February, 2012

Bankruptcy vs. Insolvency

Many people don’t understand exactly what bankruptcy is, or what it means, due to so many prevalent misconceptions. It shouldn’t really be a big surprise, either, because most people who do file for bankruptcy tend to keep it private because the myth persists that filing for bankruptcy is somehow a bad thing.

Being ‘bankrupt’ has generally meant the same thing as ‘broke’. Which, of course, means that you have no money.

But having no money is entirely relative these days, since so many of us live on borrowed money: credit. How many times have you gotten a paycheck and immediately dumped that paycheck into paying off a credit card, and then lived off of that credit until the next paycheck?

If you’re considering bankruptcy, probably quite a few times.

So when do you decide that you’re broke? Technically you have no money if your money is in the form of credit, but at that point, you can still provide for yourself and live quite well.

Being insolvent is different. Insolvency is when you have more money going out than you have coming in. It means that no matter how much money you have, you’re slowly going to use it all up and are thus unable to ever pay off the debt that you accumulate.

It’s important to realize the distinction, because it’s when you’re insolvent that you need to begin thinking about filing for bankruptcy. You can happily live on credit and be technically broke, but as long as you still have an income that equals or exceeds your expenses, you’ll be fine. However, when you become insolvent, you need to seek help!

Pay Off Your Student Loans with Bankruptcy

Any time there’s a weak economy, there’s a boom in enrollment in higher education. That’s not really surprising, because if you can’t find a job, it makes perfect sense to go back to school so that when the economy picks up, you’re even more qualified for jobs.

But when the economy is slow to recover, that rush to go back to school creates a surplus of people with higher educations. So when things finally do recover, there are far too many people who are overqualified for the available jobs. Then in addition to not being able to find a job, those people are saddled with massive student loan debts.

Student loans are unlike any other kinds of loans because they’re underwritten by the United States government. On one hand, it’s great that the government provides money for people to go to school, but on the other hand, that loan can’t be cleared during a bankruptcy filing. That leaves many people so underwater with debt that they simply can’t ever recover.

However, there is a silver lining to this cloud. While the student loans themselves can’t be dismissed, any other debt that has accumulated can be. This means that any other money that was being spent to pay off other bills can then be put toward paying off the student loan.

It’s not ideal, but it can make all the difference for someone who is struggling to get by. Consider having a consultation with a bankruptcy attorney to explore your options!

The Effects of Bankruptcy on your Retirement

Many people start to get nervous around the time they’re supposed to retire, because they don’t want anything to jeopardize their retirement that they’ve worked hard for, for their entire lives. That’s why people who are about to retire can be extra concerned about filing for bankruptcy.

And who can blame them?

However, the reality of the situation is often different than they’ve built up in their minds, and of course it is. The world has changed a lot just in the last ten years, much less over the last thirty.

Now, bankruptcy is an important weapon in the consumer’s arsenal to help fight for their ability to control their own lives.

First of all, bankruptcy has several built-in protections for retirement. Most retirement funds and Social Security payments are automatically safe, so there’s no worry about not being able to retire.

Second, it’s only rarely that someone has to give up assets like their home or their car. Many exemptions are built into bankruptcy law to allow most people to keep their primary assets.

Most importantly, bankruptcy is no longer a sign of shame or defeat. If you look in the news, it’s easy to find an article about some extremely successful businessperson or company declaring bankruptcy, and history is full of people who have declared bankruptcy and gone on to build another fortune for themselves.

Bankruptcy is just a tool, and what matters is how you use it. So consult with a bankruptcy attorney and protect your retirement today!

The Consequences of Filing for Bankruptcy

Many firms out there who want to convince you to hire them for their services will downplay the consequences of filing for bankruptcy, or assure you that there are no significant consequences.

Unfortunately, that isn’t entirely true, and while the consequences are almost always better than the alternative had you not filed, they’re still worth considering.

For example, you may be told that filing for bankruptcy won’t affect your ability to get a loan, which is false. Bankruptcy will affect your ability to get a loan for several months to several years, depending on how you treat your credit after your filing. Still, even with that, most people have such a low credit rating by the time that they decide to file for bankruptcy that that effect will be almost negligible.

It will also be difficult to secure a mortgage during that time, though again, it likely would have been difficult, anyway.

The real trick to making the most use of filing for bankruptcy is to do it at just the right time so that any consequences that you may have suffered from filing are almost unnoticeable. That way you gain all the benefits with as few consequences as possible.

The only real way to know when bankruptcy is right for you is by consulting with a bankruptcy attorney. A reliable bankruptcy attorney will be straightforward with you about the downsides to filing, and if the timing isn’t right for you, they’ll tell you so!

