As a search engine optimization specialist, I often run acrosssearch engines of different sorts than most people are aware of.This week I stumbled across a free site that is used by journal-ists to do background checks and fact checking on sources of news stories. I am also an advocate for personal and financial privacy and find privacy invasion particularly offensive, so this searchengine offends me.
The http://www.pretrieve.com/ Free Public Record Search Engine - Person Search is an example of the databasification of all public records. It's instructive to take a look at the results of a search for yourself in this free people search engine that is apparently used often by journalists. The linked page above takes you to the site home page which is a form allowing you to search for a person, business, address or phone number and the results pages can be frightening.
The results are listed as questions on the Pretrieve.com site in a row of tabs labeled "Property Info, Criminal, Court, Professional, Local Info, Miscellaneous" and the "Criminal" tab (Criminal) inserts your name or that of the person you are searching for in each possible source of criminal information under a link labeled "Registered Sex Offender Search" then a question with the searched name and state inserted: "Is anyone named (your name here) a registered sex offender in "your state here"? If you searched for your own name, it appears in that frightening position and startles you quite handily.
The arrangement of tabs with criminal info first must be done for the dramatic effect it has on what would otherwise be a rather mundane search of bland information. But when I went ahead and pressed that frightening link, I got a gratifying "no information could be found" result page. Whew! Then again on the link leading to the "Federal Inmate Search" I got a gratifying "Sorry. No Inmate Named (Your name here) Race: unspecified Sex: unspecified found." on the new window launched on the Federal "Bureau of Prisons" site search.
Since I write frequently online, there are hundreds of sources of information on me available in one of the results tabs labled "professional", I was happy to see that my occupation was correctly listed as "Search Engine Optimization Specialist" with sources coming mainly from resource boxes of my articles appearing across the web.
The interface of the Pretrieve.com result page also links you to organizations that have published information about you and fills in the name information, going directly to a search on the name entered at the new site. The interface of Pretrieve.com links you to their sources by launching new windows at different web sites and prepopulating the search forms with the name and state info.
The "professional" affiliations are tracked by a site called "Eliyon.com Business People Search" where links to web mentions are tied to the byline of my articles. Seems their forte is finding business mentions to connect with names. OK. But I was surprised to see that one company that I work with was incorrectly listed as being in Northern California, when they are in fact in Southern California. Oh, and they incorrectly named, but correctly linked to the web site of that company.
This type of error is probably common in online databases and is one of the biggest problems with this type of data aggregation. It is not kept current or accurate by all sources and there are others with the same name, etc. There is a prominent link on theEliyon.com site labeled "Log in to Update your Profile" or theDidn't find yourself? Add your profile!" link is ridiculous. Why give them info they don't have so they give it to everyone else?
The Property Info tab is truly offensive as it gives you a link to the county tax assessors office record of any property owned by someone you've searched for. Plus their home address, square footage of their house, how much it is worth and amount of taxes owed on it. Oh, and phone number, street address, zip code.
The multiple other options take you to financial records such asbankruptcy filings, political contributions, defaulted loans and dozens of other possible financial records you don't want theworld to see. Why is this acceptable - and the bigger question - why is this legal?
A very interesting note comes from the Pretrieve.com privacy page where they make this curious statement: "It may seem contrary for a company dedicated to making public information more easily accessible to be an ardent supporter of information privacy, but the fact is we take information privacy rights extremely seriously. We believe public information should be open and made available to everyone as adamantly as we believe private information should remain private."
But doesn't making all sources of public information easily available, make possible private information easily available along with it? Actually, this only applies to informaiton directly available on the pretrieve site, which is nothing other than your computer and connection info as they don't require registration to use their service. They do place cookies on your hard drive so the site will not work if you turn off that option in your browser. The information business seems to be full of contradictions.
http://www.articlebin.com/view-You_Cannot_Hide_From_Public_Record_Search_Engines-805.html
Tuesday, September 4, 2007
Corporate Insolvency Laws in India
With the globalisation of the Indian economy, the sphere of Corporate Insolvency Laws has widened collosally.
With the globalisation of economy, the issues relating to corporate insolvency have assumed greater significance and a need has been felt for long for bringing about reforms in this branch of law. Moreover, with the Indian economy having been opened up for investment by foreign creditors and, internationally, the Indian corporate also making investments in companies outside, the realm of cross-border insolvency law has multiplied colossally.
In the year 1999, the Government of India set up a High Level Committee headed by Justice V.B. Balakrishna Eradi,[2] a superannuated Judge of Supreme Court of India for remodeling the existing laws relating to insolvency and winding up of companies and bringing them in time with the international practices in this field.
Recommendations of the Committee
The Committee recommended that:
* The jurisdiction, power and authority relating to winding up of companies should be vested in a National Company Law Tribunal which should be vested with the functions and power with regard to rehabilitation and revival of sick industrial companies, a mandate presently entrusted with BIFR under SICA.
* The 1956 Act should be suitably amended to take the power away from High Court and the transfer of the pending winding up proceedings to the Tribunal.
* The adoption of the international trend in law relating to corporate bankruptcy, namely, sell the assets first as quickly as possible, and relegate to a later stage the adjudication of claims and distribution of proceeds.
* An in depth assessment of the office of Official Liquidators, in view of inadequate and incompetent manpower and absence of latest office equipments and technologies.
* A liquidation Committee consisting of creditors of the company on the lines of Section 141 of the Insolvency Act, 1986 of UK[3] be set up to assist the Liquidator.
* The repeal of SICA and recommended the ameliorative, revival and reconstructionist procedures obtaining under it to be reintegrated in a suitably amended form in the structure of the 1956 Act except that there is no stand still provision like Section 22 of SICA.
* Part VII of the Companies Act, 1956 should incorporate a new substantive provision to adopt the UNCITRAL Model Law[4] as approved by the United Nations and the Model Law itself may be incorporated as a Schedule to the Companies Act, 1956, which shall apply to all cases of Cross-Border insolvency.
* Adopt the necessary principles enunciated under the heading "Legal Framework", "Orderly and Effective Insolvency Procedures – Key issues", [5] to bring the provisions of the Companies Act, 1956 in line with international practices.
The Committee completed its work and submitted its report to the Central Government in the year 2000.In August 2001, the Companies (Amendment) Bill, 2001 and the Sick Industrial Companies (Special Provisions) Repeal Bill, 2001 were introduced in the Parliament of India.
The Bills, if passed in their present form will bring the curtains down on the Sick Industrial Companies (Special Provisions) Act, 1985 and will restructure the Companies Act, 1956 in a big way leading to the new regime of tackling corporate rescue and insolvency procedures in India with a view to creating confidence in the minds of investors, creditors, labour and shareholders.
Scheme of Insolvency Laws
The stream of insolvency laws can be segregated chiefly under two heads: Personal Insolvency, which deals with individuals and partnership firms governed by Provisional Insolvency Act, 1920 and Presidency Towns Insolvency Act, 1908 and Corporate Insolvency, whose consequence is winding up of the company under the Companies Act, 1956.
In the process of liberalization, deregulation and adopting market economy, India is experiencing a massive growth of retail loans to individuals, housing loans and credit card users. On account of phenomenal rise in retail lending it will be necessary in the near future to give a re-look at the personal insolvency laws to ensure that any insolvency proceedings against individuals are also expeditiously decided.
However, the basic tenets of corporate insolvency can be classified as: restoring the debtor company to profitable trading where it is practicable; to maximize the return to creditors as a whole where the company itself cannot be saved; to establish a fair and equitable system for the ranking of claims and the distribution of assets among creditors, involving a redistribution of rights; and to provide a mechanism by which the causes of failure can be identified and those guilty of mismanagement brought to book; placement of the assets of the company under external control; substitution of collective action for individual pursuits; avoidance of certain transactions and fraudulent conveyances, dissolution and winding up etc.
In context of corporate laws, the word “insolvency†has neither been used nor defined. However, Section 433 (e) covers a company, which is “unable to pay its debtsâ€, and thus constitutes a ground for winding up of the company. Inability to pay its debts would be a case where, a company's entire capital is lost in heavy losses and no accounts are prepared and filed and no business is done for one year. In such circumstances, the Registrar of Companies makes out a case of inability to pay debts. These debts however, would only include debts, incurred after the legal incorporation of the Company. Inability to pay debts has even been amplified in Section 434 wherein, a creditor with a due of Rs. 500 [6] or more serves a demand by registered post and the company neglects to pay, secure or compound the same in 3 weeks, in cases where the execution of a decree returned unsatisfied and also where the Court is otherwise satisfied that the company is unable to pay its debts.
Sick Industrial Companies
A sick industrial company means an industrial company (being a company registered for not less than five years and employing fifty or above workmen), which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth.[7] Net worth has been defined as the sum total of the paid up capital and free reserves.[8]
Sick Industrial Companies Act requires that when an industrial company has become a sick industrial company, the Board of Directors of the said company shall, within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which a company has become a sick industrial company, make a reference to the Board for Industrial and Financial Reconstruction for determination of the measures which shall be adopted with respect to the company. However, if the Board of Directors has sufficient reasons even before finalisation of accounts to form an opinion that the company has become a sick industrial company, it shall, within sixty days after it has formed such an opinion, make a reference to the BIFR.[9]
Moreover, SICA is basically and predominantly remedial and ameliorative in so far as it empowers the quasi judicial body, Board for Industrial and Financial Reconstruction to make appropriate measures for revival and rehabilitation of potentially viable sick industrial companies and for liquidation of non-viable companies. But, where the BIFR comes to the conclusion that it is not possible to revive the company and that it is just and equitable that the company should be wound up, it shall record and forward its opinion to the concerned High Court, on the basis of which the Court, may order winding up of the company and may proceed and cause to proceed with the winding up of the sick industrial company in accordance with the provisions of the Companies Act, 1956.[10]
If a corporate debtor is in difficulty it is likely that he would approach the senior lenders for some rehabilitation, waiver of compound or penal interest, funding of the interest dues on a zero coupon rate or at concessional terms. It would prepare a scheme of arrangement or rehabilitation plan with the assistance of experts or an advisor, which it would submit, to the senior lenders.
