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Can I Save Money During Bankruptcy?

Tuesday, June 29th, 2010

As a consumer bankruptcy attorney, I am often asked: Can I save any money during my bankruptcy? Well, if you filed a Chapter 7 case, this really isn't an issue. If you filed a Chapter 13 plan of reorganization, you will probably be in the bankruptcy for three to five years. The simple answer is: No, you aren’t supposed to save money; however, that is not realistic. In a chapter 13 bankruptcy, a debtor must pay to the bankruptcy trustee all of his disposable income for 3 to 5 years. Continued reasonable 401K contributions are considered an acceptable expense, but most other forms of saving money is prohibited.

Clients frequently ask, “How am I going to get a fresh start without saving?” True. It is difficult. At the same time, however, a debtor can wipe out $250,000 of debt by simply paying $400 a month for 60 months. The fresh start comes with the ability to force your creditors to accept pennies on the dollar for debts. The fresh start comes at the end of the bankruptcy when a debtor emerges free from the stranglehold of debt.

“What if my car needs or I have an unexpected expense? I need to save to pay for it.” This is another common concern. Bankruptcy law has a mechanism to deal with this common occurrence. In many cases, the bankruptcy payment can be forgiven for a period of time to let a debtor deal with unexpected expenses. The key is to let your attorney know about it as quickly as possible.

This blog was written by Jeremy Iskin, Esq. of The Dellutri Law Group, P.A. Mr. Iskin practices Bankruptcy Law at the firm.

Posted in Bankruptcy Myths, Consumer Protection, Good News, Life After Bankruptcy | Comments Off

Bankruptcy: Separating Myth from Reality

Saturday, June 12th, 2010

If you’ve recently found yourself buried under a pile of debt, you’ve probably spent some time researching ways to dig yourself out. Most likely, filing for personal bankruptcy did not sound like the most appealing choice. However, like visiting the dentist or and eating spinach, filing for bankruptcy can actually be quite good for your health, financially.

Like most tools that aid in personal finance recovery, the more you learn about bankruptcy, the more comfortable you may feel wielding it as a debt-reducing tool.

The following are some important things to know about personal bankruptcy:

What Will the Neighbors Say?

While many people think bankruptcy carries some stigma, the fact is that more than 1.5 million Americans filed for bankruptcy last year. And these people stretched across all social strata—from doctors and corporate executives to plumbers and house cleaners.

In addition, according to the Orlando Sentinel, a recent Harvard University study revealed that most bankruptcy filers wound up in court as a result of job loss, divorce, or medical issues. So, if one of these problems led to your financial malaise, know that you are not alone.

Where Do I Start?

First, figure out if you can stay out of bankruptcy by reducing your household expenses, or adjusting the payment plans on the debts you owe. If such tactics dramatically reduce your debts, you may be able to navigate the road to financial recovery yourself.

However, if these strategies prove ineffective, consider filing for personal bankruptcy. See if it makes more sense to file for Chapter 7 or Chapter 13 bankruptcy. Each of these options comes with its own advantages. For example, Chapter 7 bankruptcy can help discharge your debts more quickly, while Chapter 13 may allow you to keep more of your assets.

Of course, both options are pretty complex, especially after the legislative overhaul of bankruptcy law in 2005. It is possible to file for bankruptcy yourself, but seeking legal advice from an experienced bankruptcy attorney is often worth the investment.

Caveat Debtor

Reportedly, some companies promising immediate debt relief peddle misleading, or outright wrong, information. Be wary of promises to drastically reduce your debt or painlessly repair your credit, especially if these promises come attached with large up-front fees.

Also, beware of pressure tactics from your creditors. One tall tale occasionally given by debt collectors is that the 2005 reforms banned bankruptcy altogether. This couldn’t be further from the truth. Personal bankruptcy is alive and well, and over a million Americans use bankruptcy every year to reduce their debt load.

Additional Resources

To learn more about your legal rights before and after bankruptcy, check out this report from the National Consumer Law Center.

Posted in Bankruptcy, Bankruptcy Myths, Filing Bankruptcy, Setting the Record Straight about Bankruptcy | Comments Off

Life and Credit after Bankruptcy

Friday, April 9th, 2010

One of the most enduring myths about filing for bankruptcy is that it "ruins your credit" for ten years. While many myths about bankruptcy are misleading, this is one that needs to be debunked, once and for all.

A recent article from the New York Daily News examines the question of exactly what happens to a person's credit after a bankruptcy filing. In it, bankruptcy attorney and President of Total Bankruptcy Kevin Chern explains why filing for bankruptcy does not mean permanently sabotaging your finances.

Bankruptcy and Your Credit

Here are some key points to keep in mind about how filing for bankruptcy will affect your credit:

Your credit before bankruptcy: Most people who need bankruptcy protection don’t have great credit to begin with—their debt-to-credit ratios tend to be high, and that’s a key risk indicator to many potential lenders. In fact, the financial difficulties that lead people to bankruptcy filings are incredibly detrimental to credit ratings.
Your credit after bankruptcy: When you receive your bankruptcy discharge, your discharged debts should be removed from your credit history, meaning they no longer hold you down. True, evidence of your bankruptcy filing stays on your credit report for 10 years, but its impact diminishes with time (a single bankruptcy filing should not "ruin" your credit for a decade).
Overall credit health matters: Credit reports work because they combine various financial indicators to provide potential lenders with a snapshot of someone’s financial life. Someone who has filed for bankruptcy and stayed ahead of her debts since then will likely seem more attractive than someone who has not filed for bankruptcy but has delinquencies and defaults sullying his credit.

Getting Loans Again

The Daily News notes that most personal bankruptcy filers can expect to start getting credit card solicitations in the mail within two years of filing for bankruptcy—in other words, credit becomes available far before the ten-year doomsday benchmark commonly repeated.

But remember: it may be best to wait a while after a bankruptcy filing before applying for credit cards again, because the first offers may come with very unattractive interest rates or fee schedules.

For a more in-depth exploration of improving credit after filing for personal bankruptcy, check out these credit-rebuilding tips and this four-step method for regaining financial stability in your post-bankruptcy life.

Posted in Bankruptcy Myths, Credit After Bankruptcy, Setting the Record Straight about Bankruptcy | Comments Off

Double Standards in Bankruptcy

Tuesday, February 9th, 2010

I was really bothered by something that I heard on the news last night, and this morning I couldn't help but voice my opinion on Bankruptcy Law Network. I know that I shouldn't listen to the news before bed, but I heard the talking head make a comment about why people file for bankruptcy and why businesses file. The joker said that when a business files for bankruptcy, it is done for one reason, and that is because it is in the best interests of the business. When an individual files for bankruptcy protection, it is because they have made bad decisions. Nothing could be further from the truth in my opinion.

So, I wrote a blog this morning titled: Bankruptcy Double Standard ? : Businesses and Individuals

Please take a look at the blog and see if I came close to hitting the issues.

This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Dellutri also sits on the Board of American Board of Certification. Mr. Dellutri is also one of the founders of the Bankruptcy Law Network, Debt Law Network, Credit Law Network, and Mortgage Law Network. Mr. Dellutri also writes for the firm's personal injury litigation blog, www.faircreditreportingactblog.com and www.fairdebtcollectionpracticesactblog.com, and the firm's mortgage modification blog.