With the unemployment rate flirting with 10%, personal and commercial bankruptcy filings are again spiking higher and are projected to reach 1.5 million this year, according to a USA Today report June 4.

Personal bankruptcy filings occurred 6,020 times a day last month, not quite as bad as the 2 million filings in 2005, but startlingly higher than 2008’s 1.1 million. Corporate bankruptcies are occurring at the rate of 376 a day, compared to 255 a day in May 2008.

According to USA Today, Nevada, Michigan and California had the largest increase in bankruptcy filings per capita last month, higher than anywhere else in the nation. (Think real estate bust and ailing car makers.)

Bankruptcy laws were rejiggered in 2005 to reduce abuse of the system and make it harder for individuals to file for bankruptcy. But rising joblessness is putting the squeeze on many families, who then follow a predictable downward spiral of exhausting savings, depleting retirement accounts and turning to credit cards to pay the bills before resorting to the worst-case scenario — bankruptcy.

What’s the best defense?  Follow these strategies to protect yourself if you fear a job layoff could happen to you.

Consumers are still stubbornly clinging onto their hard-earned dollars, so much so that marketers of many national brands are working harder than ever to convince consumers it’s still worth parting with them.

Procter & Gamble, the New York Times reports, plans to selectively reduce prices on brands it believes are perceived as being expensive compared to its rivals.  But it will also try to position its products as being a better value. 

Consumers, we’re told, are looking more closely at the spread in prices for different brands offering the same product and making individual choices about what’s best for them — the dirt-cheap brand, the middle-of-the-road brand or the premium brand.

As the Times pointed out, “value” means different things to different people, and people may differ in their willingness to pay a premium for value for certain purchases.

It reminds me of the old L’Oreal hair coloring commercials that justified the higher price with the tagline, “Why? Because I’m worth it.”

Some might insist on paying more for good-quality clothing, while for others it’s a top-of-the-line plasma TV. I guess it really comes down to personal priorities and what’s important to you.

 Are there certain high-end brands you’re still willing to pay extra for, or has the recession put all things on the table?

We’ve all heard the ads from companies that claim they can help you settle your outstanding debts for far less than what you really owe. But as with most things that seem too good to be true, it turns out that these claims are too.

Many consumers who find themselves trapped by debt are lured by these advertised promises to reduce your debt burden, sometimes by up to 75 percent. In return, the companies require an upfront fee. However, these fees can turn out to be rather large, depending on the size of the debt, and with payments required in advance, there’s little incentive for the companies to follow through on their promises.

Now, New York Attorney General Andrew Cuomo is calling many of these debt-settlement companies out on their empty promises and shady practices.  He’s subpoenaed fee-structure records from 14 debt-settlement companies and one law firm.

“Today, millions of hardworking Americans are finding themselves imprisoned by debt. In response, a rouge industry has stepped in, offering consumers false hope, charging tremendous fees, and leaving them in a worse financial situation,” Cuomo said in a statement to the press.

But consumers need to take responsibility to protect themselves before getting involved with disreputable companies in the first place. The best way to protect yourself: Read the fine print! Know what you’re getting into before you agree to anything or pay one penny.

Attorney Gail Hillebrand told MarketWatch that consumers should steer clear of any company that requires payment upfront. She also warns consumers to avoid doing business with companies that tell customers to stop paying off their debts while the company is in the negotiation process. If you stop paying, she says, you’re only setting yourself up for harassing phone calls from collection agencies and the very real possibility of lawsuits — not to mention significant damage to your credit score.

Instead, Hillebrand says you should contact creditors directly to see if you can work out a payment plan before you’re in too deep. Credit counseling is another avenue to explore before jumping on board with one of these for-hire companies, because it has the least impact on your credit rating.

While the 30-year fixed rate mortgage loan has long been the traditional choice of homebuyers, recent data show a growing trend by home shoppers to opt for a 15-year mortgage.

The number of 15-year mortgages rose by 43% in February compared to the previous month; in dollar terms, 15-year mortgage loans more than doubled from February to March, and this pattern is expected to continue amid the current refinancing boom. 

What’s the allure of the 15-year mortgage? Homebuyers may be experiencing a growing abhorrence of debt, understandable in the current recession, and want to pay off their debt as quickly as possible. That’s a good thing, because it sets the stage for disciplined mortgage holders to enjoy their retirement days free of mortgage debt.

Still, the 15-year mortgage is not a slam-dunk decision for everyone, since 15-year mortgages will command significantly higher monthly payments compared to a 30-year loan at the same interest rate. In the long run, though, the 15-year mortgage holder would pay $194,000 less in interest over the life of a $400,000 mortgage than on a 30-year loan, according to a New York Times story on the subject.

