Monthly Archives: March 2017

Positive Decisions Using Debt Consolidation Programs

If you are similar to most consumers every single day you struggle with the idea of exactly how are you going to payeach of your obligations. This finds you tired, fighting financially and unnerved in regards to specifically how you will be able to handle to pay all of your liabilities. If a problem comes forth and messes up the fragile balance that you have occurring, you comprehend that you could be in a huge crunch. Nevertheless, plenty of shoppers clearly fail to anticipate this. Sadly, the solution is regularly a concept that is so effortless it would simply need a precise moment of time to put into place, but is regularly excluded.

A consolidate debt loan, or bill consolidation credit line is something that could be an enormous help to anyone whom is paying back debt. Without considering whether you are paying off only a few minor accounts, or you are paying back several huge accounts this may be an explination that can really aid you. If you are paying on more than a single account, you will typically paying large sums of interest rates singly. These fees could rapidly eat up the majority of your monthly submissions and increase the amount of time that you are in debt.

By obtaining a combine debt loan you are able to roll all of your bills collectively into a singular periodic payment. This combined with the reduced interest fees that are plausible can spare you as much as 70% every month in your bill submissions. Considering the sum of debt that the usual household is struggling to pay back, this could provide a huge savings. Naturally, this moreover has the benefit of assisting to repair your credit since the debt is paid back, and still saves you a ton of money.

Point blank, this is something that is so easy, however due to the simplicity, it is usually missed. The immense majority of citizens fail to consider all of their choices and typically spend too much for credit. Finding a combined debt credit line you can decrease severely the amount of cash you are sending out each month, yet still handling all of your economic responsibilities. This creates them the best option that you have to repay all of your bills and yet work to keep your finances within boundaries.

In turbulent periods like this with the economy, and also the home market place observing such huge changes, it is highly essential to make certain that you discover a successful method to cultivate entire domination in regards to your finances. This generally requires that you need to have a capacity to be certain that you can demand the time and effort to be sure that your cash is helping you as much as possible. Frankly allowing your cash to be eated up in interest charges is not a highly adequate benefit. To free yourself from debt you need to break free from just paying on interest charges.

There is honestly no way that sending only interest charges could give you the benefits that you desire for your credit. Taking the effort to conscientiously discover your choices and ensure that you select the right decision possible can go a long way to be certain that you hold your budget under control, and know that you can still submit all of your liabilities and hold your head out of water in even drowning debt.

Debt Collection – Your Frequently Asked Questions Answered

Here are your most Frequently Asked Questions about debt collection and the answers to them. The responses are based on the rights included in the Fair Debt Collection Practices Act (FDCPA).

Is my debt collector allowed to call at any time? No. Debt collectors are only allowed to call between 8am to 9pm. Calling before 8am or after 9pm is prohibited unless with your consent.

Is it okay to leave messages on my answering machine? A collector can leave his name and contact number on your answering machine. However, he should not discuss any information about your debt unless you’re available to take the call. If you don’t want your debt collector to leave messages when you’re not home, you can tell them to stop.

Is it okay to submit partial payments? Some debt collectors may refuse to accept partial payments. However, if you don’t have the money to pay your entire debt, send in your partial payments. If your debt collectors still demands a lump sum and sends your money back, keep proof of your payments for references. In case your debt collector files a law suit against you, this would prove that you never attempt to default on your debts.

Can a debt collector threaten you about a legal law case or repossession? There are debt collectors who may resort to false threats to impose fear on a borrower. If such claims are found to be untrue, you can report them for violation of the FDCPA.

Should you put up with verbal abuse or harassment? Certainly not! Even if you owe a lender, you still deserve to be treated with dignity and respect. Debt collectors should never use abusive languages, foul words, or any form of harassment to force anyone to pay.

Can a debt collector continue to contact you after you told them not to? If you want debt collection activities to stop, you can send a letter to your debt collector and inform them of your wishes. However, keep in mind that stopping an agency’s debt collection activities does not exempt you from your responsibility to make repayment. Even if the collection has been stopped, you should take the initiative to submit your payments at the soonest possible time.

