Archive for the ‘Post-Bankruptcy Debtor Education’ Category

When a dear family member dies, the last thing you want to think about is money – unfortunately, financial problems arise sometimes.

Besides funeral and burial costs, you may be forced to deal with the unpleasant question of financial obligations your loved one left unpaid.

Here’s what you need to know.

Protection from the Fair Trade Commission

The law that protects you from a family member’s debts is called the Fair Debt Collection Practices Act and is enforced by the FTC, a government consumer protection agency. Basically, the law outlines the following terms.

  • Who’s responsible for debts after death? In most cases, payment of any debts comes from the deceased’s estate. If money from the estate is insufficient to cover debts, they usually remain unpaid.
  • Is there a legal obligation to pay remaining debts? Most relatives are not legally required to pay debts. You may be obligated to cover debts left by a spouse; however, responsibility is often limited by state law. A bankruptcy lawyer in your state may help you learn more about state law and debt.
  • What should I do if debt collectors try to make me pay? First of all, don’t give out any of your personal information (SSN, bank account numbers, etc.). Some con artists stalk the obituaries and pose as debt collectors as a way to steal identities and money. Instead, direct the collector to the deceased’s representative (an executor of a will or an administrator).
  • Can I ignore debt collectors who contact me about debts? Technically, you can. But if you’re representing the deceased or otherwise responsible for his debts, you may want to negotiate with the collector to see if you can work out an arrangement.
  • How can I stop a creditor from contacting me? Write a letter to the collector asking her to stop attempting to collect the debt. Copy the letter and send it by certified mail so you’ll get a receipt when it arrives. After the creditor has received your letter, she can only contact you for two reasons: to announce a specific action (like a lawsuit) or to announce the end of collection attempts.
  • Can creditors tell others about a relative’s debt? Unless the creditor needs contact information for the representative of the deceased, he is generally prohibited from telling anyone besides a spouse, parent or guardian.

Learn more about filing bankruptcy and stopping creditor harassment.

Finally, some real help for the financially distressed in California.

Suite Solutions is offering $30,000 in college scholarships to the children of parents who filed for bankruptcy in California.

That's some serious cash for higher ed for some families that could seriously use it.

Suite Solutions is focusing on California, a state that has had more than its share of financial struggle.

Three finalists will receive $5,000 each and 15 more students will get $1,000.

Qualifications for the bankruptcy scholarship are:

  • Child whose parents filed for bankruptcy in California
  • Southern California resident.
  • High school senior graduating in the spring of 2009 or current undergraduate college student enrolled for the upcoming fall semester at a two-year or four-year accredited college.
  • Student who demonstrates participation in his/her school or community through academic achievement, participation in extracurricular activities and/or community service.

If you meet the above, you can apply by visiting http://www.suitesolutions.info/scholarship.asp.

This is a great opportunity for some folks that could use a little help, and just another reminder that, for many people, bankruptcy isn't the end. It can be a fresh start for many.

Learn more about filing bankruptcy.

If you’re trying to build or rebuild your credit after bankruptcy, you probably know that using credit responsibly is your primary goal.

Here’s how to set yourself up for success in borrowing.

Choose Affordable Payments: Before signing loan papers or credit card agreements, you’ll need to do a four-part math problem:

  1. Check your budget. Determine exactly how much money you have left over each month (no generalizing!).
  2. Calculate monthly payments for your loan. Again, make sure you know exactly what you can expect from the life of your loan – no assuming, no generalizing.
  3. Compare the two numbers. If your leftover money is less than the monthly payments, you cannot afford the loan. Assuming you’ll get a raise or a bonus is dangerous, especially in this economy.
  4. Leave a cushion. Remember: part of financial stability is saving money for unexpected emergencies, so if you’d have to spend all your income to cover the loan, you can’t afford it.

Beware of Hidden Costs: Make sure you read the entirety of a loan or credit card agreement before signing it.

If you’re not comfortable interpreting legalese, enlist the help of a bankruptcy attorney. Be on the lookout for the following.

  • Fees & costs associated with the account. Yearly charges, overdraft charges, late charges, early payment charges and others add up quickly and can cost more than you realize.
  • Fluctuating interest rates. Credit card issuers are infamous for advertising low interest rates, but not the fact that many such rates last for only a short period. Make sure you understand what events could lead to your paying more in interest (missed payments, going over your limit, etc.).

Avoid Common Predatory Practices: Unfortunately, some lenders will count on your ignorance about lending practices to trick you into paying more than you should.

Watch out for common schemes like the bait and switch, equity stripping, loan packing and loan flipping.

