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- Debt & Bankruptcy
Is Bankruptcy the Answer?
Is Bankruptcy ethical?
Will I ever get credit again?
Will it help me or hurt me?
How do I go about finding a good bankruptcy attorney?
These are just a few of the questions people ask when contemplating filing bankruptcy.
People find themselves in financial dire straits for a number of reasons: poor financial management, marrying someone who had masses of debt, personal emergencies, loss of a job, business decisions that went wrong, to name just a few reasons.
Then there is the shame that most people feel, as though they committed a horrendous crime. There is a sense of embarrassment and the feeling that they are a bad person.
Debt collectors have a tendency to make people feel like scumbags for not paying the debt, inferring that it’s immoral to not pay the debt. Most people really do want to pay their debt, it’s the right thing to do, but what about when the money is spent before it’s even in the bank?
Yes, people should pay their debt and work out a financial plan and stick with it. Stay away from the mall for a while to save money for bills, eat out twice per month instead of three times weekly, and plan the menus at home before hitting the grocery store. Our children do not need to be involved in every activity going on in town; they also do not need the best of everything. In fact, telling our children “no” is good for them.
The majority of people really do want to pay their debt. Part of the problem is that creditors increase the interest rate, sometimes as much as 30%, and then they charge outrageous fees for who knows what, then the telephone calls start when people are unable to pay and the company is unwilling to work with people who perhaps need some time to get caught up with the bills.
But what about when the money is spent before it’s even in the bank?
Credit counseling may or may not work. In researching for this article, I discovered that the majority of times credit counseling did not work. Surprised? You shouldn’t be. The company itself has to make a profit; therefore they will charge the consumer a monthly fee for collecting the money. True, the credit counseling company can negotiate a lower interest rate than the consumer would be able to, but if someone is unable to pay the bills monthly due to playing “catch-up” then credit counseling is not the answer. In fact, some of the comments that I heard were that the company did not pay the bill on time, or get this, a payment to a company would be $25 but because the interest was still somewhat high, only $4.00, yes, $4.00, was going to the principal! One person said that one of their bills was actually getting higher!! Yes, I saw the paperwork to verify this. For some people credit counseling did work, but the majority of the time it was a massive and expensive failure.
Famous folks who have filed bankruptcy are: Henry Ford - First two automobile companies failed, President Harry S Truman, John Wayne, Donald Trump (3 times), Willie Nelson, Walt Disney, and Larry King.
Not having enough money creates huge stress and compounds problems that people are already facing from the overwhelming debt.
Ask yourself the following questions to determine if bankruptcy could be for you:
ØAre you getting telephone calls from creditors?
ØAre you able to make only the minimum payment each month?
ØAre you using your credit card to pay other bills and daily expenses?
ØAre you unaware of how much money you owe?
ØAre you scared your finances are out of control?
More than two yeses and you should definitely consider bankruptcy as a possible option. When you owe more than you earn or what your assets are there is a definite problem and it will not get any easier.
Financial relief does come with the decision to file bankruptcy, it does have consequences. The bankruptcy may hinder getting insurance, renting a home, getting a particular job, yet not paying your bills on time will produce a poor credit rating and will hinder you getting the same things.
Chapter 7 wipes the slate clean – all the debt is gone. Some states allow a person to keep their home if desired. Depending on how many assets you own will determine what you get to keep. In most situations, you will get to keep everything. The prospective attorney will give you a means test to determine what is best for you in your situation. This is just an input/output of money.
Chapter 13 the debtor pays all the debts but the court negotiates with the creditor a much lower interest rate – sometimes zero interest rate, and the individual pays the court for a period of time – five years or so.
Consulting an attorney is your best course of action, but do your homework first. Each state has different laws and you don’t need to be ruled by emotions.
Conduct an online search for the attorney and put in his/her name to see what you learn.
Contact the bar association in your state.
Call several attorneys as most offer a free telephone consultation. Listen to what they’re saying and ask questions, such as:
ØCan I keep my home?
ØWhat is your fee?
ØAsk about exemptions (stuff you can keep) – each state is different.
ØWhat credentials do you have and how long have you practiced bankruptcy law?
*Remember, you’re paying for his/her services! *
Be sure to be honest with the attorney – don’t hide stuff. For example, if Aunt Susie buys an expensive gift for your birthday, don’t lie or loan it to someone, you will get caught. Chances are that you can keep Aunt Susie’s gift.
Ask who knows of a good attorney, yes, I know, who is going to go up to someone and ask, “do you know of a good bankruptcy attorney?” If all else fails, try the yellow pages and call every one of them. By calling you will learn who you would want to work with and who you wouldn’t. Remember though, that attorneys are there to earn a paycheck so ask questions!
Married people can file bankruptcy without including their spouse – although this is unusual but your attorney can consult you best.
Approach filing bankruptcy seriously but realize that it is not the end of the world. If you are having a difficult time paying your debt now, do you think it will get any easier?
Be in Charge
Grabbing your finances by the reins and getting on top of them puts youin charge and in a better position to make better decisions.
Filing bankruptcy does not make you a bad person, in fact, it shows others that you recognized a problem and you tackled it head on.
You will feel great when you receive the news that it is all over.
Pay your bills on time and stay within your budget.
Remember, you're not alone and you will enjoy sleeping soundly at night when you have made a decision.