Peter Francis Geraci A Bankruptcy Blog - Chapter 7 & 13

The current economy affects different economic and cultural groups differently.  Older minorities are taking the brunt of the current economic downturn.

 

A study done by The Greenlining Institute found a huge disparity between minorities and white retirees. The study showed 91% of African American and Latino seniors are “financially vulnerable.” High health care and living costs are some of the factors in the disproportion. 

 

Social Security recipients have not received a cost of living raise in two years. With the cost of food and utilities increasing steady, many retirees must use credit cards to pay for the basic costs of living.  Often, the credit card payments become overwhelming.

 

An increase in a minimum payment can have a ripple effect on a senior’s budget. To stay current with the payments, the increased amount must be taken from a different part of a fixed income. There are many retirees who use money from their medical budget to stay current with credit card payments.

 

A chapter 7 bankruptcy is a great solution. The way to change your life from financially vulnerable to the stable is by eliminating the debt. Money spent on minimum payments can be used for food, utilities and other living expenses.  The retirement plan of pension, social security and credit no longer works. Eliminate the debt, establish a savings account and start to enjoy retirement.

A report done by the Federal Reserve said consumer debt rises for the eighth straight month.  Credit cards are the reason for the spike.  According to analysts, more consumers are using credit cards to pay for necessities.

 

The problem is when the bill comes in; the user pays only the minimum payment. If you spend $400 on groceries and only pay the $20 minimum payment, you are living beyond your means. Your debt will quickly spiral out of control and with high interest rates; the $400 balance can turn into $600, then $800, etc.

 

The CARD Act passed in 2009 requires creditors to explain minimum payments.  If you look at your statement, you should see two figures. The first shows how long it will take you to pay off your debt making only the minimum payments. Another amount should show how much you will pay in interest over three years of minimum payments.

 

Credit is NOT an extension of your income.  You can quickly get into the cycle of using your income to make minimum payments and using your credit because your income is gone. Staying current with your minimum payments while charging necessities each month does not get you anywhere.

 

Your solution is to file a bankruptcy! A bankruptcy eliminates all of your credit card debt.  You cannot use the plastic while in a bankruptcy and are forced to live within your means. Take a minute and think how much you spend on minimums. My guess is the money is more than enough to fill up your gas tank – even at $4.00 per gallon.

A recent study down by www.bankrate.com found only 24% of Americans has a six-month emergency savings account and 24% have no savings at all.  With the unemployment rate starting to increase again, saving becomes more and more important.

 

If you or your significant other were to lose your job, think about how you would stay current with the mortgage payment or rent? How would you put food on the table? If you have other debt like credit cards, are you willing to fall behind on a car payment to stay current with your Visa bill?

 

These are questions you should ask yourself if you do not have savings.  With over $10,000 in debt, minimum payments are wasted.  Your payment goes primarily to interest and you are paying the creditors to call you if you are late.

 

Filing a bankruptcy will eliminate your debt so you are able to save.  Instead of wasting good money on minimum payments every month, you can put the money into an interest-bearing savings account.  So, if you were to lose your job, you would have a comfortable savings account to rely on until you found other employment.

 

In these shaky, economic times saving becomes more and more important.  Look at your own financial situation and see if you are able to survive six months without income.  You never know what is going to happen with your income or health and should be prepared for a financial emergency.  If you are making minimum payments and still have a large debt balance, call Peter Francis Geraci, Geraci Law for your bankruptcy options.

 

To read the report by www.bankrate.com, please click here.

According to a report by www.cardhub.com, consumers are paying less down on credit card debt. The report shows in 2011, consumers paid down $32.4 billion in credit card.  This number is down 26% from last year.

 

However, the report projects consumers will end the year with $20 billion more in debt. Paying down debt will not provide debt relief if you return to using the credit cards. By not saving the tax refund or work bonus, it is inevitable to return to paying for groceries with credit cards.  Creditors keep you in debt this way – you pay on the debt and as result of the payment, continue to use the credit card.

 

Your solution is a bankruptcy.  While in a bankruptcy you cannot use your credit cards and will learn how to live within your means.  Discharging debt through bankruptcy is guaranteed relief.  You have no debt and your extra income goes to a savings account.

 

Creating a budget and saving money is way to prevent taking on more debt.  Relying on the next tax refund or bonus is not a guarantee to get out of debt. Bankruptcy is! Paying down debt every year is fruitless if you end with more then you started with.

 

This year when you get a bonus, call Geraci Law and inquire about bankruptcy. At your first meeting you can cut up the credit cards and put them in our fishbowl. You eliminate all of the debt and can take advantage of the required credit counseling and debtor education courses.  These courses will teach you the importance of budgeting and how to create a budget. After your bankruptcy is over, do not resort to the credit cards – instead use the opportunity to live debt free!

