Filing for Bankruptcy? A Step-by-Step Guide

If you are planning on filing for bankruptcy, there are a number of steps that you will need to complete. If you successfully complete the process, you will be able to take control of your debt situation or completely eliminate it. Here are the basics of how to file for bankruptcy.


The first thing that you will need to do is choose which type of bankruptcy that you plan on filing for. There are 2 main types of bankruptcy that most people use. These types are Chapter 7 and Chapter 13. Chapter 7 is known as the liquidation bankruptcy. With this type of bankruptcy, you will be able to discharge your debt so that you do not have to pay it any longer. With Chapter 13, you will be going through a reorganization and coming up with a plan to repay your debt.

Chapter 7 is the most sought after form of bankruptcy because it eliminates your debt. However, not everyone is eligible for it. You have to meet income requirements or pass a discretionary income test in order to qualify for Chapter 7. If you do not qualify for Chapter 7, you can file for Chapter 13 in most cases.

Hire a Lawyer

Although you could potentially file for bankruptcy on your own, hiring a lawyer will usually be the best decision. They can provide you with experience in the matter that you are lacking. They will help you fill out the necessary paperwork, meet the deadlines, and walk you through the entire process. They can also be beneficial when trying to decide which type of bankruptcy to file. You want to hire an attorney that specializes in bankruptcies instead of some other type of attorney for this process.

Documents

Once you have hired legal representation, you will need to go to the courthouse and get the appropriate documents. You will have to fill out a petition that says you are filing for bankruptcy. You will also have to gather your financial documents together that detail every aspect of your life. You will have to show how much income you make, how much debt you have, and what you have in the way of assets. You will have to detail all of this information on the appropriate bankruptcy forms with your court system.

Credit Counseling

Most states will require you to complete credit counseling before you are eligible to move forward with your bankruptcy. This will have to be done with a certified credit counseling agency. You will have to provide proof to the court system that you attended the counseling session.

Bankruptcy Trustee

With both types of bankruptcy you will have to work with a trustee. With Chapter 7, they will determine what assets you have and liquidate some of them to repay your creditors. With Chapter 13, the trustee will oversee your repayment plan.

Discharge

If you are using Chapter 7, the judge will then discharge your debt. This means that you no longer owe the debt that was discharged and creditors cannot attempt to collect it from you any longer.

Why Credit Cards Can Be So Devastating

We are a society that runs largely on plastic. It’s easy. It’s convenient. And we don’t really have to watch the money leave our hands. And, if we are using credit cards, the money being used may not even be ours. Credit cards, when used irresponsibly, can have devastating effects on your finances:


Out of Sight, Out of Mind

One of the biggest issues is a mental issue. When using credit cards, it is easy to rack up the balances because you don’t actually see the money going anywhere. It’s really easy to spend a great deal in a short amount of time because you’re not pulling a dwindling pile of cash out of your pocket. Without really paying attention to what you are doing, you might find yourself spending more than you thought you would. (Indeed, studies show that those who use credit cards spend more on an average shopping trip than those who use cash.)

The fix: Pay attention to your spending. Just as your track money coming out of your checking account, you should track your credit card spending. Personal finance software can help you keep track, and financial applications on your smart phone can keep you up-to-the-minute. Consider what you spend on your credit cards as coming out of your checking account, and prepare to pay the balance of each month.

Carrying a Balance = High Interest Charges

Credit cards are so devastating because of their interest rates. When you pay interest, you are paying money directly into someone else’s pocket — all for the privilege of borrowing money. While credit card interest rates aren’t the highest out there (they are lower than pay day loan rates), they are still quite high. And, when interest is compounded daily, it means that every day that you have a balance means that you are charged a little more interest. That interest is added to your overall balance, and then interest is charged on your accrued interest as well as the principal. Soon, things get out of hand, and you find you have paid more in interest than you even borrowed in the first place.

The fix: Pay down your debt as soon as possible. Start with the highest interest credit card first, and put what you can toward paying that card down. If you use your credit card in the future (for rewards programs), make sure that you only spend what is in your budget. Pay off your card balance each month so that you aren’t charged interest.

Small Minimum Payments

It may seem like a great deal. You charge a large purchase on your credit card, and then you only have to pay around $25 a month for it. Score! Unfortunately, if you only pay the minimum payment, you could be paying that purchase off for the next 10 years; chances are that item will be long gone by the time you pay it off. On top of that, when you pay only the minimum payment, most of your payment actually goes toward your monthly interest charges. So the balance is reduced at a snail’s pace. By the time you pay off the card, making only minimum payments, you will have repaid three or four times the amount you originally borrowed.

The fix: Always pay more than the minimum payment. Pay off the entire balance each month if you can. It’s best if you just save up to buy large items, making sure that you can pay off the purchase right after you make it. If you decide you have to have it now, reconsider. If you can’t pay off an item in two months, you really probably can’t afford it.

The Debt Cycle

The combination of easy spending, high interest rates and low minimum payments makes credit cards so devastating to finances. It promotes a cycle of debt in which you spend years buying a few things on credit, carrying balances and paying them down slowly. Indeed, this combination is exactly what credit card issuers want: An army of consumers that are able to continue to make payments (comprised mostly of interest charges) without actually completely succumbing. It’s about encouraging consumers to live on the edge.

If you want to break the debt cycle, you have to get back to financial basics:

■Spend less than you earn.

■Create a spending plan or budget and stick to it.

■Say “no” to consumer items you can’t actually afford.

■Pay down debt.

■Save for the future.

Work toward moving beyond the debt cycle, and you will find that credit cards lose their power to devastate you financially.

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Bankruptcy Stats Take Center Stage in Health Care Reform Debate

Statistics have long told us that a significant percentage of personal bankruptcy filings in the United States stemmed from medical problems. A 2001 study indicated that medical problems were a contributing factor in at least 46.2% of personal bankruptcies. By 2007 that number had climbed to 62.1%, and a separate study estimated about 70% in 2008.
The importance and validity of those figures has been hotly debated, but at last week's White House health care summit a significant fact bubbled to the surface: about 80% of those whose bankruptcy filings were triggered by medical bills actually had health insurance coverage. That news--which isn't really news at all but hasn't been the focus of much coverage in the past--shifts the scope of the problem somewhat.
The approximately 47 million uninsured Americans have been mentioned liberally, but this statistic tells us that those without insurance are not the only people adversely affected by our current health care system. In fact, many of those who believe the current system is working well for them may believe that only because they haven't faced the kind of catastrophic illness or injury that has forced their fellow insured Americans into bankruptcy.
Whatever the solution to America's health care crisis might be, this data is key to understanding the extent of the challenge.
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Chapter 13

Background
A chapter 13 bankruptcy is also called a wage earners plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause." (1) If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. 11 U.S.C. §1322(d). During this time the law forbids creditors from starting or continuing collection efforts.

Advantages of Chapter 13
Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on "consumer debts." This provision may protect co-signers. Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 protection.

