What is Bankruptcy?

by Douglas Jacobs, California Bankruptcy Attorney

The term “bankruptcy,” according to Webster, means either “: the quality or state of being bankrupt or utter failure or impoverishment.”   In today’s modern parlance, to be bankrupt means you don’t have the money to pay your debts.

To file bankruptcy then is to accept that you can’t pay your debts and to take action to move forward by getting a “fresh start.”

Legally, Bankruptcy is actually a Federal program that allows companies or individuals (including married couples) to obtain a “fresh start” by reorganizing or discharging their debts.

For consumers, the two most common types of bankruptcies are Chapter 7s and Chapter 13s.  A chapter 7 bankruptcy generally wipes out or “discharges” your unsecured debts such as credit card bills, medical bills, etc.  A chapter 13 bankruptcy is a method of reorganizing or structuring your debts to allow you to discharge what you can and get caught up on debts that you want or need to keep paying, such as house payments, tax obligations, etc.

The theory behind bankruptcy starts with the basic concept that one shouldn’t spend the rest of their life trying to pay off a debt that they’ll never be able to be rid of.  Even without today’s egregious interest rates, a loss of employment or significant illness can create such a situation.

Bankruptcy is as old as when people first started lending money or commodities to each other.  Deuteronomy talks of forgiving one’s neighbor’s debts every 7 years, and there are numerous other biblical references to such a concept.

So, you should consider filing bankruptcy if:

1.    Your debts are overwhelming you and you see no way to pay them off in the next two years;
2.    You are behind in your house payment or a tax obligation and you see no way to get caught up; or
3.    You have just lost your job or recovered from a serious illness and don’t know how you will be able to pay your bills.

If any of these apply, consult a competent bankruptcy attorney in your area.

 

Source

Important facts about bankruptcy

by Jamie Billings

Bankruptcy is a tough road that best reserved for those who do not have any other options. Generally speaking, filing a Bankruptcy is a last resort. While it should not be entered into lightly, it may prove itself to be a positive solution for you. If you cannot pay your debts or you are dealing with a lawsuit bankruptcy maybe an option for you. Bankruptcy is an option when you have little or no income in order to make any kind of monthly payment to your creditors. The court will take away from you the responsibility of paying your debts. Bankruptcy usually lasts 12 months, after which time, any unpaid debt is written off.

One of the major aims of bankruptcy law is to give a financially distressed person an opportunity to make a new financial start. Bankruptcy laws help people who can no longer pay their creditors get a fresh start through liquidating assets to pay their debts or by creating a repayment plan. It also protects troubled businesses and provides for orderly distributions to business creditors through reorganization or liquidation.

Bankruptcy is an important decision and the law and it application to one’s particular situation can be very complicated. It is generally recommend that one consult with an attorney with experience in the personal bankruptcy field.

If you feel comfortable with attempting the bankruptcy process without an attorney there are several online bankruptcy services and information that may assist you. Bankruptcy information provides an expert advice and a live forum alongside a regular roundup of the latest news, statistics, and research from the world of debt solutions. You may also find reports on issues surrounding bankruptcies.

If you are deeming for a bankruptcy help, you should first understand the different consequences of bankruptcy so you will then be able to make informed decisions about the alternatives available to you. You can also try and come to an informal repayment arrangement with your creditors you can consider a formal arrangement.

There are a number of factors to consider in deciding whether bankruptcy is an appropriate option. You may wish to consult an attorney before proceeding to file for bankruptcy.

Bankruptcy laws help people who can no longer pay their creditors get a fresh start through liquidating assets to pay their debts or by making a repayment plan. Bankruptcy laws also guard troubled businesses and provide for orderly distributions to business creditors through reorganization or liquidation.

Bankruptcy will really give you a fresh start. However, careful consideration should be given before filing for bankruptcy, because doing so may affect your credit and like any ordinary phenomena, it have other consequences.

Source

Dangers of not disclosing everything to your bankruptcy attorney

 by Pamela Stewart, Attorney at Law ·

I realize potential clients are scared when they come to see me and are unsure of their circumstances and their future. But this does not excuse a client from fully disclosing their financial situation to me or to any bankruptcy attorney. I can’t help you – if you don’t help me. So, what are the dangers of not telling me everything?

