Archive for the ‘Setting the Record Straight about Bankruptcy’ Category
Monday, May 23rd, 2011
A study recently published by the web site Find Law indicates that a considerable percentage of the U.S. population (one in eight survey respondents, or nearly 13 percent) has either considered filing for bankruptcy or actually done so.
That figure may seem high, but in a nation of consumer debt, depreciating home values and a limited job market, perhaps it’s no wonder that so many of us are in need of serious the serious financial protection and debt relief that bankruptcy can offer.
Who Is Considering Bankruptcy?
The study breaks down potential bankruptcy filers in part by age:
- Americans between 35 and 54 are reportedly the group most likely to consider bankruptcy as an option.
- Americans 18 – 34 and 55 and older are, according to sources, half as likely as the middle age group to consider or actually file for bankruptcy.
- Senior citizens (those 65 and older) are apparently the least likely group to consider bankruptcy as a debt relief option, at only seven percent.
How Have Bankruptcy Filing Numbers Changed in Recent Years?
Sources indicate that in 2010, 1.5 million Americans actually filed for bankruptcy protection. This number marks the highest annual total since 2005, when the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) took effect and tightened the standards for those interested in bankruptcy protection.
Why Do So Many People Need Bankruptcy Protection?
While no two bankruptcy cases are alike, bankruptcy filers often note common triggers that led them to seek the protection of the bankruptcy court. These include:
- Unexpected medical expenses: Illness and injury can both cause serious medical bills to build up, particularly for those people who are uninsured or underinsured. And even an otherwise happy event, like the birth of a child, can prove very expensive.
- Change in family makeup: Divorce and death are difficult to deal with on their own, but are often compounded by the financial troubles they cause. Many families are forced to face unpleasant financial realities after divorce or death carries off a primary breadwinner.
- Job loss or reduction: Even good employees are at risk of losing their jobs in the current economic climate, and even though layoffs have slowed in recent months, the unemployment rate remains high. It’s no secret that this type of financial burden can lead a household to seek bankruptcy protection.
- Fear of foreclosure: Even those with good health and steady jobs may find themselves unable to keep up with their mortgage, and some families opt to file for bankruptcy in hopes of fending off mortgage foreclosure.
Considering the many factors that can contribute to a household’s decision to file for bankruptcy protection, it may be a wonder that only one in eight Americans has thought about personal bankruptcy!
Posted in Bankruptcy, Bankruptcy News and Events, Economy, Filing Bankruptcy, Setting the Record Straight about Bankruptcy, bankruptcy study | Comments Off
Monday, April 11th, 2011
Student Loan Debt
What You Don't Know Can Hurt You
Learn interesting student loan debt facts that aren’t as apparent as a student would hope. Did you know the difference in private versus public education for college equals $15,000 per year on average. For students, that’s a lot of cash that could be spent on other essentials (like food). Don’t wait until you are filing bankruptcy to find out the facts. Find out more trivia to share with your friends between classes in the infographic below.
Posted in Setting the Record Straight about Bankruptcy | Comments Off
Wednesday, April 6th, 2011
A recent press release from a group called Wider Opportunities for Women reveals what many families struggling to make ends meet already know: many families with breadwinners employed full-time are unable to earn enough money to ensure a basic standard of living.
The study (discussed more below) highlights the troubling economic reality that many Americans face and could potentially help to de-mythologize the reasons people are pushed to file for bankruptcyprotection.
The Basic Economic Security Test
Here’s some background about the study and its findings.
- Data collected since 1995: Over the past fifteen years, WOW has gathered data from state and federal pools (including census reports) to attempt to determine how much income is required to establish economic security across the country. The study attempts to determine not what people can survive on minimally, but how much they need to earn in order to achieve stability without help from public assistance.
- Economic security numbers: The study found that a single person would need to earn $30,012 per year (about $14 per hour), a single person with two children $57,756 annually (about $27 per hour), and a family of four $67,920 per year ($16 per hour for two workers) to establish economic stability.
- Minimum wage not enough: Compare the above numbers to the federal minimum wage ($7.25 per hour) and to the income identified as poverty-level for those groups ($10,830 for an individual and $22,050 for a family of four) and it’s easy to see that current diagnostic standards for “poverty” are somewhat misleading. Sources report that more than 14 percent of Americans lived below the poverty line in 2009.
