Bankruptcy Reader

Emergencies are something you cannot predict and but you can always be prepared to some extent. You need at least three months of savings in case of emergencies. But why are we talking emergencies when we should be dealing with bankruptcy? Because contrary to popular belief, it is not only spendaholics who run the risk of going bankrupt. If you belong to a regular American family, chances are your earnings just suffice to pay for your monthly expenditure and your savings are almost negligible. So in the event of an unexpected emergency, you could be one of the first people who will fall down the debt precipice and could soon be facing bankruptcy.

Unfortunately, tragedies will continue to be a part of our lives and we honestly cannot expect life to be one long stretch of sunny weather. Although nothing can replace the pain and sorrow felt due to a casualty, by taking advantage of pre-catastrophe planning efforts like, savings accounts and post-catastrophe benefits, like tax deductions, you may be able to recover some of your financial losses.

You’ve heard this many times before but if it hasn’t struck you as an important piece of advice, let me strike it in again — SAVE, SAVE, SAVE. I know it isn’t easy to save when you don’t have enough to pay off your numerous loans. But don’t make that an excuse. Let’s be real, even those bringing in 6 figures or more find themselves also living without any type of savings. Have you ever wondered why? Mainly because we don’t take stock of our daily expenses. This will help you know if there are any unnecessary expenses. Cull them out and reallocate the money to other, important avenues. Once you begin doing this, you’ll see how the money accumulates. Still not satisfied? Well, I’ll get into the nitty-gritties of saving in my next piece. Until then, think about how you can protect yourself. 

Falling into a debt trap is one of the easiest things for most of us. Have you ever thought why it is so? If you ask me, I think the main reason is the fact that there is a lot of money to go around. Easy credit available all round the clock everywhere is allowing people to take money from multiple creditors. The result? It begins with a difficulty to repay the creditors, then slowly you enter into a loop — borrow money from one creditor to repay the other creditors. And finally, there’s bankruptcy.

The picture need not be so bleak. If you are finding it difficult to repay your debts, try debt management. Simply put, debt management is a process, which allows you to slowly reduce and eventually eliminate all your outstanding debts. For this, your assets need to be carefully managed and there has to be regular and proper dealing with your creditors. Focus on clearing the debts first. Reduce the debts in a manner that is most convenient to you. This means you don’t need to sacrifice too much of your regular expenditures but only need to be more careful.

I know this news doesn’t relate to the US scene but I have been following the Yukos story for quite a few years and it is only fair that we give this once huge oil company its due by letting it have its final run in the sun. The company’s creditors recently voted for the stricken Russian oil firm to be declared bankrupt and rejected a plan proposed by its owners to prevent its demise. Reuters.com reports:

"It’s deader than a doornail. There’s going to be nothing left. It’s going to be sold in pieces," said Eric Kraus, a fund manager at Moscow-based Nikitsky Russia Fund.

Read more: YUKOS close to death as creditors choose bankruptcy

Are large corporations using bankruptcy as a tool to cheat workers and cut down on costs? At least that’s what the Soldiers of Solidarity and activist group that is trying to highlight the problems of the workforce. Mlive.com reports:

Members of the activist group say large corporations, such as Delphi Corp., feel encouraged because of the "success of the bankruptcy." Their new goal is to stop companies from using bankruptcy as a tool to cheat workers and cut down on costs, they said.

Read more: Bankruptcy an attack on workers — group

Visa and MasterCard are feeling the heat and how! They were on a roll until now as an increasing number of consumers resorted to plastic to beat the rise in costs. As gasoline rates increase, more customers are opting to use their credit cards to pay. So, what could be the problem?

Well, retailers are not too happy with how events are shaping up. They have gone to the extreme of asking Congress to step in and control certain procedures in credit card companies. Their main grouse relates to how much and in what way credit-card companies and issuing banks charge retailers for processing transactions. Retailers are asking for more regulation on interchange rates — the fee charged to retailers for processing a credit-card transaction. Washingtontimes.com reports:

Visa this week announced that it would make interchange rate factors available to participating retailers online, but only to those that sign a non-disclosure agreement.

Read more: Retailers seek fee rules for credit cards

Anybody who’s been through it will vouch for the fact that bankruptcy is the worst thing that could happen in your financial life. Of course, your debts do get wiped off but it is not so easy to wipe your credit report clean. Suntimes.com reports:

Bankruptcy is the worst thing to have on your credit report — and it will stay there for seven years! Now you have to look forward. If you still have one credit card in your name, use it wisely.