Property and/or property rights may be lost to the bankruptcy trustee or to a secured creditor if not properly disclosed. Clients often forget they have dormant savings accounts or accounts with credit unions – but this property that needs to be disclosed. The same is true with tax refunds, bank accounts that you are on but don’t use (such as a parent’s bank account), accrued vacation pay, salary or pension rights, insurance interests – especially if there is cash value.

Another often overlooked item is debt that where the client has co-signed for someone else. Even if you don’t have the item (such as a car), you are still liable for the debt and how that debt is treated in your bankruptcy could afffect the other co-debtor.

Clients often have the misconception that he or she can pick and choose which creditors will be included in the bankruptcy. WRONG!!! Failure to list a creditor could mean that debt is not discharged and cannot be discharged in a future bankruptcy.

Another common issue is when a client fails to disclose all of their property to the attorney and it turns out the property is not exempt. Had the potential client disclosed all the property interest upfront, the attorney may have advised the person not to file for bankruptcy or to delay the filing of the bankruptcy in order to keep the property.

Or, if you fail to tell me about a security interest in property such as where you have put up household goods for security for a personal loan, I am unable to utilize the statute to avoid the lien so that you can keep your household goods.

The biggest danger, though, is not disclosing all of your assets and having your discharge denied. Recently, one of our judges denied an a husband and wife their bankruptcy discharge due to their failure to disclose a number of assets. Not only did their bankruptcy discharge get denied, they still owed several million dollars in debt that can never be discharged, their non-exempt property was taken by the bankruptcy trustee and sold for the benefit of their creditors, and he will probably lose his law license. (The debtor was an attorney.)

As a bankruptcy attorney, I want you to get the maximum benefit of a bankruptcy filing and to help you keep as much property as you can. But in order to do so, it it critical that you disclose all of your assets and liabilities to me – no matter how insignificant you may think it is.

Source

My Life with Bankruptcy

by Andrew Bernstein
Certified Personal Finance Counselor 

In 1985, I had completed my first 10 years in the newspaper business, 5 as a managing editor, which had been my dream all through school and life. The opportunity was presented to me to open my own publishing company and start to produce my own magazine and newspapers. I literally jumped in without even thinking about it. I knew how tough it was going to be and that there might be a stretch that finances would be tight.

My partner and I got great backing from a few local banks and investors and we were off and running. Our first publication, a women’s magazine, was an instant critical success. We had hired a great staff and of course with my experience as a managing editor, I was able to put a gentle hand in things. The problem was that we didn’t have a great sales and marketing team. We were relying on an outside company to do it and unfortunately their staff was not totally geared to the job. After a few months, we were able to cover costs, but had little left over for my partner and I. AND THAT IS WHERE MY TROUBLE BEGAN!!!

My credit had always been great. Buying cars, homes, etc., had never been a problem. I had 4 or 5 credit cards and I started living off them. Within about a year, the debt had crept up to the $10,000 mark, which back then was very significant. I was making all the mistakes, using one card to pay off another, using cash advances, etc.

 It appeared as though I was heading for a small disaster and indeed I was. At some point I had maxed out all the cards and I was looking for more. I did get a little more and then the nightmare hit home. I started missing payments and got hit with penalties and late fees. The debt soared by several thousand and I was beginning to panic. I had always been taught that good credit is essential.

At this point, my ex-boss and good friend decided to lend me a hand. He would spot me a loan to pay off the debt and I would take on managing one of his publications in my spare time. It seemed like a good deal. The only problem was that I had not learned from my recent mistakes and started using the cards again out of necessity. Again the debt soared and while all this was going on, my partner decided to leave the business and when he did, I found out that he had left some major unpaid bills, so that of course effected the business.

It was the true perfect storm, no way to pay the bills, no way to pay myself and/or the credit card companies and the loan. To say the least it was depressing, at worst, it was totally devastating. My dream was about done and I was overwhelmed by all the debt. At that point I decided the only way out was a bankruptcy.

I filed for Chapter 7 on the personal side and I was going to file for a Chapter 11 business bankruptcy and then decided against it. I knew that it was a long shot to ever be able to open again, so I just let it go, despite pleas from certain leaders of the community to keep things going.