Chapter 13 Eligibility
Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's unsecured debts are less than $360,475 and secured debts are less than $1,081,400. 11 U.S.C. § 109(e). These amounts are adjusted periodically to reflect changes in the consumer price index. A corporation or partnership may not be a chapter 13 debtor. Id.
An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e). In addition, no individual may be a debtor under chapter 13 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.
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Bankruptcy

Personal bankruptcy generally is considered the debt management option of last resort because the results are long-lasting and far reaching. People who follow the bankruptcy rules receive a discharge — a court order that says they don’t have to repay certain debts. However, bankruptcy information (both the date of your filing and the later date of discharge) stay on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes get a job. Still, bankruptcy is a legal procedure that offers a fresh start for people who have gotten into financial difficulty and can’t satisfy their debts.
There are two primary types of personal bankruptcy: Chapter 13 and Chapter 7. Each must be filed in federal bankruptcy court. As of April 2006, the filing fees run about $274 for Chapter 13 and $299 for Chapter 7. Attorney fees are additional and can vary.
Effective October 2005, Congress made sweeping changes to the bankruptcy laws. The net effect of these changes is to give consumers more incentive to seek bankruptcy relief under Chapter 13 rather than Chapter 7. Chapter 13 allows people with a steady income to keep property, like a mortgaged house or a car, that they might otherwise lose through the bankruptcy process. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off your debts during a three-to-five-year period, rather than surrender any property. After you have made all the payments under the plan, you receive a discharge of your debts.
Chapter 7 is known as straight bankruptcy, and involves liquidation of all assets that are not exempt. Exempt property may include automobiles, work-related tools, and basic household furnishings. Some of your property may be sold by a court-appointed official — a trustee — or turned over to your creditors. The new bankruptcy laws have changed the time period during which you can receive a discharge through Chapter 7. You now must wait 8 years after receiving a discharge in Chapter 7 before you can file again under that chapter. The Chapter 13 waiting period is much shorter and can be as little as two years between filings.
Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments and utility shut-offs, and debt collection activities. Both also provide exemptions that allow people to keep certain assets, although exemption amounts vary by state. Note that personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations. And, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or security lien on it.
Another major change to the bankruptcy laws involves certain hurdles that a consumer must clear before even filing for bankruptcy, no matter what the chapter. You must get credit counseling from a government-approved organization within six months before you file for any bankruptcy relief. You can find a state-by-state list of government-approved organizations at www.usdoj.gov/ust. That is the website of the U.S. Trustee Program, the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees. Also, before you file a Chapter 7 bankruptcy case, you must satisfy a “means test.” This test requires you to confirm that your income does not exceed a certain amount. The amount varies by state and is publicized by the U.S. Trustee Program at www.usdoj.gov/ust.
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Five Most Common Questions

WILL MY CREDITORS STOP HARASSING ME?
Yes, they will! By law, all actions against a debtor must cease once bankruptcy documents are filed. Creditors cannot initiate or continue any lawsuits, wage garnishees, or even telephone calls demanding payments. Secured creditors such as banks holding, for example, a lien on a car, will get the stay lifted if you cannot make payments.
WILL MY SPOUSE BE AFFECTED?
Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card they are probably responsible for that debt.
However, In community property states, either spouse can contract for a debt without the other spouse's signature on anything, and still obligate the marital community. There are a few exceptions to that rule, such as the purchase or sale of real estate; those few exceptions do require both spouses’ signatures on contracts. But the day to day debts, such as credit cards, do NOT require both spouses to have signed.
Your bankruptcy lawyer will be able to guide you in this regard.
WHO WILL KNOW?
Chapter 7 filings are public records. However, under normal circumstances, no one will know you filed for Chapter 7. The Credit Bureaus will record your filing and it will remain on your credit record for 10 years.
WILL I EVER GET CREDIT AGAIN?
Yes! A number of banks now offer "secured" credit cards where a debtor puts up a certain amount of money (as little as $200) in an account at the bank to guarantee payment. Usually the credit limit is equal to the security given and is increased as the debtor proves his or her ability to pay the debt.
Two years after a discharge, debtors are eligible for mortgage loans on terms as good as those of others, with the same financial profile, who have not filed Chapter 7. The size of your down payment and the stability of your income will be much more important than the fact you filed chapter 7 in the past.
The fact you filed Chapter 7 or 13 stays on your credit report for 10 years. It becomes less significant the further in the past the filing is. The truth is, that you are probably a better credit risk after bankruptcy than before.
WHAT DOES IT COST?
It costs about $ 300 to file a Chapter 7 bankruptcy. A bankruptcy lawyer's fees vary but should be in the range of $ 1,000 to $ 2,000 . Many bankruptcy lawyers will give you a free initial consultation. You can keep the fees down by being well organized and well prepared. You may also be able to keep the fees down by not requiring the lawyer to attend the meeting of creditors with you. Check this with your lawyer. In some states such as Massachusetts, attorneys must attend the Section 341 meeting with the debtors otherwise attorneys are deemed to have NOT represented the debtors. (The 341 Meeting).
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Living with Bankruptcy

When you file for bankruptcy with a credit/debt help agency, you will be asked a variety of important questions regarding your financial situation; specifically, on what your current budget looks like. Reputable agencies such as debthelper.com do this in order to A) Determine whether or not you actually do need to file for bankruptcy, and B) To figure out what your current financial priorities are and whether or not you will need to change them in order to get yourself out of debt.


Many areas that debt help agencies will advise you to focus and spend your money on should be common sense. Living necessities such as food, a place to live, electricity and water bills (basic utilities), and serviceable clothing should receive the greatest amount of attention. Other things such as owning a phone and making medical appointments are also stressed to varying degrees; if you need a phone for your job or a car for work, a debt help agency will give you advice on making a space for them in your budget.


These basic living expenses need to be considered by any person who is beginning the process of declaring bankruptcy, by anyone in debt, and by people who want to avoid being in debt. When you reach a debt settlement agreement and draw up a payment plan, it is necessary to know what your living expenses are. Most credit agencies will only ask you for a general estimate, but it is good to know what you will need to budget and keep making payments on in order to survive and/or work. Also, your lawyer and debt help agency will provide you with support and advice on the subject – it is their job to do so.



The following is a list of IRS approved living expenses taken from shepleylaw.com:

• "Electricity


• Trash


• Sew/Water/Septic


• Gas (Home)/Oil


• Phone


• Cell


• Internet


• Food/Groceries


• [Basic]Cable


• Dining Out [on rare occasions]


• Work/School Lunch


• Entertainment


• Clothing


• Health Insurance


• Doctors Co-Pay


• Medications


• Medical Equipment


• Dental Insurance


• Dental Co-Pay


• Veterinary


• Clubs, Sports & Hobbies


• Life Insurance


• Car Insurance


• Gasoline


• Auto Expenses


• Taxi/Parking/Public/Transportation Contribution


• Child Support


• Child Care


• Tuition/School Fees


• Business Expenses/Union Dues


• Beauty/Barber/Nails/Dry Cleaning


• Other (Holidays, Birthday, Cigarettes, etc.)"

While some of the items on this list (such as Beauty and Entertainment) should be done only very rarely, the list should give you a good idea of the areas where you should be spending your budgeted money. Living in debt is hard, frustrating, and difficult but it does not have to be the end. Draw up a list, get something done, and talk to a debt help professional. You might have more resources at your disposal than you thought.

Linked Sites:



Shepleylaw.com post on approved living expenses for people in bankruptcy: Linked Site



2009 IRS Medical and Dental Expenses PDF



2009 IRS Moving Expenses PDF



EBPA post on IRS Eligible Expenses PDF

Bankruptcy Law: What You Need To Know

Until just a few years ago, filing for bankruptcy was fairly easy. Not anymore. When Congress changed the nation’s bankruptcy laws in 2005, many debtors found the new “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,” to be more hindrance than help in overcoming past mistakes and starting anew.


The new law is stricter, featuring more requirements than ever before. It is important for anyone considering filing bankruptcy to understand the following:

Credit Counseling:
It doesn’t matter whether you file for Chapter 7 bankruptcy that discharges your debt or Chapter 13 bankruptcy which enters you into a repayment plan with creditors, anyone filing bankruptcy is required by law to attend credit counseling by a court-approved counseling service.

Chapter 7 Filings:
Under the new law, it is no longer your right to be allowed to file Chapter 7 bankruptcy. If, after proving your income the court determines that you make more than the medium income within your state, you may be required to file Chapter 13 bankruptcy instead and enter into a repayment schedule to pay back all (or most) of your creditors.

