Real Estate Bankruptcy

$1.8 Billion Verdict May Mean Rise in Real Estate Bankruptcy

Real estate bankruptcy may be on the rise because on Tuesday the 31^st a lawsuit in Missouri found the National Association of Realtors (NAR) and two brokerage firms (HomeServices of America and Keller Williams) liable for $1.8 billion in damages after it was determined that the NAR was forcing home sellers to pay an inflated commission price that would be split between their agent and the buyer’s agent. According to home sellers, the seller typically offers the broker a set commission, which has hovered at about 5-6% of the sale price of the house. In response, the NAR made a point to say that their commission has always been negotiable, the jury’s decision shows that they agreed with the sellers on this issue. The NAR reports that they do not expect the income of real estate agents to change anytime soon as they are looking to appeal the verdict and are speculating that the issue won’t be resolved for years.

Long Term Impact

In the long term, it is likely we will see a dissipation of the practice of pairing the buyer’s and seller’s agent commissions. This will make the cost of housing lower as the commission cost is often bundled into the price of the home. The major concern is that buying a house is already a confusing process for most consumers and adding the negotiation of seller commission to the laundry list of housing costs will dissuade consumers from buying houses altogether.

Effect on Real Estate Agents

There is a chance this will mean bankruptcy. According to the NAR, the average salary of Real Estate Agents in America in 2022 was $56,400, a small raise from the year previous. This lawsuit may mean real detriments to the income of Real Estate Agents across America though, as the NAR is a country-wide representative. The average real estate agent sells just 12 homes a year, meaning they make around $4,700 per home currently. If this lawsuit is upheld, they could be looking at significant cuts in their income. According to the US courts, the median income of someone filing for bankruptcy is $35,736, or $2,978 a month. This means that if Real Estate Agents see just a 37% cut in their income, they will soon be seriously looking at bankruptcy as an option.

If you are a realtor in need of relief or simply just a regular person caught up by the turbulent real estate market, contact The Law Offices of Dax J. Miller, LLC today.

For all of your bankruptcy needs please contact us today.

November 9, 2023/by Dax Miller

Uncategorized

Bankruptcy Filings Returning to Normal

During the pandemic, bankruptcy filings dropped, mainly due to economic relief programs granted during the shutdown. Now that the economy is improving and bankruptcy filings are “returning to normal”, additional struggles from the pandemic are appearing.

As the federal aid ended, households and businesses alike began to feel the financial strain of the pandemic hit. Bankruptcy filings have since increased in the post-pandemic years, trending upwards each month in 2023. Households are feeling the effects of the economy trying to stabilize after the shutdown, between higher interest rates, inflation, and businesses closing affecting the job market. Though pandemic relief helped keep many households afloat, the absence of these programs has caused distress in both businesses and consumers.

Effects on Businesses

Businesses such as Bed Bath and Beyond, Party City, Rite Aid, and others are closing their doors, all taking to bankruptcy as the economy still attempts to stabilize after the pandemic. While businesses received some relief during the pandemic, it seems in the absence of these programs businesses are struggling to return to pre-pandemic status. With many larger businesses closing, it raises concerns about the employment rates.

Post-pandemic unemployment rates have been on a downward trend in recent months, however with the uptick in filings it seems many Americans may be looking for work again. Major corporations have struggled since resuming work after the pandemic, from issues in shipping supplies to strikes forcing businesses to lay off workers or shut down, creating additional hardships for consumers who are now struggling without a steady income.

Effects on consumers

Many consumers took out credit cards or other personal loans to help during the pandemic. With deferment periods now ending, it seems many consumers are faced with an unsurmountable amount of debt. Household debt owed coupled with the high cost of goods and services with inflation has financially hindered many consumers. The Federal Reserve has raised interest rates 11 times since last year. This has caused lenders to tighten their purses and forced consumers to agree to unmanageable interest rates, plunging them further into debt.

