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Kevin's Corner

Practice Management Tip:

Asking Affirming Questions

"Considering the current state of the economy and the fact that more and more consumers are filing bankruptcy to address their financial difficulties, I thought it would be timely and appropriate to elaborate further on a practice management tip from one of our earlier newsletters: the art of asking affirming questions as a means of connecting with consumers and getting them to take the next step with you.

"Affirming questions are generally questions that you know the answer to but want to ask to get the client or consumer to acknowledge that he feels a certain way; these types of questions are important whether you are talking to him on the phone or are meeting during a face-to-face consultation.

"Let's say you're talking with a consumer who reveals that he is really struggling with credit card debt. This is a perfect opportunity to ask an affirming question like, 'I bet those credit cards are really eating up all of your expendable income each month?'

"Of course you know prior to asking this question that the consumer is going to say 'Yeah, they are.' But by getting the consumer to go ahead and answer in the affirmative and verbally acknowledge the reality of the situation, you are taking another step toward motivating that consumer to do something about his situation.

"With this in mind, make a list of affirming questions that you know the answers to but can ask to consumers on a regular basis. You'll find that you'll get a much better response out of consumers because you are not advising or telling them to take a particular action but are rather asking them questions which lead them to their own conclusions that they actually need to do something to effect a change in their situation."

- Kevin Chern
President, Start Fresh Today

The Numbers Game on Delinquent Home Equity & Credit Accounts

A recent report by the American Bankers Association revealed that increases in delinquent home equity accounts in the first quarter of 2008 represent the biggest jump since the ABA began collecting such data 21 years ago.

More specifically, home-equity lines of credit at least 30 days past due rose 14 basis points to 1.1 percent of accounts in the first quarter of this year.

On a similar note, delinquent credit card accounts witnessed the highest increase since 2006 with a jump of 13 basis points to 4.51 percent.

A recent Bloomberg.com story noted how consumers are tapping into more credit as the result of more layoffs - there were 49,000 job losses in May - and the unemployment rate was at 5.5 percent, the biggest jump in two decades.

It also doesn't help that, as of July 2nd, the average pump price for regular gasoline was $4.06 a gallon - that's a 36 percent increase from the year before, in case you're wondering.

On the Bankruptcy Calendar

Here are some upcoming bankruptcy events to keep tabs on and start thinking about if you practice in any of the following areas:

Are we missing anything on this list?

Let us know by shooting an email to newsletters@startfreshtoday.com with any upcoming consumer-related bankruptcy events.

A Special Thanks to...

Brenna Lemieux, regular editor and frequent contributor to this newsletter.

Brenna will be moving on to graduate school at Southern Illinois University to pursue some outstanding creative writing opportunities.

Best wishes and thanks again for all of your hard work.

Bankruptcy Article of the Week

Obama Proposes Potential Bankruptcy Changes during Recent Speech in Atlanta

During a 15-minute speech in Powder Springs, Georgia on July 8th, Democratic presidential candidate Barack Obama revealed how he would provide greater bankruptcy protections for senior citizens, military families and victims of natural disasters - all groups of people whom we've pointed to as needing extra help during times of financial turmoil.

Without going too deeply into the political discourse that took place during and after the debate—Obama accused Republican opponent John McCain of siding with the credit card industry when voting in favor of the 2005 bankruptcy bill that eventually became BAPCPA; the McCain camp retorted with an email noting that 18 Democrats voted for that very same bill—here's what Obama specifically indicated he would do for:

Senior Citizens - In our last newsletter, we reported on an upcoming study detailing an increase in the percentage of older Americans (55-84) filing bankruptcy between 1991 and 2007. Obama noted that he would work hard to help seniors keep their homes when coming out of bankruptcy by hitting on the theme of homeownership as being a "cornerstone of retirement," according to an Atlanta Journal-Constitution article. He specifically talked about elderly consumers (over the age of 62) receiving a minimum federal homestead exemption equal to the median cost of a home in the state with the goal of making it easier for them to keep their homes and maintain financial independence and security.
Military Families - As the foreclosure rate for American military families surges to nearly four times the rate of the general population, Obama spoke in terms of a "fast-track bankruptcy practice" for military families that would include, among other things, exempting them from the Chapter 7 means test, removing paperwork that he deemed "unnecessary," and allowing them to keep a greater share of their homes' value through a minimum homestead exemption.
Victims of Natural Disasters - As with military families, Obama proposed streamlining the filing process for families in certified natural disaster areas by eliminating paperwork and waiving credit counseling requirements that he respectively described as "unnecessary" and "unneeded," according to an Associated Press story.

In short, Obama's extra protections for these specific groups of people are very similar to what he's talked about doing in the past for people facing bankruptcy as a result of staggering medical bills brought on by unexpected illnesses.

His proposal yesterday also touched on items that we've previously written about, including allowing bankruptcy courts to modify the mortgages of a debtor's primary residence (as was proposed in legislation by Illinois Senator Dick Durbin).

Quoted in a Wall Street Journal Article, law professor Robert Lawless of the University of Illinois and The Credit Slips Blog indicated how Obama's targeted proposals are about as far as someone can go without saying that he would undo the 2005 bankruptcy law.

For more analysis of these proposals, read Elizabeth Warren's take on Obama casting the topic of bankruptcy into the national spotlight.

And for more information on the presidential candidates' stances on these issues closest to our hearts, check out the following resources:

Detailed Harvard Study Illuminates Social Ramifications of Housing Industry's Ills

A first glance of a new study by the Joint Center for Housing Studies at Harvard University hits on points that hardly come as a surprise to anyone who's followed the mortgage crisis—foreclosures are on the rise, home prices are down, no one has a clue when things will improve, yada yada yada.

However, upon closer inspection, the study provides some illuminating societal insights that go beyond its thesis that the housing slump "has not run its full course" despite home price declines and mortgage default rates already being the worst on record since such data was first collected in the 1960s. Ultimately, the research provides some cold hard facts about just how bad the situation truly is for many families in the United States.

Consider these revealing statistics:

In 2006, 17.7 million households were classified as being "severely-burdened," meaning that more than half of income went to paying rent. This represented an increase of four million from the year before;
12.7 million children in the United States live in "severely-burdened" households, which roughly translates to more than 1 out of 6 children living in such households;
almost 1 in 5 low-income families and 1 in 4 low-income families reported living in structurally inadequate housing;
the number of people who qualified for housing assistance increased by more than 20 percent over the last 10 years; yet
housing assistance program spending fell from 10 to 8 percent of the government's discretionary domestic spending during this same time period.

If you have the time, give the in-depth Harvard study a read; it's definitely time well spent.

However, if you're looking for a short-hand account of the study, check out these resources:

Legislative Updates on Likely Credit Card Overhauls

For years, we've called for credit card companies to be more open about their practices or face stricter regulation, and they've consistently opposed such measures.

Now it seems that the credit card companies may not have much of a choice when it comes to disclosing their practices, including spelling out when lenders can raise and calculate interest rates and dole out fees, according to an enlightening New York Times article.

Bills respectively authored in the U.S. House of Representatives and Senate by Representative Carolyn B. Maloney (D-NY) and Senator Christopher J. Dodd (D-CT) are expected to be voted on by Congress before it adjourns in September and would similarly:

require lenders to apply payments to the debt with the highest interest rate;
ban "double cycle" billing in which interest is charged on already repaid debt (as we've discussed before with the similar notion of "zombie debt");
prohibit lenders from raising interest rates on existing debt under various conditions; and
extend the current time period of 14 days between when a bill must be mailed and paid.

As we've come to expect, the lending industry is performing the old song and dance of challenging such regulation and, as usual, we'll update you on the latest developments with this legislation.