Financial Stability, Emergencies and Bankruptcy
Given these numbers, it’s no wonder that millions of Americans require help from the bankruptcy court each year. One essential part of economic stability, as the report highlights, is being able to save money for emergencies. And, on bankruptcy filing surveys, filers commonly cite as reasons they filed financial emergencies such as:
- Illness or injury that led to high medical costs and/or job loss;
- Job loss, layoff, or reduction;
- Family events such as divorce, the death of a family member and the birth or adoption of a child;
- Over-extension on credit (which can result from relying on credit to buy necessities); and
- Unexpected expenses (like a car or home repair).
Recession Hurting Many Families
The study also showed that Americans with less education have the most difficulties finding jobs with livable wages, and that more low-income families than ever have reported not being able to afford basics like food within three months of losing their income.
Posted in Bankruptcy, Economy, Setting the Record Straight about Bankruptcy, debt, jobs, statistics | Comments Off
Monday, November 29th, 2010
A recent article in the Wall Street Journal offers an interesting look at how a variety of American bankruptcy filers are doing in their post-bankruptcy lives. The findings are interesting and informative – and, if you’re among those who have filed for bankruptcy protection in recent years, they may save you some time and worry.
Here’s a look at some of the highlights of life after bankruptcy these days.
- Credit checks & the job hunt: It seems that some people recovering from bankruptcy are finding that the job application process has an added difficulty: the credit check. While some states have made pre-employment credit checks illegal and the government prohibits public-sector employers from denying jobs on the basis of a bankruptcy filing, many private-sector companies are still running credit checks on applicants – and many apparently frown at bankruptcy filings.
- Finding new housing after bankruptcy and foreclosure: Another hurdle many bankruptcy filers and foreclosure http://www.totalbankruptcy.com/chapter-13/stop-mortgage-foreclosure.aspx victims are reportedly facing is finding a place to live after their finances fall apart. While sources note that most people with bankruptcy and/or foreclosure in their past will have to work harder to find housing than someone with cleaner credit, it seems that many landlords are willing to take into account the circumstances surrounding a bankruptcy filing or foreclosure. In other words, if you were a victim of unexpected illness, injury or job loss (like so many bankruptcy filers), you stand a better chance of securing a new lease.
- High auto loan interest rates: Many people have reportedly had great difficulty getting an affordable auto loan after a bankruptcy filing, especially in the current economy. Some people apparently choose to find housing close to their children’s schools and near public transportation; others managed to get high-interest loans on used vehicles and stay current.
General Tips for Life after Bankruptcy
The good news about recovering from bankruptcy in the current economy is that you are by no means alone, which means that more people are beginning to understand that bankruptcy provides, in some cases, the only viable option for people in financial distress.
Here are some general post-bankruptcy tips:
- Make & keep a budget: Mindfulness is perhaps the most important part of staying within your means – it’s far too easy to overspend if you don’t know how much money you’ve got at your disposal.
- Change your habits: Falling into your pre-bankruptcy financial habits will probably lead you back down the road to bankruptcy. So avoid payday lenders, pay off your credit cards each month and use cash if you can’t resist the urge to splurge on credit.
- Make a cushion: Saving money is key to making sure another financial catastrophe doesn’t undo you again. Even a small emergency fund can mean the difference between disaster and stability.
Posted in Bankruptcy Filings, Setting the Record Straight about Bankruptcy, after bankruptcy, bankruptcy trends | Comments Off
Thursday, August 12th, 2010
College students and recent graduates are facing a particularly difficult financial landscape as they attempt to move from the classroom to the workplace: college tuition is more expensive than ever, meaning that most students rely at least in part on loans to cover their fees.
But, with the economy still sluggish, finding a job (and particularly a job that will allow them to cover their loans) is often a difficult feat.
And the scary truth is that student loans are very difficult to discharge in a bankruptcy filing. Here’s a look at what you can expect if you’re struggling to repay educational debt—and what your options might be.
Student Loans in Bankruptcy
In most bankruptcy cases, student loans constitute non-dischargeable debt, meaning that the bankruptcy court cannot legally forgive any money you owe. The exception to this rule is that if a filer can prove “undue hardship,” she might have her loans forgiven.
In order to demonstrate that paying back your student loans would cause you “undue hardship,” you must address the following:
- Standard of living: You need to show the bankruptcy court that, if you made payments on your student loans, you would be forced to live below a minimum standard of living. This may vary depending on where you live, so be sure to consult with a bankruptcy lawyer to determine whether you might meet this criterion.
- Duration of situation: You also need to prove that your current living circumstances (such as expenses and income) are likely to continue throughout the duration of your loans’ repayment period. In other words, you need to show that you’re not only poor now, but you’re likely to remain so for as long as you’d be making student loan payments.
