The North Carolina Bankruptcy Information Blog

If you’re like so many Americans experiencing tough economic times, you may feel completely overwhelmed by your current financial situation and unsure as to what options actually exist to alleviate it. Maybe you’ve been unable to modify your mortgage, hit with the costs of an unexpected medical situation, dealing with high interest credit cards or are navigating through the pitfalls of unemployment or underemployment with little understanding of how to pull yourself out of the subsequent a financial hole.

At times like these it’s often important to get “back to the basics,” separating fact from fiction in order to make an informed decision that can get you back on track for a better financial future.…

Can states file for bankruptcy protection? That’s the question being considered by many Washington leaders. Currently, municipalities (cities, counties and towns), can file for protection under Chapter 9 of the bankruptcy code. States do not have such an option. Yet.

Many believe the primary driver of the concept to be former Speaker of the House and current political pundit and potential presidential race contestant Newt Gringrich. A recent speech he gave on the matter may have had some influence, but regardless of his politicizing of the idea, many of our states are struggling beneath monumental debts.

Also adding pressure to lawmakers to formalize the idea is the fact that a number of Congressmen believe that it won’t be long before a state seeks a federal bailout.…

Many of you already know that in tough financial times, a bankruptcy filing can provide a financial solution for corporations and individuals. But a new type of victim in the ongoing economic crisis is emerging to seek the safe havens and shelters that only bankruptcy can provide: municipalities.

The New York Times is reporting that one Michigan town (Hamtramkc, MI) is running out of money, as well as places to cut their budget, now that the town is turning to slashing funds to board up abandoned houses, clean lots, and now even plow streets in an area where winter snow is as inevitable as death and taxes.…

Bankruptcy is not just for people and businesses. Town, cities and other municipalities can file for court protection from creditors as well.

Historically, city government bankruptcies are rare. However, in one of the worst economic situations in a generation, it has become more common. Almost two years ago, as the recession was really starting to collect steam, the city of Vallejo, CA filed for bankruptcy. The Bay area suburb of San Francisco cited that rapidly diminishing tax revenue and the housing crisis was too much for it to handle. Cities rely on the housing market just like the business world. As values fall and the number of people moving away outpaces the number of those moving in, things become challenging in a hurry.…

Will California become the first US state ever to default on its bonds in 2010? Last year, Governor Arnold Schwarzenegger spent most of the year haggling with the state legislature to try to come up with a balanced budget. In May, they warned they might go bankrupt if federal government help was not forthcoming – the Obama administration declined to help them out and they went back to the drawing board. Last summer, they issued IOUs to some vendors in lieu of checks. As of December 1, the state had almost 84 billion dollars in long term budget debt.

Just last Friday, Schwarzenegger revealed a new state budget that includes an additional 6.9 billion dollars of federal assistance – assistance the federal government has not yet agreed to give.…

The good news is that the California legislature finally passed a budget (including millions of dollars of budget cuts), and, we assume, will no longer be issuing IOU’s to its vendors in lieu of real US dollars. The bad news, is that the state’s financial problems are far from being over and that many of the cuts, not to mention its increasing unemployment rate and mortgage crisis, will affect the quality of people’s lives in the state for many years to come. Unfortunately, more state and local governments around the rest of the country are finding themselves in similar situations: as of February, Illinois was broke, too.…

So bankruptcy filing rates for individuals and businesses are up – way up. They’re expected to hit record levels this year. Indeed, with the recent bankruptcies of GM and Chrysler, we’ve seen some of the biggest filings in U.S. history during this recession. But an even more historic event may be on the horizon: the bankruptcy of the federal government itself.

Well before the auto giants filed bankruptcy, the federal government threw billions and billions in “bailout” money at GM and Chrysler, along with AIG, Citigroup, and other flailing banking industry giants. Then, of course, there’s the crash of the housing market, which has been also very costly to the federal government.…