RBI has police guidelines for revival of sick industrial companies and the role to be played by lead institutions or Operating Agencies appointed by the SICA for reviving industries declared to be sick under SICA. When a lender appoints an outside expert, the Court of the Board for Industrial & Financial Reconstruction (BIFR) would normally have to intervene to render help to such expert or advisor to collect information on an unrestricted basis. Depending upon the extent of the industrial sickness and the accumulated arrears or losses, it is likely that the records of the company would be in disarray. In such circumstances reconstruction of accounts on the basis of actual transactions is laborious and difficult to achieve. Large accounting firms render costly services and lenders are wary of appointing high cost expensive services in a rehabilitation scheme. Usually the lenders, if they are public financial institutions rely upon their own in-house expertise and staffing to ferret information.
Under the provisions of Companies Act, 1956,[11] several measures have been prescribed for revival of a company. Even in the case of non-scheduled industries, not governed by Schedule I of the Industries (Development and Regulation) Act, 1951 and consequently, under the SICA; the provisions of Section 391 & 394 of the Companies Act for proposing a scheme of rehabilitation and reconstruction is normally recoursed.
Institutional Machinery
High Court is the Court of proper jurisdiction for handling winding up proceedings and power sought to be transferred to the NCLT with the onset of reforms by way of a proposed Bill. The official liquidator is the liquidator in compulsory winding up. Where a winding up order has been made or where a Provisional Liquidator has been appointed, the Liquidator shall take into his custody or under his control all the property, effects and actionable claims to which the company is or appears to be entitled. All the property and effects of the company shall be deemed to be in the custody of the Court as from the date of the order for the winding up of the company.[12] The Creditor’s Committee on inspection may be appointed .In relation to corporate insolvency, the official liquidator as an officer of the Court or the Court receiver as an officer of the Court are dealing with insolvency related procedures.
Pursuit of Individual Claims
In the sphere of insolvency laws in India, where all the suits are stayed on making of the winding up order, parties may pursue individual claims in certain circumstances.
* Winding up procedure implies all personal rights be converted into right to prove debt in winding up.
* Under section 446, stay on all suits and the winding up Court to decide all suits by or against the company.
* A secured creditor may enforce security interest without a suit and therefore, real rights of secured creditors are protected.
* Criminal proceedings or proceedings against directors or officers are not stayed.
* Income tax proceedings will continue against the liquidator.
The Stacking Order of Priorities
The debts due as workmen’s dues and the claims of the secured creditors sacrificed to workmen have an overriding preferential claim or priority to all debts.[13] The debts payable shall be paid in full unless the assets are insufficient to meet them in which case they shall abate in equal proportions.
In the dying stages of winding up proceedings, there is stacking of priorities running from the secured creditors from out of their assets securing their claims, subject to the pari passu claims of the workmen, further, the costs and expenses of winding up under Section 530 (6), then, the preferential creditors under Section 530 (1), the floating charge holders and the unsecured creditors.
There are other statutory preferential payments for taxes, revenues and cesses, wages or salary for past due prior to winding up or for period not exceeding 4 months when there is a continuing employment for the beneficial winding up and for provident fund, pension and other claims.[14]
Rules of insolvency for valuation of annuities and contingent liabilities as are prescribed by the Provincial Insolvency Act and the Presidency Town Insolvency Act continue to apply.
Also, any transfer of property, delivery of goods, payment, execution or other act relating to the property made, taken or done by or against the company within 6 months prior to commencement of winding up be deemed a fraudulent preference.[15]
Compromises & Arrangements
Apart from the lengthy and time consuming winding up procedure, all the companies liable to be wound up under the Companies Act may resort to the alternative of compromise or arrangement. The Court may make orders to enforce these remedies[16] and where a meeting of creditors or class of creditors or members or any class of members is called upon, certain disclosures shall be made. The orders passed by the Courts include transfer of property to another company and to facilitate amalgamation, merger and demergers. Even reduction of capital to the extent that the capital is lost, or capital is in surplus is permitted.
An Analysis
The institution of BIFR has hardly satisfied the call for revival and rehabilitation of sick industrial undertakings and SICA has proved to be a complete failure. The lenders i.e. the banks and financial institutions, find SICA to be the biggest obstacle on their road map to recovery of dues. The existing legal framework of corporate insolvency faces several follies, which may be rectified once the proposed amendments are notified in the Official Gazette.
Procedural delays
There are inherent defects both, procedural and legal in proceedings before BIFR. The BIFR takes nearly one year to determine whether a company is sick. Thereafter, it takes around one year to formulate revival strategy. Consideration of the same also takes substantial time since banks and financial institutions have their own hierarchy in decision making, leading to avoidable delays. The decisions by the banks are also neither transparent, nor subject to judicial review. By the time decisions are taken and communicated, the plan, which had been conceived, has lost its viability resulting in failure of revival schemes even after sanction.
Lack of timely commencement of proceedings
Under the existing law, a company can approach the BIFR for adopting steps for its revival, on erosion of its entire net worth. The erosion of entire net worth is too late a stage to attempt restructuring as by the time the net worth is eroded the company is too sick to be revived and has lost its resilience to restructure and revive itself.
Poor enforcement mechanism
The mechanism for its implementation is so poor that violations take place fearlessly leaving no fear for law. The misuse of the said forum in making an entry by manipulating must be curbed by strict penal consequences for such misuse, which should be demonstrably used to ensure that no entity attempts to misuse these provisions. However, this aspect and solution to this problem has to be found out in the proposed legislation.
Misuse of protection against recovery proceedings
Under SICA, an automatic stay operates against all kind of recovery and distress proceedings against all creditors once the reference filed by the company is registered. This is the principal drawback of the existing legislation as this has led to BIFR becoming a haven for defaulting companies. Erring debtors have misused SICA to seek protection and moratorium from recovery proceedings. The companies are able to enter easily into the reference, sometimes by manipulating their accounts to reflect net worth erosion and are then able to attract immunity against the recovery action by the creditors and this benefit is then attempted to be perpetuated. Registration of reference is dependent upon the erosion of net worth and this can be achieved by accounting manipulations. The provisions for suspension of legal proceedings are misused and perpetuated.
This problem arises due to the fact that unscrupulous promoters enter into the process of rehabilitation by manipulating sickness; take undue benefits arising out of delay in decision making of BIFR. If the reference is rejected, a fresh reference is filed with respect to accounts for the next year and the cycle goes on endlessly. There is no fear of reprisal or punitive action against the companies indulging in this malpractice.
Lack of extra territorial jurisdiction
Indian insolvency laws do not have any extra-territorial jurisdiction, nor do they recognize the jurisdiction of foreign courts in respect of branches of foreign banks operating in India. Therefore, if a foreign company is taken into liquidation outside India, its Indian business will be treated as a separate matter and will not be automatically affected unless an application is filed before an insolvency Court for winding up of its branches in India.
The recommendations of the Eradi Committee have been translated into the Companies (Amendment) Bill, 2001 and the Sick Industrial Companies (Special Provisions) Repeal Bill, 2001 to mend these defects in the existing laws and the end result being tribunalization of justice. The Companies (Amendment) Bill, 2001 proposes amendment of Article 323B of the Constitution of India and provisions of Part VII of the Companies Act, 1956 for setting up of a National Company Law Tribunal (NCLT) and its Appellate Tribunal. The Bill proposes repeal of SICA and abolition of Company Law Board.
Though tribunalisation of justice is now a recognised trend, the India’s experiences with Tribunals have nothing to boast about. They have largely failed to serve the purpose with which they are set up. NCLT would be burdened with workload of enormous magnitude and in the process would be likely to lose focus on revival and rehabilitation of sick entities. Lastly, the misuse of the said forum in making an entry by manipulating/feigning sickness must be curbed by strict penal consequences for such misuse, which should be demonstrably used to ensure that no entity attempts to misuse these provisions. However, this aspect and solution to this problem has to be found out in the proposed legislation.
At present the Government is considering the adoption of UNCITRAL Model Law on Cross-Border Insolvency to meet the demands of globalisation of economy and to deal with international insolvency. This will radically change the orientation of Indian law and make it suitable for dealing with the challenges arising from globalisation and increasing integration of Indian economy with the world economy.
“The increasing incidence of cross-border insolvencies reflects the continuing global expansion of trade and investment. However, national insolvency laws have by and large not kept pace with the trend, and they are often ill equipped to deal with cases of a cross-border nature. This frequently results in inadequate and inharmonious legal approaches, which hamper the rescue of financially troubled businesses, are not conducive to fair and efficient administration of cross-border insolvencies, impede the protection of the assets of the insolvent debtor against dissipation, and hinder maximisation of the value of those assets.â€[17]
While drafting the substantive and procedural rules of bankruptcy, international standards for both national and cross-border insolvency should be taken into consideration which, based on Indian situation, should be suitably incorporated.
http://www.articlebin.com/view-Corporate_Insolvency_Laws_in_India-1767.html
With the globalisation of economy, the issues relating to corporate insolvency have assumed greater significance and a need has been felt for long for bringing about reforms in this branch of law. Moreover, with the Indian economy having been opened up for investment by foreign creditors and, internationally, the Indian corporate also making investments in companies outside, the realm of cross-border insolvency law has multiplied colossally.
In the year 1999, the Government of India set up a High Level Committee headed by Justice V.B. Balakrishna Eradi,[2] a superannuated Judge of Supreme Court of India for remodeling the existing laws relating to insolvency and winding up of companies and bringing them in time with the international practices in this field.
Recommendations of the Committee
The Committee recommended that:
* The jurisdiction, power and authority relating to winding up of companies should be vested in a National Company Law Tribunal which should be vested with the functions and power with regard to rehabilitation and revival of sick industrial companies, a mandate presently entrusted with BIFR under SICA.
* The 1956 Act should be suitably amended to take the power away from High Court and the transfer of the pending winding up proceedings to the Tribunal.
* The adoption of the international trend in law relating to corporate bankruptcy, namely, sell the assets first as quickly as possible, and relegate to a later stage the adjudication of claims and distribution of proceeds.
* An in depth assessment of the office of Official Liquidators, in view of inadequate and incompetent manpower and absence of latest office equipments and technologies.
* A liquidation Committee consisting of creditors of the company on the lines of Section 141 of the Insolvency Act, 1986 of UK[3] be set up to assist the Liquidator.
* The repeal of SICA and recommended the ameliorative, revival and reconstructionist procedures obtaining under it to be reintegrated in a suitably amended form in the structure of the 1956 Act except that there is no stand still provision like Section 22 of SICA.
* Part VII of the Companies Act, 1956 should incorporate a new substantive provision to adopt the UNCITRAL Model Law[4] as approved by the United Nations and the Model Law itself may be incorporated as a Schedule to the Companies Act, 1956, which shall apply to all cases of Cross-Border insolvency.
