Bankruptcy Reader

Getting your bankruptcy insurance depends heavily on whether you work in a public or non-public corporation. It is assumed that many employers and employees will be looking into bankruptcy insurance as a means of protecting non-qualified deferred compensation plan benefits. If as an employee you wish to secure non-qualified deferred compensation plan benefits, bankruptcy insurance company is the place to head for.   

But there is a rider i.e. your boss’s willingness for your policy. In case of public corporation, the bankruptcy insurance company decides the price the policy based on readily available public information but in case of non-publicly traded corporation, a customer needs to get the financial statements of the company from your employer to furnish the same to the insurance company. Employees will have to counter the willingness of their bosses for company’s participation in furnishing financial information. As the IRS made it very clear in its private letter ruling that an employer may not have any involvement or participation in an employee’s purchase of a bankruptcy insurance policy…the chances rely on company boss. So please you boss!

The concerns are always high and the rush of blood reaches pinnacle when you think to be approaching bankruptcy-related matters. With the new bankruptcy law making its presence felt, you should identify whether there is need for filing bankruptcy or things could be turned around in your favor otherwise. How? Consider this.

Prior to filing for bankruptcy under either Chapter 7 or Chapter 13, you should have gone through credit counseling with an agency approved by the United States Trustee’s office. The purpose is to get an idea where the need is potent enough or whether an informal repayment plan will do the trick.

Although, counseling doesn’t bind you but if agency proposes a repayment plan, you have to submit the same to court with certificate(s) before you can file for bankruptcy. Once the bankruptcy case ends, you go through another round of counseling session to learn personal financial management. And after submission of proof to the court about requirement fulfillment you get a bankruptcy discharge.

In a debt trap and cannot see any way out of it? Don’t worry you are not alone. Contrary to popular belief, it is not only spendthrifts that get caught in the debt vice. Common folks like yourself can also make the mistake of taking more than what you can repay. It doesn’t happen at one go. When you take a loan initially, it is with the knowledge that you can repay it. But over time as the number of loans increase, you will find that you are in no position to repay the money. There is no point in feeling frustrated and confused. It doesn’t help you repay your debts. What will help are these few tips, that if used correctly, can help you get out of the trap.

The first thing you need to do is create a budget for yourself. Add all your income, payments, expenses and everything else that involves money. This will help you check wastage. In case you are not too good at creating a budget, you can use BudgetMap or Myelopes Personal

When a person who’s just filed for bankruptcy begins to get credit cards by the dozens, there’s definitely cause for worry. As increasing numbers of people fall into irreversible debt traps and file for bankruptcy, a disturbing trend is emerging. There are more companies that now want them as customers. From Citibank to MasterCard, all of them have propositioned the newly bankrupt. So what is it that draws the banks to these cash-strapped people?

An open secret in the financial community — these newly available customers are charged some of the highest interest rates — some banks charge nearly 20% and more as interest rates. Also, the new bankruptcy law makes it harder for debtors to free themselves from the yoke of credit card debt. Once you have filed for bankruptcy, you have to wait a good eight years before you can liquidate new debts through bankruptcy again.

These two points make newly bankrupt people a great source of revenue for banks. The old debts are all cleared now and any new debts will have to be paid back for at least 8 years! And the worst part? Under the new law many of those who file for bankruptcy again, have to pay their previous credit card bills — bills that may have been excused under the old law.

But bankers beg to differ. They believe that by providing the newly bankrupt with credit cards, the banks are offering them a chance to start anew, afresh. But the argument sounds flimsy when faced with the ire of consumer groups who believe that this will only create a continuous and irreversible debt loop for millions of Americans.

A low credit score would seem to be a strong hint that you should be filing for bankruptcy soon, but is not always a good gauge. According to experts, consumers who file bankruptcy can have very different credit histories with a wide range of FICO risk scores at the time they file. And they can be affected in very different ways. Bankrate.com reports:

Attorneys say that if you do have to file bankruptcy, preparation and timing are extremely important, especially with the new provisions in the law such as the Chapter 7 bankruptcy "means test," which determines a consumer’s disposable income.

Read more: Bankruptcy timeline: Pre-bankruptcy

Tired of looking for places to hide everytime your telephone rings? You know it’s one of your creditors calling to try to collect a payment that you don’t have. If this scenario sounds familiar, it is possibly time to check your options. However, be warned, many people have complained that after seeking help from credit counselors, they found themselves worse off.

