Bankruptcy Reader

If your financial situation is in such a bad shape that nothing short of filing for bankruptcy will help solve your problems, then you better not take too much time deciding to do it. One of the biggest mistakes people make is to defer the decision to file for bankruptcy. According to bankruptcy experts, people tend to wait until it is almost always too late to do anything at all and sometimes, people filing for bankruptcy don’t even have enough money to pay for the mandatory counseling sessions.

Then, there are the mistakes that people make prior to filing, which drastically affect their ability to get a "fresh start". The most common such mistake is to use your credit cards. Why so? Well, you were probably unaware of these facts:

• If you incur debts for the purchase of luxury goods and services from a single creditor in excess of $500.00 within 90 days of filing, this debt is nondischargeable and you may have to shell out the money.
• Cash advances of more than $750.00 within 70 days of filing are presumed to be nondischargeable and may be found to be due and owing.

Another very common mistake people make is to repay the debts owed to family members. Remember: when it comes to repaying your debts, family members to whom you owe money are like any other creditors. A bankruptcy trustee can even reclaim any amount repaid to a family member within one year of filing bankruptcy.

Think you can reduce your debt burden and probably not have to file for bankruptcy. Good, so how do you plan to do it? Liquidate your retirement account? Don’t EVER make that mistake. Retirement accounts are generally protected. You can eliminate your debt and keep whatever you have in an ERISA qualified account, free and clear.

There are many more mistakes but the biggest one would be to not tell your attorney the truth. In a worst case scenario, failure to notify your attorney about your assets may even lead to the loss of those assets, denial of your bankruptcy case, fines, or even imprisonment.

The new school year hasn’t brought any cheer to the Oakland Unified School District which is entering its fourth year of state control because of bankruptcy. Administrators claim that the district, which was $50 to $80-million in debt, is almost in the black thanks to some tough decisions. Kcbs.com reports:

Betty Olson-Jones, president of the Oakland Education Association, said teachers would love to see more positive changes. "We would love to see a credentialed classroom teacher in every single room. We would love to see class sizes that aren’t over the contract limit from day one." Which is why the union will be watching the schools carefully this week to hold the district to its promises.

Read more: Oakland District Starts Fourth School Year in Bankruptcy

I am one of the many people who believed the new bankruptcy law to be flawed and honestly thought that it was only a matter of time before things took a turn for the worse. Turns out, I was wrong — at least, that’s what is apparent from these latest statistics. According to reports, U.S. bankruptcy filings have fallen to the lowest level in five years. Chron.com reports:

About 1.5 million personal and business bankruptcies were filed in the year that ended June 30, a 9.3 percent drop from the previous year, according to data released Monday by the Administrative Office of the U.S. Courts.

Read more: Bankruptcy filings fall after tough new law

It’s a sad time for fans of Tower Records’ legendary Sunset Strip store. Tower Records recently filed for bankruptcy for the second time in three years. This move has fueled speculation that the firm might have to liquidate its stock and close the chain, including its legendary Sunset Strip store. In its heyday in the 1970s and early ’80s, the Sunset Tower attracted throngs of music fans.

However, Tower officials have denied plans to close any of its 89 stores — at least for now. The main reason for the bankruptcy bid is the fall in its revenues. Its revenue fell to $430 million for the fiscal year ending July 31 from $476.1 million a year ago. One of the main reasons for the decline is the steady growth of Internet sales and big-box retailers, which are said to have hurt Tower’s market share. Legal digital downloads grew 200 percent in 2005 while album sales fell 7.8 percent. Montereyherald.com reports:

Given its waning popularity, industry observers say, the chain could have a tough time finding a buyer willing to keep its stores operating in an industry increasingly dominated by online music purveyors and big-box retailers.

Read more: Tower Records files for bankruptcy protection

A new study shows that the idea that more than half of all bankruptcies are caused by medical debt is incorrect. Far more common are bankruptcies related to credit card debts. Ncpa.org reports:

Mathur does not find support for the view that medical debts are the leading cause of bankruptcy filings. In fact, households who are most likely to file are those with primarily other forms of debt, such as credit card or car debts, who also incur medical debts.

Read more: MEDICAL BILLS AND BANKRUPTCY FILINGS

Did you know that there are people who take advantage of the bankruptcy provisions? There are some people who may be slow to pay their bills. So, what do they do — transfer their assets into some other person’s name and declare bankruptcy in order to avoid paying their creditors. Businessweek.com reports:

Unfortunately, this kind of scam occurs all too often, and small businesses sometimes end up victimized as a result, experts say. Even when an outfit declares bankruptcy legitimately, smaller companies like yours are typically listed as unsecured creditors and get low priority when it comes to payment of the debt.

Read more: How to Fight Bankruptcy Scams

I know it is pretty odd to talk about ways to control debt when you are contemplating bankruptcy. However, maybe you are not so badly off and a little financial control may help bring you back from the brink. Contrary to popular belief, it is not only spendthrifts that are 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. However, 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.

Your budget will reveal all those seemingly small and inconsequential expenses that are not necessary. Cut them and see how much you save. Another thing you need to cut is credit card purchases. Make it a habit to pay cash. This will limit your expenditure tremendously.

Create a repayment fund and remember to keep some money aside for this fund. It may seem small and inconsequential in the beginning, but it will slowly build to an imposing corpus. Any excess cash should be added to your repayment fund.

Limit unnecessary expenses like entertainment. It may seem difficult but remember, you are not totally eliminating them, and you are just controlling these expenses until you’ve paid off all your creditors.

Create a list of creditors in the order of urgency of repayment. So creditor number 1 should be repaid first. Once you have saved up enough in your repayment fund, pay off your creditors one by one.

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

Filing for bankruptcy is a pretty painful time and I’m sure not everyone will be in the mood to look at it as a new beginning. It is painful but if you look at the brighter side, you may not feel so distraught. In case of a Chapter 7 filing, you can wipe off your entire debt and begin with a clean slate once again. A Chapter 13 helps you structure your debt payments — this will help you get back on your feet and get a fresh start. And the best part — your creditors can no longer harass you with those annoying calls. In short, you need not fear that phone again since the courts notify your creditors and they are ordered to stop attempts at collections once you file for bankruptcy.

In some ways, filing bankruptcy can also work out to be better for your overall credit. Imagine taking 7 to 8 years to pay off your debts! By filing bankruptcy you can get the financial breather that you need to start building your life again. You can create a savings reserve and, slowly apply for new credit. So you see, the glass of milk can be half full instead of half empty, what says??

Anybody who wants to have a home of his/her own knows the importance of maintaining a good credit score. For this you need to pay your bills on time, have a low debt to income ratio, etc. I know all this is easier said than done and bankruptcy is not something you will on yourself. A huge combination of factors is responsible for a person going bankrupt.

But can you give up the dream of a home just because you’ve gone bankrupt? So, if you’ve filed for bankruptcy, how does it affect your chances of getting a reasonable mortgage loan? There are several lenders who are eager to offer home mortgages to individuals with bad credit. These mortgages have a higher interest rate, which increases the monthly payment. Another question that needs answering is how long should you wait before you can buy a home? Hotlib.com reports:

Obtaining a home after filing for bankruptcy is feasible; nonetheless, individuals who have filed must adhere to specific stipulations. To obtain a mortgage after filing a chapter 7 or chapter 13, you must wait at least two years after the bankruptcy is discharged.

Read more: Buying A Home After Bankruptcy - How Long Should You Wait To Buy?