In the New York Times example, a borrower taking out a $400,000, 15-year loan at 4.375% would have monthly payments of about $3,034 a month, compared to about $2,056 a month on a $400,000, 30-year fixed-rate loan at 4.625%.

Taking on the higher interest payments of a 15-year mortgage also carries added risk should you lose your income. Indeed, some economists predict we’ll soon see a “third wave” of foreclosures as many of those with good credit and prime loans lose their jobs. (The first wave was foreclosures induced by speculators, and the second wave occurred when low-interest introductory rates expired and the rates shot higher, resulting in prohibitively expensive monthly payments.) 

That’s why it puzzles me to see consumers willingly take on such added risk in a climate of continued high unemployment.  There’s a perfectly workable alternative that allows them to pay off their mortgage as quickly as they could with a 15-year mortgage — but without the greater burden they’d face if they were laid off.

Simply take out a 30-year mortgage, but make the higher payments you would make as if it were a 15-year loan. This way, you have the flexibility of stopping the higher payments in the event you lose your income; when your income returns to normal, you can resume the higher payments. The only shortcoming here is that you won’t benefit from the lower interest rate associated with a shorter-term loan. Still, assuming you held onto your job for the duration and that you have the discipline to continue the higher payments, you’d succeed in paying off your loan in just 15 years, with built-in flexibility and safeguards. (Just make sure there are no pre-payment penalties in your loan contract.)

In the end, it’s an individual decision that balances the value of the savings you’d gain from the lower rate of a 15-year loan versus your confidence in your job security and how things would go if you lost your job.  It’s your call.

Have you ever considered why you bank with Chase or Bank of America instead of your local community bank or credit union?

Now might be a good time to reconsider your banking habits, since we keep hearing how lending has dried up at many of the big banks. According to a recent New York Times story, the nation’s 8,500 community banks have plenty of money to lend and are itching to supply borrowers with needed cash, if only they could find them.

What’s the big difference between a bank like Citigroup, the world’s largest financial services network, and your local savings and loan? For one thing, community banks have come out on the other side of the recession in pretty good shape. That’s because they mostly steered clear of such exotic financial instruments as loan securitizations and credit-default swaps and instead stuck to the basics.

Consider the philosophy of Rusty Cloutier, CEO of Lafayette, Louisiana’s MidSouth Bank, as told by the New York Times:

Cloutier says he believe his job as a banker is to know who runs a business well and thus may survive a downturn. Community banks are well equipped to make that kind of judgment because, as clichéd as it sounds, they really do know their customers. “If a guy owes you seven or eight million dollars, you better know everything there is to know about him,” Cloutier [said]. Cloutier knows scores of people just from coaching local basketball, baseball and football teams. Like most community banks, MidSouth sponsors a long list of organizations and causes; the shelves in Cloutier’s office are lined with awards from civic organizations. And because community banks often sit on the board of nonprofits and local businesses, they know their local industries.

The mega banks, on the other hand, make loan determinations based on mathematical models and mainly measure creditworthiness based on income and a look at the consumer’s credit score.

Why do consumers continue to bank with lenders who accepted billions in taxpayer bailout dollars after their greed and widespread abandonment of standard lending standards dismantled the global monetary system? Many of these same banks are now trying to bilk yet more money from responsible credit card borrowers before more consumer-friendly laws go into effect next year.

As the Times points out, the five largest American banks (that would be J.P. Morgan Chase, Bank of America, Citibank, Wachovia, and Wells Fargo) control 40% of all deposits, yet community banks still make 43% of all small business loans under $1 million. Significantly, less than 1% of all community banks have failed since January 2008.

Simon Johnson, a former chief economist at the International Monetary Fund, said our financial system would be healthier if we abandoned the mega banks in favor of a network of regional banks and community banks, the Times reported.

Meanwhile, back in Lafayette, Louisiana, Mr. Cloutier says that “trying to make a loan today is like trying to feed my 7-month-old grandson green peas.”

All I can say is that if we all act like sheep, we’ll continue to be led around by a halter and collar. Let’s connect the dots between what we read about in the news and how it affects our everyday financial lives. Then let’s decide not to condone or contribute to the mess that big banks have gotten us in by continuing to give them our business, whether it’s in the form of a loan, checking account or credit card.

A lot of things about Texas are big. In terms of landmass, it’s the largest state in the contiguous U.S., second only to Alaska overall. It’s also the second-largest state in terms of population, after California. The Texas economy is also out-sized, with leading oil, biomedical research, aerospace and information technology companies headquartered there.