* Adopt the necessary principles enunciated under the heading "Legal Framework", "Orderly and Effective Insolvency Procedures – Key issues", [5] to bring the provisions of the Companies Act, 1956 in line with international practices.
The Committee completed its work and submitted its report to the Central Government in the year 2000.In August 2001, the Companies (Amendment) Bill, 2001 and the Sick Industrial Companies (Special Provisions) Repeal Bill, 2001 were introduced in the Parliament of India.
The Bills, if passed in their present form will bring the curtains down on the Sick Industrial Companies (Special Provisions) Act, 1985 and will restructure the Companies Act, 1956 in a big way leading to the new regime of tackling corporate rescue and insolvency procedures in India with a view to creating confidence in the minds of investors, creditors, labour and shareholders.
Scheme of Insolvency Laws
The stream of insolvency laws can be segregated chiefly under two heads: Personal Insolvency, which deals with individuals and partnership firms governed by Provisional Insolvency Act, 1920 and Presidency Towns Insolvency Act, 1908 and Corporate Insolvency, whose consequence is winding up of the company under the Companies Act, 1956.
In the process of liberalization, deregulation and adopting market economy, India is experiencing a massive growth of retail loans to individuals, housing loans and credit card users. On account of phenomenal rise in retail lending it will be necessary in the near future to give a re-look at the personal insolvency laws to ensure that any insolvency proceedings against individuals are also expeditiously decided.
However, the basic tenets of corporate insolvency can be classified as: restoring the debtor company to profitable trading where it is practicable; to maximize the return to creditors as a whole where the company itself cannot be saved; to establish a fair and equitable system for the ranking of claims and the distribution of assets among creditors, involving a redistribution of rights; and to provide a mechanism by which the causes of failure can be identified and those guilty of mismanagement brought to book; placement of the assets of the company under external control; substitution of collective action for individual pursuits; avoidance of certain transactions and fraudulent conveyances, dissolution and winding up etc.
In context of corporate laws, the word “insolvency†has neither been used nor defined. However, Section 433 (e) covers a company, which is “unable to pay its debtsâ€, and thus constitutes a ground for winding up of the company. Inability to pay its debts would be a case where, a company's entire capital is lost in heavy losses and no accounts are prepared and filed and no business is done for one year. In such circumstances, the Registrar of Companies makes out a case of inability to pay debts. These debts however, would only include debts, incurred after the legal incorporation of the Company. Inability to pay debts has even been amplified in Section 434 wherein, a creditor with a due of Rs. 500 [6] or more serves a demand by registered post and the company neglects to pay, secure or compound the same in 3 weeks, in cases where the execution of a decree returned unsatisfied and also where the Court is otherwise satisfied that the company is unable to pay its debts.
Sick Industrial Companies
A sick industrial company means an industrial company (being a company registered for not less than five years and employing fifty or above workmen), which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth.[7] Net worth has been defined as the sum total of the paid up capital and free reserves.[8]
Sick Industrial Companies Act requires that when an industrial company has become a sick industrial company, the Board of Directors of the said company shall, within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which a company has become a sick industrial company, make a reference to the Board for Industrial and Financial Reconstruction for determination of the measures which shall be adopted with respect to the company. However, if the Board of Directors has sufficient reasons even before finalisation of accounts to form an opinion that the company has become a sick industrial company, it shall, within sixty days after it has formed such an opinion, make a reference to the BIFR.[9]
Moreover, SICA is basically and predominantly remedial and ameliorative in so far as it empowers the quasi judicial body, Board for Industrial and Financial Reconstruction to make appropriate measures for revival and rehabilitation of potentially viable sick industrial companies and for liquidation of non-viable companies. But, where the BIFR comes to the conclusion that it is not possible to revive the company and that it is just and equitable that the company should be wound up, it shall record and forward its opinion to the concerned High Court, on the basis of which the Court, may order winding up of the company and may proceed and cause to proceed with the winding up of the sick industrial company in accordance with the provisions of the Companies Act, 1956.[10]
If a corporate debtor is in difficulty it is likely that he would approach the senior lenders for some rehabilitation, waiver of compound or penal interest, funding of the interest dues on a zero coupon rate or at concessional terms. It would prepare a scheme of arrangement or rehabilitation plan with the assistance of experts or an advisor, which it would submit, to the senior lenders.
RBI has police guidelines for revival of sick industrial companies and the role to be played by lead institutions or Operating Agencies appointed by the SICA for reviving industries declared to be sick under SICA. When a lender appoints an outside expert, the Court of the Board for Industrial & Financial Reconstruction (BIFR) would normally have to intervene to render help to such expert or advisor to collect information on an unrestricted basis. Depending upon the extent of the industrial sickness and the accumulated arrears or losses, it is likely that the records of the company would be in disarray. In such circumstances reconstruction of accounts on the basis of actual transactions is laborious and difficult to achieve. Large accounting firms render costly services and lenders are wary of appointing high cost expensive services in a rehabilitation scheme. Usually the lenders, if they are public financial institutions rely upon their own in-house expertise and staffing to ferret information.
Under the provisions of Companies Act, 1956,[11] several measures have been prescribed for revival of a company. Even in the case of non-scheduled industries, not governed by Schedule I of the Industries (Development and Regulation) Act, 1951 and consequently, under the SICA; the provisions of Section 391 & 394 of the Companies Act for proposing a scheme of rehabilitation and reconstruction is normally recoursed.
Institutional Machinery
High Court is the Court of proper jurisdiction for handling winding up proceedings and power sought to be transferred to the NCLT with the onset of reforms by way of a proposed Bill. The official liquidator is the liquidator in compulsory winding up. Where a winding up order has been made or where a Provisional Liquidator has been appointed, the Liquidator shall take into his custody or under his control all the property, effects and actionable claims to which the company is or appears to be entitled. All the property and effects of the company shall be deemed to be in the custody of the Court as from the date of the order for the winding up of the company.[12] The Creditor’s Committee on inspection may be appointed .In relation to corporate insolvency, the official liquidator as an officer of the Court or the Court receiver as an officer of the Court are dealing with insolvency related procedures.
Pursuit of Individual Claims
In the sphere of insolvency laws in India, where all the suits are stayed on making of the winding up order, parties may pursue individual claims in certain circumstances.
* Winding up procedure implies all personal rights be converted into right to prove debt in winding up.
* Under section 446, stay on all suits and the winding up Court to decide all suits by or against the company.
* A secured creditor may enforce security interest without a suit and therefore, real rights of secured creditors are protected.
* Criminal proceedings or proceedings against directors or officers are not stayed.
* Income tax proceedings will continue against the liquidator.
The Stacking Order of Priorities
The debts due as workmen’s dues and the claims of the secured creditors sacrificed to workmen have an overriding preferential claim or priority to all debts.[13] The debts payable shall be paid in full unless the assets are insufficient to meet them in which case they shall abate in equal proportions.
In the dying stages of winding up proceedings, there is stacking of priorities running from the secured creditors from out of their assets securing their claims, subject to the pari passu claims of the workmen, further, the costs and expenses of winding up under Section 530 (6), then, the preferential creditors under Section 530 (1), the floating charge holders and the unsecured creditors.
There are other statutory preferential payments for taxes, revenues and cesses, wages or salary for past due prior to winding up or for period not exceeding 4 months when there is a continuing employment for the beneficial winding up and for provident fund, pension and other claims.[14]
Rules of insolvency for valuation of annuities and contingent liabilities as are prescribed by the Provincial Insolvency Act and the Presidency Town Insolvency Act continue to apply.
Also, any transfer of property, delivery of goods, payment, execution or other act relating to the property made, taken or done by or against the company within 6 months prior to commencement of winding up be deemed a fraudulent preference.[15]
Compromises & Arrangements
Apart from the lengthy and time consuming winding up procedure, all the companies liable to be wound up under the Companies Act may resort to the alternative of compromise or arrangement. The Court may make orders to enforce these remedies[16] and where a meeting of creditors or class of creditors or members or any class of members is called upon, certain disclosures shall be made. The orders passed by the Courts include transfer of property to another company and to facilitate amalgamation, merger and demergers. Even reduction of capital to the extent that the capital is lost, or capital is in surplus is permitted.
An Analysis
The institution of BIFR has hardly satisfied the call for revival and rehabilitation of sick industrial undertakings and SICA has proved to be a complete failure. The lenders i.e. the banks and financial institutions, find SICA to be the biggest obstacle on their road map to recovery of dues. The existing legal framework of corporate insolvency faces several follies, which may be rectified once the proposed amendments are notified in the Official Gazette.
Procedural delays
There are inherent defects both, procedural and legal in proceedings before BIFR. The BIFR takes nearly one year to determine whether a company is sick. Thereafter, it takes around one year to formulate revival strategy. Consideration of the same also takes substantial time since banks and financial institutions have their own hierarchy in decision making, leading to avoidable delays. The decisions by the banks are also neither transparent, nor subject to judicial review. By the time decisions are taken and communicated, the plan, which had been conceived, has lost its viability resulting in failure of revival schemes even after sanction.
Lack of timely commencement of proceedings
Under the existing law, a company can approach the BIFR for adopting steps for its revival, on erosion of its entire net worth. The erosion of entire net worth is too late a stage to attempt restructuring as by the time the net worth is eroded the company is too sick to be revived and has lost its resilience to restructure and revive itself.
Poor enforcement mechanism
The mechanism for its implementation is so poor that violations take place fearlessly leaving no fear for law. The misuse of the said forum in making an entry by manipulating must be curbed by strict penal consequences for such misuse, which should be demonstrably used to ensure that no entity attempts to misuse these provisions. However, this aspect and solution to this problem has to be found out in the proposed legislation.
Misuse of protection against recovery proceedings
Under SICA, an automatic stay operates against all kind of recovery and distress proceedings against all creditors once the reference filed by the company is registered. This is the principal drawback of the existing legislation as this has led to BIFR becoming a haven for defaulting companies. Erring debtors have misused SICA to seek protection and moratorium from recovery proceedings. The companies are able to enter easily into the reference, sometimes by manipulating their accounts to reflect net worth erosion and are then able to attract immunity against the recovery action by the creditors and this benefit is then attempted to be perpetuated. Registration of reference is dependent upon the erosion of net worth and this can be achieved by accounting manipulations. The provisions for suspension of legal proceedings are misused and perpetuated.