- Effort of repayment: Finally, you have to demonstrate that you’ve honestly attempted to repay your loans but have found yourself unable to continue doing so while maintaining reasonable living standards.
Clearly, these criteria are not easy to meet—and it’s likely you might not even want to meet them. After all, none of us want to think we’ll be having the same difficulty finding work ten years from now that we’re currently having.
Dealing with Student Debt
If you don’t think you’re likely to have your student debts discharged by a bankruptcy court, you may want to consider these options for repayment.
- Filing for bankruptcy: No, that’s not a typo. If you’re stretched too thin by a variety of debts, filing for bankruptcy may allow you to discharge other debts (like those from credit cards) so you can funnel money to debts you have to repay.
- Applying for forbearance: Most student lenders offer graduates periods of forbearance, in which they’re not required to make payments on their loans. If you expect to be employed (or be earning more money) in the near future, this option may give you some breathing room.
- Negotiating: Finally, consider contacting your lender, explaining your situation and asking for altered loan terms that would allow you to make smaller monthly payments so you could stay on target.
Additional Resources
Repaying Your Student Loans
Posted in Filing Bankruptcy, Setting the Record Straight about Bankruptcy, Student Loans, forbearance, student loan debt | Comments Off
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
Tuesday, June 1st, 2010
Chapter 7 bankruptcy is an option for debtors who simply cannot pay off their creditors due to any number of circumstances: divorce, job loss, or high medical bills. The common view of people who file for bankruptcy is that they must be deadbeats or living beyond their means, but it's normal people who file for bankruptcy.
Perhaps you qualify for Chapter 7 bankruptcy. You may be wondering if you’ll lose everything in the process. The good news is that some property is exempt from bankruptcy proceedings. There are two lists of possible exemptions: one state, one federal. Most states allow debtors to utilize only state exemptions, but a few states allow the debtor to choose between federal or state exemptions. An attorney may be able to assist you in determining what property your state exempts.
Homestead Exemption
The first, and most common, exemption is known as the “homestead exemption,” and it applies to your residence. The limitations on value of the homestead vary from state to state. For instance, in Texas there is no limit on the value of the homestead. In contrast, the maximum value that can be claimed in Alabama is $5,000.
Some states require special proceedings for spouses who jointly own property. You may also be required to continue making mortgage payments in order to keep the house. Once again, an attorney may be able to help you decide if those requirements apply in your state.
Vehicle Exemption
The second most common exemption is the vehicle exemption. Most people will not lose their car, provided its value in equity is below the state exemptions requirement. This value is usually around $3,000, but you need to check your state’s requirements.
In order to calculate the equity of your vehicle, find the market value of the vehicle and then subtract any money owed on it. If the vehicle is worth less than the exemption vehicle, you will probably be permitted to exempt your vehicle from the bankruptcy proceedings. If the vehicle is worth more than the exemption value, it is possible to pay the bankruptcy trustee the amount above the exemption value in order to keep the vehicle.
Like the homestead exemption, if you retain your vehicle, you are required to continue paying any loans or leases on the vehicle.
Other Exemptions
Other exempted property includes household property and appliances, clothing, jewelry up to a certain value, life insurance, alimony and child support, public benefits, retirement plans, and tools that are necessary for the debtor’s trade. For example, a professional musician will not lose her harp in bankruptcy proceedings, even if it is a very expensive musical instrument.
Unexempted property may include stamps, coins, and other collections; cash; bank accounts; stocks, bonds, and other investments; a second vehicle; or a second or vacation home. It is possible to keep a second vehicle, however, if it qualifies under another exemption category, for instance "tools of the trade." For example, if the debtor owns a carpet cleaning business, and needs his company’s van in order to continue doing business. This varies between states as well.
When filing for bankruptcy, the debtor will file a schedule, or list, of all exempted property, including its description, market value, and exemption value. This will allow other parties in your proceedings to review your exemptions and object. However, even if a creditor believes an exemption to be improperly claimed, they have the burden of proof—they can't simply demand you hand over assets.
Bankruptcy can provide relief from a wide array of debts, and despite common myths, very few debtors are left with nothing after they file. Most of all, bankruptcy gives you the chance to move on from debts and start anew.
For more information on bankruptcy exemptions, check out the state bankruptcy laws or talk with a local bankruptcy lawyer today.