Bottom Line: There’s No Rush

Many people are eager to reestablish credit after a bankruptcy filing, but don’t let this drive to improve your finances lead to poor borrowing decisions.

Right after filing bankruptcy, you can expect to pay a bit more in interest rates and to qualify for lower loan amounts.

But, if the offers you receive seem too expensive, wait a while.

With a year or so of strong credit practices under your belt, you should be able to get more affordable loans – and improve your chances of improving your credit and staying debt-free.

Saturday, June 6th, 2009

Saving Money — Are You Doing it Right?

Whether you’re recovering from filing bankruptcy or just trying to save money like the rest of us, you’re probably familiar with basic budgeting techniques: know what you make, examine how you spend your money, spend less than you earn, etc.

But are you doing it right?

Examine these tested money-saving tips:

  • Know the sellers’ tricks. If you’ve ever experienced that rush of excitement when you see a really good sale price or thrilling new item you didn’t know about, you’ve made a retailer somewhere proud. We all love the feeling of “discovering” a good buy, but keep in mind that vendors want to sell to you. Tricks like rearranging merchandise often to create a sense of urgency and creating hype around a sale are classic. Don’t let the artificial thrill of limited-time offers trick you into making purchases you otherwise wouldn’t.
  • Save first, then spend. Studies have found that people tend to part with “found money” more quickly than hard-earned dollars. So next time you get a check from Gramps or find a ten in the pocket of last winter’s coat, put it in the bank for a while. It seems that after such money has spent time in a savings accounts, we tend to be less willing to part with it.
  • Don’t ignore the big picture. Hopefully, you’re diligent about comparing per-unit prices at the grocery store, buying generic when possible and taking advantage of sales on necessities to pinch pennies. But are you as careful with bigger-ticket items? Make sure you’re crunching the numbers each time you plan to make a major purchase like a new appliance, a family vacation or a car. And keep in mind that the up-front cost is only one aspect: consider likelihood of repairs, repair costs, maintenance/energy costs, etc.
  • Shop with cash. It’s not surprising to learn that people tend to spend more money when no cash leaves their wallets – in other words, we drop more money when we shop with plastic. So use cash to limit yourself: decide what your budget is for a shopping trip and leave your credit cards at home. Even minor impulse buys can add up over time.
  • Compare prices wisely. A study of consumer behavior found that when deciding between choices of varying prices, we tend to practice what’s called “extremeness aversion.” If you see a really high-priced item and a really low-priced item, you’ll tend to go with the one in the middle. Call it the Goldilocks Effect. You can avoid this by researching what you want to buy ahead of time, deciding on features and a price range that suits you and sticking with that when you shop.

Wednesday, May 27th, 2009

Thrifty Tips Now Hip as Recession Lingers

In some aspects, it could be considered a great time for folks who are filing bankruptcy: with the economy in the worst recession in recent memory, it’s suddenly cool to be thrifty .

Here’s a look at some traditional post-bankruptcy wisdom that’s seeing new life in the down economy.

Post-Bankruptcy Move #1: Cut back on spending
The fresh financial start bankruptcy can offer is great, but it only really works if you’re able to maintain your debt-free status.

Those recently out of bankruptcy have always been encouraged to shop with detailed lists (and stick to them!), switch to generic brands, carpool, buy secondhand clothes and the like to save money.

Recession Twist: Swap, barter or share to get stuff free (or cheaper).
These days, it seems everybody is looking to cut costs. It’s no wonder, then, that sites like Meetup.com, Swaptree.com and Paperbackswap.com are springing up to help bargain-minded Americans trade their old stuff and save.

And some especially resourceful individuals are chipping in for costly items and sharing them.

Post-Bankruptcy Move #2: Design and stick to a budget
As you get your finances back in order, it’s important to have a plan for where your money needs to go each month. And, while the word budget may have been a "dirty" word once upon a time, these days it’s a must-have.

Recession Twist: Look outside your comfort zone for terrific deals.
Maybe you don’t have money to travel like you used to (and “staycations” are so 2008), but summer on a budget doesn’t have to mean three months of boredom.

Check out events that you might not normally consider attending: movie nights at the local library, amateur music at outdoor parks, even special deals on hotels in your area.

Bargains are everywhere (one benefit of a recession) – take advantage of the price cuts businesses are offering to stretch your budget to its limits.

Post-Bankruptcy Move #3: Develop savings strategies
A savings cushion could mean the difference between swimming and sinking when a financial disaster hits. In your post-bankruptcy life, it’s crucial to make regular, consistent savings a key part of your cash management.

