue to fight back and express their concerns about high gas prices, health care, and the war in Iraq
5. In the coming weeks more Americans will voice their support for one candidate or the other
6. More laws will be passed in favor of same sex couples
7. The war in Iraq will continue until 2010
8. Brittany Spears will get married again
9. The number of jobless claims will continue to rise through the end of 2008
10. Mortgage companies and other financial institutions will begin to place calls requesting a payment from customers in good standing who usually make payments on time but make a payment after the due date
11. Halloween, Black Friday and Christmas sales will be less than expected
12. Many small business will file bankruptcy or go out of business by the end of 2008
13. More scandals and fraud cases will be exposed to Americans by the end of 2009
14. The current financial crisis will end in 2010

America's Woes Spread to Other Countries

The current financial crisis began in the United States when lax lending standards on certain home mortgages came were allowed. Foreclosure rates began increasing as of 2000 and financial companies began reporting huge losses.

Many other parts of the world funded America’s consumer spending boom by lending America money. Many banks and investment funds outside America are holding large amounts of American debt paper and are now very upset and unhappy with bank and financial institution assets that no longer have any value.

Leaders of the world's top countries, the Group of Eight, are scheduling a meeting to meet in the near future to discuss solutions for the financial crisis. The Group of Eight consists of the United States, Japan, Germany, France, Britain, Italy, Canada and Russia.

European financial and political leaders agreed to pump billions of euros into their banks to help with declining economy. To deal with their failing economy Iceland's central bank dropped interest rates by 3.5 percentage points. Greece has pledged up to 28 billion euros or $38.5 billion to help its banks through the current financial crisis. Germany is proposing a plan to provide 400 billion euros or $536.7 billion to their banks.

How the Bailout Affects Your Credit

Due to the failure of many banks and financial institutions, lenders and other companies that extend credit to consumers are implementing stricter requirements for approval. Many people who received benefits of having a 700 credit score will now feel the affects of the new bailout plan.

The bailout plan will affect approval for credit cards and loans. This will also affect consumers in their personal and business life. Many small businesses that rely on business credit to purchase business equipment and supplies will also be greatly affected when trying to get approval for credit.

A year ago, a consumer could be approved with a credit score of 700 for any type of loan or credit card with a good interest rate. One year later things have changed.

According to a Yahoo article consumers will now have to have a higher credit score to get approved for a loan or credit card and to get good interest rates. For credit cards you need a 720-750. According to CNW, it will be even harder to get approved for an auto loan; you will need the minimum credit score of 786 to get the very best rate.

To get approved for a mortgage you will need a credit score of 740 to get the best rate. Previously you could get approved for a credit score of 700.

If you have bad credit follow these 5 tips to increase your credit score:

1. Get current on late bills
2. Setup payment plans with your creditors
3. Keep credit card balances at 30% or below the credit limit
4. Don't open a new account more than once every 2 years
5. Don't use credit cards for everyday purchases

It may be difficult to change your spending habits but you will be in a better position to ensure you get approved for credit when needed and this advice will help you maintain a good credit score.

How the 700 Billion Dollar Bailout Affects You

A credit freeze is currently in place because of the current economic crisis. President Bush signed a 451 page bill to implement a 700 billion dollar plan buy bad mortgages and other low valued assets currently held by distressed financial institutions which would allow them lend credit again to businesses and consumers.

The bill will also temporarily expands federal insurance for bank and credit union deposits of up to $250,000 which will help small businesses and many Americans including those will retirement accounts and 401Ks.

The bill will also allow mortgage lenders and banks to restructure home loans, reduce mortgage interest rates or change mortgage loan terms. However, with the bailout, it may be harder to get approved for credit or a loan because banks and financial institutions will no longer be willing to work with customers with bad credit because they don't want to take any more risks.

Approvals will require higher credit scores and possibly larger down payments. Credit card limits may be reduced or credit card accounts may be closed if accounts are maxed out or delinquent. Many small businesses that use credit to make purchases will also be affected which may reduce their revenue or possibly force some businesses to close.

Since this is an election year remind your congressmen of the issues that affect you the most and make your voice heard.

Tips for AIG Customers

AIG got a loan from the FDIC for 85 billion dollars because they lost money due to the sub-prime market. AIG is the parent company of many insurance holders.

If AIG has to file for bankruptcy they would pay off as many policyholder claims as they can. For the remaining unpaid claims they would be paid by the state because the state has guaranteed the policies.

If you have property or auto insurance, the state will also cover these, but usually have a cap. The level of coverage may vary by state, but every state association provides withdrawal and cash-value coverage for annuities of at least $100,000. Life-insurance policies are backed up with at least $300,000 in life insurance death benefits and $100,000 in cash surrender or withdrawal value. States offer at least $100,000 in health insurance policy benefits.

Every state including the District of Columbia, Puerto Rico and the Virgin Islands have established guarantee funds to protect homeowner's or car-insurance policies. Most state guarantee funds to pay all of their state's workers' compensation benefits.

Don't take money out of your AIG account. Your AIG insurance and annuity policies are safe because they are still insured. The Insurance Commissioner’s Office will continue to closely monitor the status of AIG to ensure that policyholders are protected and that assets remain to pay claims. If you do decide to cash in your policies check to see if your policy contains a surrender charge or cancellation penalty. Continue to pay your insurance premium bills for you AIG coverage. If decide not pay your policy may be canceled.

If you are unable to contact an AIG representative you can call the Insurance Consumer Hotline at 1-800-562-6900.

Be aware of scams. If someone tells you to replace your AIG policy because "may not be able to pay your claim" this is a scam. Call the Insurance Consumer Hotline at 1-800-562-6900 to report the incident.

To see if your insurer is owned by AIG, visit the state Insurance Commissioner's Web site at insurance.wa.gov and click on latest news or call 800-562-6900.

Advice for Wamu Customers

Here are answers to some of your questions regarding your WaMu accounts.


1. All Wasington Mutual and Henderson, NV accounts have been transferred to JPMorgan Chase Bank. No money was lost in any account during the transfer.

2. If you had a loan with Washington Mutual your loan has been transferred to JPMorgan Chase Bank. Continue to send payments to the same address and make checks payable to Washington Mutual Bank. Your payment due dates, balances and interest rates still remain the same.

3. Your debit and ATM cards will still work. Your direct deposits, automatic deductions and automatic bill paying will still work.

4. Any outstanding checks will clear with no problem. You can still write checks on any checks that you have.

5. If you have a loan that is currently being processed or line is credit that has not been approved yet contact your loan officer or processing agent for more information.

6. If you account balance is over $100,000 is will still be insured for up to 6 months after the merger. After that time you will need to move your money around to other accounts so the balance is below $100,000.

7. Contact your financial advisor regarding any Washington Mutual stock that you own.