Bankruptcy Status Report

January 6, 2009, Phoenix, AZ – According to the American Bankruptcy Institute, personal bankruptcies increased in quantity throughout 2008. “Consumers are under great financial stress, with no immediate end in sight,” said ABI executive director Samuel Gerdano. “We expect the upward spike in personal bankruptcies to continue in 2009.”

The Administrative Office of the United States Courts confirmed the number of bankruptcies rose by 32% to 1.06 million in 2008. In 2007, 801,840 American consumers filed for bankruptcy.

“We have been monitoring the steady growth of personal BK cases,” said Robert Davies, President of www.OnlineBKmanager.com. “The good news is our dealer clients are working with lenders like Tidewater, CapOne, AmeriCredit, Wachovia and many others to offer quality sub-prime loans to these individuals.”

In today’s volatile economy, sub-prime lenders see the advantage in lending to those consumers who have a fresh bankruptcy and can not file again for many years. “We have been booking fresh BK deals since the year 2000, and historically they are by far our best-performing loans,” explained Dedra Muffley of Tidewater Motor Credit. “We are looking to do away with the non-bankruptcy paper or customers who look like they are on their way down. We want the customers that have their problems behind them.”

“Currently, chapter 7 bankruptcies represent over 75% of all cases being filed with the courts,” said Davies. “This fact contradicts previous thoughts that the 2005 law change would force more people into filing a chapter 13 over a chapter 7.”

As of January 6, 2009, there are nearly 1 million open bankruptcies being processed for discharge by the United States bankruptcy courts. “In 2009 bankruptcy marketing will continue to prove its value to automotive retailers throughout the United States,” concluded Davies.

Bankruptcies Awaiting Discharge by State

Total = 955,501

OnlineBKmanager.com upgrades web application in time for increased Filed and Discharged Bankruptcies

PHOENIX, Arizona –December 1, 2008—OnlineBKmanager.com announces a major overhaul of its web-based marketing system.  “Due to the current sub-prime automotive lending environment, BK marketing is more valuable than ever”, said Robert Davies, President of www.OnlineBKmanager.com.  “We have hundreds of dealers logging on to our BK system on a daily basis and with the fresh BK being the most sought after loans by the sub-prime lenders these days, we took this as an opportunity to add new features and processing capabilities.  With the advent of these new features we are clearly maintaining our status as the industry leader.”

More than 100,000 people filed and more than 65,000 people discharged a bankruptcy in October 2008. This proved to be the busiest month for the bankruptcy court system since the Bankruptcy Abuse Prevention and Consumer Protection Act went into effect more than three years ago. “We have been booking fresh BK deals since the year 2000, and historically they are by far our best-performing loans,” explained Dedra Muffley of Tidewater Motor Credit.  “We are looking to do away with the non-bankruptcy paper or customers who look like they are on their way down. We want the customers that have their problems behind them. You are seeing the larger subprime lenders, the AmeriCredit’s and CapOne’s, becoming our competition with these fresh discharges.”

The OnlineBKmanager.com overhaul included new user features as well as performance and capacity increases.  “Our application service provider (ASP), www.hyper-systems.com , upgraded our database software and hardware to take advantage of the new features and optimizations that up until now were not available,” said Robert, “The application upgrades were done without any service interruptions and have increased the application performance tenfold.  The overall application platform is completely scalable, meaning that as our customer base grows and the quantity of BKs increase we will be able to respond without performance loss.”

Good News from Subprime Lenders!

By Robert Davies

Subprime Finance Companies Focus on BKs, Relationships and “Old-School” Basics to Remain Profitable.

Bankruptcies are at a three-year high, jobless claims are at a 14-year high, and both are increasing. So, what are the subprime finance companies doing to remain profitable? What can you do to guarantee the survival of these needed financing sources? And where do you stand with your finance companies?