Chapter 13:
It is not uncommon to find your repayment schedule a bit more than you can financially handle under a Chapter 13 filing. The amounts you must repay each month are calculated according to specialized guidelines that take into account your income in the last year (not what you make now), and your assets.

Residency:
While everyone must obey federal bankruptcy laws, some states offer their own, more lenient exemptions. The new federal law, however, requires residents to live in a specific state for a specified amount of time (usually at least two years) in order to qualify for any state-exemptions.

Allowable Expenses:
In the past, those  filing bankruptcy could virtually erase their debt and start new in seven years, while continuing to live the lifestyle they’d grown accustomed to. That’s no longer the case.

Under new federal bankruptcy laws, the IRS determines your monthly budget, and what you should be able to repay. Most are forbidden from having cell phone expenses as well as cable TV, high-speed Internet access, movies, meals out with the family, and anything else beyond the minimum allowable expenses as determined by the IRS and the courts.

Bankruptcy isn’t what it used to be, thanks to millions of Americans who abused the system in the past. Once reserved for people in dire financial situations to help them free themselves from excess debt and start fresh, today’s bankruptcy laws are designed t punish those who have been financially irresponsible and force them to pay back most or all of the debt they’ve accumulated. While filing for bankruptcy may have once seemed like a good way out of a bad situation, many consumers are now opting to try and fix their financial woes themselves in lieu of letting the government fix it for them.

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Can I Keep My Credit Card After Bankruptcy?

Debtors filing bankruptcy often want to keep at least one credit card out of their bankruptcy filing. Their reasoning is that since it is almost impossible to survive in our society without a credit card, keeping one credit card out of bankruptcy would be helpful. However, when a debtor files bankruptcy they are required to include all of their debts in the bankruptcy filing. But they are allowed to “reaffirm” a debt after the bankruptcy filing. When a debtor reaffirms a debt, they are entering into a legally binding agreement that says that that particular debt will be permanently taken out of bankruptcy and that the debtor will repay the debt, adhere to the originals terms of the loan and continue to make payments as agreed. Many debtors reaffirm mortgage debt and car loan debt which are secured loans. They often reaffirm the secured loans in bankruptcy because it allows them to keep the secured property (house or car). However, is it a good idea to reaffirm credit card debt? In most cases it is not a good idea to reaffirm unsecured credit card debt during bankruptcy. Even if a debtor reaffirms credit card debt during bankruptcy, it is not guaranteed that the credit card account will remain open and available for the debtor’s use. A matter of fact, it is highly likely that the credit card account will remain closed and you will be required to repay the debt, plus any additional fees and interest accrued. For debtors filing bankruptcy, the best solution is probably to keep all of your credit card debt in bankruptcy and get a secured credit card after your bankruptcy has been discharged. A secured credit card will allow you to have the convenience of a credit card while rebuilding your credit record.

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Credit Card Laws Change this Month

This is a heads up for people with credit cards. On the 22nd of this month (February) credit card laws will undergo major changes. Thanks to the Credit Card Act passed by Congress last year, credit card laws have been drastically changed. Credit card companies have been forced by the congressional act to change their lending practices and the manner in which they can charge fees, and the due date is the 22nd. Here are a few ways that you might be impacted by the Act.



The Good News:

Banks have lost some of their proverbial teeth. Thanks to the passage of the bill, credit card companies can no longer:

• Charge interest on fees due


• Limit the amount that banks can charge on specific fees (such as late fees and over limit fees)


• If you get pre-approved by a company for a new credit card but you don't want to open a new account for it, you now have the ability to "reject the card" up until you activate the card


• Banks must give you 45 days notice in advance if they want either raise the APR on your accounts


• And more

The Bad News:

Credit Card Companies are trying to grow new teeth to replace the ones that they have lost. Companies are looking to charge new fees for their services to make up for any lost revenue. Here are a few known tricks that will soon be making an appearance:

• Annual fees are on the rise


• The interest rates placed on cards are expected to rise as card companies try to find new ways to make up for their lost revenue


• Chase changed balance transfer fees from 3% interest to 5%


• Bank of America instituted a great deal of changes, including the ability to raise the APR on future accounts if you miss a payment (go here for a more in-depth review of BoA's changes)

Keep A Watch Out:

The most important thing to get out of this is that you, the consumer, are now more protected than ever before. Banks now have to give you a heads up on policy changes, rate increases, etc... something that they did not have to do in all cases before. As long as you pay attention to your monthly statements released by your credit card companies and any email notification that you recieve from then, you should be well ahead of the curve. Good luck!

Related Links:

The Credit Card Act in PDF format is linked here

A Forbes article changes that you can expect to see as a result of the Credit Card Act: Forbes Article

Three Reasons Why You Shouldn’t Get A Home Equity Loan To Avoid Bankruptcy

When it comes to money troubles, friends and family are full of advice. One of the worse pieces of advice given to debtors considering bankruptcy is to get a home equity loan. That could be a big mistake. Here a few reasons why getting a home equity loan to avoid bankruptcy might not be the right move for you:


1.Typically, you can’t use debt to get out of debt. Anyone who has filed bankruptcy can attest to that truth. For most debtors considering bankruptcy, their financial troubles are caused by two problems, 1) lack of income and 2) too much debt. Getting a home equity loan would only worsen the second part that problem and move you closer to bankruptcy despite your best efforts.

2.Taking out a home equity loan could also be the first step towards foreclosure. This can be one of those situations where trying to avoid one situation puts you right into an even worse situation. Debtors who think they can avoid bankruptcy by taking out a home equity loan often find that they can’t pay back the loan or the mortgage and end up facing foreclosure and bankruptcy anyway.

3.Since a home equity loan is considered a secured debt, you won’t be able to discharge it in bankruptcy like credit card debt. A home equity loan works like your mortgage in that it is secured by your home. If you don’t pay the loan, they can foreclose. In bankruptcy, if you want to keep your home, you must pay the home equity loan and your mortgage. But fortunately, you do have the option to surrender the home in bankruptcy, which will release you from the obligation to repay the loan.
 
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Does My Wife Have To File Bankruptcy With Me If We Are Both On the Deed and Mortgage?

by Peter Orville, Attorney at Law on January 21, 2010 ·

Even if you and your wife are both on the deed and mortgage it is permissible for only one to file for bankruptcy. This is true even if you are past due on your mortgage payments. If only one of you files a Chapter 13 bankruptcy, you will include the past due mortgage payments in the Chapter 13 plan to be paid by the Chapter 13 Trustee. As long as you continue to make the mortgage payments due after the bankruptcy is filed, no adverse action will be taken.

When a Chapter 13 bankruptcy is filed, an “automatic stay” is put in place. The automatic stay stops all action against you by creditors. A Chapter 13 bankruptcy also creates a “co-debtor stay”, which prohibits creditors from going after your wife for collection of the debt.

Before deciding whether to file a bankruptcy alone, or with your wife, you should contact an experienced, knowledgeable bankruptcy attorney to discuss your options.

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Can Bankruptcy Help Stop Repossession?

Bankruptcy is designed to protect individuals or businesses that are unable to meet their financial obligations–and provide protection to involved creditors as well. While bankruptcy is a serious procedure and should only be considered if absolutely necessary, sometimes it is the best solution for those suffering severe financial hardship. And, for some, it may be the only solution.