What can I do if a lender collects debts I don’t owe? Under the FDCPA, consumers have the right to dispute billing charges if they think it’s incorrect. As soon as you received your bill, send a dispute letter (via registered mail) to your creditor. They should immediately stop with their collection attempts and begin an investigation about the issue. A creditor has 30 days to set the matters straight. Meanwhile, debt collection should be put to a stop.

Remember, if your creditor or debt collector is guilty of a violation of the rights listed in the FDCPA, don’t hesitate to report them to the Attorney General’s Office of your State and file a complaint to the Federal Trade Commission (FTC).

How Chapter 11 Saved the US Economy

It’s no surprise that Harvard Business School professor Stuart C. Gilson gave an enthusiastic thumbs-up to the recently announced $11 billion US Airways/American Airlines merger. The deal, which came after American’s parent company, AMR Corporation, declared bankruptcy in November 2011, will allow the airline to work with the court to restructure and unload a significant amount of its debt, giving an iconic company “a second bite of the apple,” says Gilson.

An unabashed advocate of Chapter 11 and debt restructuring, Gilson is an expert in the legal innovations and institutional changes that have revolutionized their use in practice. He contends that both serve the US economy by helping troubled companies stay viable by giving them time to find new financing, renegotiate unfavorable leases and supply contracts, or expedite processes for selling off assets.

Despite these benefits, he says that Chapter 11 has suffered an image problem.

“When I first started in this area, I faced challenges selling this to students,” says Gilson, the Steven R. Fenster Professor of Business Administration. “Bankruptcy was seen as the study of dead or dying companies.”

The truth is anything but— “it’s about reviving companies,” says Gilson, author of the 2010 book Creating Value through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups .

REVIVING THE ECONOMY
Taking a look at the 2008 financial crisis, Gilson says that restructuring and Chapter 11 played a heroic role in helping the country rebound. He outlines these ideas in Coming Through in a Crisis: How Chapter 11 and the Debt Restructuring Industry Are Helping to Revive the US Economy , published in the fall 2012 Journal of Applied Corporate Finance.

“BANKRUPTCY WAS SEEN AS THE STUDY OF DEAD OR DYING COMPANIES”
During the crisis, the “amount of debt that needed to be restructured posed a seemingly insurmountable challenge,” he writes in the article. At one point, a whopping “$3.5 trillion of corporate debt was distressed or in default. [Between] 2008 and 2009, $1.8 trillion worth of public company assets entered Chapter 11 bankruptcy protection— almost 20 times more than during the prior two years.”

A significant portion of the private equity industry, he says, was “widely believed to be on the verge of extinction.”

Instead, in a relatively short time, much of the corporate debt that defaulted during the financial crisis has been managed down, mass liquidations have been averted, and corporate profits, balance sheets, and values have rebounded with remarkable speed, he says. Even Lehman Brothers, the largest and most complicated bankruptcy in US history, emerged from Chapter 11 with a confirmed plan of reorganization in only three and a half years.

Because of Chapter 11 and the expertise of US restructuring professionals who advise troubled companies, Gilson says America’s economic recovery has been far speedier than Europe’s, where bankruptcy laws tend to favor immediate payback of creditors.

“Many countries around the world have bankruptcy laws that primarily seek to liquidate distressed companies,” he says. “The emphasis is on reimbursing creditors, or protecting particular stakeholders such as employees, rather than doing what’s necessary to rehabilitate the business.”

According to Gilson, this provides compelling evidence that “US bankruptcy laws and restructuring practices have played a critical role in driving the economic recovery and restoring the competitiveness of US companies.”

CHAPTER 11’S EVOLUTION
Despite much criticism of Chapter 11 as too costly, slow, or inequitable, Gilson says managers and financiers working with distressed companies in Chapter 11 have “evolved and adapted to deal with large, complex cases.”

During the 1970s and ’80s, Drexel Burnham Lambert’s Michael Milken carved out new ways to restructure large amounts of publicly traded debt. Gilson’s research suggests that the total costs associated with Milken’s method of reorganizing troubled companies were as little as one-tenth of those associated with a conventional corporate bankruptcy.

In the post-Milken era, Gilson points to a hybrid approach that has blurred the line between Chapter 11 and restructuring, offering alternatives to “free-fall” bankruptcy. Prepackaged and prenegotiated bankruptcy combine the most attractive features of Chapter 11 and out-of-court restructuring.