More than 100,000 people filed and more than 65,000 people discharged a bankruptcy in October 2008. This proved to be the busiest month for the bankruptcy court system since the Bankruptcy Abuse Prevention and Consumer Protection Act went into effect more than three years ago. What exactly does this mean for you and your finance companies? Great news! I recently caught up with Dedra Muffley of Tidewater Motor Credit to get her view. “We have been booking fresh BK deals since the year 2000, and historically they are by far our best-performing loans,” she explained. “We are looking to do away with the non-bankruptcy paper or customers who look like they are on their way down. We want the customers that have their problems behind them. You are seeing the larger subprime lenders, the AmeriCredits and CapOnes, becoming our competition with these fresh discharges.”

I also asked Ms. Muffley what Tidewater Motor Credit is doing to remain profitable besides buying the historically high-performing fresh BK deals. “We are looking at all of our expenses including look-to-book ratios. Those dealers who have been longtime loyal dealers really want to help us. They definitely want to see that we are here for them over the next 12 months and beyond,” she said. “Some of our dealers have even gone off automated platforms where it costs the lender per-application and have gone ‘old school’ by faxing in credit applications and deal structure,” concluded Ms. Muffley.

How can dealers help guarantee the survival of finance sources? According to a top-level executive with a large national auto dealer group, the three-word answer is simple: “Relationship, Relationship, Relationship! We know our subprime lenders are going back to the basics by buying fresh BKs or higher credit score deals with solid down payments,” he explained. “So that is what we are sending them.”

Reid Anderson, special finance director of a Dodge Chrysler Jeep dealership, agreed. “My partner-style bank relationships are critical to our success. By working with our customers one-on-one, I get their entire story and can relay those findings on to the lender … We have found this helps our individual lender portfolios perform better.”

Ron Odom, general manager of a high-volume Chrysler GMC franchise, takes this approach. “We try to maintain relationships with the underwriters. We do not want to waste their time and money by shot-gunning or sending applications that clearly do not meet their underwriting guidelines,” he said. “I believe ‘approval-to-book’ ratios are important and I usually go with the lender that made the best first call.” I also asked Mr. Odom about his current business. “I agree with Ms. Muffley,” he added. “Right now, we see a lot of applicants that are a BK waiting to happen and are tougher to get bought. My lenders are more aggressively buying and funding the fresh BK loans, and I can see why. They cannot file for bankruptcy again for quite some time, and their debt-to-income ratios are in good shape,” concluded Mr. Odom.

Finally, the million-dollar question—where do you stand with your finance sources? If you honestly do not know the answer, now is time to find out. Call your finance sources or ask them to stop in. Find out how your portfolio is performing, and ask how you could improve it. Also, keep an eye on your look-to-book and approval-to-book ratios with each source. The fastest way to get cut off by a finance company is by having them review applications that do not meet their guidelines or only sending them a very small percentage of the deals they approve.

The professionals I spoke with stressed the importance of the dealer-finance company relationship and the value of the fresh BK customer. With finance sources preferring “old-school” methods in today’s environment, your relationship will naturally improve. However, you must take the extra steps to strengthen your footing with your finance partners. Those of you with the best partner-style relationships will prosper, while dealers with poor look-to-book ratios and limited interaction with their finance sources will struggle in the months to come.

Robert Davies is the President of Direct Marketing Associates, Corp. and www.OnlineBKmanager.com, the industry leaders in subprime marketing since 1997. Robert may be contacted at 800.942.3603 or rdavies@direct-mkt.com.

Direct Marketing Associates, Corp. Announces Money Back Guarantee on the www.OnlineBKmanager.com Marketing System!

PHOENIX, AZ - Direct Marketing Associates, Corp. announced Monday that it is now offering a money back guarantee on its www.OnlineBKmanager.com marketing system. Upon celebrating its 13th anniversary, the company unveiled the industry's first Return on Investment (ROI) Guarantee to answer the tough market conditions Franchise Dealers are currently being faced with.

"Dealer Principals are keeping a watchful eye on expenses and demanding ROI on every advertising dollar spent, so we elected to offer a guarantee with our OnlineBKmanager.com product," said Robert Davies, President of Direct Marketing Associates, Corp. "It is no secret that automotive sales are down, but the core sub-prime lenders are still offering fresh BK options that fit perfectly with this program."