One area that bankruptcy can be particularly helpful in alleviating financial hardship is by protecting property that may be in danger of repossession. This is when creditors take back goods that buyers are failing to make timely loan payments on. Some loans are secured–meaning the buyer has put down some form of collateral, often the item being purchased–while some are unsecured–typically credit cards. If you default on an unsecured loan, the only option creditors have when collection attempts have failed is to sue. But with a secured loan, creditors can repossess the collateral and sell it. Of course, if that doesn’t provide sufficient funds to wipe out the loan, they can then sue you for the remainder of the loan balance.
Bankruptcy can sometimes help cancel the debt, or even allow you to stop the repossession process. After filing a bankruptcy petition in bankruptcy court, all creditors are prevented from making any further collection attempts. This is also known as an “Automatic Stay”, which is an automatic order from the bankruptcy court issued upon the filing of a bankruptcy petition to all creditors. This applies to creditors attempting to repossess collateral such as automobiles.

If you file for chapter 7 bankruptcy in order to stop repossession, you’ll have to make arrangements with the creditor to bring all payments current after filing for bankruptcy. If you want to keep the car after bankruptcy, you’ll need to sign a reaffirmation agreement and make all payments after the bankruptcy.

In a chapter 13 bankruptcy, the repossession will be stopped and the debtor gains the chance to repay the value of the car to the creditor through the chapter 13 plan. Chapter 13 is beneficial to debtors owing more on a car than what it is worth, since chapter 13 payment plans can lower car payments on car loans where the debtor owes more than the car is worth.

If you’re thinking about filing for bankruptcy in order to stop repossession, you should seek out an experienced bankruptcy attorney in order to find out which option will work the best in your particular situation.

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Earthquake Relief for Haiti

In an effort to help those who have been affected by the earthquake in Haiti, and their continuing tragedies, Credit Card Management Services, Inc. d.b.a Debthelper.com is now a collection center to help those in need.

Your gift will help distribute relief supplies to children and families impacted by the earthquake and aftershocks in Haiti.

Anything you are willing to provide will be greatly appreciated and invaluable to the families you will be helping. The immediate need is dry foods such as rice, beans; can foods, tents and army type cots, blankets and medical supplies.

Where: 4611 Okeechobee Blvd. Suite 114 WPB, FL 33417

Time: Mon – Fri: 9:00am – 8pm; Sat: 12:00pm – 5:00pm

Information: (561) 472-8000

Debthelper.com

Don't Get Scammed - Choose Your Credit Agency Wisely

Scams are everywhere and a fast growing problem in the current recession is a con scheme involving the impersonation of debt consolidation, negotiation, and elimination agency. Such plans represent a last hope for many people to get out of debt; they are effective and time proven to help you get out of debt. And thanks to the rising levels of unemployment (over 10% in some states) more people are using them than ever before, and some of them have fallen victim to the scammers.

If you are in a situation where you are looking at these debt plans in order to free yourself from debt, here are a few tips/methods for spotting which are legitimate agencies and which ones are scams.

Talk To A Credit Counseling Agency:

Credit Counseling Agency's exist to help people in debt figure out the financial options that are best for them. Agencies base it on peoples specific problems and resources. They are often non-profit agencies, and their services are either free or provided when you pay a small fee ($75 is average). Different agencies can offer different services (such as reverse mortgages, debt consolidation plans, and more) which means that it is important to figure out which agency will be able to help you the most.

If you are in a situation where you are looking at debt plans and credit agencies in order to free yourself from debt, here are a few general tips/methods for figuring which are legitimate and which ones are scams.

• If you are working with a lawyer or a paralegal concerning your debt, ask if they can refer a debt help agency. Most will either have lists containing reliable and certified credit agencies on hand or they will be able to find one for you fairly quickly.
• States usually require credit agencies to be accredited and to have certified counselors in order to operate within specific states. Always ask an agency if this is true for them - while not all agencies have certified counselors the best ones usually do. Agencies with counselors who are certified by an outside group (one that you can research for yourself) often have websites and phone lines that you can research and call.
• Understand what you are getting yourself into. If you feel confused at any point during your conversation with the agency, always ask them to go over the information again. Most agencies will be happy to do so and will give you as much time as you need to figure out the options being offered to you. However, agencies that offer their counselors a commission for each customer gained are less likely to do this than companies who offer their counselors a flat rate.
• Make sure that you have been walked through the agencies entire privacy agreement. If an agency refuses to do so, or you do not feel that their privacy agreement is tough enough, then don't use that agency! Your financial information has to be protected, and if one agency can't do it then another one can.
• Get things down in writing. Most legitimate credit agencies will offer written contracts, certificates, or other legally binding agreements. These written promises are in place to protect you; they often contain the name of the counselor who helped you and the entire agreement in physical writing. Make sure that you read through the agreement and that the writing is straightforward and simple. If it isn't or you find yourself confused by something on it, call the agency back and ask them to go over it with you. You can often get written agreements emailed to you by the agency in question.
• Check for them with your states Better Business Bureau (BBB). If they are legitimate, then the BBB will be able to tell you how helpful they are and whether or not the BBB has received complaints about the agency.

Related Links:

New York Times Scam Article: Is a brief expose on scams targeting people who have been hit hard by the recession.
BBB1: Tips from the better business bureau on how to find a good credit counseling agency.
BBB2: An article detailing the difference between debt consolidation, debt negotiation and debt elimination plans.

Why People File for Bankruptcy

If you're struggling with debt, you may sometimes find yourself wondering if you should file for bankruptcy. If you're like most people who wonder about doing this, then you don't - but why? Well, one reason that many people don't file for bankruptcy is because they don't know if they are in a position to do so.

There are actually many different reasons that people file for bankruptcy, most of which involve common sense like the loss of ones job or overwhelming medical bills - and not laziness. Other reasons may surprise you, with one being that you may actually be able to improve your credit score by doing so! In any case, if you feel like one of the reasons below could apply to you, you may want to consider filing for bankruptcy yourself.

Reason #1: Loss of a job

One of the most common causes for why people choose to go bankrupt is because of a job loss. It is hard to find a job in today's market, and if you are already struggling with debt, the loss of your job can come as a major blow. Not only will you lose the money provided by the job, but other things as well. This includes things such as medical benefits, insurance, bonuses (such as access to a company vehicle), or discounts which also came with the job.

Reason #2: Preventing repossession of properties

If you file for a Chapter 13 bankruptcy, you might be able to force creditors to return property (such as your car) back to you. Your past missed payments will be consolidated into your bankruptcy plan, and you will give monthly payments to the trustee of your bankruptcy plan, and who will in turn pay the finance company on your behalf.

It is important to remember that repossession of properties is only possible under a Chapter 13 bankruptcy and NOT a Chapter 7 bankruptcy.

Reason #3: Improving your credit score

There are actually some cases where filing for bankruptcy can help you improve your credit score. To use an example, it is possible for someone with a credit score of 450 to raise their credit score as high as 700 if they meet certain requirements.

This is because when you file for bankruptcy your score is determined based on how you well you do compared to other bankruptcy filers. In other words, your score is matched against people in similar situations as you, not against people with perfect credit scores and zero debt.

As long as you manage your bankruptcy plan well and manage to meet its minimum payment obligations, then it is possible to raise your credit score. Keep in mind, though, that you cannot raise your score to an 850 (or close to it) so long as you are registered as being bankrupt.

Also, if you file for bankruptcy when you have a high credit score (which is not advisable, because doing so would indicate that you have other options available to you) then doing so may in fact harm your credit score. It is also advisable consider other means of raising your credit score before filing for bankruptcy.

Reason #4: Stop home foreclosure and catch up on missed mortgage payments

Filing for Chapter 13 Bankruptcy will stop foreclosure before bidding or sales will occur. This gives you time to repay mortgage arrears or your remaining mortgage balance. It does not eliminate your property mortgage.

Reason #5: Put a halt to creditor harassment

It doesn't sound like a major reason, but if you're struggling with debt and receiving rude and harassing calls on a daily basis, the pressure can sometimes be too much. People can only deal with so much stress before something gives way. Sometimes the best option to get rid of the calls and the stress is to file for bankruptcy.