This problem arises due to the fact that unscrupulous promoters enter into the process of rehabilitation by manipulating sickness; take undue benefits arising out of delay in decision making of BIFR. If the reference is rejected, a fresh reference is filed with respect to accounts for the next year and the cycle goes on endlessly. There is no fear of reprisal or punitive action against the companies indulging in this malpractice.
Lack of extra territorial jurisdiction
Indian insolvency laws do not have any extra-territorial jurisdiction, nor do they recognize the jurisdiction of foreign courts in respect of branches of foreign banks operating in India. Therefore, if a foreign company is taken into liquidation outside India, its Indian business will be treated as a separate matter and will not be automatically affected unless an application is filed before an insolvency Court for winding up of its branches in India.
The recommendations of the Eradi Committee have been translated into the Companies (Amendment) Bill, 2001 and the Sick Industrial Companies (Special Provisions) Repeal Bill, 2001 to mend these defects in the existing laws and the end result being tribunalization of justice. The Companies (Amendment) Bill, 2001 proposes amendment of Article 323B of the Constitution of India and provisions of Part VII of the Companies Act, 1956 for setting up of a National Company Law Tribunal (NCLT) and its Appellate Tribunal. The Bill proposes repeal of SICA and abolition of Company Law Board.
Though tribunalisation of justice is now a recognised trend, the India’s experiences with Tribunals have nothing to boast about. They have largely failed to serve the purpose with which they are set up. NCLT would be burdened with workload of enormous magnitude and in the process would be likely to lose focus on revival and rehabilitation of sick entities. Lastly, the misuse of the said forum in making an entry by manipulating/feigning sickness must be curbed by strict penal consequences for such misuse, which should be demonstrably used to ensure that no entity attempts to misuse these provisions. However, this aspect and solution to this problem has to be found out in the proposed legislation.
At present the Government is considering the adoption of UNCITRAL Model Law on Cross-Border Insolvency to meet the demands of globalisation of economy and to deal with international insolvency. This will radically change the orientation of Indian law and make it suitable for dealing with the challenges arising from globalisation and increasing integration of Indian economy with the world economy.
“The increasing incidence of cross-border insolvencies reflects the continuing global expansion of trade and investment. However, national insolvency laws have by and large not kept pace with the trend, and they are often ill equipped to deal with cases of a cross-border nature. This frequently results in inadequate and inharmonious legal approaches, which hamper the rescue of financially troubled businesses, are not conducive to fair and efficient administration of cross-border insolvencies, impede the protection of the assets of the insolvent debtor against dissipation, and hinder maximisation of the value of those assets.â€[17]
While drafting the substantive and procedural rules of bankruptcy, international standards for both national and cross-border insolvency should be taken into consideration which, based on Indian situation, should be suitably incorporated.
http://www.articlebin.com/view-Corporate_Insolvency_Laws_in_India-1767.html
Finding the Success in Failure
Failure does not exist at higher levels of awareness. Failure is experienced when the mind is focused on the physical life and present circumstances.
Thomas Edison succeeded with the invention of the light bulb by eliminating all the things that didn't work-more than a 1000 so called failures. Walt Disney created Disney Land from bankruptcy by successfully visiting over 400 banks before he found one that would lend him the money.
Neither one of these men focused on failure-in fact their minds were not focused in the physical world. Both of them had a dream and their minds were focused in the imagination where failure does not exist. It is a wonderful place where we have 100% control over the outcome, anything is possible and there are no limitations. If we stay focused we will always succeed. The so called failure comes from interpretation of the images into physical life and the failures are simply a process of elimination-taking away what does not work to get to what does work.
From the position of the silent observer (a place of quiet reflection), all steps you have taken lead you to this moment of awareness. From this place of observation there are just moments of success in the knowingness of all things are as they should be. What you perceive as failures are steps towards success. It is when you let go of the notion you have failed you will have found success. Your life can never be a failure-it always reflects your own thoughts. Even if you consider yourself a failure, you will find success in that belief. Your physical life will always demonstrate accurately what you believe. You can demonstrate what a failure looks like and be successful at it.
If you consider yourself a successful failure then it is relatively easy to move to another place. You have already arrived at where you said you now are. You were successful at getting there-at that moment of realization you can let go and begin to be successful at something else.
In your search for a certain grocery item, you stop into a store and do not find it-are you a failure or did you just make a poor choice. How would you know the store did not have the item you were searching for unless you stopped in-do you give up? You stop into three other stores and do not find what you are looking for, but you found two other items you have been searching for for months-is the trip a failure? Finally at the last stop you run into an old friend you have lost contact with-he invites you out to lunch and you order a dish which just happens to be made from the grocery item you were looking for.
Was this your original intension? From the place of the ego it would be a failure-you still didn't find the grocery item you set out to find in the form you desired. The truth is (your root thought) you wanted to consume it. If you let go of the thought of failure and look back on the events you will see your intentions worked out perfectly-in fact you got more than the ego bargained for. When you work from a higher level of consciousness you will know things always work out favorably-intention brings opportunity which brings success. You may have forgotten certain aspects of what you desired, but opportunity in time brings them all together in place-the right time and place.
Even when success is not immediate, you will get what you desire as long as you maintain the power of intention. Your intention will bring what you desire when the opportunity for its greatest rewards are ready for manifestation. We often consider our failure when we try to control our success. To be truly successful at creating, you must allow the spirit to create it without the interference of your mind-know that it will happen and it will. The creation process itself is too complicated for the physical mind to comprehend. The only thing you need to know are the three steps-thought, word, and deed. Imagine what you desire, declare it is what you wish to create and know you have it. That is so simply, yet it is too complicated for most conscious minds to comprehend. Most people when told of this process will first consider the failure of it-and it is what they will experience. It's just too simple, nothing works like that, they will snap their fingers and say-"see, I told you."
With practice one will be able to snap ones fingers and create on demand-once you let go of the notion you cannot. Your history texts and holy scripts are full of these stories. In hind site you will find these experiences in your own life. The only other thing getting in your way of this kind of success is your belief you "do not deserve" and somebody else does. This you will also experience successfully.
The universe is perfect, what you consider to be your creator is perfect, therefore the systems which are in place-the natural laws are perfect. Humanity comes into conflict with them because he does not understand the perfection. All things are created from mind, therefore all things are possible-you are mind-all things you imagine are possible unless you believe they are not.
Seven years ago I went bankrupt from a successful business. I lost sight of my success and refocused on poverty as the way of obtaining spiritual enlightenment-stupid move-you don't have to be poor to be spiritually aware. However, it was the path I chose. One of the greatest motivators of any belief system is it can be demonstrated that it works and brings you all that you desire.
In hindsight I can plainly see all things worked together to bring me the success I am enjoying today. I went from digging out coins in the phone both returns to buy supper-to publishing my first printed book this year. The book is now distributed in six difference countries and it's only the beginning. I have finished my next book and have started on the third-there are seven more to come. I had no writing experience when I started and the process has been a great learning experience and a lot of hard work.
As much as I have learned spiritually in the last seven years, I still have years of negativity to overcome or let go of. The system has clearly worked for me and it is observable. The only limitations to what I can create come from the years of being told I cannot have anything that I desire-but mostly from the fear of failure.
When I started out on my spiritual quest I let go of any thoughts of what I was experiencing as being "crazy" or "insane." I was, and still am willing to go there if it is what it takes. My books, ebooks and articles and now my work shops are filled with these thoughts that for many are controversial, pushing the limits, or for some just plain blasphemous.
From what may have appeared as failure come new insights, and new awareness I have always shared with others. The failure was not as it seemed at all-what I have achieved could not have been accomplished any other way. All turns brought me to this place I now find myself in. This does not exclude me from life, but brings me closer to it, to its magnificence and perfection. Once again I am reminded of the Buddhist saying, "Before enlightenment comes chopping wood and carrying water-after enlightenment comes chopping wood and carrying water." There are no failures in life unless you believe there are. All failures are successful steps leading to something better. Once you have obtained failure, success is the next step.
In every step you call failure are the seeds to your next success. Learn to see all the things you do in your lifetime as successful, and success is all you will experience. Failure is just a word-it is how you experience it that makes the difference. Even people who demonstrate abundance and success have failed if what they have created has not brought them what they truly desired. It is simply a demonstration of what they have chosen to manifest success. It may be a process of elimination and not an end unto itself.
It is not possible to accurately judge the choices of others-what appears failure to one is actually success in progress to another. Self judgment is worse than any judgment declared by another because it is personal and you believe it. Judgment by another is simply a demonstration of personal thoughts and is not your truth. Judgment is never a correct observation of any circumstance.
Failure is merely success in motion-learn to accept it, and know it is leading to something better.
http://www.articlebin.com/view-Finding_the_Success_in_Failure-36780.html
Thomas Edison succeeded with the invention of the light bulb by eliminating all the things that didn't work-more than a 1000 so called failures. Walt Disney created Disney Land from bankruptcy by successfully visiting over 400 banks before he found one that would lend him the money.
Neither one of these men focused on failure-in fact their minds were not focused in the physical world. Both of them had a dream and their minds were focused in the imagination where failure does not exist. It is a wonderful place where we have 100% control over the outcome, anything is possible and there are no limitations. If we stay focused we will always succeed. The so called failure comes from interpretation of the images into physical life and the failures are simply a process of elimination-taking away what does not work to get to what does work.
From the position of the silent observer (a place of quiet reflection), all steps you have taken lead you to this moment of awareness. From this place of observation there are just moments of success in the knowingness of all things are as they should be. What you perceive as failures are steps towards success. It is when you let go of the notion you have failed you will have found success. Your life can never be a failure-it always reflects your own thoughts. Even if you consider yourself a failure, you will find success in that belief. Your physical life will always demonstrate accurately what you believe. You can demonstrate what a failure looks like and be successful at it.
If you consider yourself a successful failure then it is relatively easy to move to another place. You have already arrived at where you said you now are. You were successful at getting there-at that moment of realization you can let go and begin to be successful at something else.
In your search for a certain grocery item, you stop into a store and do not find it-are you a failure or did you just make a poor choice. How would you know the store did not have the item you were searching for unless you stopped in-do you give up? You stop into three other stores and do not find what you are looking for, but you found two other items you have been searching for for months-is the trip a failure? Finally at the last stop you run into an old friend you have lost contact with-he invites you out to lunch and you order a dish which just happens to be made from the grocery item you were looking for.