Last year, 1,286 complaints were filed with the watchdog U.S. Better Business Bureau against credit and debt counselors. A few months back, IRS audits revealed that some of the nation’s largest edcuational credit counseling services existed mainly to prey on debt-ridden customers. To stop this exploitation, the IRS has canceled the tax-exempt status that it granted these services. Zwire.com reports:

IRS Commissioner Mark Everson said organizations looking to make a profit take advantage of consumers by securing tax-exempt status and making cold calls to people in desperate financial straits. They use scare tactics to sell the people "cookie-cutter" debt management plans that often are not geared toward reducing the consumer’s debt, and are too costly to pay.

Read more: Cracking down on credit counselors

The new bankruptcy law, which took effect in October last, was designed to make it more difficult for people to write off their debts under Chapter 7 bankruptcy. And for the first time, the new law mandated that anyone filing for bankruptcy would have to compulsorily go through credit counseling to consider alternatives before filing — but the moot question is; does this solution work? Orlandosentinel.com reports:

Steve Bartlett, president of an industry association called the Financial Services Roundtable, supports the law but says it’s flawed. "Early on, most of the pre-bankruptcy counseling is not especially useful because it’s only occurring for people right before they go into bankruptcy," Bartlett said. "The flaw is that the bankruptcy counseling is only occurring at the end of the process when you have little option."

Read more: Bankruptcy law put to the test

If you are parent to a teen, then you know what it means to have an outgo that is much larger than your income. Well, you really cannot blame your teen for all your expenses, but fact is, those ‘wonder years’ of your children do leave a dent on your purse. According to reports, teens spent around $160 billion last year. By the time a student enters freshman year of college, his/her average debt on a personal credit card is about $1,500. So how do you help them get over their have-now-pay-later attitude? You can either hope they grow out of it OR you can do something about it before your child drowns in debt. You can try a couple of these tips to help your youngster get back on track:

• Teach them that money matters: Financial education seems to be passé today and most schools don’t bother with imparting it. So that means, the onus lies on you to tell your child that every dollar s/he spends has to be accounted for. Help them create a budget and learn to control their spending to remain within their means.
• Supervise: It’s not enough to teach them to budget; you must also keep a watchful eye and ensure that they spend within their means. This is especially true if your child holds a part-time job and has control over his own money. If they earn a decent sum, you could even open a joint account with them and encourage them to save their money.
• Be a role model: You can lecture them until you are hoarse or you can lead by example. Agreed that debt is an integral part of life today and you cannot escape it. But the least you can do is try to stay out of debt as far as you possibly can. If you show your teen that money matters to you and that you are scrupulous with it, chances are, they will catch on fast.

If you are the parent of a teenager, here are some statistics you should worry about: one out of every 10 teens uses a credit card. By the time a student enters freshman year of college, their average debt on a personal credit card is about $1,500. No parent wants to see her child drowning in debt — let alone filing for bankruptcy protection, so you probably need to begin financial education pronto. Msnbc.msn.com reports:

At the very, very least, you need to be a role model. Americans, as a whole, carry about $800 billion in credit card debt. And many are not taking advantage of 401(k)s to save for retirement. If you don’t want your children to fall into the debt trap, set a good example for them. The truth is that parents who are bad with money usually have kids who are bad with money.

Read more: 5 tips to stop your teen from going into debt

Casino gambling and bankruptcy go hand in hand in Indiana. It is now almost ten years after the first gambling boat set sail in Indiana, and the effects are there for all to see. Indiana led the nation in the number of personal bankruptcies filed in 2005, with 11 of every 1,000 people filing being from Indiana. And anybody who wishes to verify the veracity of these claims just has to check the U.S. Bankruptcy Court statistics. As per these figures, the bankruptcy rate more than doubled in Indiana since 1996 — the year the first boats set sail.

Of course, detractors can always claim that bankruptcies have been on the increase nationally since the early 1980s. According to researchers, most of the increase happened after the bankruptcy laws were loosened in the 1970s. This combined with the rise of the credit card made it almost ‘impossible’ for people to not fall in debt. Post-trib.com reports:

Ohio, which has often joined Indiana in leading the nation in bankruptcy filings over the decade, saw an even bigger leap in the past decade from only a 2.8 percent rise in bankruptcies from 1980 to 1995 to a 12 percent jump from 1996 to 2004. The closest casino to Ohio is just across the river from Cincinnati in Lawrenceburg.

Interested? Read more