If you are in this situation please remember that if there are other options available to you, take them! Bankruptcy can get rid of the creditors, but don't file for it unless your debt, credit score, and overall financial situation seems hopeless and impossible to work off.

Reason #6: Medical bills

Medical expenses have caused many families to file for bankruptcy. Whether you are middle-class, low-class, or somewhere in-between, the cost of medical treatment is steep and scary. One of my own close friends is currently struggling to pay a bill that her insurance didn't cover, and she only had a doctor remove a piece of food that had gotten lodged in her throat.

If you're in a situation where you're being crushed by paying a medical bill off and your financial state is in ruins, then filing for Chapter 7 bankruptcy can help you to reduce or possibly even eliminate your medical bill.

Reason #7: A new start

After you have filed filed for bankruptcy and completed the payments that you are responsible for under it, some people have found that it gives them a fresh start. This is not to say that your slate gets wiped clean - you can have the fact that you filed for bankruptcy on your credit report for ten or more years.

However, you will be: out of debt, free of creditor harassment, and (hopefully) have a higher credit score than you did before you filed for bankruptcy. All of these things can help you to feel better about yourself, and provide you with a figurative goal or 'light at the end of the tunnel'.


At the end

Hopefully these reasons will help you should you be in the position where bankruptcy seems like a possibility. Remember though... Filing for bankruptcy should be your last resort. If you have any other option (such as cutting your budget) you should definitely take it.

Also, before you file for bankruptcy, you should consult with a credit counselor to determine whether or not it would be in your best interests.


Source 1
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What If I Want To Sell My Home During Chapter 13 Bankruptcy?

If you’re in Chapter 13 bankruptcy and you want to sell your home, there are few things you need to know before you proceed:


1.The bankruptcy court must approve the terms of the sale before a debtor closes on the property.

2.The debtor’s bankruptcy attorney must notify all of the creditors in the bankruptcy before the property is sold.

3.You and your bankruptcy attorney must disclose the details of the proposed sale to both the creditors and the bankruptcy court before you can proceed. Those details should include, the home’s sale price, proof of the property’s current value and the details of how the proceeds from the sale will be disbursed to the creditors. That takes us to our next point.

4.Your bankruptcy attorney must provide the bankruptcy trustee and creditors with a detailed account of all deductions made and profits earned from the sale of the home. All proceeds from the sale of your home during Chapter 13 bankruptcy become part of the bankruptcy estate and must be paid directly to the bankruptcy trustee. The bankruptcy trustee will then disburse the proceeds from the sale to the creditors.

It is possible that after selling your home in Chapter 13 bankruptcy you will not see any of the proceeds of the sale. The question then becomes, should you sell your home during Chapter 13 bankruptcy? Well, it depends. If it is your primary home and you can afford the payments it may not be a wise decision. However, if it is a second property that you are struggling to pay for, it may be wise to proceed. But before you sell any property, work with your bankruptcy attorney to create an effective plan. A matter of fact, you should create a plan with the help of your bankruptcy attorney before you file.

Source

What is Bankruptcy?

While searching the internet and posting blogs, I realized that it has been awhile since this blog dealt with what bankruptcy actually is. To make sure that you are aware of whether or not you should pursue this option, here is some information that I have pulled from various sites (which are linked below) to help you out.

Two Types of Bankruptcy

While there are many types of bankruptcy, here are the two most commonly filed chapters (or types). For a full list of the requirements and your potential eligibility concerning bankruptcy, you can get a free consultation with a bankruptcy attorney, consultant, or a similar expert.

1) What is a chapter 7 bankruptcy? (a more thorough explanation can be found in our September 27th post)

"Under the federal bankruptcy statute, a discharge is a release of the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer required by law to pay any debts that are discharged. The discharge operates as a permanent order directed to the creditors of the debtor that they refrain from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts. Although a debtor is relieved of personal liability for all debts that are discharged, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien."

2) What is chapter 13 bankruptcy?

"In a chapter 13 case you file a plan showing how you will pay off some of your past-due and current debts over a period of three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property, like your home or car, even if you are behind on payments or you have equity not covered by your exemptions. Your payments on these secured debts will generally be your regular monthly payments plus some extra amount if you need to get caught up because you are behind when you file."

Experts in this field can be found in your local area or through sites such as http://www.debthelper.com/.

Source

Experts Answer your Bankruptcy Questions

The Dow may be over 10,000, but unease about the economy persists as unemployment hovers over 10%. To help ease some of your concerns, WalletPop is ready to answer your personal finance questions. Here's this month's sample:


Question: My wife and I are in debt that I no longer can tolerate. I am retired and have burned through my 401(k) and my annuity to pay the $6,000 a month in mostly credit cards and home mortgages.

What are my options? I don't think we qualify for Chapter 7 bankruptcy. What about Chapter 13, and what does that entail?? Do I need an attorney? How do I keep creditors from calling me day and night?

--Gary Anders

Answer from James Caher, co-author of Personal Bankruptcy Laws for Dummies

"Bankruptcy is definitely something you should look into, since it looks like you're sinking fast and probably wasting your retirement paying debts that you might be able to eliminate in bankruptcy. But there are many, many things to consider.

"I suspect that you may very well qualify for Chapter 7 (the one that does not involve a repayment plan of any kind), since you are living on retirement income. But this depends on whether your income exceeds the median income for your state, which is probably around $4,300/month before taxes. Social Security income does not count. Even if your income exceeds the median, you may qualify for Chapter 7, but you would have to pass the Means Test.

"You might not want to file a Chapter 7 if the equity in your home exceeds the allowable exemption in your state. For example, assume that your home is worth $200,000 with mortgages totaling $150,000, leaving $50,000 in equity (the difference between the value of the property and the mortgages). If your state allows a homestead exemption of $50,000 or more, you won't lose your home in a Chapter 7 -- provided you keep up with your mortgage payments.

But if your state allows, say, $15,000 for a homestead exemption, a Chapter 7 trustee could sell your home, pay off the mortgages, pay you $15,000 and pay the rest to creditors.

Chapter 13 is different. Property is not liquidated. Instead, folks pay what they can afford for the next 3-5 years, and remaining balances are wiped out. If you are behind on your mortgage, you can use Chapter 13 to catch up on back payments by stretching them out over 3-5 years while continuing to make regular payments going forward. Yes, you should consult with an experienced bankruptcy lawyer for advice tailored to your particular situation, but you can get a very good idea about your options from our book, Personal Bankruptcy Laws for Dummies.

Source

67 and Bankrupt: Are the Kids to Blame?

Larry and Abby are in their late 60’s. They are broke, about to lose their home and there is nothing they can do about it.
But it didn’t have to be this way.

10 years ago, they had over $500,000 saved on top of the two rental units they inherited when Larry’s mother passed away. At the time, Abby owned a successful small business and had a comfortable income. Everything looked like peaches and cream.

So what happened?

Patrick happened.

Pat is their son. He borrowed money from his parents seven years ago to open his auto repair business. Pat was a great mechanic but a horrible business person.

Larry and Abby just wanted to help their boy. They convinced themselves that the money their were forking over was just a loan. They were sure Patrick would pay them back some day.

But as the days passed, the likelihood of seeing that money again grew smaller and smaller.

He slowly drove the business into the ground.

But each time he feel deeper into the hole, Larry and Abby were there to bail him out. They were sure that all Pat needed was a little more working capital.

Of course, this enabled Pat to amass even greater debt. Within three years he exhausted all his parent’s savings. They had to sell all the real estate they inherited and they refinanced their home as well. Even after going through all that, Pat was left with debts of over $300,000 including $150,000 to the IRS.

He was much too proud to close the business. He was determined to make it successful – even if it meant spending every last dime his parents had.

So was Patrick to blame for Abby and Larry’s financial destruction?

Not in my opinion.

