Credit and Credit Cards

70% of American are feeling Financial Stress. Chapter 7 or 13 Bankruptcy can help.

in Bankruptcy, Credit and Credit Cards

Financial Stress

According to a new CNBC survey, 70% of Americans are feeling financially stressed. This is not surprising given the economic challenges that many people have been facing in recent years. However, there are ways to address financial stress, and one of those ways is through bankruptcy.

Bankruptcy is often seen as a last resort for people who are struggling with debt. However, it can actually be a powerful tool for reducing financial stress and starting fresh. Bankruptcy can help people in several ways:

  1. It can stop creditor harassment: When people fall behind on their bills, they often receive calls and letters from creditors demanding payment. This can be a source of constant stress and anxiety. Filing for bankruptcy can put an end to this harassment, as creditors are required to stop contacting debtors once they file.

  2. It can eliminate unsecured debt: Bankruptcy can discharge many types of unsecured debt, such as credit card debt, medical bills, and personal loans. This means that people can get a fresh start without having to worry about these debts hanging over their heads.

  3. It can prevent foreclosure or repossession: If people are behind on their mortgage or car payments, they may be at risk of losing their homes or vehicles. Filing for bankruptcy can stop the foreclosure or repossession process and give people time to catch up on their payments.

  4. It can create a payment plan: Chapter 13 bankruptcy allows people to create a repayment plan for their debts. This can make it easier for people to manage their debts and can reduce financial stress.

Overall, bankruptcy can be a powerful tool for reducing financial stress and starting fresh. While it is not the right choice for everyone, it is important to consider all options when dealing with financial difficulties. If people are feeling overwhelmed by their debts, they may want to speak with a bankruptcy attorney to learn more about their options.

A Myth: 5 Big Lies About your Score

in Bankruptcy, Credit and Credit Cards

myth

We’ve talked a lot about credit scores and we’ve tried to debunk a myth or two about them.  Credit Scores are the topic of almost every conversation we have in our office with clients.  They’re always concerned about how a bankruptcy will affect their credit score going forward.  While we can tell you that bankruptcy will change your credit score, we can also tell you that your credit score will improve dramatically in the weeks and months following your bankruptcy.  Don’t believe me? Just as the Consumer Financial Protection Bureau. 

That said, there are a number of myths about credit scores and how they change and how that change impacts you.  

Myth #1: The higher the income, the higher the score

Your income and your credit score are almost entirely unrelated.  Obviously, the better your debt to income ratio is, the more likely you are to get credit. However, the bulk of your credit score is made up of three things: Payment history, how long a line of credit has existed and credit utilization. 

We’ve had clients making minimum wage who have excellent credit and clients making 6 figures with credit scores in the 500s.  Your income is not indicative of your credit score.  

#2: Carrying a balance increases your score

Apparently, more than 3/5 of consumers believe this.  It is also a total lie.  In fact, credit card utilization (i.e. how much you owe) is one of the biggest factors in determining your credit score. 

You should always shoot for having a utilization rate under 30%.  That is considered healthy by pretty much every major credit reporting agency.  Carrying a balance is eating up your credit utilization and also likely costing you substantially in interest.  

#3: Closing an old card will increase your score.

Nope. One of the major factors in determining your credit score is the longevity of your credit history.  The older the account the more it helps your cause.  In fact, you should do everything you possibly can to keep a card active, even if you don’t use it. 

Take it out from time to time, but at least once a year, and use it for a small purchase.  Pay it off on or before the due date to keep the card active.  The longer you have that account open, the positively it will reflect on your credit score. 

#4: There’s only one credit score

This is a major myth.  While the FICO score is the most commonly used score, there are a number of other companies that utilize and create credit scoring models.  

There are many credit scoring agencies out there and they all do things slightly different.  In fact, the score you just saw on whatever app you’re using may not be the same one that lenders view.  However, there is one universal truth.  If you have “Good” credit with one, you should be in the same ballpark on all the other ones as well.  

#5: Co-signing a loan won’t affect your credit

This is perhaps, the most dangerous myth about credit scores.   Co-signing is ALWAYS a bad idea.  We’ve discussed it before.  Co-signing increases your credit utilization just as if you charged up a significant balance.  Credit agencies consider co-signing the exact same thing as you taking out a loan on your own.

If the person you co-signed with misses a payment or, god forbid, defaults, you’re on the hook for that loan.  Those missed payments and the eventual default will lead to extremely negative consequences for your credit score and could potentially lead to lawsuits and other collection efforts.

Don’t let lies, misinformation and myths get in the way of making good choices when it comes to credit.  If you have questions about your credit, financial information or bankruptcy, call us.  Our firm has been helping people get out of debt for almost 40 years. 

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.

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.

Can my creditors sue me even if I’m working with a debt settlement firm?

in Bankruptcy, Credit and Credit Cards

debt settlement

The short answer…yes, absolutely.  Even if you’ve started working with a debt settlement agency.  

In Georgia, like most of the rest of the country, debt settlement agencies usually aren’t lawyers and they certainly don’t offer the protections that the automatic stay does in bankruptcy.  

