10Dec 2014

6 Bad Habits that Can Lead to Bankruptcy

Facing financial ruin and having to declare bankruptcy is a terrifying experience, but one that unfortunately affects many people within the U.S. In order to make sure that you’re financially set and have all of your monetary affairs in order, here are six bad habits that can lead to bankruptcy that you should absolutely avoid:

1. Not Paying Your Bills on Time

One of the worst habits that a consumer can get into is failing to pay bills on time, regardless of what type of bill it is. Whether it’s a student loan payment, a phone bill, household utilities, a credit card, a car payment, or a mortgage, paying your bills on time is important. When a consumer fails to pay his bills on time, a black mark against the consumer’s credit history is often made – as a credit score gets worse, the chances of having to declare bankruptcy skyrocket.

2. Having Multiple Credit Cards

The second biggest mistake that a consumer can make is having an excessive amount of credit cards. While one, two, or even three credit cards may be okay for the person who knows how to manage his debt, any more than that, and even a financially responsible consumer might find themselves in financial trouble. Having too many credit cards is risky because it allows a person with poor spending habits to rack up monstrous amounts of debt with a variety of different companies. If a consumer can’t pay back his credit card on time or in full every month, then his credit score takes a hit. Plus, having multiple credit cards makes a person a more likely victim for credit card fraud.

3. Failing to Budget

Perhaps the single most debilitating bad financial habit a consumer can have is failing to create a budget within his means. Financial solvency is all about establishing a reasonable and manageable budget, and then sticking to it. Too many consumers fail to create a financial plan that works for them, and then end up spending way beyond their means. A budget should include all of the basic monthly and yearly expenses – like rent, food, utilities, a car payment, etc. – as well as extra expenses like eating out, and a savings account. CNN recommends saving 10 to 15 percent of income.

4. Not Creating an Emergency Fund

Let’s face it: emergencies happen. Maybe you’ve locked yourself out of your apartment and require a locksmith (which costs approximately $100); maybe your car gets a flat tire; maybe you have an urgent and unexpected ER trip – whatever it is, being prepared with cash on hand in the event of an emergency is essential to avoiding bankruptcy. An emergency fund and a savings account are not the same thing. The former should be used in an event of an emergency, and savings shouldn’t be used at all – savings are for retirement purposes, or large financial expenses in life, like buying a house or getting a college degree.

5. Making the Minimum Payment Only

All credit cards companies issue a monthly statement, which informs the debtor of how much they owe. However, the credit card company also highlights on the statement the minimum monthly payment that is due. For example, if a person has a debt of $200 that month, they may only have to pay back $35 of it that month. While this may seem advantageous, the truth is that this can be crushing for a consumer. When you fail to pay back the full amount that you’ve borrowed every month, you’ll get charged an extreme amount of money in interest. To help your credit score, and to avoid accumulating more debt than you really owe, always borrow within your means, and pay your credit card back in full every month.

6. Buying the Most Expensive Version of Everything

Even if you are living within an established budget, that doesn’t mean that you need to be buying the most expensive version of everything. Often times, people will choose to buy cars, homes, and other pricey items that they can technically afford, even though the purchase means saving less and living more lavishly than necessary. Because you never know when a financial emergency might happen, remind yourself that while you definitely deserve nice things, you might not need the latest and greatest device, home, or vehicle on the market.

In order to avoid bankruptcy, make sure to set a budget, live within your means, avoid accumulating more debt than you can afford, create an emergency fun, and always pay your bills on time and in full.







08Dec 2014

The Difference Between Secured Debt and Unsecured Debt

No debt is the same. In fact, debt is usually placed in one of the following categories: secured debt and unsecured debt. Such a categorization is very essential, since it guides you in your borrowing habits and determines the type of payment terms that accompany the debt.

With secured debt, the amount of money you borrow is linked with an asset. This asset functions as collateral for the loan, which means that the creditor (the person who lends the money) can take the pledged item if you as the borrower default on the loan. Thus the collateral secures the loan. Cars and houses are two of the most popular items used for collateral; the idea is that the item has to have a significant amount of value, or can be easily turned into cash to cover liabilities. Examples of secured debt include personal loans, mortgages, and auto loans.