Abby and Larry volunteered to become an ATM machine for Patrick. Nobody put a gun to their heads. But that wasn’t really the root problem.

You see, the reason they wrote blank checks to Pat was because they didn’t take the time to think about what impact their decisions would have on their own financial future.

They were very mindful about their spending – except when it came to supporting their kids.

Pat needed money.

They wrote him a check.

It was automatic – and it was ridiculous.

Abby and Larry put their heads in the sand. They didn’t pay attention to their own financial plan. In fact, they didn’t have one.

Sure they had assets and income. But even though their estate was worth over $2.5 million at the high point, it didn’t last long once they started writing checks for $50,000 every other month to keep their kid in business.
I know this is an extreme example. You might not be sending huge amounts to your children….but the amounts don’t matter. And it also doesn’t matter how your kids spend the money you give them. I don’t care if they use your money to open a successful business or go to Harvard. If you can’t afford it then you can’t afford it. Period.

How do you know you can afford the support you give to your kids? Have you ever said “no” to your kids when they asked for financial help? How did that impact your relationship?

If you are on the receiving end of this, do you have an obligation to your parents to discuss the ramifications of their support?

Source

Student Loan Debt — Dischargeable In Chapter 13 Bankruptcy?

Anyone who has ever taken out a student loan is quite aware of the fact that student loan debt is next to impossible to discharge in bankruptcy unless the debtor can prove “undue hardship.” But the 9 th Circuit Court ruled in October that student loan debt could be discharged through the confirmation of a Chapter 13 plan if the creditor is given notice of the plan and does not object, (Espinosa v. United Student Aid Funds Inc., No. 06-16421, 9th Cir. 10/02/08).


The court stated:

“Our long-standing circuit law holds that student loan debts can be discharged by way of a Chapter 13 plan if the creditor does not object, after receiving notice of the proposed plan, Pardee, 193 F.3d at 1086, and that such notice is not constitutionally inadequate. In re Gregory, 705 F.2d at 1123. We find it highly unlikely that a credi­tor whose business it is to administer student loans will be misled by the customary bankruptcy procedures or somehow be bamboozled into giving up its rights by crafty student debtors. If the creditor fails to object, it is doubtless the result of a careful calculation that this course is the one most likely to yield repayment of at least a portion of the debt. In such circumstances, bankruptcy courts have no business standing in the way. Cases such as In re Webber and In re Patton are, to that extent, overruled.”

Although this ruling should not be considered an open door for all who want to discharge student loans in bankruptcy; it is a long overdue relief for debtors who are burdened by massive student loan debt. If the Chapter 13 bankruptcy trustee has examined the debtor’s ability to repay his/her student loan debt and has determined that the balance of the student loan should be discharged in Chapter 13 bankruptcy, then it is up to the creditor to accept or dispute the ruling. No special provisions should be given to student loan creditors who do not follow bankruptcy proceedings and challenge discharge rulings according to the law.

Source

Personal Finance 101: What Does FDIC Insurance Really Mean?

One of the biggest things I encourage people to look for when they open a bank account is that the bank is FDIC insured. Most banks operating in the United States offer this insurance. In an era where people are more than a little worried about bank failures and the like, FDIC insurance is vital.


But what exactly is it?

Charlie writes in:

What exactly is FDIC insurance? How does it work? [A local bank] went under recently and seems to have been bought out by another bank and from what I understand the accounts are intact. Is that FDIC insurance at work?

(I edited out the bank in Charlie’s question for privacy reasons.)

What Is FDIC Insurance?

FDIC insurance refers to insurance policies created by the Federal Deposit Insurance Corporation, which is an organization wholly run by the government of the United States. The FDIC sells insurance policies to banks which insures the checking and savings accounts at those banks against the failure of those banks. Thus, when you open an account with a bank, that bank purchases insurance on that account for you from the FDIC.

FDIC insurance covers checking accounts, savings accounts, certificates of deposit, money market accounts, and cashier’s checks. It does not cover stocks, bonds, mutual funds, money market accounts, US treasuries, safe deposit box contents, or other such items.

Most banks that operate in the United States buy this insurance. When they do, they’re required to display the FDIC logo on signs in their business as well as on their websites.

FDIC insurance insures deposits up to $250,000 per depositor. This means that if your bank fails, the first $250,000 in your account is insured by the FDIC and will be returned to you in the event of a bank failure.

What Happens If My FDIC Insured Bank Goes Under?

If a bank that offers FDIC insurance becomes insolvent, the FDIC takes over that bank and all of the accounts held there. One of two things then happens.

In one type of takeover, called the “purchase and assumption” method, an already-existing bank takes over the accounts of that bank as well as some (or all) of the loans that bank has given out to customers. This purchase is usually done quickly. For you, the customer, this means that one morning, you’ll wake up and your bank account will be with a new bank. This is what happened when Wachovia failed and was taken over by Wells Fargo, for example.

In another type of takeover, called the “payout” method, the FDIC liquidates everything that’s left in the bank and then issues payouts for insured amounts to customers. So, if you have less than $250,000 in your accounts, you’d receive the full amount – if you had more, you’d just receive $250,000.

In either case, the process is really straightforward, usually involving minimal hassle from the customer. At most, you’ll simply need to open an account at a different bank (if your bank isn’t bought out or if you don’t like the new bank).

What If My Bank Doesn’t Have FDIC Insurance?

If your bank fails, you’re out of luck. You get nothing at all.

This is the reason why I encourage people to use banks that provide FDIC insurance. Luckily, almost all banks in the United States do offer it, but it’s worth checking just to make sure.

Source

FDIC Officially Goes Bankrupt

From today's FDIC quarterly, there is final confirmation that the Deposit Insurance Fund is negative $8 billion.
by Jake Towne, the Champion of the Constitution

WASHINGTON, DC - Today the FDIC released its quarterly report, revealing that the Deposit Insurance Fund is bankrupt and now stands at negative $8.2 billion dollars. (page 13/26) Central planner and FDIC Chairwoman Sheila Bair has confirmed separately that future bank failures will be funded by the bailout fund allotted to the FDIC.

If you are new to the US banking scheme, you might question why banks and the FDIC are going bankrupt -- don't they HAVE all the money? The answer is they do not, banks in July 2008 had lent out about 99.4% of all the money they had on deposit. This is despite the rather insane truth that the Federal Reserve can create more money whenever it desires.

The FDIC had predicted its bankruptcy in a September letter. I had been following the FDIC closely for the past 18 months, but I finally threw my hands in the air after seeing how the report was rigged to keep the DIF fund positive in the Q2 2009 report, as I reported in "FDIC: 'We Aren't Bankrupt and Everything is A-OK.'"

However, the best friends of the FED banking cartel, the United States Congress, has a lot more nice surprises in store for America's working class. Politicians like to wave around one hand as they mess around with the other hand behind their backs, out of sight. While all the fury of the concerned is focused on the health care spend-and-tax bill, HR 3996, dubbed by yours truly as the "Automatic Bailout Bill" will grant the FED the ability to bailout any "individual, trust, or corporation" (section 1701) as well as impose a bureaucratic system of unneeded regulations.

Source: FDIC

Save Money Without Clipping Coupons

There are plenty of articles about how to slash your holiday spending. Sure, you can clip coupons, make retailers play "match the markdown price" and spend your Thanksgiving evening loitering in some dark, damp parking lot guarding your place in line so you can snag those Black Friday door buster deals.

Alternately, you could try a more cerebral cost-cutting strategy. Here are five ways to psych yourself into saving money.

1. Sweat the big stuff

No need to drive around all day to find the best price on wrapping paper and snowglobe stocking stuffers (unless you're really sick of rewashing the dishes just to avoid the in-laws). Concentrate your cost-cutting first on high-dollar purchases -- big-ticket items where saving 20% puts some real cash back in your pocket. Then tackle the smaller stuff as time, energy, and sanity allows.