Posted in Bankruptcy Laws, Chapter 7 Bankruptcy, Exemptions, Setting the Record Straight about Bankruptcy | Comments Off
Saturday, April 24th, 2010
Despite the vast body of research that indicates otherwise, many Americans still think of filing for bankruptcy as a sign of personal or moral weakness, rather than a needed safety net for people who truly cannot afford their bills.
An article from the Minneapolis Star-Tribune does an excellent job of addressing this common misconception about the protection bankruptcy offers. The writer was inspired to action, it seems, by a columnist from another publication who cited bankruptcy as proof of moral weakness.
His response includes these important facts about bankruptcy that reinforce its role in the U.S. economic system:
- Medical costs contribute to many bankruptcy filings. In fact, a study conducted in 2007 (link below) found that more than 60 percent of Americans who file for bankruptcy do so because of excessive medical bills. This is no surprise to anyone who has had difficulty getting health coverage or being able to afford insurance.
- Job loss and divorce play a huge role. Along with medical costs, these two factors account for the vast majority (about 90 percent) of all bankruptcy filings. And, if the current economy has done anything, it has reminded us how devastating job loss can be.
- People who file really need help. The article notes that the average Chapter 7 bankruptcy filer has an income of only $20,000 per year, which isn’t exactly a lot of money, and can easily disappear when an unexpected financial burden hits.
- Credit card companies are not your friends. Many people who file for bankruptcy have some or all of their unsecured debt discharged by the court—this debt often includes credit card bills. And, with high interest rates, fines and fees that these companies rake in, it’s hard to feel sorry for their loss of income.
The bottom line here is that bankruptcy exists to protect those who truly need its protections. Without it, the American economy would likely not flourish with as much innovation as it does today—thanks to the security that bankruptcy provides, entrepreneurs can take risks that they might not otherwise have.
Additional Resources
Medical Bankruptcy in the United States, 2007 (PDF)
Medical Bills and Bankruptcy (PDF)
Posted in Setting the Record Straight about Bankruptcy, bankruptcy stigma, medical debt, reasons for bankruptcy | Comments Off
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
Thursday, April 8th, 2010
What leads people to file bankruptcy? A recent article from the Idaho State Journal offers an interesting peek into the mind of a U.S. bankruptcy judge and a refreshing reminder about the causes of bankruptcy.
Why Americans File for Bankruptcy
U.S. Bankruptcy Court Judge Jim Pappas explained how bankruptcy protection is one of pillars of the U.S. economic system: the promise of a fresh financial start for those who get into more debt than they can handle encourages the sort of entrepreneurship that makes America what it is.
Pappas went on to identify three factors that he has reportedly found contribute to the majority of bankruptcy cases he sees in his court:
- Medical bills: Medical catastrophes can bankrupt even those who have medical insurance—having too little insurance can be just as problematic as having none at all when astronomical medical expenses enter the picture. Plus, lost work hours and/or the lost ability to perform many jobs leaves some people without a chance to recover from a financial setback.
- Job loss: As millions of Americans have learned in the last year, getting laid off or having your hours or pay cut can seriously strain your finances. For people who don’t have a tidy emergency fund in place, job loss often throws finances into turmoil—without steady income, people risk defaulting on credit cards, home loans, car payments and student loans. This can lead to stress, foreclosure and repossession—for many, bankruptcy is the only available remedy.
- Family problems: Divorce can be expensive, and single parenting isn’t much easier. Apparently, the majority of single filers Judge Pappas sees are women, often strained financially by their obligation as the primary caretaker for their children.
Why the Bankruptcy System Works
One point mentioned in the article bears repeating: the judge mentions that bankruptcy still has a bad reputation in this country as being for “deadbeats” and people who are interested in “gaming the system.”
But, according to anecdotal evidence and statistics from the U.S. government, nothing could be further from the truth. In fact, only an estimated one to three percent of bankruptcy filings are fraudulent—meaning that between 97 and 99 percent of bankruptcy filers are truly in need of financial protection.
If you’re struggling financially—whether because of one of the factors mentioned above of for another reason—you may want to consider whether filing bankruptcy is the right choice for you. Often, taking action earlier rather than later gives filers the most options for financial recovery.
Additional Resources
Medical Debts and Bankruptcy Filings (PDF)
The Rise in Personal Bankruptcy (PDF)
Find a Bankruptcy Lawyer Near You
Posted in Filing Bankruptcy, Setting the Record Straight about Bankruptcy, bankruptcy judge, bankruptcy trends, causes of bankruptcy | Comments Off
