The US Bankruptcy Court has a series of Bankruptcy Basics videos, which provide a helpful overview into an often overwhelming subject. While the videos are not a replacement for consulting with a knowledgeable attorney, they are a good starting point.
Have you resolved that 2013 is the year you will, once and for all, get out of debt? Did all the last-minute holiday spending send you further into an abyss of debt? Is it time to get your financial life back in order and finally resolve your bill problems? Is it time to put an end to those pesky telephone calls and letters?
First – You must determine your priorities. Is getting out of debt your priority? Do you want to tackle your debts one at a time? Starting with the largest balance or the highest interest rate? Do you need a bit of instant gratification – maybe tackle the smallest debt so you can check something off the list and achieve a feeling of accomplishment. Are your debts so overwhelming you don’t know where to turn – your phone is ringing off the hook, you’re being sued by old credit cards you can’t afford to pay, and you’re having trouble making your mortgage or car payment? Maybe considering bankruptcy as the way out of debt is the way to start your journey to becoming debt free in 2013. .
Second – Create a budget. Whether you are going to tackle your debt on your own or you elect to use the bankruptcy process to tackle your bill problems, you will need a budget.
Take a look at your pay checks. Are you an hourly or salaried employee? Does your pay fluctuate from week to week or month to month? Next, pull out you bank and credit card statements and take a good hard look at where you money is going. Add up all you income and subtract all of your expenses. See what’s really left over at the end of each month.
What are your fixed expenses? These are items such as rent, mortgage, and car payments.
What expenses can you control?
Do you have a gym membership that you no longer use? Cancel it.
Is your grocery spending out of control? Maybe it’s time to create a weekly meal plan. Take some quality time in your kitchen and do some batch cooking – not only can you save some money, but also precious time during the week. You can often find me in my kitchen on Sunday mornings whipping up a big pot of soup for lunches during the week. Leftovers get tossed in the freezer for a quick meal on a busy night.
Do you have expenses you can reduce? Is it time to shop around for a new cable provider? Or better yet – cancel your cable subscription.
Think your car insurance bill is too high? Can you shop around for a lower cost insurance provider?
Do you need a pricey cell phone plan? Call up your provider and see if you can save a few dollars.
Take a look at your utility and garbage bills – Can you choose the provider? Shop around and save some money.
Take a look at your health plan – many employers offer different options. What are your health care needs and does the plan you’ve enrolled in meet those needs? Is there a lesser cost option available? Have questions, reach out to your HR person to get some answers to help you make a solid decision.
Third – Educate yourself and don’t be afraid to seek help. We go to the doctor when we’re sick. Many of us go to the accountant to have our taxes prepared. Don’t be afraid to seek out a professional. Many attorneys, myself included, offer free, no cost, no obligations consultations for bankruptcy matters. If you’re a lousy candidate for bankruptcy or it won’t aid you in achieving your goals – I’ll tell you that. Bankruptcy is not for everyone, but for many people it is a powerful tool to rid them from burdensome debt, oftentimes without repayment in a no asset Chapter 7.
Lastly – Make a plan. If you find after a few months the plan isn’t working, go back and revisit it – Re-evaluate your priorities, take a look at your budget, and when in doubt ask for help.
It’s a new year and now is a great time for a fresh start!
Has your discharge been entered and you’re now wondering what to do to rebuild your credit? I was recently quoted in an article discussing life after bankruptcy. Check it out to learn more on how to rehab your finances.
It’s important to note that use of credit during a bankruptcy is prohibited, unless you have secured prior permission from the court. Use of such credit markets during a bankruptcy are limited and generally used for vehicle loans and mortgage products, which may be used to fund a Chapter 13 Plan.
A few months back, my husband and I decided to expand our family and adopt a retired racing greyhound. After spending entirely way too long researching dog breeds, talking to breeders, visiting shelters, and yes watching you tube videos of dogs doing crazy things, we stumbled upon greyhounds. A friend had suggested the breed as a possibility a while back, but we both dismissed it. Fast forward to the summer of 2012 a visit to the local adoption group’s meet and greet and attendance at adoption day back in August, Miss Lila entered our lives.
Now, we were wholly unprepared for Lila on adoption day. Silly me thought we were going to look at possible dogs, I truly didn’t think we’d be taking one home the same day. So off we went with Lila, who was only known by her racing name at that point, and brought the poor thing into PetSmart to load up on supplies. We brought her home and she sniffed a bit before settling down on the area rug in our living room.
We’ve learned a lot through trial and error. Our dog has no interest in toys unless they dispense tasty treats. Yes, we have a food hound on our hands. Apples, bacon, and cheese are among her favorites — what’s not to like there!
We have lots of locally owned fancy pet shops filled with tons of lovely toys, treats, and high-end kibble. Owning a dog can get pricey pretty fast, but it doesn’t have to and you don’t discount the small locally owned shops. Owning a pet shouldn’t send you into debt.
The pet shops in my area all have customer loyalty programs. I get weekly discount emails from one, another offers a discount after you spend a certain level. Sometimes the locally owned shops even have better prices than the big box pet stores. Shop sales and look for coupons. I’m regularly able to stock up on kibble from the fancy locally owned pet store for less than some of the internet only retailers. Not to mention they’re all pet friendly, so Miss Lila gets to tag along, explore the sights and scents, and sometimes even a cookie or two from the owner.
As with everything else if life, do your homework first. No, you don’t need to research every purchase for years before taking the plunge, but do a quick internet search first.
Need to purchase consumer goods? Hop down to the local library and grab a copy of Consumer Reports. Check out customer reviews from retailers’ websites. Want to shop local – again do your homework – will your local retailer price match? Do they offer a loyalty program? You might be able to shop local, shop local, and still save!