2. Do some retail recon before you shop

You won't know whether you're getting a real bargain or a dud deal unless you have some pricing history for comparison. Many stores don't include an item's original price in their advertising circulars. If the original markup was helium-high, even 50% off is hardly a "sale." Keep a folder for sales circulars on items of interest, so you aren't suckered into buying something that seems like a good deal until you get it home.

3. Don't fall for the upsell

Skip the extended warranty, which can pad the price of the item by 10% to 30%. With just a few exceptions -- such as treadmills and big-screen HDTVs -- warranties are rarely worth the extra price, according to Consumer Reports. If you feel the need to purchase extra protection, pay no more than 15% of the product's price, and buy the manufacturer's warranty, not the store's version. Same goes for all those extra doodads that are displayed near the only item that's actually on your list. It's called an "up-sell" for a reason -- it drives up your tab and the store's profit margins.

4. Shop with blinders on

Avoid last-minute upgrades by picking the must-have features and target price range for more complex goods such as electronics and small appliances. Studies show that the more choices shoppers are given, the more likely they are to trade up to a fancier (an unnecessary) model. So weigh the merits of each product independently. Compare like with like -- and erase from your mind the alternatives that don't fit your criteria.

5. Go on an all-cash diet

Yes, credit cards are convenient -- they offer purchase protection, rewards, an easy way to track your spending (albeit after the damage is done), and they take up less wallet room. But they're also too convenient. Studies show that people spend more -- and more impulsively -- when no actual cash changes hands. Plastic makes us devalue what we spend because we don't experience the immediate loss of buying power that we do when we pay with cash. (Why do you think they use poker chips and not actual currency in Vegas?) If you tend to overspend, leaving your credit cards at home during the holidays can be a serious boon to your bottom line.

Source: The Motley Fool

Florida is First in Foreclosures

Sometimes, being in first place is not a badge of honor. Take Florida, for example, which currently holds the dubious distinction of being first in the nation in foreclosures.

The Palm Beach Post informs us that close to 1 out of every 5 homes loans in Florida was delinquent in payments by 90 days or more, or was somewhere in the process of foreclosure during this last quarter.

The state has almost 3.5 million outstanding loans, and more than 13% are in trouble. This type of economic behavior does not bode well for a recovery. It also indicates that another large group of foreclosed homes is about to crash into the real estate market with a resounding thud.

This somewhat alarming foreclosure statistic is not being helped by Florida’s other problem, an 11.2% unemployment rate. Experts do not expect employment to alleviate before the second quarter of next year, by which time it will have risen, according to projections, to 11.4%.

While Florida’s foreclosure figures seem high, the reality is, according to the Mortgage Banker’s Association, that 1 out of every 7 loans across the nation is in foreclosure. This is an increase from the 1 out of 10 that began the year.

Florida foreclosure rate is closely followed by Nevada, California, and Arizona. These four states are responsible for 43% of the new crop of foreclosures that is due to hit the market.

In addition, foreclosure filings in October of 2009 showed an 11% increase over those from a year earlier, and are up more than 25% on a year to date basis. According to the Boston Globe, it is not subprime loans that are spurring the foreclosure increase; instead, it is rampant unemployment, which stands at a 26 year high nationally.

Nationwide, the rate of joblessness has moved beyond 10% and expected to rise above 11% before it turns around sometime next year.

What is extremely alarming is a report from the Mortgage Banker’s Association that fixed-rate home loans, which were often made to people with excellent credit, are also falling victim to foreclosure. These formerly credit-worthy individuals are succumbing to unemployment. When faced with a choice of feeding a family or paying a mortgage, food always wins out.

What may be even more disturbing is that the Federal Housing Administration (FHA), which has been holding the housing market together by insuring more than 40% of new home loans, reports that more than 18% of those who hold FHA loans are delinquent by at least 1 payment.

Source: huliq.com

Debt Relief Grants To Clear Credit Card Debts

By: Walter Sigmore  
Debts are dreaded by almost everyone. No matter how confidently one promises to himself about using the credit card only when the need arises, all the users end up being guilty for having made purchases that are well beyond their budget. This in turn directs them to huge debts, which necessarily means headache. Debt relief grants can come to your rescue now. With these grants, it is easier to get rid of your debts and lead a peaceful life.


These debt grants can be utilized for your educational purposes, health care, to clear your household or store debts, etc. The good thing about such grants is that the rate of interest is relatively low and repayable by any person with not so good financial status. These financial grants are issued by debt consolidation companies and also nonprofit organizations. The nonprofit companies provide relief to people who are in critical financial crisis and can hardly find any means to get out of the same.

Credit counseling should be the first step that any person who is fully submerged in debts should look forward to. This will help him analyze the various options left and which one suits him the best so that he can comfortably get out of the debts. Normally, a person who has huge debts to clear will be in a confused state. Hence, it is necessary to submit to a credit counselor.

Before you can attend these sessions, you are required to collect all your credit bills and other debt bills. When you carry these to the credit counselor, he will analyze your financial status and with his experience, will provide you with all the possible scenarios. A good counselor will strive hard to lead you towards personal freedom and helps in stabilizing your future.

There are umpteen credit consolidators in the market today. While most of them genuinely struggle to help you out, there are scams too. You should conduct a brief research on which company has been successful in helping the debtors to restore their life like before.

You can compare the success rates of the various companies and zero-in on the best company that can help you out. You can try looking for nonprofit companies that offer debt relief grants for people who are in terrible crisis. If your condition is really poor, then you can benefit from such grants. Start today with ending your bad debt.

Source: Article Snatch

How to Set Up an Emergency Fund

“Most financial advisers recommend building up emergency savings equivalent to three to six months’ worth of living expenses… however, some recommend a fund to cover eight months’ living expenses.”
Emergency Fund?

Respondents (n=122) in Wi$eUp’s latest online poll have…

42% – NO emergency fund

26% – less than 1 month’s savings on hand

15% – 1-2 months’ savings on hand

7% – 3-4 months’ savings on hand

3% – 5-6 months’ savings on hand

7% – more than 6 months’ savings on hand

(http://wiseupwomen.tamu.edu/03-resource-center/polls.php)

The Wi$eUp poll results highlighted above illustrates a challenging reality for many families – NO or very limited emergency savings. Polls and studies reported in the media frequently talk about people being “a paycheck away from financial disaster.” Is it possible to be proactive and establish an emergency fund even during tough economic times? The answer is, yes, if you are able to make it a financial priority. That may not be easy when money is tight, but it is important.

Just what is an emergency fund? Your emergency fund is a reserve of money intended to cover basic living expenses IF you experience a financial emergency, such as losing your job or other sources of income, or having an unanticipated, catastrophic expense (perhaps a medical expense or a major household expense).

Here’s how to start an emergency fund…

• First, do the math. What are your “bare bones” monthly living expenses? That is, what is the least amount of money you would need to cover the very basics and not fall behind with your monthly bills? This amount is
generally less than what you actually spend on a monthly basis.

• Once you know the monthly fi gure, multiply it by three, six, or eight – whatever is your goal for how many months’ worth of living expenses you want to build up.

• Next, determine how much you can save regularly on a monthly basis.

• Then decide how long it will take you to build up your emergency fund. Remember, you do not have to fully fund your emergency fund overnight!


Example:

• “Bare bones” monthly living expenses = $2,100
• Emergency fund goal (3x, 6x, or 8x) = 8x
• Total amount needed to fund it = $16,800 (8 x $2,100)
• What I (we) can aff ord each month = $300
• How long it will take to build it up = 56 months
($16,800 divided by $300)
• In the example, 56 months may seem like a long time, but remember the money can be accessed for emergencies if needed during this time. And you can always alter your goal.