Stopping Repossessions

We live in a society that focuses on material wealth, and as a result, we become very attached to the things that we own. But some of those things we become attached to because we need them in order to have a decent life, like a car and a home.

When someone threatens to take those things away from us, it’s upsetting because it can really affect our lives. And not just our lives, either, but our emotional wellbeing.

During turbulent times, people need stability in their lives in order to carry on, and having the threat of repossession hanging over your head takes away that safety even in the comfort of your own home.

The anxiety and stress caused by that lack of safety can affect every aspect of your life, and most importantly it can take away all of the joy you have.

If you live in constant fear of collections or repossessions, you should consider filing for bankruptcy. When you file for bankruptcy, the court issues an automatic stay on all types of collections and collection attempts.

That means that during the bankruptcy process, you no longer need to worry about your property. Even after the bankruptcy is over, chances are very good that your debts will either be cleared, or be taken down to a manageable level.

Using a good bankruptcy lawyer is the best way to do that, because the better your advocate during the bankruptcy process, the more rewards you’ll be able to reap!

Bankruptcy Misconceptions

Many misconceptions have been propagated about bankruptcy in both film and television, as well as by word of mouth.

The first mistake is that people look at bankruptcy as some sort of failure, or something to be ashamed of. As if filing for bankruptcy was a public admission of defeat. The fact of the matter is that you can fail all on your own without filing for bankruptcy, and actually taking the step of filing isn’t a sign of failure, but a sign that you’re taking control of your life back and you’re making the first step toward financial recovery.

But there are plenty of other misconceptions, such as that you’ll lose everything. In fact, bankruptcy has built-in protections, and it exists to help you, the consumer. In all likelihood, you’ll be able to keep both your home and your vehicle.

Some people think that bankruptcy will make them lose their retirement funds. In fact, bankruptcy can protect your retirement funds so that you can actually enjoy your retirement on schedule.

Some people think that bankruptcy will ruin your credit forever, and that they won’t be able to recover. Honestly, by the time most people consider filing for bankruptcy their credit is already ruined. Bankruptcy is the best way to help recover from a bad credit score.

While it may be hard to get a loan for a while after your bankruptcy, creditors like to see people who have had a successful bankruptcy and have turned their finances around. After some time elapses so that you can prove yourself, creditors will be very happy to give you loans because you’ll be a much safer investment!

So call a bankruptcy attorney today, and get started!

Do I Have to Lose my Home?

Filing for bankruptcy often comes with a lot of unwanted baggage, such as stress, doubt, worry, and fear. Will I lose everything? Can I recover?

One of the most common fears is that people will lose their home, and rightly so. Homes are more than just a place to live, they provide safety and security, which are both necessary for good mental and physical health.

Thankfully, bankruptcy law allows for a sixty thousand dollar home exemption. Doesn’t sound like much, does it? Most homes can be anywhere from eighty thousand to three hundred thousand dollars, which makes sixty thousand seem pretty inadequate.

The exemption isn’t for home value, though, it’s for your home equity. For example, if you own a house that’s worth one hundred and fifty thousand dollars and still owe ninety thousand dollars for your mortgage, that means that you have sixty thousand dollars in equity in the home. Your equity is the amount that you’ve already paid. It’s your ownership stake.

Most people filing for bankruptcy don’t have anywhere near sixty thousand dollars’ worth of equity in their homes, and especially considering how home prices and interest rates have fallen in the last few years, the likelihood that you’ll be able to keep your home is pretty good!

Rather than leaving it up to chance, though, it’s a good idea to make an appointment to consult with a bankruptcy attorney who can go over your finances and tell you for sure whether you can keep your home. It’s worth the peace of mind!

Bankruptcy and Divorce Payments

When you get divorced, it can be hard, especially when there are children involved. It can be hard enough to pay your own bills, but having to pay someone else’s bills, too? That can be quite a struggle!

Alimony and child support payments exist for a reason, though, and failure to pay them can directly result in someone else, possibly your children, going without food.

So what happens when you file for bankruptcy? Will the court discharge your alimony or child support payments? Not usually, no.

When you owe money to a creditor, that money goes into their bank accounts. But when you owe money to another person, that money goes directly into the things that they need to live. That’s why the courts usually won’t discharge alimony or child support payments unless there are significant mitigating circumstances.

However, bankruptcy can still be an immense benefit to you if you’re struggling with those payments. By having all of your other debts reduced or eliminated, that money that you used to pay to creditors can instead go to people who will actually appreciate it, and for whom it will make a difference in their life.

It’s best to secure the services of a bankruptcy attorney when dealing with complicated situations such as divorce or child support, because only a bankruptcy attorney will know how to properly represent those situations in court so that everyone can receive the highest level of benefits from your bankruptcy process.

You can only file for bankruptcy once every several years, so be sure that you make the most of it!