Read more: Credit history doesn’t end with bankruptcy

Guess what’s the latest on the bankruptcy front: Congress thinks you are not paying enough and now wants to increase the fees for filing bankruptcy. One more fee hike will only block many people, who have suffered genuine financial misfortune, from filing bankruptcy. Our legislators want to raise the fee for filing Chapter 7 bankruptcy by $40, to $439. I’m sure most of you are now wondering what these guys want to do with this extra money. Believe it or not, they want to better compensate Chapter 7 trustees, who are appointed by the court to investigate the filers’ assets, meet with and pay creditors, and oversee bankruptcy sales.

So probably, these trustees are underpaid for the kind of work they have to do. But does that mean you have the freedom to loot money from people who already don’t have enough of it? I mean most people wouldn’t grudge the trustees earning a little more but does this extra burden have to be shouldered by the poor debtor — a person who is already in a financial mess and needs all the help s/he can get to get out and move on.

If you’ve recently purchased a home and are contemplating bankruptcy, what can you file for — Chapter 7 or Chapter 13? Past a certain point, your only bankruptcy option will be a Chapter 13 bankruptcy, which calls for a repayment plan. Bankrate.com reports:

The logic is that once you have the house, it might be worth it to eliminate all the credit cards and start fresh. Granted, this is taking advantage of the bankruptcy laws and will undoubtedly upset your creditors (and anyone who believes you should not own a home if you cannot pay your other debt).

Read more: Buying a home, then filing bankruptcy

If you are a self-employed person, then you very well realize the importance of credit– it helps you get your business started, and also to expand it. But taking loans means there is a repayment factor and sometimes, the numerous loans are not easy to tackle. In the past year, consumer credit, or non-mortgage loans to individuals rose $4.4 billion, or 2.5 percent at an annual rate, to $2.174 trillion. While these figures may seem just that — figures — they hide the story of a growing number of people who are deep in debt and find it difficult to repay their loans. When your loans become larger than your repayment capacity, it could create a dangerous situation for any business because as every small businessman knows, cashflow problems have sounded the death knell for many a small business.

Some simple methods of improving cashflow include meeting your own debtors. If you need to repay your creditors, your debtors must pay you first. Meet people who are using your services on credit. Discuss with them modes of repayment, including installments and deadlines. This exercise will also help you weed out the bad debts. It will also give you an idea of how much of your finances you can expect to get back.

One very important thing is to keep paying for services like utility bills, water rates, rent. This will help you convince your creditors that you mean business and that you plan to honor your debts and repay all the loans. And if necessary, go in for some expert help and, possibly, even counseling. Some of the better-known counseling services include the ones offered by the Consumer Credit Counseling Service, Business Debtline, and The Bankruptcy Association.

Is middle-class America’s growing bankruptcy linked with its growing bankruptcy in areas of spirituality, morality, and education? Mike Rogers, in his article “America is Bankrupt” certainly thinks so:

Intelligent discussion on American TV and radio has now taken a back seat to a sort of childish one-upmanship. It’s no longer a question of who can thrust and parry their opponent into a corner through the use of beautiful English phrasing and logic; it’s now a question of who can belittle the other with snappy (but rude) one-liners.

Is it true that our changing mentality is affecting us financially? Have our values deteriorated to the point where we feel that using (or abusing) drugs and alcohol is a normal part of growing up or even long-term living?

I remember reading an American student-tourist’s memoirs where he mentioned how he was “rich” compared to the people of the third world countries he was touring. I nearly laughed out loud, and wanted to ask him, “If you are so rich, how come you are living in a cheap, dingy hotel instead of a 5 star, or even a decent clean hotel?” Our kids are working hard on part-time jobs so that they can then blow this hard-earned money on cheap drugs in third world countries. Talk about values!

I do not understand the mentality of the likes of Kevin Federline who borrows (takes) money from his wife so that he can take his friends to Las Vegas and have fun, while his wife looks after the newborn. Even more weird is Britney Spears who lets him do this. Whose values have gone for a toss? The husband’s, who feels it is perfectly acceptable to blow his wife’s hard-earned money with friends while she nurses the baby? Or the wife’s who married such a weirdo, and then thinks his behavior is acceptable/normal? Where are we heading?

(more…)