• Designate a special savings account to hold your emergency fund. Select an account that will accrue interest or earnings and is liquid (accessible when needed without penalty), but don’t make it so easy that you will “raid” the fund every time you need a litt le “extra.”

• For more information on emergency funds and set-aside accounts, check out

Chapter 5 – Savings Basics at Wiseupwomen.org

The Importance Of Finding A First-class Bankruptcy Attorney

Bankruptcy. It’s not a decision anyone comes to lightly. For most people it is, as it ought to be, a last resort, chosen only after other options have been exhausted. Before you even get to point of considering bankruptcy, you’ve probably already been through disappointment, discouragement, worry, and many gut-wrenching bill paying sessions.

Don’t compound your troubles by trying to make decisions about bankruptcy without good expert advice. A reputable Phoenix bankruptcy attorney can review your situation and will honestly let you know whether or not bankruptcy is the best option and if you are likely to qualify. If you are unsure where to begin finding an attorney, you can check with the Maricopa County Bar Association. Their referral service can help you find a competent and reliable Phoenix bankruptcy lawyer. A creditable lawyer will charge you a nominal fee for an initial consultation, at which point you can determine if this is the right person to help you move forward with your bankruptcy filing.

Good advice can help you determine the best way to manage your debt and get your life back on track. It will take time, but eventually your can regain a good credit standing as well, certainly faster than if you continue to miss payments or try to borrow more and more to catch up to your debt obligations. Your bankruptcy lawyer will assess your state of affairs and let you know which form of bankruptcy is the better option: Chapter 7 or Chapter 13. These labels refer to the federal codes regulating bankruptcy, and your personal circumstances, including type of debt and assets you may want to protect, will determine the better choice.

Many people will not even have an option, as you must meet the standards of a means test to qualify for a Phoenix Chapter 7 bankruptcy. Congress passed a sweeping new bankruptcy law in 2005, making it more difficult for people to qualify, and file, for bankruptcy.

The reasoning behind the new bankruptcy regulations was that too many people were carelessly piling on debt and using bankruptcy to get out of their obligations. If you find yourself facing this incredibly difficult decision, you probably think that any member of Congress ought to try walking in your shoes for a while. They might become aware that injury, illness or job loss does not constitute carelessness. When you find yourself in this challenging position, don’t tough it out alone. Find yourself a good Phoenix bankruptcy lawyer to help you guide you through to the light at the end of the tunnel.

Source: Lawyers-Law.com

Home Affordable Modification Program

In March 2009, the US government declared an initiative that was set into motion so as to aid homeowners to keep their homes and put off the threat of foreclosure. This program gives each homeowner in financial duress a glimmer of light in an area that seemed so dark and it is called the Home Affordable Modification Plan.


President Obama put this plan into effect this year in order to pull people out of possible financial disaster and keep the economy ticking along. The majority of homeowners who have a mortgage could possibly be eligible and monthly payments will be largely lowered to a point where their mortgage payment fits into their budget.

This fantastic initiative has shown to be a massive break for those homeowners who have come close to losing their house and the government has permitted thousands of dollars to help give both the consumer and the economy a large helping hand.

Who is eligible for this initiative?

Because of the giant number of homeowner's and the fact that the majority of lenders are not suitably staffed, now is the time to jump in and attain help in paying down your mortgage. It will assist you to avert foreclosure and the credit issues that will haunt you for the next umpteen years. There are guidelines put into place that will allow you know if you qualify for the home affordable modification plan.

The main qualification is that you received your current mortgage before the beginning of 2009.

It is imperative that your home be both owner occupied and your primary residence or you will not be entitled. To qualify, the property cannot be an investment and the house cannot be left sitting empty under the terms of this plan. The basics are that the house be your current residence. You will have to document proof of residency with some sort of bill with your name and address on it during the application process.

How much money you make monthly needs to fall into a particular area and guidelines. Talk to a professional ahead of you continuing the process.

Throught the application process, there will be numerous factors being evaluated with your income, expenses and assets being one of the largest parts. Don't rush things and take care to include everything you own that has any true value. If you don't disclose anything you could lead to future problems and keep you from qualifying for this program or government assistance in later years.

Additionally an important point that needs to be made is about those who are currently in the middle of a bankruptcy suit. Don't automatically think that this fact will completely rul you out from this modification scheme. Simply ensure that you are truthful with regards to all that your lawsuit entails at the time of your application.

The initiative will come to an end by December 2012, however all payments will keep going for numerous months after the finish.

The Treasury Department has provided a cash incentive to those who apply early for this plan and make timely monthly mortgage payments. This is a way to encourage people to sign up and the government hopes this will reach everyone that is entitled.

The Home Affordable Modification Plan has been created to make fantastic steps in assisting folks to lower their mortgage payments and put off foreclosure. In the state of our current economy it has taken the burden off many homeowners' shoulders. Now numerous individuals might have a long future with the home they worked so hard for.

Source: CMLC Mortgage

Avoid Bankruptcy Double Jeopardy

Our guest author for this post is Morlino and Lathea Morris on How to Avoid Bankruptcy Double Jeopardy

As more people remain unemployed and layoffs continue, more and more consumers are finding themselves unable to pay their bills and forced to file Chapter 7 bankruptcy. Although you expect your credit score to take a hit when you file bankruptcy, you shouldn’t be penalized twice. But many consumers who have filed bankruptcy and anxiously applied for financing soon after their bankruptcy is discharged, are shocked to learn they have been denied only because the credit bureaus have failed to do their job. Credit bureaus sometimes don’t update consumer credit reports to show debts that are included in the bankruptcy. A court ruling requires the three credit bureaus - Experian, Equifax and TransUnion to report all debts that are discharged through Chapter 7 bankruptcy to be listed as such on consumer credit reports. Delinquent debts that were discharged through bankruptcy that still appear on your credit report not updated will negatively impact your credit score. Why? These debts will be looked upon as current debts and will appear to a potential lender that you still owe these debts.

A customer who has been using our Complete Credit Management Toolkit to smartly manage his credit after filing Chapter 7 bankruptcy, unfortunately, missed a very important follow-up step. He spent a period of time getting his family finances in order and remaining debt free. But it wasn’t until his mortgage application was denied, that he realized he had failed to take a very important step. Had he reviewed his credit reports after his bankruptcy was discharged, he would have discovered credit cards debts that had been included in the bankruptcy were being inaccurately reported on his credit reports. So despite the fact in reality he was debt free, to the mortgage lender he was carrying more debt than he could afford, and he was delinquent on these accounts as well. The lesson here is this, if you see a bankruptcy in your future, remember, once your bankruptcy is discharged, your job is to follow-up with the credit bureaus to make sure they have done their job. Unresolved errors will negatively impact your credit worthiness. Here are some Smart Credit Moves:

1. Request a copy of all three of your credit reports from the three major credit reporting agencies, TransUnion, Equifax and Experian. You can get them free online at www.annulacreditreport.com or call 877-322-8228.

2. Examine your reports carefully for errors. Pay particular attention to any accounts that were discharged as part of a bankruptcy. Any civil judgments discharged in a bankruptcy should be reported as discharged or included in bankruptcy and show a zero balance. Any other accounts discharged in bankruptcy should be reported as discharged or included in bankruptcy and show a zero balance versus showing charge-off or any other reporting.

3. Report to the credit bureaus any errors uncovered. Send them a copy of the credit report with the errors high-lighted, include any supporting documents from the bankruptcy court.

During these economic times, it’s more important than ever for consumers to review their credit reports for inaccuracies that could cause their credit score to plummet -and interest rates and insurance premiums to spike! It is your responsibility to make certain credit bureaus are doing their job. Be Proactive!

Source: Rosie's Boomer Review