For the next year, I virtually lived in hiding, my reputation tarnished and my future looking bleak. There were no real credit counselors at the time per se, so there was no one to talk to about rebuilding, other than friends and interested colleagues. I started doing some consulting work for businesses that were having problems. It seemed so strange to see so many of them going through what I had just been through. I was able to help turn some of them around or at least delay the inevitable. It was then I also started seeing some potential in the fledging credit counseling industry. I joined a company in the late 1990’s and acted as a mediator between clients and their creditors. I felt as if I were getting a second chance. My own finances were now under control and I had decided to limit my credit cards to the minimum that I felt I needed.

My employer decided to move to FL in 2000 and I moved with them. I had always wanted to live in FL and this was a perfect opportunity, except that exactly a year later, the owner decided to move back to NY. I wanted to stay, so I was able to hook up with a similar company and in a short period of time, I became a floor manager and then general manager. The company was sold in 2004 and I immediately got hired by the company I work for now. I was doing counseling and began to conduct financial literacy seminars. It grew to the point where I was presenting programs in prisons, county jail facilities, the Air Force and many other agencies. I had and have truly found my niche. Of course, it’s not publishing, but I do get to write and create a lot of good and useful information. I have also learned to live exactly within my means and I keep to a tight monthly budget. It is the budgeting process that I love to teach at my seminars.

Most of all, I have discovered that there is life after bankruptcy and this is the message I like to convey to all my clients; that is, if I could come back from total economic devastation, so can they.

 Andrew Bernstein

ABernstein@debthelper.com
Certified Personal Finance Counselor
Credit Card Management Services, Inc.
4611 Okeechobee Blvd. #114
West Palm Beach FL 33417
1-800-920-2262

The Magnificent 7: Where state laws get you extra free credit reports

A handful of states guarantee you an extra peek at your credit

By Lisa Bertagnoli

 

Everyone loves a freebie, so residents of seven states may be happy to know that state law grants them a free extra copy of their credit report every 12 months. 

That’s one from each of the three major credit bureaus, in addition to the one that federal law promises to all citizens every 12 months. That works out to six free credit reports a year for residents of Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey and Vermont. 

Most residents of those states don’t know about that extra report, though, and the big credit bureaus don’t exactly advertise it. Getting them takes some legwork, but experts say it’s worth the effort: Frequent peeks at your credit report can mean better financial health.You can find and scrub errors faster, and see what you’re doing right and wrong.

Important, but little-known rule
Federal law guarantees each consumer the right to one free credit report from each of the three major credit bureaus — Equifax, Experian and TransUnion — every 12 months. That right comes from the Fair and Accurate Credit Transactions Act (better known as the FACT Act), which became law in 2003 as an amendment to the Fair Credit Reporting Act (FCRA). Due to the recession, overall awareness of credit report availability is rising. Nationwide awareness jumped to 53 percent in November 2010 from 37 percent in July 2010, according to Freescore.com, a Norwalk, Conn.-based for-profit credit information site.

But in the seven “extra credit report” states, word about the additional report doesn’t seem to have gotten out. A call to the Colorado Attorney General’s office, for instance, yielded a telephonic blank stare: “Nobody knows anything about the law other than that it exists,” says Mike Saccone, communications director.

How to get them
Getting that extra credit report isn’t as easy as getting your first one, however. Your initial free report should come from AnnualCreditReport.com — the official government-mandated site for obtaining free credit reports. A few clicks on that site and a few minutes later, you’re all set. To get the second one isn’t so simple.

Residents of the seven “extra free report” states must contact the three major credit bureaus to request their reports. Each bureau features a different process, spelled out below.

Equifax: Visit www.Equifax.com/FCRA. After filling out the name, address and Social Security number fields, check “Free State Credit File” under the “Reason for Credit File Request” header.

Experian: The “Check Credit Report” page on Experian.com requests that consumers call (866) 200-6020 to confirm their eligibility and to request their extra free credit report via snail mail. The automated phone system uses the caller’s area code to identify their location and then provides options based on where the person is calling from. 

TransUnion: Visit TransUnion’s “Learn More About Getting Your FACT Act Free Credit Report” page. On that page, click the link that says, “Learn more about obtaining a free credit report if you meet one of the above conditions.” On the next page, click “Yes, I am eligible” next to option No. 4. You’ll then be taken to a page where you can choose your state of residence so you can get your free report.

