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

What To Do When Your Unemployment Checks Stop Coming?

By Tisha Tolar, on April 6, 2011

You’ve learned to live off of your unemployment benefits. You’ve cut your budget and are finally starting to make some progress in the new job market. Right when all seems to be going well, the rules change. It is expected that many more states will start the process of cutting back on the unemployment benefits they are issuing to their unemployed residents.

The bottom line is many states are broke. Cutting back on unemployment helps solve a portion of this immediate financial problem. In addition to saving a state budget funds, the cuts are being considered because of the unemployment taxes companies have to pay. The hope is that if business taxes can be decreased, more companies would begin to hire new employees.

Changes Are Coming

States across the nation are inundated with claims for unemployment benefits since the recession came about. Employers were quick to downsize to keep the company afloat, leaving many in the lurch without reliable income or the prospects of finding a new job immediately. The unemployment trust funds set up in each state took a serious beating, prompting some to take a loan from the federal government in order to meet the demand for covering eligible benefit distributions to those without jobs.

The states of Florida and Arkansas are currently looking at reducing the number of weeks unemployed workers can receive benefits. Florida’s legislature has proposed cutting the benefit receipt time by 6 weeks. Indiana has been working to reduce the number of jobless that are eligible to receive benefits in the first place. Govenor of Indiana Mitch Daniels recently signed into law a bill that limits eligibility for unemployment benefits. The law also changes the way payments are calculated and these changes will start in July 2012. There are a total of 32 states which still owe monies back to a federal unemployment fund. For now, the total owed is estimated at $45.7 billion and states are expected to repay about $1.4 billion back in interest.

This is not the first time states have had to borrow federal funds and make cuts to unemployment benefits. It happened in the 1980s when a recession forced states to borrow $28 billion to meet the unemployment benefits needs for laid-off workers. During that time 40 of the 50 states made changes to the way money was distributed for unemployment, even going as far as changing up the eligibility guidelines for workers.

How to Prepare for Benefit Cuts

Above all you need to get off unemployment benefits. Even with multiple Congressional extensions they will eventually run out. Aside from that, the best thing you can do now if you are worried about cuts and changes to your unemployment benefits is be proactive about learning the facts. Follow the news in your state about the impending changes on benefits guidelines so you know what to expect.

You should also look at the big picture and work to save enough cash as you can while you look for work. It may not be easy to get by even with the benefits you are now receiving, but planning budget cuts of your own is a good start.

Brush up on old skills or learn new ones as you continue to look for a new job. There are often community accessible courses where you can learn new skills and improve your existing knowledge. Many of the unemployment departments in your state will either already require some job polishing efforts by recipients and often have resources available for free that can help spice up your resume. You will also be able to find opportunities to seek work through the unemployment office in your state.

Most changes will not be immediate but it is important to plan for the inevitable, especially if you have gone a while without securing a new source of income.

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

12 Tips to Prevent Identity Theft

Identity theft is very much in existence and is a federal offense. It is not something that paranoid people worry about, but is a crime that has affected more than 250,000 Americans in the year 2009 alone. Of these 17 per cent were subjected to credit card fraud, another 16 per cent to documents/benefit fraud, 15 per cent to phone/utilities fraud and 13 per cent to employment fraud. 10 per cent were subjected to bank fraud and 4 per cent to loan fraud. By statistics alone, you have excellent reason to be careful.

Identity theft offenders steal some one else’s identity to meet their own ends; either for economic purposes or for committing some other sort of crime. These criminals make use of your social security number, bank account or credit card number, telephone calling card number and similar identity data. You could end up losing your money, your credit record, financial reputation and even social reputation and standing as well if the thief does some crime in your name.

The thieves usually get information by methods such as stealing your wallet, mail or purse. They may also get personal information from you by posing as credit card companies or legitimate companies. They may even steal information from businesses or use bribes to get the information. Some identity theft victims have claimed that the theft was done by people known to them. This is why you need to be very careful.

Here are a few tips that can help you avoid identity theft:

1. Shred Documents Containing Financial And Personal Information after Use. The information in there can get into wrong hands and be used to steal your identity. Somebody doesn’t have to break into your house or steal your mail to get their hands on your personal and financial information. Instead, a seemingly harmless credit card statement or other document thrown in the trash can be picked up by anybody as they walk down your street on trash day. You don’t need anything fancy, but a 30 dollar shredder will at least help minimize the chances of somebody getting their hands on your important information and could prove to be priceless.

2. Protect Your Social Security Number, Passport And Bank Cards. This should go without saying, but don’t carry these around. Don’t write your social security number down and carry it in your wallet and don’t carry a bunch of credit or debit cards around if you don’t need them. Keep your Social Security card and passport locked up and only bring them out if you need them for something. And when you’re carrying credit or debit cards, only take the ones you plan on using with you. A lost or stolen purse or wallet can be a financial nightmare.