By contrast, an unsecured debt is not secured by any assets—thus the term “unsecured.” So, if you default on your payment obligation, the creditor cannot take any of your belongings. However, the creditor can take you to court and obtain a money judgment against you. Examples of unsecured debts include credit cards, medical bills, student loans, and rent and utility payments



21Nov 2014

Why should I hire a bankruptcy attorney?

When filing for bankruptcy, there are a myriad of rules and regulations that must be adhered to. If regulations aren’t met and technical missteps are made, the errors can be costly in regards to a debtor’s rights. If you’re filing for bankruptcy, you have the right to file without the help of an attorney, also known as filing pro se. However, doing so may have long-term financial and legal repercussions. When filing for bankruptcy, here are five reasons why seeking legal counsel is a must:

Understanding the Different Types of Bankruptcy

Filing for bankruptcy involves deciding between the different types of bankruptcy options. U.S. Bankruptcy Code offers five different bankruptcy filing options – Chapter 7, 9, 11, 12, and 13. Each type of bankruptcy is completely different, and offers different options regarding status (individual or business), debt extinguishment, and payment options. Having a thorough understanding of the types of bankruptcy available, and regulations and rules associated with each is critical. An attorney can help you to understand the different types of bankruptcy, and provide you guidance regarding which type is most suitable for your financial needs.

Avoiding Bankruptcy Fraud

Bankruptcy fraud is a serious crime in the United States, punishable by both civil penalties (such as loss of exemptions) and criminal penalties (like prison time or fines). If, when filing for bankruptcy, you do not disclose all property and assets, falsify information or records, or fail to fill out your bankruptcy forms accurately, truthfully, and completely, you may be at risk of committing bankruptcy fraud. In order to ensure that you avoid both civil and criminal penalties associated with bankruptcy fraud, it is essential that an attorney review your forms prior to submittal.

Filing for Chapter 13 Bankruptcy

Chapter 7 bankruptcy is much more straightforward and simple than Chapter 13 bankruptcy is.  If you are filing for Chapter 13 bankruptcy, you should know that doing so is much more complex and labor intensive, and requires constructing a realistic payment plan that can be presented to creditors. Additionally, if alterations to a mortgage or car loan are included in your bankruptcy needs, the paperwork is even more intense. Essentially, filing for Chapter13 bankruptcy requires an extensive understanding of bankruptcy law; if you are not trained in bankruptcy law, it is highly advised that you seek legal counsel.

As a note, Chapter 7 bankruptcy can also be complex if you are a business owner, have a high number of assets, have non-dischargeable debts, or have income that may disqualify you from filing.

Fulfilling Credit Counseling and Debtor Education Requirements

In order to file for bankruptcy, both credit counseling and post-filing debtor education courses are required for Chapter 7 and Chapter 13 bankruptcy. You must receive credit counseling from an approved agency prior to filing, and you cannot receive a discharge of debts until debtor education requirements have been fulfilled. If you fail to do either, your bankruptcy claim will be denied. If working with an attorney, your lawyer can help you to understand the differences between the two courses, and how to attend both.

Contact a Bankruptcy Attorney Today

Being buried in debt can be a very emotional and exhausting experience, as well as one that is scary and stressful. If you are facing overwhelming amounts of debt and are considering filing bankruptcy, it is within your best interest to retain the assistance of a bankruptcy attorney. An attorney can help to put an end to debt creditor harassment, explain your options for filing, help you to get all necessary documents and paperwork in order, and provide you with a straight-forward and stress-free solution to your financial problems.




09Jul 2014
The difference between chapter 7 and chapter 13

Understanding the difference between chapter 7 and chapter 13

Chapter 7 and Chapter 13 Explained

Filing for bankruptcy can be one of the most difficult decisions of a person’s financial life. When it comes to eliminating overwhelming debt, there are several options to choose from. Each of these have their own positives and negatives, and as every one’s situation is unique, it’s important to understand the differences between them. There are critical differences between filing for bankruptcy under the Chapter 7 and Chapter 13 statutes.

Chapter 7: Straight Bankruptcy Liquidation

Filing for bankruptcy under Chapter 7 will dismiss most types of unsecured debt from a persons financial history. The person filing will be required to sell any nonexempt property in order to repay their creditors. This is part of the liquidation process, where some of your your assets are sold to pay off part or all of your debt. A typical filing under this chapter can take several months to be considered complete. Many debtors who chose this option will keep all or the majority of their existing property, and those in a higher-income bracket may not be eligible for Chapter 7.