They promise you the world. “We’ll fix your problems.” “We’ll make the debt disappear.” The problem is, they don’t do it quickly enough to stop lawsuits from being filed and creditors from getting court dates.  

Once that happens, guess who won’t show up in court on your behalf.  

Most of these companies operate all over the country, so honestly, they couldn’t care less if you’re getting sued in Georgia.  Most likely they’ve already got several hundred or even thousands of dollars from you. 

What is Debt Settlement?

Basically, you stop paying all of your debts and instead send money to a debt settlement company every month.  The debt settlement agency will then contact your creditors and try to work out a deal with them and see if they’ll take a one time, lump sum payment to settle the debt.  

Unlike bankruptcy, if at any point the creditor wishes to opt out of the agreement and sue you, they can.  Nothing is stopping them with a debt settlement agency, whereas in bankruptcy, they will get smacked down by the full weight of the United States Federal Court system.  

I’m in debt settlement, why would they sue me?

Long story short, it’s because they can.  Some get tired of waiting.  Some have bought the debt from your original creditor for pennies on the dollar and they want to flip a profit ASAP.  

Generally speaking, if they file suit against you they’ll get your attention.  Either you’ll pay them first or they’ll obtain a court order and start garnishing you.  In Georgia, they can take 25% of your pre tax earnings from each pay period.  

Additionally, it takes a while to build up enough money with the debt settlement agency for them to actually be able to settle your debts.  

If you owe MegaBank, N.A. $10,000 and you’re only paying $500 a month to the debt settlement agency, it’ll take nearly a year for the agency to be able to offer to settle the debt for 50% of the value.  Keep in mind, that’s just one debt.  If you owe MonsterBank, and HorseCarraigeBank and BASSBank 5-10 thousands dollars each, think how long that’s going to take to settle.  

Inevitably, someone’s going to get tired of waiting and just file a lawsuit, at least that way they’ll get something out of you.  

How do I stop a Lawsuit?

There’s three options, only one of them is easy. 

  1. Prove to the court that you don’t actually owe the debt.  This probably won’t work because the burden of proof is on you.  Plus, it’s 2021, it’s extremely easy to find people and make sure that you’re actually suing the right person.  
  2. Pay off the debt.  But then again, if you’d had the money you’d have already paid them.  They know this and that’s why they sue.  If they get a garnishment, they can take the money you need to put food on the table and a roof over your head, but hey, they got paid. 
  3. The best way to stop a lawsuit is to file bankruptcy.  A Chapter 7 or 13 bankruptcy stops a lawsuit dead in its tracks.  It’s like a bullet hitting armor plating.  If you bring everything we need to your appointment, we can file emergency cases in as little as 6 hours. 

In the end, bankruptcy is usually the cheapest and definitely the most effective way to stop lawsuits and eliminate debts.  Unlike settlement companies, creditors absolutely have NO CHOICE but to follow the orders of the bankruptcy court.  

If you’re ready to make a fresh start, give us a call.

Don’t be scared

in Bankruptcy, Credit and Credit Cards

Scared

Often,  I advise my clients to cease making payments to credit card companies in preparation for a bankruptcy filing.  After all, if the debt will be discharged anyways, that last $29 minimum payment isn’t going to break Wells Fargo. 

I often get looked at like I just asked them to shoot a puppy. 

They’re scared and bumfuzzled. What on earth?

“If I don’t make my payment, won’t they send me to collections?”

To many of my clients, being in “collections” is the worst thing ever.  Almost like a prison even, complete with the dank, dingy cells and the rattling bars. 

Chances are, as long as you file within a reasonable time, there’s no need to be scared. You’ll probably never even hear from a bill collector. 

The weapons they deploy

Most of the tools at the disposal of a debt collector are psychological.  

They call and harass (alot) to try to get you to pay up.  If you don’t there isn’t much else they can do without deploying their next weapon.  

A lawsuit.

This is where things get hairy.  In the State of Georgia, a lawsuit can (and often does) result in a garnishment.  They can take 25% of your pre-tax income. 

I don’t know about you, but if I lost 25% of my pre-tax income, I’d be up a creek. 

The good news is, bankruptcy stops garnishments dead in their tracks, but that’s not the point of this blog. 

What really matters 

The problem with debt collectors is that they have you focused on the wrong thing and they often have you scared for no reason. 

They want you to worry about their problem.  Namely, the debt you (supposedly) owe them. 

They are concerned about getting their money, but often, paying this one bill isn’t going to solve all your problems.  In fact, it may make them worse.  

You need to be focused on solving the bigger problem: What does the totality of your financial life look like? 

First, don’t let debt collectors distort your priorities. There are bills that absolutely need to be paid first.  Mortgages, child support, rent, car payments, taxes.  Without a roof over your head or a car under  your bottom, you can’t get to work. 

Additionally, the government is way more aggressive than any collection agency could ever dream of and the government doesn’t give up. 

I try to impart upon my clients this important lesson.  Don’t worry about one debt collector. Worry about the whole health of your finances.  

In the end, you need to be able to sort out your finances and find a way to live in financial peace and comfort.  

You need to be able to sleep at night, make ends meet and retire one day. 

That’s why you need to call me.