Good News, you have options!
Do loan modifications, HAMP, HARP, foreclosure, loss mitigation, short sales, refinancing, and deeds in lieu of foreclosure make your head spin? Do you just want to pack up your home and move out because there is no way you’ll ever be able to catch up on your delinquent mortgage payments?
I spoke a few weeks back on the options the bankruptcy process offers to distressed homeowners. The bankruptcy process offers a loss mitigation program to help keep homeowners in their homes. Loss mitigation lets homeowners have a direct conversation with their lender to discuss their options. When homeowners enroll in loss mitigation they are able to reduce, at least temporarily, their monthly mortgage payment.
A Chapter 13 bankruptcy can assist in giving you time to catch up on those missed payments. Sometimes you can even strip an unsecured home equity loan. Bankruptcy offers some powerful options for homeowners seeking relief from their mortgage payments.
Maybe bankruptcy isn’t for you. That’s okay, you still have options!
If keeping current on your mortgage is your only debt issue, maybe a short sale makes sense for you. Consult with some experts and learn about your options.
Have you recently received a Notice of Intent to Foreclose from your lender or have you been served with a Foreclosure Complaint? You aren’t alone, the foreclosure rate in New Jersey is nearly double the national average. New Jersey offers a foreclosure mediation program to help keep homeowners in their homes. The program is free of charge and allows homeowners the opportunity to work with a mediator and a representative from the mortgage company to try and work out a solution.
So just because you are having mortgage troubles, you are not without hope. There are many options to help keep you in your home and sometimes can even make the payments more affordable to you!
Fill in the blank – house, car, credit card, student loan, tax obligation, engagement ring, antique car, etc.
The short answer is yes.
Bankruptcy is a full disclosure process. So that means you must include everything you own and everything you owe on your bankruptcy petition.
I want to keep my car and I’m still making payments, can I keep that out of my bankruptcy?
You must list your car and car loan. You must list everything you own and everything you owe. Chances are you will keep you car. If you are still making payments on your car loan, you will need to state your intentions, what you wish to do with your car.
You have a few options. You can surrender the car, meaning you are going to voluntarily repossess the car or give it back to the lender. You can reaffirm the car loan, meaning that you are going to legally re-obligate yourself to make payments on the note. You can state that you intend to retain the car and continue to make payments on the loan. You may also redeem the car by paying off the amount due.
I want to keep my Visa card out of my bankruptcy, it has a zero balance and it’s my oldest account, can I do that?
No, you must list every open credit account. Visa will receive notice of your bankruptcy. Even if the account has a zero balance, whether its your oldest or newest account, it will close upon the filing of your bankruptcy. You are prohibited from using credit while in bankruptcy without seeking prior permission of the court. Remember, bankruptcy provides a fresh start. It discharges or eliminates the past credit history. After your discharge, you have the opportunity to form a new credit future.
When in doubt, speak with an experienced bankruptcy attorney who can guide you through the process and explain what must be listed on your bankruptcy petition.
Are you having difficulty making your monthly credit card payments? Do you have overwhelming medical bills that just continue to pile up? Do you have some equity in your home and think that’s the answer to make it all go away?
It might be, but it also may not be the best idea.
Mortgage interest rates are at historic lows and they’re likely to remain low for a while longer. Refinancing to pay off consumer debt at a lower interest rate seems attractive right? It may be a good option to tackle your debt problems, but there are a few things you should consider before taking the plunge.
Conversion of Unsecured Debt to Secured Debt
Your mortgage and a home equity loan are secured debts. When the bank lent you the money to purchase your home, you pledged the real estate as collateral for the loan. Same holds true with home equity loans and home equity lines of credit, you pledge the equity or value in your home to secure the money you seek from the bank. Most consumer debts and credit cards are unsecured debts, meaning the bank lent you money or extended you credit to make a purchase upon your promise to repay them over the course of time. Refinancing to pay off debt is not necessarily a bad thing, but it is important to understand the ramifications in the event of a default. What does that mean? If you are unable to repay the money loaned, the bank can foreclose and you could risk losing your home.
Paying Debt with Debt
Refinancing to pay off consumer debt won’t break the debt cycle. Not only are you converting an unsecured debt obligation into a secured debt obligation and increasing the risk of loss upon default, but it may not solve the underlying issue. Yes, refinancing may lower the effective interest rate and save money on payments going forward. Given the consumer debt load, it might make a whole lot of sense if the payment after refinancing is affordable and sustainable moving forward. However, it is important to be mindful of consumer credit usage going forward. Your house is not an ATM machine. If you continue to incur new consumer debts and look to refinancing to pay off those debt obligations, at some point, there will be no equity left in your home. At that point where do you turn and what do you do?
Determine Your Break Even Point
How long do you plan to live in your current home? How many months or years will it take for you to break even on the refinance? A simple search for a “mortgage refinancing calculator” will provide you with online tools to help you make these determinations. If you are looking to sell your home in the near future, now may not be the time to refinance.
While mortgage refinancing may offer an alternative to the bankruptcy process, it’s not always the case.
When are times where I should file bankruptcy instead?
If your debts are predominantly credit cards and you have limited equity in your home, you may be eligible to file a Chapter 7 bankruptcy to eliminate your credit card debt and preserve the equity in your home.
If you have consumer debts and are already struggling with your mortgage payment, bankruptcy coupled with the loss mitigation process may offer some relief.
Under a bankruptcy repayment plan, you only pay what you can afford, which may allow you to reduce the amount you pay to your creditors.
There is no one size fits all solution. Each case is different and must be tailored accordingly.