In regards to foreclosure, Chapter 7 may temporarily stop the process, but unless the debtor is able to catch up and become current on their mortgage, eventually the foreclosure will continue. In order to be eligible for Chapter 7, a persons income must be less than their state’s median, or must pass a means test. Anyone filing for Chapter 7 must also obtain mandatory crediting counseling within 180 days prior to filing a petition with the court. A record of bankruptcy will remain on the debtors credit report for up to 10 years from the initial date the petition was filed. Chapter 7 works best for unemployed debtors with few assets, or unemployed homeowners who have an upside-down mortgage.

Chapter 13: Payment Plan for Regular Income

Like those filing for Chapter 7, debtors filing for Chapter 13 must also obtain mandatory credit counseling within the 180 days prior to petitioning the bankruptcy court. However, Chapter 13 is more commonly used by individuals who have regular income, and the means to make payments towards their debts. An individual who is badly in debt can file for bankruptcy either under Chapter 7 (liquidation, or straight bankruptcy), under Chapter 13 (reorganization), Chapter 12 (family farmer reorganization), or under Chapter 11 (reorganization of a company, or an individual debtor whose unsecured debt exceeds $383,175.00 and/or whose secured debt exceeds $1,149,525.00). To successfully complete the requirement for the repayment plan, and have their remaining debts forgiven, the debtor must make all payments in accordance to the court-mandated plan.

Chapter 13 allows for a repayment plan, where debtors repay their creditors, some partially and some in full. The payment plan usually lasts three to five years, and at the end, most of the remaining unsecured debts will be released. No property is liquidated in this type of bankruptcy, and requires a regular income, with no restrictions on amount. Chapter 13 can halt foreclosure and arrange for payment of past due mortgage costs. A record of this type of bankruptcy will remain on the debtors credit report for 7 to 10 years from the initial date the petition was filed. Chapter 13 works best for unemployed homeowners who possess significant equity or employed homeowners who are facing foreclosure or mortgage delinquency.


16Jun 2014
The Positives of Bankruptcy | Start Fresh Northwest | A service of Lauber Dancey

The Positives of Bankruptcy

Far too often people stop paying their bills because they simply do not have the money to pay. Is bankruptcy the right decision? Can it help you start a new life free of debt and financial burdens? Declaring bankruptcy is actually something that can help you, and can protect you from dealing with serious legal problems. Did you know creditors can sue you if you do not pay your bills? They can place a lien on your home! Declaring bankruptcy is a great way to legally tell your creditors you do not have the money to pay your bills. Financial expert Suze Orman recommends declaring bankruptcy if this is the first time you have gotten into financial trouble and you are facing collection letters with debt that continues to accrue interest, it is time to consider declaring bankruptcy to start your financial life over.

The Automatic Stay

Once you file bankruptcy, you will receive immediate protection from collection activity. This will prevent a bank from foreclosing on your home. It prevents problems with license suspensions, repossessions, garnishments, and creditor harassment. Based on the bankruptcy option you declare, and the amount of debt you are dealing with, the stay can have different lengths.

Bankruptcy Protects Your Assets

Each state has different bankruptcy laws and requirements. Assets will be valued differently and some will be exempt during the bankruptcy process. Your assets are things that you own like your car or your home. A bankruptcy filing will have financial experts review your finances to determine what is exempt and which assets should be surrendered to pay off your debts.

Discharging Debt With Bankruptcy

A major advantage to declaring bankruptcy is that it will end up discharging all your unsecured debts. This means you are no longer under legal obligation to repay the debts. If you choose to discharge a car loan, you could potentially lose the car in the repossession phase.

Bankruptcy Prevents Mortgage Foreclosure

If you declare Chapter 13 bankruptcy, you can combine your mortgage, student loans, car payments, and other debts into a single monthly payment. This can help you to pay for your assets without the fear you will lose them. It makes your financial obligations more affordable and allows your life to be improved financially. Get in touch with the right financial counselors to help you understand the good things about bankruptcy and why you need to consider declaring it.