Recession Twist: Get the whole family involved.
As a nation, we’re saving significantly more money now than we did a year ago (nearly five percent of income in ’09 compared to almost nothing in 2008). Take this opportunity to teach your kids about the importance of savings – help them start bank accounts, savings jars, piggy banks, etc.

And make savings an important part of your family’s life – set goals for yourselves (vacation, pizza night) and work together to reach them.

Bottom Line: Make the Most of It

The recession’s got plenty of negative features, but you don’t have to dwell on them. Take advantage of all the benefits it can offer you!

When you receive your bankruptcy discharge, you are legally excused from responsibility for any debts that have been discharged.

Unfortunately, some unscrupulous creditors count on people filing bankruptcy not knowing how far their protection extends and attempt to collect on debts after the court has excused them.

Don’t Pay What You Don’t Owe

The fresh start granted to you by the court protects you from the following.

  • Mail contact from creditors: Letters indicating that payment is due are prohibited; if you receive any, show them to your attorney.
  • Phone calls from creditors: Again, you have no obligation to pay discharged debts. Contact from creditors asking you to do so is forbidden. Record the time and date of any such calls.
  • Lawsuits from creditors: Because you no longer owe money on discharged debts, creditors have no legal recourse to collect them.
  • Failure to update your credit report: Creditors that threaten to continue reporting a discharged debt as unpaid to scare you into paying it are breaking the law. Be sure to check your credit report for accuracy and note any wrong information you see.

Why Creditors Attempt Collection

Put simply, creditors stand to make money by attempting to collect on debts you don’t owe.

If you pay them, they get cash they otherwise wouldn’t have.

In some cases, the people or groups attempting to collect aren’t even your original creditors! Here’s why:

  • Say you owed one credit card company $1,000, but the debt was discharged in bankruptcy. You now owe the company $0, which is how much they can legally collect from you.
  • A third party collector may offer to buy your debt from the credit card company for, say, $10 for the privilege of “owning” the discharged debt. The credit card company may agree, since $10 is more than $0, so they technically make a profit.
  • The collector can then hound you about paying the debt, even though you no longer have any legal obligation to do so. If you end up paying, they make $990. If not, they only lose $10.
  • Because enough bankruptcy filers are unaware that they don’t have to pay these debts (or feel somehow guilty about not having paid them), many pay. This makes the illegal debt collection profitable even when some people refuse to pay.

Contact a Bankruptcy Lawyer

If any of your creditors tries to collect on this “zombie debt,” you have the right to contact a bankruptcy lawyer.

You have rights and can take action to protect them – that’s what the fresh start is all about!

Credit traps are dangerous to everyone, but they can be especially damaging to those trying to rebuild credit after filing bankruptcy.

As you work your way to financial health, make sure you steer clear of these common post-bankruptcy pitfalls.

  1. Failing to Plan: When you receive your bankruptcy discharge, you’ll likely be debt-free; but that will only last as long as you spend less than you make. It may sound simple, but many people forget that continued financial health depends on continual, conscious planning.

Solution: Make sure you develop a budget and stick with it.

  1. Slipping into Old Habits: If you’re like most Americans, you needed bankruptcy protection because some crisis (like divorce, death, layoff, injury or a lawsuit) pushed you over the edge; but you may have also had financial habits that left you unable to weather a storm: over-reliance on credit cards, use of payday loans, having little or no savings, etc. After bankruptcy, it’s more important than ever to avoid such costly sources of credit.

Solution: Take advantage of the tips offered in the financial management course you’ll take during your bankruptcy – they’re designed to help you stay out of debt!

  1. Credit Repair Scams: Solutions that promise to wipe out bad credit, erase your credit history or achieve any other feat that seems too good to be true should be avoided. There’s no quick way to improve your credit and most offers of this type will likely cost you money and hurt your credit.

Solution: Take the slow-and-steady route to better credit: pay off your bills every month, don’t open more credit cards than you need and stick with your budget. Over the course of a couple years, you should see your credit improve.

  1. Picking the Wrong Plastic: As you rebuild your credit, you’ll want to open a credit card account. But be wary of the offers you receive in the mail. Your post-bankruptcy status may mean you’ll have to pay higher interest rates or fees than a borrower with stronger credit, but don’t settle for shoddy terms. Know which credit cards to avoid.

Solution: Consult with your bankruptcy lawyer if you’re not sure about the terms of a credit card agreement and consider visiting a site like bestcreditcards.com to see the variety of options available to you.