Texas is also “big” in terms of tuition rate hikes at its state colleges and universities. Those schools have increased their tuition costs by 89% during the past six years, according to ConsumerAffairs.com.

Texas legislators recently said enough’s enough. State senators approved a bill that would limit tuition and fee hikes to 5%. But they would only mandate the 5% limit at those schools where tuition and fees were above the state median.

State lawmakers had established tuition rates at state universities in the past, but as their ability to provide monetary support to the schools dwindled in recent years, they decided to let state schools set their own rates so they could make up for the lack of support from the state.

Many would argue that, when left to its own devices, the state university system in Texas, as elsewhere, went overboard.

Are rate increases at state-funded universities in your state within reason, or rising by leaps and bounds?

A truly great bargain offers an unforgettable experience. I still bask in the glow of getting a designer dress originally priced at over $400 for a mere $52 — and that was over four years ago. But ask anyone — male or female — to recall their all-time best bargain, and within seconds they’ll proudly describe the details of their steal. (In a quick, unscientific survey, four out of five men were able to tell me all about their “deal of a lifetime.” I’m willing to bet the fifth’s girlfriend must do all of the shopping.)

Surprisingly, or perhaps not so surprisingly in this economic climate, one man’s first response was “my house,” and another said “my car.” We’ve been hearing for a while that now is the time to act on a new home purchase if you can afford it. There’s a lot of inventory out there, and many sellers are willing to make a deal — not to mention foreclosure and short-sale bargains. Now it appears that car dealers are backed into the same “must-sell” corner and willing to do what it takes to move overstocked inventory, including selling cars for less than what they paid the factory.

According to MarketWatch, dealers “were selling about 25% of all 2009 model cars below cost” by March 2009.

While I have to appreciate the amazing deals that means for consumers, I also find it somewhat bittersweet. It’s certainly a huge advantage for car-shoppers to score a new car at such a discount, but it’s also another indication of the sad state of the economy. Dealers willing to lose money just to get cars off their lots present staggering economic implications.

When gasoline was priced over $4 per gallon last summer, Toyota dealers couldn’t keep their prized gasoline-electric hybrid Prius models in stock. Consumers were calling dibs before the cars even arrived on the lots and paid thousands over sticker price just to get behind the wheel of these fuel-saving machines. Fast-forward almost a year: Gas prices have dropped by 40 percent, the economy is ailing (to say the least), and those formerly coveted hybrids are sitting on lots with no where to go, even with the energy efficiency tax credits available.

I’d like to think it’s the economy — not apathy towards the environment following lowered gas prices — that’s stalled hybrid sales. But regardless of why, the facts remain the same: The cars simply aren’t selling.

And here’s an interesting illustration of supply and demand: Last July, eager car-buyers were paying up to $4,000 above sticker price to own a 2009 Prius. Today, you can get that same 2009 Prius for $4,000 BELOW dealer cost in some cases.

So if you’re able to cash in on incredible savings, it seems now is the time to do so. Be sure to head to the dealership educated and ready to negotiate, and you too could drive off with the deal of a lifetime.

Debt collectors, never known for their soft touch, have apparently ratcheted up their offensive tactics (pun intended) once again. An agency in Phoenix, Arizona, called Auto Financing Network (AFN), bullied one delinquent borrower by creating a website using her name as the URL and pronouncing that she hadn’t paid the loan for her Chevy Cavalier.

When the owner missed a payment, the company repossessed the car, informing the owner they were able to do so quickly because they’d hidden a GPS tracking device on the vehicle.

According to the TPMMuckraker’s account of the story, the borrower was apparently able to regain possession of the car after making a payment. But a few months later, when she fell behind on payments again, the company created a website using the borrower’s name with the title, “Jennifer Dicks isn’t paying for her Cavalier!”

AFN President Michael Fischer then began a series of dozens of defamatory and harassing text messages saying things like “I wish you died when you fell off the roof” and calling the borrower a “loser” and “f****** retarded,” said the TPMMuckraker story.

According to AFN’s website, the company’s top three priorities for 2008 are “#1 Treat customer right; #2 Treat customer right. #3 Treat customer right.”

Ms. Dicks has retaliated with a lawsuit.

Have you had an experience — good or bad — with debt collectors?

If you’ve ever missed a car payment — or two — you may have been flirting with car repossession.

For car owners, vehicle repossession can be a stressful, confrontational and even violent experience. Recent accounts have reported on one 67-year-old retiree being shot and killed after confronting a repo man and two helpers who sought to reclaim his vehicle in the wee hours of the morning.

Now, a New Jersey auto finance company is using technology that makes car repossession unnecessary. By inserting a small device inside the vehicle, South Jersey Auto Finance of Glassboro simply transmits a cellular signal to the device remotely to disable the starter. The signal is activated after three days of nonpayment.