Credit reports requested online are available immediately and are encrypted for security reasons, says Rod Griffin, director of public education for Experian, the Costa Mesa, Calif.-based credit bureau. Reports requested by telephone take about seven to 10 days to reach consumers by mail. Mailed reports do not include information dangerous in the wrong hands, such as the consumer’s entire Social Security number.

Why it matters
After a few costly experiences with look-alike websites, Donna Trimarco, a resident of Lumberton, N.J., got a free report after attending a financial services seminar at Fort Dix, N.J., where she is an administrative assistant.

The report revealed a few surprises, including a lien on her house. Still, Trimarco was glad to have the information, as she needs a new car and wants to get a student loan to finish her master’s degree.

She admits to a checkered financial past, including a bankruptcy, but hopes regular review of her credit report will help her plan a rosier future. “If I keep my act together, it means looking at everything, each credit report,” Trimarco says.

Indeed, experts advise obtaining as many free reports as are due you, and timing them to arrive regularly. Taren Coleman, president of Coleman Financial Group, a financial advising firm in Bethesda, Md., advises clients to obtain reports at least once a quarter. Consumers are better able to spot, and correct, mistakes if they pull reports often, says Coleman.

Coleman also advises thinking ahead. For instance, if you plan to purchase a house or car or refinance your home, study your credit report before the bank does. The advantage? “No surprises, no errors,” Coleman says.

Read more: http://www.creditcards.com/credit-card-news/7-states-where-residents-get-extra-free-credit-report-1282.php#ixzz1Apq2AIzD

Nevada’s residents remain most likely to file for bankruptcy

Filings expected to hit 1.6 million in 2010

By Tyler Metzger

When it comes to filing for bankruptcies, Nevadans have the dubious honor of being way out in front of the residents of any other state, according to bankruptcy per capita figures compiled from court records for the third quarter of 2010.

Of every 1,000 Nevada residents, 11.4 filed for bankruptcy, according to the figures from Automated Access to Court Electronic Records.

Total bankruptcy filings reached 1.2 million since the beginning of the year, an increase of 11 percent over the same period in 2009. The majority of bankruptcies were personal (Chapter 7 and Chapter 13); business bankruptcies made up just 6 percent of those filed.

States change rankings
When looking at individual states, Tennessee and Georgia switched places for second and third place in the third quarter. 

Only a few states made big moves up or down the rankings. Michigan, Kentucky and Delaware had sharp increases in bankruptcy filings per capita, Vermont had a sharp fall.

South Carolina and Alaska remain the states with lowest bankruptcies per capita, and the range between the states most likely and least likely to file is wide: Someone from Nevada is about seven times more likely to file for bankruptcy than someone from Alaska.

As the fourth quarter begins, bankruptcy filings in the United States are continuing a slow climb back toward the record 2.1 million recorded in 2005. In October of that year alone, more than 630,000 Americans filed for bankruptcy, rushing to avoid the effects of the Bankruptcy Abuse Prevention and Consumer Protection Act, which made it harder for individuals to erase debt.

“While the 2005 bankruptcy overhaul law aimed to reduce filings, overall consumer debt and continued financial stress have led to consumer bankruptcies climbing back to pre-BAPCPA levels,” said Samuel J. Gerdano, executive director of the insolvency research group American Bankruptcy Insttitute, in a prepared statement. “We expect that there will be nearly 1.6 million new bankruptcy filings by year end.”

How Long Will A Bankruptcy Filing Stay On My Credit?

People in Victorville want to know: “How will Bankruptcy affect my credit? How long will a Bankruptcy stay on my credit report?” This is only normal because they want to rebuild their credit as soon as possible.

Let’s talk about that.

How will Bankruptcy affect my credit?

Think about it. If you’re at the point of needing a Bankruptcy, then your credit report is probably about as bad as it can get. Chances are that charge-offs, garnishments, late payments, and foreclosures have already taken a significant toll on your credit.

Just after you file Bankruptcy your credit score will drop. Then it will gradually start to rise and get better over time. Here’s why.

First, creditor will change the way they see you. Right now they see you as a person with a lot of unsecured debt that might file Bankruptcy at any time. But after a Bankruptcy they’ll begin to see you and someone with little or no unsecured debt (i.e., credit cards). They’ll realize you can’t file Bankruptcy again for 8 years. That means you’re a good credit risk and you’ll probably start receiving credit card offers again.

Second, your debt-to-income ratio will greatly improve overnight.

How long does Bankruptcy stay on my credit report?

