Bankruptcy Reader

And you thought that it was only people who had no control over their money that went bankrupt. Well, those types do exist but there is one more category of people that has begun to declare bankruptcy — those who’ve broken up with their partners. According to recent research, in Scotland, the average age of people going bankrupt has risen to 40 because of couples splitting up. While until recently the average age of people splitting up was around 30, now there seems to be a shift in debt trends.

While much of the debt among people in their early 40s can be attributed to credit card abuse, some of it is associated with the financial pressures imposed by failed relationships. Experts believe that the division of assets among separating couples may have contributed to the debt crisis. Now, it would be interesting to see if this phenomenon repeats itself in America or not. Oh, and by the way if you don’t know where Scotland is, you probably should be looking up a map.

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. 

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

Who doesn’t love the word exemption when it comes to bankruptcy matters? And you should know that there is a certain limit to it and also a time duration clause, which keeps on changing from time to time and year to year. Though, the application of exemption does not come to place when any interest is transferred from a debtor’s previous principal residence.

The value of the exemption, like in case of state owned homestead, is reduced by any addition to the value brought about on account of a disposition of non-exempt property made by the debtor during the 10 years prior to the bankruptcy filing. It is important to note that the court takes into account about debtor’s background; whether he or she has been convicted of an offence or not.  It is checked that filing of a case doesn’t lead to abuse of the provision that come under the Bankruptcy Code. There are also pension plans exempt from seizure and education funds exempt from seizure — something you should look forward to but keep yourself away for offences.

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!

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.

Bad financial planning combined with an unexpected emergency — this is just the right recipe for a person to swirl down the debt abyss. Here’s the story of Jackal Lean — it may sound distinctly familiar… it just may be your story! Nytimes.com reports:

Like so many others I know, I used credit cards to bridge that expanse (often quite broad) between what I made (on average, for many years, less than two grand per month) and what I needed (to cover child care, food, rent, utilities, gas). I also used credit cards to cheer myself up.

Read more: Hooray for Bankruptcy!

While some run up their credit cards on consumer products, others are hit with a medical emergency — whatever the cause, the end result is the same — a severe debt that could lead to bankruptcy. There are several options for reducing and eliminating debt, however you will not eliminate your debt overnight. Bestsyndication.com reports:

On a recent Oprah Winfrey series of shows called The Debt Diet, experts agreed the best approach is to make more and spend less. Don’t get me wrong, I am not saying this is an easy thing to do. Part time jobs or a sideline business were the most common methods given for making extra money. Cutting expenses is just as hard.

Read more: How to Get out of Debt - Debt Consolidation and Ideas - Avoid Bankruptcy and Reduce Payments Using Credit Counseling Agencies

A recent survey by the National Foundation for Credit Counseling (NFCC) found that the biggest reason consumers face bankruptcy is poor money management. And the new bankruptcy law which insists on credit counseling sessions before filing for bankruptcy, has seen filings drop phenomenally since it was introduced. Lsj.com reports:

Nationally, debtors who received prefiling counseling had average debts of $40,673 and an average income of just $31,255, according to a survey by the National Foundation for Credit Counseling, the umbrella organization for Consumer Credit Counseling Services.

Read more: Is bankruptcy reform working? Here’s the difference between the two options