3. Do Not Give Out Personal Information To Anybody Over Phone, Mail Or Internet. Unless you have initiated the contact, in which case you can be sure of the person at the other end, don’t give people sensitive personal or financial information, not even to somebody claiming to be calling from your bank (your bank will already have the info). They may ask for a piece of identifying information, last four-digits of your Social Security number or part of an account number, but they shouldn’t be asking for every little detail. If someone calls you to offer credit cards or any other offer, ask them to provide you with a written application. If your bank or any other financial institution calls you and begins asking more information than you’re comfortable giving out simply hang up and call them directly and then ask about why they were calling to make sure it is a legitimate request.

4. Secure Yourself While Using Internet. Use firewalls, anti-spyware, anti-virus and other protection on your computer. Keep them updated and download new versions as they become available. Also, type in known web addresses and do not click on links in unsolicited mails. The number one method of identity theft is through the web. Thieves prey on people who click links in spam emails and who visit illegitimate websites. So, just be aware of what you’re doing online. If you’re using a wireless network at home be sure to secure it with the strongest method possible. I can’t tell you how many people are using completely unsecured networks just in my neighborhood alone. Take a moment to read through your router’s manual and set up the proper security. Otherwise smart thieves could be monitoring your internet connection.

5. Use A Password which is Difficult to Guess. Another obvious tip, but it needs repeating because of how common the problem is. Don’t use something obvious like your’s or your mother’s maiden name, date of birth, digits of your social security number, and so on. After working in tech support for a number of years I can’t tell you how many times people would use overly simple passwords. Just because it’s long doesn’t mean it’s secure. Also, be sure that nobody is watching you while you type in your password and don’t type in sensitive passwords on public computers.

6. Keep Your Info Secure. If you share your residence with some one or employ some one for service, keep your personal info such as passport, social security number, checkbooks, and anything else of value locked up. Sure, you might not think the plumber is a bad guy, but while he’s down fixing a pipe he might also be snooping for account numbers. Invest in a personal lock box or filing cabinet to keep the majority of your important financial documents secure.

7. Protect Your Data From Radio Frequency Theft. Your documents such as credit cards and passport may have tags which makes them susceptible to theft using radio frequency (RFID). Use metal lined wallets or invest in a protective shield for your cards. While not an incredibly common type of theft right now, it is becoming increasingly important to protect this type of data.

8. Cancel Credit And Debit Cards If You Lose Them. Even if you think that you have just misplaced them, it is better to inform the bank or issuer immediately. Every minute your card is missing is a minute a thief could be racking up charges. Sure, you may not be liable for the charges anyway, but it’s still a hassle to deal with fighting all the charges. When you notice a card missing just call your bank and let them know. At the very least you can place a temporary hold on the card so that if you do find it you can turn it back on with ease.

9. Inspect Your Credit Reports, Financial Statements And Bills. Peruse your bank statements, bills, credit report, and mail for irregular activity such as transactions or purchases you did not make; or credit denials which cannot be normally explained. You are allowed a free credit report at least once a year. Make use of it. If you already used your free annual credit report and suspect there may be a problem you can always pay a small nominal fee for another report. It’s better to spot a problem early rather than find out too late.

10. Maintain Meticulous Records Of Your Financial Transactions. These will help you identify any discrepancy in your statements immediately. I know it’s easy to get into the habit of just glancing over a statement before shredding or trashing it, but take a few minutes each month to really look things over. A thief who has your information may simply be doing test transactions that amount to little more than a couple of dollars and could go undetected for months before they wipe out your entire account.

11. Have Your Mail Held At Local Post Office While Traveling. Your mail can be stolen and the info used for stealing your identity. If you take a little vacation you should schedule a hold for your mail. This ensures no mail is delivered and left sitting in your mailbox while you’re away. It may be tempting to have a friend or neighbor get your mail for you, but it’s better to play it safe and just have the post office hold it. It doesn’t cost anything and it’s the most secure method of holding your mail.

13. Use a Private Area If You Need to Pass Financial Info Through Telephone. Cell phones are our lifelines. We take them everywhere we go and conduct most of our business over the phone. While in a public place be mindful of what you’re saying. What could be a seemingly harmless conversation could be providing an eavesdropping thief a ton of information to be used against you. Take a moment to step outside or into a less-crowded place before talking about anything personal or financial in nature.

Following these tips should protect your from identity thefts in most cases. If you do find any discrepancies, close any unauthorized accounts, inform banks, and file a police report. Report your complaint to Federal Trade Commission. Prompt action will help immensely in a situation like this.

Source

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

Getting Your Degree On Plan B – College – daveramsey.com

Getting Your Degree On Plan B – College – daveramsey.com.

Money Managment Tips for Your 20’s

This week as I enter a new decade in my life, I reflected on my 20’s in terms of what I did right and where I left room for improvement when it came to money management. I have a few tips for you 20 somethings.

Live like a cheap college student as long as you can. When you graduate from college and start making a few bucks you have the urge to buy new, nicer things. Resist it. Be creative. Most of the furniture in our home office is stuff given to us that I spray painted black. Up until two years ago our bedroom furniture was my husband’s childhood bedroom set. We got by just fine until we paid cash for a bedroom set we’ll keep forever.