The length of time your Bankruptcy stays on your credit report varies for one credit reporting agency to the next. Here’s the general rule:

• A Chapter 7 Bankruptcy remains on your report for 10 years from the date of filing.

• A Chapter 13 Bankruptcy remains on your report for 7 years from the date of filing.

• Other negative information (i.e., late payments or charge-offs) can stay on your credit report for 7 years.

What should I do after filing Bankruptcy?

First, you need to set a goal to start rebuilding your credit rating. That’s not as difficult and you may think.

The most important thing you can do to rebuild your credit is PAY YOUR BILLS ON TIME. Like someone has said: “It’s not Bankruptcy that hurts your credit; it’s not paying your bills on time.”

Second, after you’ve received your Bankruptcy discharge, you need to check with the 3 major credit bureaus at least once a year to make sure that your credit reports are correctly stated. If you find errors or debts that haven’t been removed, then write the credit bureau and point it out. Demand that they correct it.

Remember … the Bankruptcy court doesn’t report any information directly to the credit bureaus. It’s your responsibility to do that.

Here’s how to get your free credit report

Did you know that recent federal law gives yo the right to have one free credit report per year from each of the 3 major consumer credit reporting bureaus. Because each of the credit reporting agencies have different information you should check out all 3 and correct any errors on your reports.

To get your free credit report you can click on the following link

www.AnnualCreditReport.com

Here are the links to Contact the 3 major credit bureaus directly for yourself.

www.Experian.com

www.TransUnion.com

www.Equifax.com

Contact a Bankruptcy attorney to learn more about how a Bankruptcy may help you and how it will affect your credit.

I’ll bet you have some questions. You can Contact Me by phone at 760-241-3215. Stephen Brittain

Talk with me. I’ll treat you like a friend.

Bankruptcy Help – The Effects of Filing and Alternatives to Review First

Filing for Bankruptcy, regardless of whether chapter 7 or chapter 13 may have long lasting negative effects on your credit history for up to 10 years. These negative marks against your credit history may make it difficult to apply for future credit, secure jobs that require a positive credit profile, rent an apartment, purchase a vehicle, etc.
The cost of filing bankruptcy can add up over the course of years. Banks or other lenders will most likely charge higher interest rates and fees should they choose to lend money. Bankruptcy is deemed as a high credit risk and therefore to compensate for the risk lenders charge higher interest rates and/or fees.

Bankruptcy can have a severe negative impact on relationships or marriages. The stress of bankruptcy leads to many separations or even divorce. Financial problems create much unneeded stress on relationships, filing for bankruptcy does not offer the fresh & clean start that many seek when filing and that carries over into relationship difficulties in many cases.

What can you do to Avoid Bankruptcy?

Live Within Your Means

Avoid getting into debt trouble to begin with. Do your best to avoid charging credit cards for every day living expenses. Look at your current financial situation. Are there charges that you pay monthly that are attached to a credit card payment such as utilities, cell phone bills, magazine subscriptions, grocery bills, etc.? Review your budget to find unnecessary charges to your credit cards that you can manage without.

Identify the Debt Problem Early

Being proactive rather than reactive to your debt problems is the key to avoiding bankruptcy. Many individuals are able to avoid bankruptcy by realizing their debt problems early, therefore leading to more time for those individuals to regain control of their finances. One recommendation is to create a monthly personal budget report. This will lead to earlier detection of potential problems. By doing this an individual can also identify their savings potentials as well. Saving money now, regardless of amounts, will help for future emergency needs.

Review all of Your Options First

There is a common misconception that filing bankruptcy gives an individual a fresh start on their credit. This is simply not true. Filing for bankruptcy has several long lasting negative impacts as outlined above. One of the first things that should be done is to speak directly to your creditors. They may be able to work out arrangements that would allow you to pay less than the minimum amounts for a short period of time. Sometimes this is enough to help an individual avoid bankruptcy. Another option is to look at getting a part time job or selling assets to avoid filing. Selling your assets should be a last resort, however in the long term this can help avoid the long lasting impact of bankruptcy.

Seek Help

Seek advice from a non-profit Credit Counseling agency. Look for a Credit Counseling or Debt Management provider that offers a free consultation. Keep in mind that Credit Counseling / Debt Management organizations are designed to assist an individual with their finances first and then provide debt reduction services second. You may find that with a few minor changes you may be able to avoid filing and repay your debts on your own.