This effect can be seen when comparing pre-pandemic filings to more current years. In 2019 there were 777,940 filings across all chapters for the year. In 2020, filings dropped 30%. Filings continued a downward trend in both 2021 and 2022. However, in 2023 filings were up 17% in the first half of the year alone. This number is anticipated to continue to rise throughout the end of the year as the number of consumers struggle to regain financial freedom in a post-pandemic world. Bankruptcy filings returning to normal is only the start of the economy’s return to to the status quo.

If you are reading this article and find that it speaks to your financial situation, contact us today.

October 29, 2023/by Dax Miller

Uncategorized

Increased Bankruptcy Filings Due to Debt Surge

Debt Surge Leads to Increased Bankruptcy Filings

Credit card and loan payment delinquencies are experiencing an upward trend, posing significant challenges for consumers in Atlanta, Georgia. While some individuals may continue to meet the minimum payment requirements on their loans, the mounting interest and growing balances are becoming increasingly burdensome leading to increased bankruptcy filings. Furthermore, securing new loans has become a formidable challenge, as lenders are adopting a cautious stance. This shift is leading to a reluctance among lenders to extend new lines of credit or personal loans to help individuals manage their debts, trapping consumers in high debt balances with little respite in sight.

High Interest Rates Contribute to Increased Bankruptcy Filings

The Federal Reserve (the “Fed”) has been proactively addressing the surge in inflation rates. However, the consequences of these efforts are acutely felt by those striving to regain their financial stability in the post-pandemic landscape. In March 2022, the Fed raised the benchmark borrowing rate for the first time since 2018, and in July 2023, they elevated it to the highest level in 22 years. These actions have incentivized savings at the expense of lending, causing financial institutions to curtail lending activities. Consequently, consumers are facing challenges in obtaining loans or lines of credit and are encountering elevated interest rates across various consumer loan types, including auto loans and mortgages. Furthermore, this change in lending dynamics is dampening consumer demand and their ability to spend, contributing to the slowdown in economic growth.

Beyond the effects of higher interest rates and reduced lending, unemployment rates remain volatile. Before the pandemic, unemployment rates were approximately three percent. However, by May 2020, they had skyrocketed to nearly fourteen percent. Although post-pandemic unemployment rates have declined significantly, as of August 2023, the unemployment rate remains at its highest level since early 2022. Many Americans continue to struggle to secure full-time employment and often resort to multiple part-time jobs or face unemployment altogether.

Credit Card Balances Reaching Record Highs

While some credit card companies provided relief during the pandemic, credit cards and loans have become a significant source of hardship for most consumers in the post-pandemic era. The average credit card interest rate has reached a record high, currently standing at 20.6 percent. Traditional banks and credit unions have shown reluctance in extending lines of credit and conventional loans. This downturn is exacerbating the difficulties consumers face in finding financial relief without accumulating substantial additional debt.

Household debt has surged by $16 billion in just the second quarter of 2023, with credit card balances growing by $45 billion, partly due to utilization and partly due to the challenging task of reducing balances given the high interest rates. Auto loan debt has increased by $20 billion, reflecting the elevated value of vehicles since the pandemic.

On average, the typical American consumer carries around $21,800 in personal debt, with a significant portion attributed to credit cards and car loans. Recent economic trends suggest that these numbers are likely to rise further. Many available debt relief programs recommend debt consolidation loans. However, consumers are grappling with the same issue of high interest rates and stringent lending restrictions imposed by financial institutions.

Answer May Lie in Bankruptcy

Genuine Relief Filing for bankruptcy offers consumers the opportunity to discharge a portion or all of their debts while safeguarding their assets and seeking to repay non-discharged debts. Bankruptcy enables consumers to achieve genuine debt relief immediately upon filing, accompanied by a federal injunction that halts debt collection phone calls, letters, and negative credit reporting. In just a matter of months, bankruptcy can provide consumers with a fresh start.

We invite you to schedule a complimentary phone consultation with our office to explore how bankruptcy can offer you a pathway to financial recovery. Click here to book your appointment today.

October 24, 2023/by Dax Miller