Stay Out of Debt! Except for a home mortgage do whatever you have to do to stay out of debt. If you can’t pay cash for it, you can’t afford it, period. One of the best money management things we have done is becoming debt free (except our mortgage) before we turned 30. Unlike many Americans I sleep easier, have less stress and a happier marriage. I’m not fighting over money, worrying about or strapped down by a payment.

Your 20’s are the most important years of your retirement savings. Retirement is the last thing on your mind in your 20’s, but it should be the first. At this time in your life, interest is on your side. Most people don’t get that whatever you can manage to invest while your in your 20’s has the most time to grow. All the time I hear, I can’t afford to save for retirement now. Actually you can’t afford not to. Our investment adviser gave us the rule of that if you invest $27,000 towards retirement by the time your twenty-seven years old you will have a million dollars when you retire.

Set up a Roth IRA right now. Hopefully you realize you need more than your work 401K to retire. The first thing you want to get is a Roth IRA. It’s a tax-free investment, so it grows tax-free and you won’t be taxed when you withdraw at retirement. My husband and I both have one. Each month we have money automatically withdrawn from our checking into it, just like our other expenses. By automatically withdrawing the funds we never miss it and its treated as another monthly expense.

Avoid car payments. Contrary to popular belief having a car payment is not something you have to have. Just because you can doesn’t mean should go buy a new vehicle. I cringe just thinking about all that interest people pay on vehicles. You can get a decent vehicle for around $10,000. This will easily get you through your 20’s. When you don’t have a vehicle payment, you can withdraw money as if you did into a saving account and pay cash for the next one. I say this from experience. I bought a brand new GMC Acadia two years ago and its paid for now. I absolutely love my vehicle, but shouldn’t have bought a brand new car. That money (and interest) I paid for two years could be sitting in my new home fund right now. Even just purchasing a vehicle that’s a few years old saves alot of money.

Get money mentors. Find people who you admire or look up to when it comes to how they manage their money. Ask them for advice or what has been successful for them. Keep in mind many of the people with all the nicest things are often the ones farthest in debt and the least financially secure. Seek out people who have made good decisions and have similar goals as you.

Keep you standard of living under control. The more you make the more you have to spend or so you think. Since my first job right out of college, I make twice what I did then and my husband, three times what his first job paid. You’d never know it. We still live in the same house and except for the mistake of buying a brand new vehicle we really haven’t changed the way we live or save. The longer you can keep your standard of living down, the faster you can accomplish your saving goals for the purchases you truly want.

Have at least 20 percent down if not more when you buy a home. A bank will approve a home loan for way more than you can actually afford. Just because they’ll give you that much money certainly does not mean you should take it. Life it too short to be stressed out with a mortgage you can barely make. Do not get a second mortgage either. We fell into that trap. If we’d had a little patience and waited another six months to a year we could have easily made the down payment, avoided a second mortgage and the higher interest rate that went with it.

Read. Educate yourself on money. It’s overwhelming to get married, start your own household or buy a house. Read everything you can to make the best choices. Magazines, books and the internet all have great resources. My husband and I both read the same books and that helped us be on the same page when it came to money. A couple I recommend: Total Money Makeover and The Millionaire Next Door.

Have goals. You can’t get where your going if you don’t know where your going! You may have career or personal goals and you should have financial goals too. If you want a different vehicle figure out how much you need to save a month to get there. I’m currently saving to build a new house and have a savings goal in place for a down payment. I have photos of homes I’m interested to keep me on track and motivate me. Each time I’m tempted to divert from savings I look at the photos to keep me on track.

Utilize Coupons. I wish I would have know about couponing ten years ago. Much of our financial success has come from not our income, but controlling our expenses through coupons. You can drastically reduce your expenses when you get things for free and pay at least 50 percent off the retail price. We’ve found this small time investment has paid us large returns in savings.

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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Does Bankruptcy Clear IRS Debt?

Bankruptcy can clear some types of tax debt.  It will not clear a federal tax lien that has attached to your assets.  However, when no tax lien has been filed, income tax debt can be discharged and cleared from your record if some very specific requirements are met in either a Chapter 7  or a Chapter 13 proceeding.  Not only can bankruptcy clear IRS income tax debt, it can get rid of state and local income tax debt as well.

Timing is an important issue in clearing a tax debt and there are some other basic steps that must be followed.  To discharge income tax debt, the following rules apply:

1. Your tax returns must have been due three years or more before the  petition was filed;
2. Your tax returns have to have been filed more than two years before the petition;
3. The tax you owe must have been assessed against you by the government for at least 240 days before the case is filed;
4. Your tax returns must have been truthful and not fraudulent; and,
5. You must not have been intentionally attempting to evade or defeat the tax when you failed to pay.

There are some technical rules that can complicate a discharge of tax, but in most cases the tax will be discharged if the above requirements are met.

If a notice of federal tax lien has been filed by the IRS, the tax debt covered by the lien becomes attached to any assets you own at the time it is filed.  What is worse is that it attaches to anything new you get so long as the lien is in effect.  This applies as long as you owe the tax.  Until the collection time limit expires or the tax debt is cleared the lien remain in place.

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