Avoid Debt Settlement companies. Debt Settlement, in many cases is viewed as filing for bankruptcy by many lenders. This may sound like a quick fix however nothing beats repaying your debts in full, whether on your own or through a Debt Counseling / Debt Management company.

Use bankruptcy as your last option. Some situations can spin out of control very quickly. Just be sure that you review all situations before filing.

Source

Eight Quick Ways to Bankrupt Yourself

In the first half of 2010, personal bankruptcy filings in the United States totaled 770,000+ people.  Filing for bankruptcy is a difficult, emotionally draining process.  While it may not be the end of the world for some people, it is still a financial outcome that you should strive hard to avoid. The reasons for bankruptcy filings can vary greatly from persons to persons, and many times it can be out of your control. But sometimes the things you do can accelerate the outcome, and here are eight such ways (in no particular order).

1. Abusing Credit Card Balance Transfers

At times, credit card balance transfers can be a savvy financial move to consolidate and reduce the interest you pay on your credit card account. But many times, it can also easily be a way for you to continuingly shuffle your credit card balance from one credit card to another. A 0% balance transfer may seem like a good idea at the time, but with the advent of high fees without caps, coupled with an improper plan to pay off the balance transfer, you can easily increase your debt to an unmanageable level.

2. Frequently Using Payday Loan / Payday Advances

Payday loan may seem like a convenient means to meet your financial deadlines, especially if cash is tight and you have bills coming up. But the fact of the matter is, payday loans are financial products that keeps you in the poor house. The business practice takes advantage of those without access to traditional/mainstream banking services.

Thought the 29% interest on your credit card was sickeningly high? Payday loans are an entirely different beast. When the fees are factored in (e.g., $17.50 for every $100 you borrow), the interest rate for such a payday loan are a ridiculous 911% for a one-week loan, 456% for a two-week loan, and 212% for a one-month loan.

3. Keeping Up with the Joneses

What’s this? The neighbors just got a brand new luxury sports utility vehicle?  Well we can’t be the only family on the block without one too!

Keeping up with conspicuous consumption can be a sure-fire way to dash to the poor house.  Just because your peers, family, or neighbors are appearing to do well financially does not mean you need to splurge to match.  The quicker we can remove the tie of materialistic purchase with our livelihood, the happier we’ll all be.  Spend your money on what’s truly important:  a fun trip for the family to visit grandma; or college tuition for the kids.  There’s nothing wrong with plopping money down for a nice new European-made SUV, but if you’re buying it just to one-up the neighbors, you’re probably spending your money for the wrong reasons.

4. Spending More than You Earn

This should be rather self explanatory.  Budgeting is never fun but declaring bankruptcy is even more of a joy kill.  By being careful with your expenses, you can avoid facing debts that may unexpectedly accumulate.  Avoid purchasing decisions that involves thought process such as “We can always pay it off later” or “I’ll just put it on the credit card for now.”  While there are other methods to quickly reach bankruptcy, spending more than you earn is an almost guaranteed method.

5. Living Larger than Necessary

This is a bit similar to “keeping up with the Joneses” — but in this particular case, you can be doing it without anyone noticing.  Just graduated from college and landed an okay job?  You don’t need to immediately upgrade your studio apartment to a lavish luxury penthouse.  Even if you can afford it, stretching your dollar and living it up at times can be a detriment to your financial well-being.  You can easily cross into the “spending more than you earn” zone and find yourself in financial hot water.

6. Underestimating Health Care Costs

Time after time and studies after studies has revealed that medical bills and health care cost are the number one leading cause for personal bankruptcy in the United States.  A 2007 study from Harvard researchers showed that 62% of bankruptcy were caused by medical bills, and what’s even more troubling is that 78% of those bankruptcy filers had insurance.

Unfortunately, there’s no easy way out of this potential financial pitfall.  Making sure you have the proper health insurance coverage base on your family’s medical history, actually utilizing your doctor’s visit from any health coverage plans you have, and being proactive about your lifestyle/health choices will do wonders to negate any avoidable illnesses that can be devastating to your financial life.

7. Paying for Expensive Degrees that Don’t Pay Back

Here’s the thing about student loans, even filing for bankruptcy will not wipe the slate clean.  Along with certain taxes owed and child support payments, student loans are not dischargeable under United States bankruptcy laws.  Though you can argue for undue hardship, the granting of this appeal is extremely rare.