Was this your original intension? From the place of the ego it would be a failure-you still didn't find the grocery item you set out to find in the form you desired. The truth is (your root thought) you wanted to consume it. If you let go of the thought of failure and look back on the events you will see your intentions worked out perfectly-in fact you got more than the ego bargained for. When you work from a higher level of consciousness you will know things always work out favorably-intention brings opportunity which brings success. You may have forgotten certain aspects of what you desired, but opportunity in time brings them all together in place-the right time and place.
Even when success is not immediate, you will get what you desire as long as you maintain the power of intention. Your intention will bring what you desire when the opportunity for its greatest rewards are ready for manifestation. We often consider our failure when we try to control our success. To be truly successful at creating, you must allow the spirit to create it without the interference of your mind-know that it will happen and it will. The creation process itself is too complicated for the physical mind to comprehend. The only thing you need to know are the three steps-thought, word, and deed. Imagine what you desire, declare it is what you wish to create and know you have it. That is so simply, yet it is too complicated for most conscious minds to comprehend. Most people when told of this process will first consider the failure of it-and it is what they will experience. It's just too simple, nothing works like that, they will snap their fingers and say-"see, I told you."
With practice one will be able to snap ones fingers and create on demand-once you let go of the notion you cannot. Your history texts and holy scripts are full of these stories. In hind site you will find these experiences in your own life. The only other thing getting in your way of this kind of success is your belief you "do not deserve" and somebody else does. This you will also experience successfully.
The universe is perfect, what you consider to be your creator is perfect, therefore the systems which are in place-the natural laws are perfect. Humanity comes into conflict with them because he does not understand the perfection. All things are created from mind, therefore all things are possible-you are mind-all things you imagine are possible unless you believe they are not.
Seven years ago I went bankrupt from a successful business. I lost sight of my success and refocused on poverty as the way of obtaining spiritual enlightenment-stupid move-you don't have to be poor to be spiritually aware. However, it was the path I chose. One of the greatest motivators of any belief system is it can be demonstrated that it works and brings you all that you desire.
In hindsight I can plainly see all things worked together to bring me the success I am enjoying today. I went from digging out coins in the phone both returns to buy supper-to publishing my first printed book this year. The book is now distributed in six difference countries and it's only the beginning. I have finished my next book and have started on the third-there are seven more to come. I had no writing experience when I started and the process has been a great learning experience and a lot of hard work.
As much as I have learned spiritually in the last seven years, I still have years of negativity to overcome or let go of. The system has clearly worked for me and it is observable. The only limitations to what I can create come from the years of being told I cannot have anything that I desire-but mostly from the fear of failure.
When I started out on my spiritual quest I let go of any thoughts of what I was experiencing as being "crazy" or "insane." I was, and still am willing to go there if it is what it takes. My books, ebooks and articles and now my work shops are filled with these thoughts that for many are controversial, pushing the limits, or for some just plain blasphemous.
From what may have appeared as failure come new insights, and new awareness I have always shared with others. The failure was not as it seemed at all-what I have achieved could not have been accomplished any other way. All turns brought me to this place I now find myself in. This does not exclude me from life, but brings me closer to it, to its magnificence and perfection. Once again I am reminded of the Buddhist saying, "Before enlightenment comes chopping wood and carrying water-after enlightenment comes chopping wood and carrying water." There are no failures in life unless you believe there are. All failures are successful steps leading to something better. Once you have obtained failure, success is the next step.
In every step you call failure are the seeds to your next success. Learn to see all the things you do in your lifetime as successful, and success is all you will experience. Failure is just a word-it is how you experience it that makes the difference. Even people who demonstrate abundance and success have failed if what they have created has not brought them what they truly desired. It is simply a demonstration of what they have chosen to manifest success. It may be a process of elimination and not an end unto itself.
It is not possible to accurately judge the choices of others-what appears failure to one is actually success in progress to another. Self judgment is worse than any judgment declared by another because it is personal and you believe it. Judgment by another is simply a demonstration of personal thoughts and is not your truth. Judgment is never a correct observation of any circumstance.
Failure is merely success in motion-learn to accept it, and know it is leading to something better.
http://www.articlebin.com/view-Finding_the_Success_in_Failure-36780.html
Divorce, Debt & Credit... Facts you need to know
Before a divorce, during, and after getting a divorce you need to concern yourself with credit... credit establishment, credit files and credit scores. Though divorce and credit is a concern for both men and woman, woman tend to have the greater credit difficulty due to societal standards. Therefore, I encourage woman of any age or marital status to learn as much as possible from this and other articles.
But for all men and woman, essential credit and financial matters must be addressed when contemplating a divorce in order for either and/or both parties to fiscally survive. Even if legally divorced, until finances are divorced, there is still a partnership as will soon be apparent.
Here are some key points concerning credit that should be dealt with.
Joint Accounts - Joint Responsibility
The Federal Trade commission says: "If you're considering divorce or separation, pay special attention to the status of your credit accounts. If you maintain joint accounts during this time, it's important to make regular payments so your credit record won't suffer. As long as there's an outstanding balance on a joint account, you and your spouse are responsible for it."
If you divorce, you may want to close joint accounts or accounts in which your former spouse was an authorized user. Ask the creditor to convert these accounts to individual accounts.
By law, a creditor cannot close a joint account because of a change in marital status, but can do so at the request of either spouse. A creditor, however, does not have to change joint accounts. The creditor can require you to reapply for credit on an individual basis and then, based on your new application, extend or deny you credit. In the case of a mortgage or home equity loan, a lender is likely to require refinancing to remove a spouse from the obligation.
SPECIAL NOTE: any time you open an individual account, you may authorize another person to use it. A creditor who reports (good or bad) credit history to a credit bureau, will report it in the file of any person you have named as "authorized user" as well as your own file.
BEWARE - Defaulting on a Joint Account
Regardless of any court decision, if one joint account holder defaults on a loan, I guarantee the creditor will not care who the court ordered to pay it. The creditor will definitely come after the other joint account holder. Even if declaring bankruptcy, a creditor will make every effort to reclaim their lost revenue or property from the surviving spouse.
Therefore be fully aware that if a creditor does not agree to transfer joint accounts to an individual, then both of you are still responsible for full repayment to the creditor, regardless of how you've agreed to split the bills in the divorce settlement. If a spouse fails to make a payment, a creditor will come after the remaining joint holder, regardless of any divorce agreement. Additionally both joint holders will have negative comments on their credit file regardless of fault.
Experian Offers Tips
Experian says, "There are several ways you can prevent credit obligations from making divorce more difficult - and reestablish your own distinct credit lines after divorce occurs. You may wish to consider the following:
Communicate with your ex-spouse. Make as clean a financial cut as possible.
Communicate with your creditors. Decide which credit belongs to whom, then ask each company and bank that extended you credit to transfer the debt to the name of the person who will be responsible.
During divorce negotiations, keep your joint bills current, even if you ultimately will have no responsibility for the debt. If you don't, your creditors could become more reluctant to release one party from joint liability.
Ask the credit grantor to remove your spouse's name as an authorized user or close the joint account to additional charges.
If your spouse runs up large amounts of debt, you should cancel as many of the accounts as possible. Inform all creditors, in writing, that you are not responsible for these debts. This may not prevent them from trying to collect, but it does show that you attempted to act responsibly.
Upon your divorce settlement, you and your ex-spouse might consider obtaining individual consolidation loans to cover your share of the joint bills. Pay off the joint bills with your individual loans and close all joint accounts. This helps ensure you'll be responsible only for those bills you agreed to pay. It also will help you establish or reestablish credit in your own name. "
Other Points To Ponder
Though critically important for surviving this terrible time, emotions and so many other issues divert attention away from personal credit and its impact. Here then is a checklist and summary for a potential divorce in order to best protect your credit and rating.
1. Get a bank account in your name only.
2. Get at least one unsecured credit card in your name only. At a minimum get a secured credit card but in your name only. (This should occur whether divorcing or not.)
3. Ask to freeze any joint accounts with an outstanding asset or liability (bank, credit card, loans, etc.) so that both signatures are required before any transactions can be made.
4. Notify all creditors in writing (and call them) Document dates and who spoken to:
Have joint accounts closed if a zero balance or if possible have the account placed in the primary responsible party's name only;
Instruct all creditors that you want all authorized users removed except the primary holder;
Inform all creditors you are not responsible for charges from that point on if not in your name.
The primary party may have to re-qualify with the lender. This also means whoever will be responsible for a mortgage will probably have to refinance in order to remove the secondary party's responsibility.
5. Get copies of your 3 credit reports and inform all credit bureaus when the divorce is final. Make every effort to separate your credit file from that of your former spouse.
MyVesta and Divorce.net
MyVesta.org adds the following great suggestions
"Make sure your name is listed on your utility accounts, an item often overlooked by many. When you go to get credit, they often look to see if you have a phone number in your name. If you don't, even if you are listed in the phone book at that number, it can be problematic.
"Before signing the divorce papers, consider one addendum: change of name authorization. Crazy as it seems, many states require your ex-spouse's signature before issuing you a driver's license or other ID in a previous or maiden name. Men who added hyphens during marriage could encounter identity trouble, as well."
Divorce.net offers very fitting final thoughts.
"Your spouse may be in contempt of court for disobeying a court order that requires him [or her] to pay certain bills. However, if you are jointly liable to a creditor as in the case of a mortgage or co-signed credit applications, your spouse’s contempt of court is NO EXCUSE for your non-payment. It simply isn’t a legally sufficient defense to say, “It’s no longer my responsibility because the court ordered my spouse to pay.”
And from yours truly I add this. Until you are financially divorced with your own credit established, you remain tied to your former spouse. Divorce is not the tidy little package some people would like to think it is. It is not simply a matter of walking out one day. Over and above issues of child support and alimony, there are other financial ramifications beyond the emotional ones. The greater the communication at these times on both parts, the less of an impact there will be to both parties and the sooner the final separation will occur.
Communication is critical in a marriage. It is just as critical in a divorce.
http://www.articlebin.com/view-Divorce__Debt__Credit____Facts_you_need_to_know-42895.html
But for all men and woman, essential credit and financial matters must be addressed when contemplating a divorce in order for either and/or both parties to fiscally survive. Even if legally divorced, until finances are divorced, there is still a partnership as will soon be apparent.
Here are some key points concerning credit that should be dealt with.