The www.OnlineBKmanager.com system was developed by Direct Marketing Associates, Corp. in 2003. This private and secure web-based BK management tool is designed to provide the Sub-Prime Retail Professional with accurate and industry leading FRESH data for marketing.

"Due to our client's success, our confidence level is extremely high with this product," added Mr. Davies. "We want to eliminate any advertising risk, and give support to Dealers that are struggling and tired of being taken advantage of by fly-by-night ad companies".

Bankruptcy Status Report
4th Quarter 2007

January 16, 2008 - Phoenix, AZ – The 4th quarter of 2007 continued the steady up trend in the bankruptcy markets.  Chapter 7 filings amplified and represented 72% of all personal cases being handled by the United States Bankruptcy courts.  Personal Bankruptcies increased 41% over the 4th quarter of 2006 with 326,749 households either filling or discharging.

“There’s obviously an impact from the down turn in the housing market, subprime-loan problems and the increase in foreclosures,” said Chris Bayley, a partner focusing on bankruptcies at the Phoenix law firm Snell & Wilmer.  The 2007 increase “presages even higher filings this year, as the heavy consumer-debt load is made worse by the home-mortgage crisis,” predicted Samuel Gerdano, executive director of the American Bankruptcy Institute.

As of January 16th, there are a total of 875,899 open bankruptcies that are being processed for discharged by the United States Bankruptcy courts.  What does all of this mean to the Automotive Special Finance Professional?  “Its simple,” said Robert Davies, President of www.OnlineBKmanager.com.  “37% of bankrupt individuals purchase an automobile within 30 days of discharge and a grand total of 70% purchase within a year of that discharge.  This suggests a substantial increase in sales for dealerships marketing to the discharged BK market in 2008,” concluded Davies.

Bankruptcies Awaiting Discharge by State

Total = 875,899

Bankruptcy Status Report
3rd Quarter 2007

October 23, 2007, Phoenix, AZ – The third quarter of 2007 was very active for bankruptcies according to the American Bankruptcy Institute. "Families facing heavy household debts are increasingly turning to bankruptcy as a short-term fix." observed ABI’s Executive Director Samuel J. Gerdano.

The Administrative Office of the United States Courts confirmed a 41% increase over third quarter 2006, with 340,882 bankruptcies either discharged or filed during third quarter 2007.

"We have been monitoring a steady growth of chapter 7 cases over the past few months and the numbers do not lie," said Robert Davies, President of OnlineBKmanager.com. "With the melt-down in the housing market and the anticipated increase in foreclosures, all indication is that the BK courts will continue this upward trend for the foreseeable future."

"Chapter 7 bankruptcies represent over 72% of all cases being handled by the courts" concluded Davies. "This fact contradicts previous thoughts that the new laws would force more people into filing a chapter 13 over a chapter 7."

U.S. BANKRUPTCIES ON THE RISE

Phoenix, Arizona – February 15, 2007 – According to the Administrative Office of the U.S. Courts, personal bankruptcies filed between January 1st and February 9th 2007 increased 212% compared to the same time frame in 2006. So far this year 60,010 households have filed for bankruptcy protection in the U.S. Of these, 37,206 households filed for chapter 7 and 23,803 filed for chapter 13. Furthermore, January discharges were up 23% over the previous 9 months, at 45,779. “These increases are quite a surprise,” said Robert Davies, President of Direct Marketing Associates, Corp. and www.OnlineBKmanager.com, “We did project a jump after the smoke of the new laws cleared, but we did not imagine 212% over last year. However, we did foresee discharges reaching pre-legislation quantities sometime in 2008; but, at this pace we may see this scenario quicker than anticipated.”

In addition, the U.S. courts are reporting higher than normal chapter 7 conversions. This is when an individual files for chapter 13 then, with the courts approval, converts their bankruptcy into a chapter 7. “I am not sure why the conversion rates are so high,” explained Robert, “I can only speculate that the courts are showing leniency towards the new federal guidelines.”