In an interview with National Public Radio, General Manager Mark Barr explained that while the newest devices transmit no advance warning of an imminent shutdown, customers are made aware of the device at the time they purchase the car. All of the company’s customers are considered high-risk borrowers, so all vehicles are outfitted with the device.

“Contractually, we have 10 days before charging a late fee, but we’re not looking for a late fee, we just want timely payments,” Barr said. Out of a little more than thousand accounts, Barr said, about 10 or 15 vehicle ignitions are disabled every week due to nonpayment of loans.

Is the recession wearing thin on you? Are you tired of scraping by on unemployment benefits, worrying about your 401(k) balance, feeling stuck because you can’t sell your house or wondering how in the world you’ll finance your next car purchase? Or worse?

Amidst your many immediate worries, hearken back to how this all started — a red-hot real estate market where big banks made big money through their willingness to disregard standard lending practices and substitute poor judgment for credit checks. These Wild West business deals led to high mortgage default rates and subsequent foreclosures that exposed widespread weaknesses in financial industry regulations and ultimately train-wrecked the global financial system.

If you’re looking for someone to throw a dart at, why not put your money where your mouth is and stop doing business with those most responsible for the mess we’re in? There are plenty of healthy regional banks or credit unions that largely steered clear of subprime lending, mortgage-backed securities and other questionable practices, and they’d dearly love your business.

The Center for Public Integrity recently released The Subprime 25, a black list of the top 25 subprime lenders and their Wall Street backers who were responsible for nearly $1 trillion in subprime loans — that’s 7.2 million high-interest loans — made from 2005 through 2007.

“Together, the companies account for about 72% of high-priced loans reported to the government at the peak of the subprime market. Securities created from subprime loans have been blamed for the economic collapse from which the world’s economies have yet to recover,” the report says.

While 20 of the top 25 companies have been sold, closed or stopped lending (I still remain uneasy about employees of these companies simply migrating elsewhere), five of The Subprime 25 remain in business.

#8-ranked Wells Fargo Financial:

Total high-interest loans, 2005-2007: At least $51.8 billion

CEO John G. Stumpf’s 2008 salary: $878,920; $13,782,433 in total compensation

Federal bailout money received: $25 billion

#12-ranked Chase Home Finance (the consumer lending unit of JPMorgan Chase):

Total high-interest loans 2005-2007: At least $30 billion

CEO James Dimon’s 2008 salary: $1,000,000; $19,651,556 in total compensation

Federal bailout money received: $25 billion. JPMorgan also benefitted when the Federal Reserve Bank of New York guaranteed against losses $29 billion in shaky Bear Stearns assets, clearing the way for the company’s sale.

#15-ranked CitiFinancial (part of Citigroup)

Total high-interest loans, 2005-2007: At least $26.3 billion

CEO Vikram Pandit’s 2008 salary: $958,333; $10,815,263 in total compensation

Federal bailout money received: $45 billion in direct investment and federal guarantees on $306 billion in assets

Settlements over lending practices:

2002: Citigroup agreed to pay $215 million to settle Federal Trade Commission charges that Associates First Capital Corp., before it was acquired by Citigroup in 2000, had practiced systematic, widespread, deceptive and abusive lending.

2004: CitiFinancial was hit by a $70 million civil penalty by the Federal Reserve for subprime lending abuses.

#18-ranked American General Finance (part of AIG)

Total high-interest loans, 2005-2007: At least $21.8 billion

Former CEO Martin Sullivan’s 2007 salary: $1,000,000; $14,330,736 in total compensation

Federal bailout money received: $187 billion in federal loans, guarantees and direct investments

Settlements over lending practices:

2007: AIG subsidiaries agreed to pay $128 million after the Office of Thrift Supervision found they ignored borrowers’ credit when making loans and charged excessive broker and lender fees. AIG also agreed to contribute $15 million to financial literacy and credit counseling.

#20-ranked GMAC Financial Services

Total high-interest loans, 2005-2007: At least $17.2 billion

CEO Alvaro G. de Molina’s salary: Not available

Federal bailout money received: In 2008, the Federal Reserve approved GMAC’s request to become a bank holding company so it could obtain a $5 billion investment from the Treasury Department.

Settlements over lending practices:

2004: GMAC-Residential Funding Corp. and other companies agreed to cough up $41 million to settle a federal class-action lawsuit over predatory lending claims.

2005: Homecomings Financial Network Inc. (a GMAC subsidiary) and Fairbanks Capital agreed to forgive $11 million in debt and pay $773,000 in restitution, account credits and refunds to West Virginia homeowners.