Because of this, it is even more important for you to be savvy when you take out student loans for higher education.  While the merit and earning potential of a college degree cannot be refuted, as the cost of college steadily rise through the years, more and more students are finding themselves in the troubling position of an expensive degree but with a job that doesn’t cover the cost of said degree.

Be smart about your education choices.  You don’t need to specifically go for degrees that lands six-figure jobs, but if your degree ended up costing you $80,000 in student loans and all you can get are $30,000 a year jobs, you may have made an impractical mistake.  Figure out what the job prospects for your major/interest may be like, and be realistic about your earning potential with your education.

8. Overindulging in Vices

This will come off a bit judgmental, but sometimes, balance in life is key.  A drink now and then is no big deal.  In fact, getting smashed is probably one of the finer things in life.  There is nothing more enjoyable than having a good time with friends and family, but doing it responsibly is key.  And this obviously isn’t limited to drinking.  Maybe you love to visit the local card room.  Perhaps you love betting the spread whenever your favorite team plays.  And of course, there are many more other things that can easily fall into the “vice” category.

Yes, bad habits are a subjective thing.  Yes, there are plenty of functioning alcoholics/what-nots out there, but that doesn’t mean they’re not one slippery slope away from a destructive, life changing behaviors.  How we choose to live and how we spend our time will eventually affect our pocket book.  No doubt that living life on the extreme end can be a quick way to reach bankruptcy courts — but let’s be frank; there are far more important things it’ll affect before the damages reach your wallet.  If you ever worry that you’re partaking things on the extreme end, step back, and seek help where appropriate.

Source

When Business Fails, Filing for Bankruptcy

Adapted from THE WALL STREET JOURNAL COMPLETE SMALL BUSINESS GUIDEBOOK (Three Rivers Press).

 My business, in operation for more than eight years, has been slow lately. There is little cash flow and debts are past due. Unsecured credit cards and business lines are up to their limits. Basically, we can’t afford to pay our bills. Will I be held personally liable for the debts and liabilities of the company? Will this affect my personal credit? What are the consequences of filing bankruptcy?

These questions that I received from a reader illustrate probably the most painful position that you can find yourself in as a business owner: Not only has business ground to a halt, but you’re deeply in debt, too.

Your first course of action, of course, is to try some of the cash-crunch strategies outlined in last week’s tip (see related article, “Tips for Dealing with Cash Crunches“). If creditors are circling, you may want to consider using the services of a debtturnaround firm. While they charge a fee, turnaround specialists can help get creditors off your back and assist you in liquidating inventory, selling parts of a business (if applicable) and cutting staff.

Read more

• Accounting 101: How to Keep Financial Records
• A Cash Crisis
• For Rent: Chief Financial Officer

The alternatives aren’t pretty. Can you be held personally liable for debts and liabilities of your company? Most likely yes. Credit-card companies, for instance, typically issue cards (even business credit cards) based on the owner’s personal credit and require the owner to assume personal liability.

As for bankruptcy, it’s painful, messy, expensive—and generally should only be used when all other options have been exhausted. Consult an attorney familiar with small-business bankruptcies to figure out whether this is the best choice for you and which direction to take. In some cases, it might make sense to file separate bankruptcy cases—one for the business and one for yourself as an individual.

The two most commonly used business bankruptcy proceedings are Chapter 7 and Chapter 11. If you’ve decided to shut your doors forever, you might consider a Chapter 7 filing, in which you turn your business over to a court-appointed trustee, who will then sell the assets and distribute the cash to your creditors.

If you’re hopeful that you may survive this downturn, at least enough to have a business left to sell, you might consider seeking Chapter 11 bankruptcy protection. When you file this type of petition, you come up with a reorganization plan (under the direction of a court-appointed trustee) to repay outstanding debts and continue to operate as a business. In most cases, unless you have personal means, you’ll need to obtain debtor-in-possession (DIP) financing to keep the business afloat while in bankruptcy court.

In recent years, with credit tight, many struggling businesses have been unable to file for Chapter 11 because they can’t obtain DIP financing. In general, it certainly isn’t easy to salvage a business through a Chapter 11 filing, and many business owners who try wind up converting to a Chapter 7 liquidation.

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