Bankruptcy for Blockbusters?
March 3, 2009 | Leave a Comment
Another key High Street name, Blockbuster, is the latest casualty of the credit crunch and recession. Whilst, understandably, unwilling to comment, it appears that Blockbusters is exploring bankruptcy.
Edward Woo, Wedbush Morgan Securities, said: “Blockbuster has been facing some liquidity issues for a while now and this is one of the options they have. It’s not a great one.
“I don’t think it’s going to result in a liquidation like Circuit City, but if you’re doing business with them, it’s not a great thing,” he said.
Like many key retail businesses in the current financial crisis (Woolworths being another notable example), Blockbusters has been trying to re-invent itself in order to reduce the negative impact of online dvd and video game sales upon their business. With many online rental schemes available in the U.S and U.K it has become harder to encourage as many customers to come out to choose and return their films when they can now rely on the convenience of a postal rental service at an often lower cost.
Beating businesses down on price is the name of the game for consumers now faced with greater choices…especially during a recession. Let’s hope that Blockbusters find an alternative to bankruptcy as a way forward out of their liquidity issues.
Credit Card Debt – Are You Risking Bankruptcy?
November 2, 2008 | Leave a Comment
Why do people use credit cards at a level to risk bankruptcy?
Credit card debt is one of the main reasons why private individuals end up in bankruptcy. Coupled with the negative equity many homeowners now have during the credit crunch and recession, risks of bankruptcy are running higher than ever. Temptation towards excessive use or credit cards can be high as household bills soar and the money needs to come from somewhere to pay the mortgage and the bills. In times of despondancy during recession, retail therapy is also a common behaviour racking up further credit card debt. Debt resolution becomes an increasing concern.
How might using credit cards in this way lead to bankruptcy?
It is not a real solution, though, as excessive borrowing on credit – often from multiple lenders- makes more room for error on remembering repayments on time as well as keeping track of just how much those debts are costing you each month in total. Before long, it is common to find that the expense of those credit card bills is exceeding that of the household bills you were struggling with. Where will the money come from then? More debt means one step closer to bankruptcy.
How can I use credit cards wisely then?
It is always best to keep to a maximum of 2 to 3 credit cards. This is part of good financial management enabling easy monitoring of debt levels and not having so many payment deadlines in a month that you might forget some.
The main reason for bankruptcy in America and the U.K. is credit card debt. Households have developed the habit of paying off household expenses using credit cards day by day instead of using cash or checks.
As the credit crunch and recession start to bite deep, those with existing credit cards are relying on using credit to pay for food and heat and light. Essentially they are paying for these things with money that they do not have coming in….eventually the credit train will hit the buffers if this behaviour does not change and bankruptcy will inevitably follow.
How can credit card behaviours be changed?
There is little doubt that the media and company advertisers try to make out that we are old fashioned or something is wrong if people don’t use plastic (credit cards) instead of cash or checks. Never underestimate the power of advertising! Infact it is those paying with money that they actually have that will have the last laugh as they understand just how far that money will stretch each month and adjust their spending choices accordingly.
It takes nerves of steel to change deeply ingrained spending habits. Credit card statements show what you have available to spend before what you owe on your statement. Similarly, bank teller machines often state what you have available to spend instead of the actual amount in the bank plus the overdraft available to you should you choose to borrow on it.
Communication of information in this way leads people to behave as if they actually have the money that is available to them instead of it being available to them to borrow. It makes the lenders and credit cards companies richer whilst leading the borrower one step closer to the bankruptcy courts.
Remember, as the the level of your credit card uses takes you closer and closer to only making the minimum payment on you card statements each month, the time it will take to pay it all off will extend hugely. With a credit card debt of $5K, it will take 382 months to pay off your debt with the minimum repayment each month (assuming no further use of the card in the meantime. Meanwhile, that debt is costing you $7,300 in interest alone making a total to repay of $12,300 for $5000 debt.
Suddenly we start to see how that $150 pair of shoes you fancy treating yourself to on your credit card will ultimately cost you a total of $369 by the time you have paid off the interest of $219 (at current rates on them) over nearly 32 years. Suddenly they sound less appealing don’t they? They sure must be comfy to spend that much…yet across the land, people are making similar spending decisions daily that are leaving them in bondage to debt!
So what about the future of credit cards in the current economic climate?
Nobody could fail to notice the struggle that our economy is facing. With redundancies increasing, real estate prices falling and household bills rising it is imperative to get you financial house in order before there is a sudden change in you life circumstances that could lead you towards bankruptcy.
- If at all possible, in the current climate, change high interest credit cards into lower interest cards….this will increase the debt busting power of your dollar.
- Try to double the minumum credit card payment each month to really start clearing that debt.
- Avoid using your credit cards when at all possible. Leave them at home so you have to return for it in order to use it. In that cooling off period you may decide you did not really need to make the purchase after all.
- Do not use your credit card for household bills or food purchases.
- If you really are in debt too deep to get out on your own, go for debt counselling and make sure that you stick to the budget they set for you otherwise you will be heading straight to the bankruptcy courts.
If you really can’t face sitting down with a stranger and going through your financial situation, there are packages available for debt resolution that will help you to develop your own strategy to get out of debt in 3 – 5 years….completely….now that sound better than nearly 32 years the way things are looking now doesn’t it? This resource pack for eliminating debt is entirely legal and workable without needing to involve anyone else except your creditors themselves. Click on the link to find out more.
