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Drought Could Dry Up California Consumers' Bank Accounts

July 28, 2012

The drought that is snaking its way across the country is threatening to push countless California consumers over the edge. parchedsaltyground.jpg

In and of itself, it probably won't be enough to drive anyone to a bankruptcy who wasn't already on the verge. However, Los Angeles Chapter 7 Bankruptcy Attorney Vincent Howard knows that for those already struggling with debt, increases in everything from gas to groceries could be the tipping point.

Fortunately, a Chapter 7 bankruptcy can relieve you of many of those burdens. It won't drive down corn prices, but it can help you become more able to cope with those inevitable fluctuations in the economy.

The three ways in which consumers will be most affected are: gas, groceries and electric bills.

With regard to groceries, corn has been hit especially hard. Even if you aren't a big corn-eater, you're probably going to be impacted because so many products are made with corn or corn-base.

You also consider that many pigs, cows and chicken are also corn-fed, which means you will pay more for those products as well. In fact, feed is about 40 percent of what you're paying for when you purchase those products. Same goes for milk.

While you may begin to see a hike in fresh corn products within a few weeks, the real impact won't hit until early next year.

While the USDA estimates prices to rise about 4 or 5 percent, other economists believe it could be as high as a 10 to 15 percent hike in your overall grocery bill.

The next blow to your budget will be in the form of gas prices. Little less than half of the entire corn crop grown in the country is used to produce ethanol. Corn is generally a small portion of overall gasoline costs, but the lack of it is still likely to have an impact.

And finally, electricity costs are expected to climb over the next several months. Most electricity plants use water in order to cool. The drought and subsequent water restrictions means that many of these plants aren't able to operate at their full capacity. That means less electricity is generated and power companies have to pay more for it. That cost gets passed onto you.

Consider too that overall for California, the drought is bad for economy because this is one of the country's top states for cattle ranches. In 2010, California reported more than $2.1 billion in sales. Poultry production in the state, which includes eggs, accounts for about $720 million in sales, while pigs and hogs account for almost $70 million in state profit. These may represent smaller shares here than in some other states, particularly in the Midwest, but overall, that impact is going to have a ripple effect.

There will be an impact to the restaurant industry, with many people likely to opt to stay home to cook with the soaring prices of food.

The bottom line is that there are few people likely to feel no effect at all. Some will be able to absorb it better than others. For those who are already treading water with their debt, this could be enough to push them further under.

Los Angeles Bankruptcy Attorney Vincent Howard at Howard Law can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.

Additional Resources:
How the Drought Will Affect Consumers (and What You Can Do About It), By Gary Foreman, U.S. News & World Report

More Blog Entries:
Child Support Payments Can't be Discharged in a Chapter 7, July 15, 2012, Los Angeles Bankruptcy Lawyer Blog