With some planning, discipline and perseverance, YOU CAN rebuild your credit after filing bankruptcy.

Wednesday, March 25th, 2009

Starting a Savings Plan

Whether you’re recovering from bankruptcy or just trying to improve your finances, saving money is essential.

How to Save Money

The secret to saving is to do it little by little. This isn’t winning the lottery, but over the years, the small amounts you sock away will accumulate.

Forced savings: If you don’t think you can resist spending what you earn, consider a plan that forces you to save. Many employers offer retirement accounts that automatically deduct money each month from your paycheck. Or, if you have a mortgage, you’re building equity in the home with every payment – another type of savings.

Mini-savings: Even saving toward specific goals can save you money. Consider opening a savings account strictly for purchases – a new car, a stereo, etc. Rather than paying interest on a loan, you can make a purchase when you have enough money in your account for a one-time payment.

Gradual savings: If you’re like most Americans, you don’t have much money left over after each paycheck to stash away. But that shouldn’t keep you from hanging on to whatever you have. Even 20 dollars a month will accumulate with help from compound interest.

Why Save? Think About It.

The safety net. If you’re hit by job loss, reduced income, divorce, injury or a natural disaster, you’ll likely have unexpected expenses.

Many people who file for bankruptcy do so because some surprise cost overwhelmed them financially. A savings account can help you in a crisis.

The money-saver. As you know, if you’ve ever taken out a loan to buy something (home, car, etc.), interest payments add up quickly. If you have enough money saved to pay sticker price with no help from a lender, though, you’ll save money in the long run.

Even if you have only enough savings to make a larger down payment, you can keep interest costs lower.

The money-earner. The beauty of savings accounts is compound interest: when you put money in a savings account, you earn interest on the principal amount (whatever you initially deposits) plus whatever interest your account earns.

So, the longer you let your savings account sit, the more money it earns you, and you don’t have to lift a finger.

Friday, March 20th, 2009

Chapter 7 Bankruptcy: The Process

After you’ve met with your bankruptcy lawyer and decided to file for Chapter 7 bankruptcy, here’s what you can expect from before you file until you after you receive your discharge.

The credit counseling briefing: Before filing your petition with the bankruptcy court, you must complete this briefing, which acts as a filter: anyone who could benefit from credit counseling, debt negotiation or another bankruptcy alternative is discouraged from filing bankruptcy.

The automatic stay: Once your lawyer has filed your certificate from the briefing with your petition for bankruptcy, the automatic stay takes effect. It protects you from all collection action and lasts for the duration of your case.

The next six months: Your bankruptcy case will likely last about six months, during which time, you can expect the following:

  • Meeting of the creditors: You’ll testify in front of all the people to whom you owe money that the information in your petition is complete and accurate.
  • Liquidation sale: If your bankruptcy trustee determines that you have any non-exempt assets, he or she can sell them to raise money to pay your creditors. In many Chapter 7 cases, filers do not have any non-exempt assets.
  • Reaffirmation of debts: If you have any non-exempt assets you’d like to keep, you’ll have a chance to reaffirm (renew) your debt with the lender – basically, you’ll agree to keep making payments so you can keep whatever property you don’t want to give up.

The financial management course: Before you’re eligible for your Chapter 7 discharge, you must complete a financial management (also known as “debtor education”) course. The course is designed to help you make the most of your fresh financial start and includes tips on saving, managing money and handling credit.

The bankruptcy discharge: The court will determine which of your debts can be forgiven, and will relieve you of your responsibility to pay those debts. After you receive your discharge, you’re technically out of bankruptcy.

The Next Eight Years

You cannot file for Chapter 7 bankruptcy again for the next eight years.

Bankruptcy’s fresh start is intended to be a long-term solution, not an occasional boost. Take the lessons of the financial management course to heart – and good luck!

An editorial in the New York Times applauds Congress for finally trying to rein in predatory credit practices. Congress says it will tackle credit card company policies that many consumers don’t know about.

Especially after a bankruptcy, consumers need to understand the fine print in their credit card agreements. Post-bankruptcy debtor education can teach you how to protect yourself while Congress tries to stamp out these credit company tricks.

The Times editorial points out some common credit tricks: Skyrocketing interest rates due to a late payment on not just your credit card bill, but any bill, even your utility bill; and marketing vast amounts of revolving credit to teenagers entering college.

Other tricks that need be addressed include interest rates for payday loans averaging three to five hundred percent. Bills in Congress may cap payday interest rates for military personnel, but why shouldn’t everyone be protected from these immoral deals?