Month: January 2022

A Matter of Fairness

in Bankruptcy, Credit and Credit Cards

fairness

Bankruptcy is, at its core, a matter of fairness. It’s one of the greatest tools for people looking to get out of debt and return to a semi-normal life (I say semi-normal because let’s be honest, what is normal anyways). If you’re unable to pay your bills and service your debts, you’ve got to make tough choices every month.  

Do I want to keep paying Monster Mega Bank for some shoes and a TV I bought 5 years ago when I couldn’t see the big picture, or do I want to put that money towards my retirement savings? 

If you don’t have enough money to make your mortgage payment, car payment, utility bills or groceries, you need to cut where you can, and old debts are a good place to start.  

What does Bankruptcy Do?

Bankruptcy is designed to ensure fairness.  Look, no one wants to take on debt they promised they’d pay and then not pay it.  

Bankruptcy is designed to ensure that everyone gets a fair shake.  Creditors get paid back what a person can afford and the debtors are able to go on and pay for life’s necessities.  

Safe Spending?

As a debtor who is considering bankruptcy, many clients ask, what CAN I spend money on? The answer is simple

  • Healthcare
  • Personal care products (think grooming and personal hygiene)
  • Reasonable clothing (don’t run down to the local Chanel boutique and buy a new suit)
  • Childcare costs
  • Educational expenses
  • Utilities (Power, Gas, Water and Sewer, Internet, TV).
  • Transportation expenses
  • Reasonable expenses for entertainment

Additionally, you may also continue to tithe, contribute to retirement accounts and pay for insurance products as long as they aren’t excessive, unreasonable and you were doing it before you filed bankruptcy. 

This is especially true in a Chapter 13 Bankruptcy.  In a Chapter 13, you’re required to pay all disposable income (i.e. what you have left over after all you necessities are paid) back to their creditors through the bankruptcy plan.  

The Chapter 13 trustee analyzes your salary, listed expenses and other items listed in your budget to make sure that everyone is being treated fairly.  

Because of this, it’s imperative that you have a highly experienced bankruptcy attorney on your side.  A good bankruptcy attorney can ensure that you don’t have to pay back one cent more than you’re legally obliged to.  

In a Chapter 7, your budget isn’t as heavily scrutinized since you’re not having to make payments to your creditors. However, it’s still a good idea to have an experienced attorney on your side.  If the Chapter 7 Trustee feels like you’re sitting on a large pile of disposable income, they can request that your Chapter 7 be forcibly converted into a Chapter 13. 

In Good Faith

You must file your bankruptcy case in good faith. Good faith essentially boils down to fairness.  If the bankruptcy code is going to be fair to you, it must also be fair to your creditors.  You can’t lie about expenses or hide sources of income.  This can result in your case being dismissed, converted or could even lead to charges of perjury.  This is yet another good reason to have an experienced bankruptcy attorney on your side.  

Before you file bankruptcy, you need to be cautious about spending great sums of money on things you don’t need.  It’s not unreasonable to go out to eat once in a while or go to the movies, but don’t treat yourself to a $5,000 shopping spree at Saks Fifth Avenue. Spending like this is considered a luxury and can draw the ire of the Chapter 7 trustee.

Trustees may argue that you did this with the intent to defraud creditors.  The same goes with transferring property or selling things for less than they’re worth.  If you engage in these types of behaviors, the trustee could sue the person you transferred the property to in order to recover the value of that for your creditors.  

If a debtor engages in these types of behaviors, the court can punish you by denying  your discharge, or worse.  

That said, bankruptcy is there to protect people who are honest and upfront about their troubles.  Paying for life’s necessities isn’t illegal and in reality, that’s what bankruptcy is there for.  

If you’re ready to take the first step in becoming debt free, call us.

The Creditor Scam

in Bankruptcy

SCAM

Every Creditor is not the same, and some aren’t even creditors at all, they’re scams. We live in unprecedented times.  By virtue of that, we also have an unprecedented number of money hungry creditors looking to scrape up every cent they think they can get their hands on.  

Frequently, debtors will find themselves in a situation where they are continuously being hounded by any number of creditors.

The debts they supposedly owe have been sold and resold so many times that the creditor isn’t really sure that the person they’re pursuing even owes the debt.