Joint Accounts - Joint Responsibility
The Federal Trade commission says: "If you're considering divorce or separation, pay special attention to the status of your credit accounts. If you maintain joint accounts during this time, it's important to make regular payments so your credit record won't suffer. As long as there's an outstanding balance on a joint account, you and your spouse are responsible for it."
If you divorce, you may want to close joint accounts or accounts in which your former spouse was an authorized user. Ask the creditor to convert these accounts to individual accounts.
By law, a creditor cannot close a joint account because of a change in marital status, but can do so at the request of either spouse. A creditor, however, does not have to change joint accounts. The creditor can require you to reapply for credit on an individual basis and then, based on your new application, extend or deny you credit. In the case of a mortgage or home equity loan, a lender is likely to require refinancing to remove a spouse from the obligation.
SPECIAL NOTE: any time you open an individual account, you may authorize another person to use it. A creditor who reports (good or bad) credit history to a credit bureau, will report it in the file of any person you have named as "authorized user" as well as your own file.
BEWARE - Defaulting on a Joint Account
Regardless of any court decision, if one joint account holder defaults on a loan, I guarantee the creditor will not care who the court ordered to pay it. The creditor will definitely come after the other joint account holder. Even if declaring bankruptcy, a creditor will make every effort to reclaim their lost revenue or property from the surviving spouse.
Therefore be fully aware that if a creditor does not agree to transfer joint accounts to an individual, then both of you are still responsible for full repayment to the creditor, regardless of how you've agreed to split the bills in the divorce settlement. If a spouse fails to make a payment, a creditor will come after the remaining joint holder, regardless of any divorce agreement. Additionally both joint holders will have negative comments on their credit file regardless of fault.
Experian Offers Tips
Experian says, "There are several ways you can prevent credit obligations from making divorce more difficult - and reestablish your own distinct credit lines after divorce occurs. You may wish to consider the following:
Communicate with your ex-spouse. Make as clean a financial cut as possible.
Communicate with your creditors. Decide which credit belongs to whom, then ask each company and bank that extended you credit to transfer the debt to the name of the person who will be responsible.
During divorce negotiations, keep your joint bills current, even if you ultimately will have no responsibility for the debt. If you don't, your creditors could become more reluctant to release one party from joint liability.
Ask the credit grantor to remove your spouse's name as an authorized user or close the joint account to additional charges.
If your spouse runs up large amounts of debt, you should cancel as many of the accounts as possible. Inform all creditors, in writing, that you are not responsible for these debts. This may not prevent them from trying to collect, but it does show that you attempted to act responsibly.
Upon your divorce settlement, you and your ex-spouse might consider obtaining individual consolidation loans to cover your share of the joint bills. Pay off the joint bills with your individual loans and close all joint accounts. This helps ensure you'll be responsible only for those bills you agreed to pay. It also will help you establish or reestablish credit in your own name. "
Other Points To Ponder
Though critically important for surviving this terrible time, emotions and so many other issues divert attention away from personal credit and its impact. Here then is a checklist and summary for a potential divorce in order to best protect your credit and rating.
1. Get a bank account in your name only.
2. Get at least one unsecured credit card in your name only. At a minimum get a secured credit card but in your name only. (This should occur whether divorcing or not.)
3. Ask to freeze any joint accounts with an outstanding asset or liability (bank, credit card, loans, etc.) so that both signatures are required before any transactions can be made.
4. Notify all creditors in writing (and call them) Document dates and who spoken to:
Have joint accounts closed if a zero balance or if possible have the account placed in the primary responsible party's name only;
Instruct all creditors that you want all authorized users removed except the primary holder;
Inform all creditors you are not responsible for charges from that point on if not in your name.
The primary party may have to re-qualify with the lender. This also means whoever will be responsible for a mortgage will probably have to refinance in order to remove the secondary party's responsibility.
5. Get copies of your 3 credit reports and inform all credit bureaus when the divorce is final. Make every effort to separate your credit file from that of your former spouse.
MyVesta and Divorce.net
MyVesta.org adds the following great suggestions
"Make sure your name is listed on your utility accounts, an item often overlooked by many. When you go to get credit, they often look to see if you have a phone number in your name. If you don't, even if you are listed in the phone book at that number, it can be problematic.
"Before signing the divorce papers, consider one addendum: change of name authorization. Crazy as it seems, many states require your ex-spouse's signature before issuing you a driver's license or other ID in a previous or maiden name. Men who added hyphens during marriage could encounter identity trouble, as well."
Divorce.net offers very fitting final thoughts.
"Your spouse may be in contempt of court for disobeying a court order that requires him [or her] to pay certain bills. However, if you are jointly liable to a creditor as in the case of a mortgage or co-signed credit applications, your spouse’s contempt of court is NO EXCUSE for your non-payment. It simply isn’t a legally sufficient defense to say, “It’s no longer my responsibility because the court ordered my spouse to pay.”
And from yours truly I add this. Until you are financially divorced with your own credit established, you remain tied to your former spouse. Divorce is not the tidy little package some people would like to think it is. It is not simply a matter of walking out one day. Over and above issues of child support and alimony, there are other financial ramifications beyond the emotional ones. The greater the communication at these times on both parts, the less of an impact there will be to both parties and the sooner the final separation will occur.
Communication is critical in a marriage. It is just as critical in a divorce.
http://www.articlebin.com/view-Divorce__Debt__Credit____Facts_you_need_to_know-42895.html
Money Talk or “Debt Us Do Part”
Whether you are thinking of getting married, you are a newly wed, or you are a seasoned couple of marital bliss, you must have a joint talk about debt and credit. Debt communication is simply not an option. This debt and money talk article can open doors of communication and enhance the success of your marriage. In the case of pre marital situations, it may allow you to realize "problems" before they even start.
In David Olson’s 2003 National Survey of Marital Strengths we learn that the average adult spends 80% of waking hours earning, spending, or thinking about money. In a study of 21,501 couples Olson found that 66% indicated indebtedness was one of the top 5 major stumbling blocks to their marriage.
Conversely, he discovered "one of the unique strengths of the majority of happy couples was that they did not have major debt problems." Similarly the Administration office of the US Courts tell us there were 1,661,996 bankruptcies filed in Fiscal Year 2003 (up 7.4 percent from the 1,547,669 filings in Fiscal Year 2002). Bankruptcies have exceeded 1 million filings annually since the early 90's and show no signs of letting up.
All of the above strongly indicates one thing. Far more financial communication must occur in the relationship.
To overcome some of these staggering statistics, I firmly believe each couple has a superior chance of surviving separation and/or divorce because of financial stress, by simply opening the doors of financial communication. I strongly suggest 4 areas of communication for any couple regardless of how long they have been together. But the sooner in a couple's existence that communication occurs, the greater the opportunity of success for that couple and the less the stress level within their lives.
Here then are 4 suggested areas of financial communication:
1. Hidden Debt and Personalities - openly and without prejudice or pre-judgment
a. Share each other’s credit report and ask questions about past performances. For example: Why are there late pays? Why is there no credit history? Explain the bankruptcy. What is this judgment about?
b. Determine and discuss each person's ability to be a spender or a saver. Do you have a tendency to live paycheck to paycheck or do you have a consuming desire to put at least something away for a rainy day? Do you track every dime or is anything under $10 unimportant to track?
c. Discuss any debts not listed in the credit report.
d. Determine who has what credit lines and what is each person’s feelings on separate credit lines, joint lines, becoming an authorized user and/or co-signing any loans. Similarly discuss checking and savings accounts.
e. Discuss who has what assets and should they be kept separated or joined. (Should there be a pre-nuptial agreement?)
2. Goal Setting - where are you going and how will you know when you get there?
a. Set specific goals together for the next year, 5 years, and 20 years.
b. Read and discuss 5 Proven Steps To Budget Motivation (as well as other Budget Management articles under Article Index above.)
c. Commit a plan of action to paper stating how you will be accomplishing your goals.
d. List contingency plans when the inevitable “never expected emergency” pops up.
Budgeting and CEO - Who will carry the ball?
a. Who will have responsibility for paying the bills and balancing the checkbook?
b. How will you deal with existing bills? Especially for newlyweds? Will each continue to pay individually or will you join incomes to meet expenses?
c. Together plan out your budget
d. Frankly discuss “what if's”.
1. No one plans on bankruptcy but what if the bottom falls out? Will you both declare so the one spouse does not have to absorb the other's debt?
2. What if divorce does happen?
3. What if one spouse dies or becomes disabled?
“What if...” and fill in the rest.
4. Will one person be assigned to listen to the partner but ultimately make the final financial decision or will both have an equal voice?
Estate Planning
1. Discuss the existing life, health, and disability needs of each partner. Does it meet current and future needs?
2. Talk to a reputable health and disability representative and determine your needs.
3. Based upon your future goals, what investment strategies do you intend on initiating and when?
4. Who will do your taxes and do you need tax strategies to offset tax payment?
5. How will you develop an emergency savings and how much will it be?
6. Are there education needs expected?
Now for the ultimate marriage counseling tip. Reschedule this exact same discussion for next year and the year after and the year after that. Just call it your "Annual State of the Union Discussion".
http://www.articlebin.com/view-Money_Talk_or_%E2%80%9CDebt_Us_Do_Part%E2%80%9D-45797.html
In David Olson’s 2003 National Survey of Marital Strengths we learn that the average adult spends 80% of waking hours earning, spending, or thinking about money. In a study of 21,501 couples Olson found that 66% indicated indebtedness was one of the top 5 major stumbling blocks to their marriage.
Conversely, he discovered "one of the unique strengths of the majority of happy couples was that they did not have major debt problems." Similarly the Administration office of the US Courts tell us there were 1,661,996 bankruptcies filed in Fiscal Year 2003 (up 7.4 percent from the 1,547,669 filings in Fiscal Year 2002). Bankruptcies have exceeded 1 million filings annually since the early 90's and show no signs of letting up.
All of the above strongly indicates one thing. Far more financial communication must occur in the relationship.
To overcome some of these staggering statistics, I firmly believe each couple has a superior chance of surviving separation and/or divorce because of financial stress, by simply opening the doors of financial communication. I strongly suggest 4 areas of communication for any couple regardless of how long they have been together. But the sooner in a couple's existence that communication occurs, the greater the opportunity of success for that couple and the less the stress level within their lives.
