November 2011

In my last post I discussed the nation’s financial condition, and contrasted national bankruptcy with personal bankruptcy.  In this post I will contrast the nation’s credit rating with personal credit rating.

I.          The Nation’s Credit Rating

Some time ago I wrote “Bankruptcy And Your Retirement Accounts”, in which I talked about the growing problems with retirement funds that had invested in various types of government debt.  I observed that since many states and municipalities had large unfunded obligations on such things as employee pension and medical plans, the quality of some state and municipal bonds as investment vehicles could be headed toward junk bond status.  In passing I referred to the recent downgrading of federal debt.

Well, it looks like a further downgrading of federal debt is in the offing – perhaps even before Christmas.
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If you’re considering filing for bankruptcy protection, you’re not alone.  Large numbers of your fellow citizens are thinking the same thoughts.  And large numbers have already filed for bankruptcy protection this year – I’ll give you the exact number later in this post.  But what about the nation as a whole?  How is it doing?

I.          National Bankruptcy?

In the November 17, 2011 Los Angeles Times Michael A. Memoli reported:

The Treasury Department confirmed this week that the national debt has surpassed $15 trillion – that’s 15, followed by 12 zeros . . .

A little more than a week earlier, in the November 7, 2011 Los Angeles Times, Mr. Memoli reported:

The federal government recorded a $1.3-trillion budget deficit in the 2011 fiscal year, roughly even with the previous year’s shortfall.

What does this mean?
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When the foreclosure sale looms large, filing for bankruptcy protection prior to the sale date is probably the only smart move. It avoids the unpleasant post-foreclosure sale tax hit, and frees you from owing the bank anything.

Those of you who have followed these posts for a while know that I have predicted a new wave of residential and commercial foreclosures. I stand by that prediction, the residential portion of which has just been bolstered by a recent article by Don Lee in the Los Angeles Times:
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