Frequently, debtors are not even sure who they owe funds to anymore either.

The problem is that this can make unsuspecting debtors vulnerable to scams. If a debtor receives communication from an aggressive creditor demanding payment, the debtor may not even take the time to figure out if they actually owe the debt.  

The Scam

This type of debt collection is what we like to call a scam.  Unscrupulous creditors (potentially even criminal organizations) will call people they think owe the debt.  Since they paid pennies on the dollar, if they recover anything, it’s a profit.  They’ll offer to settle the debt at a substantial discount if you pay right now.  You’re tired of being harassed and so without any investigation, you pay them.  

Now you’re out whatever you paid and it may not have even been a debt you owed.  

In these difficult times when debt changes hands so frequently, it’s best to be skeptical of debt collectors, even legitimate ones.  

With debt collectors calling you, mailing you nasty letters and even sliding up in your DMs, you need to be wary of everyone. Yes, creditors can contact you on social media.  The government allows it. 

The best way to combat this is to get a copy of your credit report.  The overwhelming majority of legitimate creditors will list things on your report.  

Additionally, if you’re skeptical (remember, you should be) ask the creditor for their contact information and use that to verify that they’re legit.  Call them back at the number they give you and do a little searching on the internet to make sure they’re legit.

Finally, under the fair debt collections act, you have the right to request proof that the debt is actually yours and that you owe it.  If they can’t provide this proof, tell them to go pound sand.  

How to stop it

Legitimate creditors will reach out to you in a variety of ways, but always be skeptical unless you’re absolutely sure you owe the money.  Do your research BEFORE you send money or else you could fall victim to a scam.  

This is especially true if the creditor is overly aggressive, abusive or hostile. Always remember your rights under the fair debt collections act.  

In the end, the only surefire way to eliminate debt that’s suspect is through the bankruptcy process. The full weight of the United States government and the federal court system is behind you.  It’s why it was created.  

If you have any questions about the bankruptcy process, call us.  We’ve helped thousands of people eliminate more than 1 billion dollars worth of debt.

A Resolution

in Bankruptcy, Credit and Credit Cards

The new year always brings new challenges, fresh hopes and resolutions to make life better and more fulfilling. Life comes at you fast as these last two years of living under a global pandemic have taught us.  Things change fast and often for unexpected reasons.  One thing that we all know about life is that we need to face our challenges head on and take control of the situation.  

Make a Resolution

One of the most troubling situations we find ourselves in is debt.  We have repeatedly discussed the harmful effect debt can have on our physical and mental health. Debt also keeps us from getting ahead in life.  If you’re constantly scraping and clawing to make minimum payments on credit cards or you’re in over your head on auto, boat or RV payments, you’re never going to be able to save for retirement or leave a nest egg for your loved ones when the time comes.  

More Americans got into debt this holiday season than in previous years.  Nearly 1 in 3 Americans spent an average of more than $1,200 more than they could afford.  Most of that spending was covered by credit card usage.  

The Reality of Debt

What does that mean for the 33% that spent that much more than they could afford?  First of all, in the short term, it means struggling to make higher payments. In the long term, it means less money to save for the future.  

The average American household carries around $6,100 in revolving (credit card) debt.  Add to that an extra $1,200 and suddenly an average monthly minimum goes from around $250 a month to nearly $300.  Add to that the nearly 1 extra year of payments and nearly $2,000 more in finance charges and you have a real problem on your hands.  

If you invested that same $2,000 in finance charges and the $50 a month payment increase in an interest bearing account, over the same amount of time, you’d have over $12,000 in savings. If you took that same $7,300 and invested it and made a $300 a month contribution to your savings, you’d have 67,000 over the same time period.  

Now What?

So, Amanda, what’s your point? 

My point is this.  

Make a resolution to do something about your debt.  

Bankruptcy is the most absolute way to rid yourself of debt that’s ruining your life and keeping you from saving for the future.  

Bankruptcy stops the phone calls, harassing letters and lawsuits. 

It eliminates debts either through a Chapter 7 fresh start or a Chapter 13 consolidation plan. 

If you take control now, you’ll have more time to save for the future, lead a less stressful life and have more security. 

When you’re ready to keep that new year’s resolution, call us.  We’re here to help.