In prepackaged bankruptcy, companies negotiate restructuring plans with creditors, gathering formal votes prior to filing for bankruptcy so they can enter Chapter 11 with a reorganization plan and disclosure statement already in place. (In 2009, “prepackaged bankruptcies accounted for $124 billion corporate assets filing for Chapter 11, including CIT Group, Six Flags, Lear Corp., and Charter Communications,” Gilson writes.)

In a prenegotiated Chapter 11, firms don’t formally solicit votes but rather ask key creditors to sign a “lock-up” agreement promising to vote for the plan once the firm is in Chapter 11.

The advantage of either type of filing is that it allows companies to avoid steep costs associated with spending months in bankruptcy court and to take advantage of Chapter 11’s “more lenient voting rules, minimizing the holdout problem that can frustrate attempts to restructure out of court,” Gilson writes.

Companies also increasingly using Chapter 11 to expeditiously sell off assets. Section 363 of the US Bankruptcy Code allows a bankrupt company to sell assets in a competitive auction overseen by the court; assets purchased this way are also less vulnerable to subsequent legal challenges. This option has always existed, Gilson says, but it’s been used more often in recent years so asset-rich companies that are cash poor can raise money. In 2001, American Airlines acquired the assets of bankrupt TWA using this approach. More recently, Section 363 sales played a key role in some of the largest and most complex bankruptcies of the financial crisis, including General Motors and Lehman Brothers.

“THE AMOUNT OF DEBT THAT NEEDED TO BE RESTRUCTURED POSED A SEEMINGLY INSURMOUNTABLE CHALLENGE”
Chapter 11 gives troubled companies other valuable options for raising cash, Gilson says. While operating in Chapter 11, a company is freed from paying interest on its pre-bankruptcy debts. Section 365 of the Bankruptcy Code allows the company to reject unprofitable leases. And through so-called debtor-in-possession (DIP) financing, new lenders are given priority in the capital structure. This is a critical incentive because it spurs banks and other creditors to lend to companies in Chapter 11 by giving them senior status, effectively letting them stand in front of pre-existing creditors. (American did not need such debtor-in-possession financing. United and Delta together raised almost $3.5 billion in DIP financing in their bankruptcies.)

Some argue that putting earlier investors at the back of the line is unfair, but Gilson says that giving a distressed company access to new cash can increase its chances of paying back more investors overall. “It’s about increasing the size of the pie available to all the firm’s stakeholders,” he says.

NOT A UNIVERSAL SOLUTION
But Chapter 11 isn’t the answer for all companies, Gilson says.

It might yield big benefits for commercial airlines and retail chains, which typically lease a large fraction of their assets, and for steel- and automakers that have large unionized workforces, which will give them greater leverage to renegotiate collective bargaining agreements. But Chapter 11 will be less beneficial for companies where the “stigma” of bankruptcy is apt to scare off customers and suppliers, or for banks and other financial firms that have large liabilities under derivatives contracts, which, unlike most debts, are not frozen by a bankruptcy filing.

Realogy Corp., featured in Gilson’s article, is an example of a company that chose to deal with its financial problems outside of bankruptcy court.

One of the world’s largest real-estate companies, Realogy was acquired in the spring of 2007 by the private equity firm Apollo Management in a $7 billion leveraged buyout. The buyout came at the peak of the US housing boom, and the company was struggling to manage its $6 billion debt load. As the housing and mortgage market collapsed, Realogy scrapped to pay more than $600 million in annual interest. With a total debt of $6.6 billion in 2010, the company decided to restructure out of court instead of filing for Chapter 11 for several reasons, Gilson says.

First, most of Realogy’s operating cash flows were from franchise agreements with local real-estate agencies, and a Chapter 11 filing could have critically damaged relations with the agencies. Second, its workforce was not unionized. Finally, the appearance of “giving up” through bankruptcy could have sent a signal to Apollo’s limited partners—and to its competitors—that the firm wasn’t “willing to support its less successful investments, undermining future fund-raising efforts or its ability to restructure other portfolio companies,” Gilson writes.

While the jury is still out on the restructuring, Gilson says Realogy is seeking opportunities to grow the business, and “operating improvements made during the restructuring have positioned the company to take full advantage of any recovery in real-estate values