Here then are 4 suggested areas of financial communication:
1. Hidden Debt and Personalities - openly and without prejudice or pre-judgment
a. Share each other’s credit report and ask questions about past performances. For example: Why are there late pays? Why is there no credit history? Explain the bankruptcy. What is this judgment about?
b. Determine and discuss each person's ability to be a spender or a saver. Do you have a tendency to live paycheck to paycheck or do you have a consuming desire to put at least something away for a rainy day? Do you track every dime or is anything under $10 unimportant to track?
c. Discuss any debts not listed in the credit report.
d. Determine who has what credit lines and what is each person’s feelings on separate credit lines, joint lines, becoming an authorized user and/or co-signing any loans. Similarly discuss checking and savings accounts.
e. Discuss who has what assets and should they be kept separated or joined. (Should there be a pre-nuptial agreement?)
2. Goal Setting - where are you going and how will you know when you get there?
a. Set specific goals together for the next year, 5 years, and 20 years.
b. Read and discuss 5 Proven Steps To Budget Motivation (as well as other Budget Management articles under Article Index above.)
c. Commit a plan of action to paper stating how you will be accomplishing your goals.
d. List contingency plans when the inevitable “never expected emergency” pops up.
Budgeting and CEO - Who will carry the ball?
a. Who will have responsibility for paying the bills and balancing the checkbook?
b. How will you deal with existing bills? Especially for newlyweds? Will each continue to pay individually or will you join incomes to meet expenses?
c. Together plan out your budget
d. Frankly discuss “what if's”.
1. No one plans on bankruptcy but what if the bottom falls out? Will you both declare so the one spouse does not have to absorb the other's debt?
2. What if divorce does happen?
3. What if one spouse dies or becomes disabled?
“What if...” and fill in the rest.
4. Will one person be assigned to listen to the partner but ultimately make the final financial decision or will both have an equal voice?
Estate Planning
1. Discuss the existing life, health, and disability needs of each partner. Does it meet current and future needs?
2. Talk to a reputable health and disability representative and determine your needs.
3. Based upon your future goals, what investment strategies do you intend on initiating and when?
4. Who will do your taxes and do you need tax strategies to offset tax payment?
5. How will you develop an emergency savings and how much will it be?
6. Are there education needs expected?
Now for the ultimate marriage counseling tip. Reschedule this exact same discussion for next year and the year after and the year after that. Just call it your "Annual State of the Union Discussion".
http://www.articlebin.com/view-Money_Talk_or_%E2%80%9CDebt_Us_Do_Part%E2%80%9D-45797.html
bankruptcy facts
Knowing that you need to better understand this topic I recommend that you take Five minutes to read what we have to say. Since bankruptcy is a place that seems to be hit more people it is best to know some bankruptcy facts. These facts can help you to understand what happens when you claim to be bankrupt. The first fact that you will need to interpret is that filing for bankruptcy is not the end of the world. Bankruptcy is a way for you to suspend the dissimilar debt collections that are being carried out in your life during the time that you have in some way managed to roll up lots of debts. Once you have filed for bankruptcy the tribunal will allow an automatic stay order. This stay order will keep the dissimilar debt collection agencies from trying to collect their debts while the tribunal is looking into your tangled up finances. According to the known bankruptcy facts, during the time of your failure money cannot be collected from you by your creditors. These individuals will need to talk to your attorney to find data about the debt payment. These creditors can sooner or later petition the court for alleviation from the stay order. This alleviation order will provide them with the ability to collect any secured debts that you have written over to them. This is the only way that these creditors can collect money, property and assets from you. By knowing about bankruptcy facts like this you can make sure that you are careful about assignment your property as security measures to credit companies. There is another failure fact that you should know about. In this fact once your failure payments have been fully paid off you will be released from further debt payments. At this point former creditors will no longer have any claim on you and they can not force you to pay any more of the former debts. Even so if you do happen to get into credit difficulties with these same creditors once more they will have the right to search compensation for these new debts that you have incurred. As you look through the various bankruptcy facts and advice, you will see that in most cases your assets that can be turned into immediate payment must be turned over to a bankruptcy trustee. This judicature decreed person will make sure that you are paying off your debt in a sensible manner. You disposable assets once they have been liquidated will be distributed amongst your creditors. This is also another way for you to drop your bankruptcy charges. There are many other bankruptcy facts that can help you to keep off being in trouble with the various people to whom you owe money. You just need to talk with your attorney for help. Thank you for Taking the time to read my article it is greatly appreciated. Try searching through my other articles.
http://www.articlebin.com/view-bankruptcy_facts-47898.html
http://www.articlebin.com/view-bankruptcy_facts-47898.html
Direct Mail Marketing – Can it Really Pay Off? Step 1: Researching Your Target Market
Maybe you have thought about direct mail. Maybe you have wondered whether it could work for you. Maybe you have done it, but it never really paid off. Possibly you thought there was so much to learn that you didn’t know where to start. Whatever your particular ‘story’ is you are reading this. And yes, there are a million and one ways to do something wrong – but there are only a handful of ways to get it right. In this article, I will show you what has brought success to hundreds of mortgage brokers and how direct mail marketing can work for you.
My goal in this article is to help you get started by helping you figure out WHO you should be mailing to and WHAT product to promote to them. In fact – I will be writing a series of articles taking you all the way from the research to the tracking of the results and your return on investment. There will be practical exercises for you to do in between the next issues, so roll up your sleeves and get ready to start cooking – or start rolling in the dough.
I’ve literally dealt with the marketing of thousands of mortgage brokers and one thing is certain… Once you guys start doing really well financially you want to branch out on your own and start your own company. However, most brokers haven’t taken Marketing 101, so they tend to fail. Not because they aren’t good brokers, but because they aren’t good marketers. In fact, it is not only a trend I see in the Mortgage Industry, but many other industries as well. To tell you the truth, with all that I know about marketing I’m confident that I could make ANY business successful. Sounds pretty cocky but hands down, I could do it. Because I know marketing.
Why do I know that I could make it successful? Because I learned something vitally important: outbound communication is key. It is more important then what you receive. You will generate interest and credibility the more you communicate and the more you communicate repeatedly.
But not just to anybody. Why would you communicate to folks that have no reason to buy a home or refinance their home if you were a mortgage broker? How will you go about defining your target market? What is the scientific approach to choosing your mailing list?
On the outset, that may seem easy. Just advertise your subprime product to a subprime list. Or maybe not. But you do not want to guess on this. You need solid evidence. The best way to get that evidence is via your own records – your past closes and what it was you sold and to whom. What you are looking for is twofold:
1) Your easiest-to-close customers and
2) Customers that financed with your highest income-generating products.
To recap in mid-stream let me give you four key data to latch onto:
1) Outbound communication is key.
2) Repeated communication is vital.
3) Your easiest-to-close customers should be promoted to first.
4) Your highest income-generating products should be next in line to promote.
Now let’s get started. Research which product you need to market.
When you start researching, you really shouldn’t go off of assumptions. Ideally you’ll go through your client list and tabulate which product you sold the most of. Was it prime? Subprime? Re-fi? Jumbo? Most of the time, you really have to do a sincere survey. You are looking to market the product that makes you the most income the quickest FIRST.
Exactly how should you do the research?
Create a spreadsheet and go through all of your past closes over the last year. List them out: Product X, Product Y, Product Z and so on – find every close you made over the few year and mark down which product it was and what you earned off of it. Also note down HOW MANY of that product you sold.
Example Tabulation:
Product X: Earned 1% Sold 8
Product Y: Earned $900 Sold 20
Product Z: Earned ½% Sold 12
Using the above example it is easy to see that Product ‘Y’ is what you should be marketing in your direct mail campaign. We’ll consider product ‘Y’ your bread and butter. Obviously these are the easiest to close so let’s create as many leads as we can and assume you’ll close them up.
Once you’re grooving right along with that product (and we’ll get to the target market in a few paragraphs) use the same spreadsheet to determine which product yielded the highest commissions. Maybe product ‘X’ averaged around $2000 per close but with only five sold you’re still doing better with ‘Y’, economically speaking. BUT if you just increase the number of leads that would need or desire product ‘X’ you could really start raking it in, right?
Do you see where I’m going with this? Haphazardly, with little or no direct mail – perhaps with referrals only – you’re managing to sell certain products to certain demographics. Of course, in reality, it will be many more than three different products which is why you need to go about this systematically.
However, once you start promoting product ‘Y’ and you start receiving an abundance of leads, DO NOT stop promoting that product just because you now have some more business. Keep on putting out that communication repeatedly and additionally market to the next product to the target market. We’re going for abundance here. When you’ve got an abundance of business, it is much easier to solve whatever problems arise with that than the type of problems that come from having a scarcity of business.
Learning a subject is all about wrapping your wits around the key principles involved and building upon those. Wrap your wits around this and you will be on your way to becoming a marketing expert.
Now that you know which product to start with, you have to know who is going to buy it, which comes to our next step.
Research to find who the audience is that you are going to sell to.
Not all audiences are the same. Take for example the TV show, Showtime at the Apollo. Not everyone would want to watch that. Just like there is a totally different target audience for American Idol. (If you never heard of these, then more than likely you aren’t their audience.) Case in point: you have to determine who your audience is, which is called a “market”. A “market” is a type of audience, a type of user. Figure out everything you can about that particular market that buys your main (what you sell the most of) product. The good thing is that you already have access to all their data – age ranges, credit scores, income, etc. It is time to add this data to your spread sheet.
Product X: Earned 1% Sold 8
Product Y: Earned $900 Sold 20
Product Z: Earned ½% Sold 12
Credit ranges
Age ranges
Income level
Once you have the demographics of the people that buy your “easiest-to-sell” product, you can then buy a list of that particular type of audience. You can go to a list company that you feel good about or have gotten recommendations for, and buy a list of people within those specific criteria. Get a list in a certain zip code or a certain mile radius around your office. (I have found that in more rural areas you will have to do a larger mileage radius than you would have to in a more urban area – it depends on the population.)
The reason you want to do such a thorough job of finding out who you are selling to is that 40% of your marketing campaign’s success (success meaning whether or not you get a good response) is dependent on your list. 40%! That is a big percentage to mess up on at the get-go. Besides, it is your list and the postage that are going to be the most expensive parts of your direct mail campaign. I cannot stress enough the importance of a good list – it makes all the difference in the world.
Here is an excellent case study of a company of mortgage professionals called Priority Financial Services that did exactly what I have been writing about here. They did an exhaustive research of what type of product they should focus on offering and what type of consumer would reach for their services.
Ervin Kowitz and Brian Kowitz are the owners of PFS. Their specialties include "no income qualifier" loans and loans for those without an income. They have a great deal of experience and expertise for those borrowers with credit problems including bankruptcy and foreclosure. With over 12,000 loans closed since 1994, they had quite a history that helped them determine the type of customer that they decided to focus on. Coupling their own internal study with market research and data retrieval from a source of strategic partners, Ervin and Brian were able to focus on a sector of the market whose need was the biggest segment of the growing market and truly specialize in it. This will vary for your particular business or area, but you can ascertain your niche in the same or similar way that they did.
The question they asked themselves was, ‘what was the most valuable asset that their business had’. Contrary to the usual answers of inventory, lease or even employees – even though employees are very high on the list, Ervin and Brian determined that their actual client base was their most valuable asset with their employees running a close 2nd. Once they determined this, they were on the right track to determining their niche.
PFS determined via their client base where their best clients were coming from and also analyzed where they were getting their best return. They saw a tremendous need in their customer base for financing for credit challenged individuals. Being primarily in the sub-prime market, Ervin and Brian further targeted a highly unique sector of the mortgage business – bankruptcies. They had spent 11 years dealing with the ‘ins and outs’ of bankruptcies, so much that 41% of their business was that specialized market. When this was unearthed, they had found their niche.
Niches can be very selective and they can be very broad as Ervin and Brian discovered. Even though they researched and found their niche, every issue they are presented with is unique. Though they offer many different products for their specialized market, they have been able to create a “service” niche. Through their creativity and understanding of the needs of their credit-challenged clients, they have been able to create literally a road map for each individual customer that is specific to them and in their best interest.
Priority Financial Service’s research may be very different than the research you need to do. The important thing is to comb through your files and take a look for the biggest commonalities and find out all you can about that product, market or trend you discover. You will have your own realization and you’ll be able to better define your target market and what particular products you need to concentrate your efforts on. Being everything to all people doesn’t necessarily communicate in marketing. People want to know what you can do for them specifically and when you are able to communicate that to a specific group – bingo! You just hit the jack pot.
In my next article,“Direct Mail Marketing-Can It Really Pay Off -Part Two”, I will teach you how to create copy (text, verbiage) in your promotional material to really get your message across to your target market in order to get a response. In the meantime, you have some homework to do. Happy Hunting!
http://www.articlebin.com/view-Direct_Mail_Marketing_%E2%80%93_Can_it_Really_Pay_Off__Step_1__Researching_Your_Target_Market-59736.html
My goal in this article is to help you get started by helping you figure out WHO you should be mailing to and WHAT product to promote to them. In fact – I will be writing a series of articles taking you all the way from the research to the tracking of the results and your return on investment. There will be practical exercises for you to do in between the next issues, so roll up your sleeves and get ready to start cooking – or start rolling in the dough.
I’ve literally dealt with the marketing of thousands of mortgage brokers and one thing is certain… Once you guys start doing really well financially you want to branch out on your own and start your own company. However, most brokers haven’t taken Marketing 101, so they tend to fail. Not because they aren’t good brokers, but because they aren’t good marketers. In fact, it is not only a trend I see in the Mortgage Industry, but many other industries as well. To tell you the truth, with all that I know about marketing I’m confident that I could make ANY business successful. Sounds pretty cocky but hands down, I could do it. Because I know marketing.
Why do I know that I could make it successful? Because I learned something vitally important: outbound communication is key. It is more important then what you receive. You will generate interest and credibility the more you communicate and the more you communicate repeatedly.
But not just to anybody. Why would you communicate to folks that have no reason to buy a home or refinance their home if you were a mortgage broker? How will you go about defining your target market? What is the scientific approach to choosing your mailing list?
On the outset, that may seem easy. Just advertise your subprime product to a subprime list. Or maybe not. But you do not want to guess on this. You need solid evidence. The best way to get that evidence is via your own records – your past closes and what it was you sold and to whom. What you are looking for is twofold:
1) Your easiest-to-close customers and
2) Customers that financed with your highest income-generating products.
To recap in mid-stream let me give you four key data to latch onto:
1) Outbound communication is key.
2) Repeated communication is vital.
3) Your easiest-to-close customers should be promoted to first.
4) Your highest income-generating products should be next in line to promote.
Now let’s get started. Research which product you need to market.
When you start researching, you really shouldn’t go off of assumptions. Ideally you’ll go through your client list and tabulate which product you sold the most of. Was it prime? Subprime? Re-fi? Jumbo? Most of the time, you really have to do a sincere survey. You are looking to market the product that makes you the most income the quickest FIRST.
Exactly how should you do the research?
Create a spreadsheet and go through all of your past closes over the last year. List them out: Product X, Product Y, Product Z and so on – find every close you made over the few year and mark down which product it was and what you earned off of it. Also note down HOW MANY of that product you sold.
Example Tabulation:
Product X: Earned 1% Sold 8
Product Y: Earned $900 Sold 20
Product Z: Earned ½% Sold 12
Using the above example it is easy to see that Product ‘Y’ is what you should be marketing in your direct mail campaign. We’ll consider product ‘Y’ your bread and butter. Obviously these are the easiest to close so let’s create as many leads as we can and assume you’ll close them up.
Once you’re grooving right along with that product (and we’ll get to the target market in a few paragraphs) use the same spreadsheet to determine which product yielded the highest commissions. Maybe product ‘X’ averaged around $2000 per close but with only five sold you’re still doing better with ‘Y’, economically speaking. BUT if you just increase the number of leads that would need or desire product ‘X’ you could really start raking it in, right?
Do you see where I’m going with this? Haphazardly, with little or no direct mail – perhaps with referrals only – you’re managing to sell certain products to certain demographics. Of course, in reality, it will be many more than three different products which is why you need to go about this systematically.
However, once you start promoting product ‘Y’ and you start receiving an abundance of leads, DO NOT stop promoting that product just because you now have some more business. Keep on putting out that communication repeatedly and additionally market to the next product to the target market. We’re going for abundance here. When you’ve got an abundance of business, it is much easier to solve whatever problems arise with that than the type of problems that come from having a scarcity of business.
Learning a subject is all about wrapping your wits around the key principles involved and building upon those. Wrap your wits around this and you will be on your way to becoming a marketing expert.
Now that you know which product to start with, you have to know who is going to buy it, which comes to our next step.
Research to find who the audience is that you are going to sell to.
Not all audiences are the same. Take for example the TV show, Showtime at the Apollo. Not everyone would want to watch that. Just like there is a totally different target audience for American Idol. (If you never heard of these, then more than likely you aren’t their audience.) Case in point: you have to determine who your audience is, which is called a “market”. A “market” is a type of audience, a type of user. Figure out everything you can about that particular market that buys your main (what you sell the most of) product. The good thing is that you already have access to all their data – age ranges, credit scores, income, etc. It is time to add this data to your spread sheet.
Product X: Earned 1% Sold 8
Product Y: Earned $900 Sold 20
Product Z: Earned ½% Sold 12
Credit ranges
Age ranges
Income level
Once you have the demographics of the people that buy your “easiest-to-sell” product, you can then buy a list of that particular type of audience. You can go to a list company that you feel good about or have gotten recommendations for, and buy a list of people within those specific criteria. Get a list in a certain zip code or a certain mile radius around your office. (I have found that in more rural areas you will have to do a larger mileage radius than you would have to in a more urban area – it depends on the population.)
The reason you want to do such a thorough job of finding out who you are selling to is that 40% of your marketing campaign’s success (success meaning whether or not you get a good response) is dependent on your list. 40%! That is a big percentage to mess up on at the get-go. Besides, it is your list and the postage that are going to be the most expensive parts of your direct mail campaign. I cannot stress enough the importance of a good list – it makes all the difference in the world.
Here is an excellent case study of a company of mortgage professionals called Priority Financial Services that did exactly what I have been writing about here. They did an exhaustive research of what type of product they should focus on offering and what type of consumer would reach for their services.
Ervin Kowitz and Brian Kowitz are the owners of PFS. Their specialties include "no income qualifier" loans and loans for those without an income. They have a great deal of experience and expertise for those borrowers with credit problems including bankruptcy and foreclosure. With over 12,000 loans closed since 1994, they had quite a history that helped them determine the type of customer that they decided to focus on. Coupling their own internal study with market research and data retrieval from a source of strategic partners, Ervin and Brian were able to focus on a sector of the market whose need was the biggest segment of the growing market and truly specialize in it. This will vary for your particular business or area, but you can ascertain your niche in the same or similar way that they did.
The question they asked themselves was, ‘what was the most valuable asset that their business had’. Contrary to the usual answers of inventory, lease or even employees – even though employees are very high on the list, Ervin and Brian determined that their actual client base was their most valuable asset with their employees running a close 2nd. Once they determined this, they were on the right track to determining their niche.
PFS determined via their client base where their best clients were coming from and also analyzed where they were getting their best return. They saw a tremendous need in their customer base for financing for credit challenged individuals. Being primarily in the sub-prime market, Ervin and Brian further targeted a highly unique sector of the mortgage business – bankruptcies. They had spent 11 years dealing with the ‘ins and outs’ of bankruptcies, so much that 41% of their business was that specialized market. When this was unearthed, they had found their niche.
Niches can be very selective and they can be very broad as Ervin and Brian discovered. Even though they researched and found their niche, every issue they are presented with is unique. Though they offer many different products for their specialized market, they have been able to create a “service” niche. Through their creativity and understanding of the needs of their credit-challenged clients, they have been able to create literally a road map for each individual customer that is specific to them and in their best interest.
Priority Financial Service’s research may be very different than the research you need to do. The important thing is to comb through your files and take a look for the biggest commonalities and find out all you can about that product, market or trend you discover. You will have your own realization and you’ll be able to better define your target market and what particular products you need to concentrate your efforts on. Being everything to all people doesn’t necessarily communicate in marketing. People want to know what you can do for them specifically and when you are able to communicate that to a specific group – bingo! You just hit the jack pot.
In my next article,“Direct Mail Marketing-Can It Really Pay Off -Part Two”, I will teach you how to create copy (text, verbiage) in your promotional material to really get your message across to your target market in order to get a response. In the meantime, you have some homework to do. Happy Hunting!
http://www.articlebin.com/view-Direct_Mail_Marketing_%E2%80%93_Can_it_Really_Pay_Off__Step_1__Researching_Your_Target_Market-59736.html
Subscribe to:
Posts (Atom)