The Social Security trustees report came out last week and discovered social security will run out earlier than expected. The trust fund is called the Social Security Old Age and Survivors Trust fund and originally the fund was supposed to pay out benefits until 2037 and now the date has been pushed to 2036.  After, the fund will only be able to pay out 77% of benefits.

Currently, it is estimated that 54 million people received retiree and disability benefits and these people have not received a cost of living increase in the last two years.  With the fund going bankrupt, they should not expect increase anytime soon.  The cause could be attributed to the high unemployment rates (less people paying into the trust) or the high, high, high costs of healthcare. 

 

So with higher premiums with health care and no raises in income, what does a person on a fixed income supposed to do? Bankruptcy is one option.  Your social security cannot be garnished but creditor harassment is terrible enough. If you have assets, you are leaving them exposed to creditor’s liens. Not to mention if you are making minimum payments with your fixed income – the payments are probably just going to interest.  Think about it, if you are paying $200 per month toward $20,000 of credit card debt – the $200 could go to paying for your prescriptions or rent.  If you put the $200 in a savings account, you could have $2400 saved in a year.

 

Filing a bankruptcy will eliminate your debt and you can develop a feasible budget with the required credit counseling and debtor education courses.  When the bankruptcy is discharged, you can put the money you were paying on the debt into a savings account to help with the inevitable increases in the costs of living and health care.  Instead of waiting for the trust to go bankrupt, get control of your finances now.

 

 

Summer is here! It’s going to be 80 degrees in the Chicagoland area today and jackets are finally going back into storage.  Summer means sunscreen, sundresses, and of course increased spending.  If you are about to receive your discharge from a bankruptcy, it is important control your spending this summer and stay debt-free.  It is easier said than done.  If you are working, you may face the added expense of childcare or if you want to take a road trip you will face $3.81 per gallon gas prices (the national average). 

 

So to save money this summer, look at your bankruptcy petition schedule I form – this will show your monthly income and your monthly expenses. Look for ways to trim your expenses.  For example, instead of going to a restaurant to eat out – pick up some hot dogs and buns for grilling. Ask some of your family members, neighbors or friends to attend and have pot-luck meal. You would be outside in the summer heat and save money. 

 

Another example of cost-cutting is eliminating or amending your big summer vacation plans.  Summer is a great time to take a vacation because the kids are out of school; however it is also peak vacation time for resorts.  You need to set money aside and save for the vacation.  Instead of purchasing the trip on credit, have the money saved so you can enjoy the vacation instead of worrying how you are going to pay for it.  If you wait to take your vacation during slower months for hotels, the cost will be significantly less. Camping is another solution, you may have to pay for a permit but the cost will be less than a beach resort.

 

Most cities offer a plethora of activities for families in the summer months.  Going to free fairs in your local community or contacting your park district is an affordable way to make the most of your summer.  Options like the local pool will offer discounts for families and also for residents of the city.  Most churches and other nonprofit agencies will offer low-cost summer day camps for younger children.

 

With the cost of living going up, watch your spending this summer.  Create a feasible budget and stick to it.  Maintaining your finances is as important as SPF 15.

                                                                                                                          

Blame the economy, the job market, the cold weather, choose any reason you want but a wave of “boomerang” children are moving back in with their parents.  The phrase boomerang child defines an adult dependent that moves out on their own and ultimately returns (like a boomerang) to their parent’s home. If a child loses their job or has a different loss of income, the child turns to parents for financial support.  Generally, the parents are either retired and on a fixed income or are having financial problems of their own.  Parents need to draw a line in the sand defining how much financial help they are willing (and able) to provide.

 

Making payments to save a credit score is ridiculous especially if it causing you to fall behind on your own debt. You can assume with a job loss, a possible apartment eviction/foreclosure and high credit card debt, your child probably does not have good credit now. Not to mention the additional expenses with having another full-grown adult living with you.  All of a sudden you have two mouths to feed instead of one. Additional cost for utilities and other expenses can double when you have an adult child back at home.

 

You need to feel comfortable with how much you are willing to help your child. Approach providing financial help to your children as a financer would to you for a loan.  Think about your child’s financial history and payment history.  Think about whether you want to loan the amount or if you do not expect repayment, you can gift the amount.  If you child has quit three jobs and “boomeranged” three times back into your household, co-signing a loan and paying for their financial mistakes will not help you or them.  You need to answer how much is too much? Helping your family is one thing, digging yourself a financial grave is another.  Bankruptcy can be a great solution to help you and your child.

 

Instead of paying the minimum payments on their debt, pay for their bankruptcy attorney to eliminate their poor past financial decisions.  You and your child could create a budget to live by until your child gets back on their feet.  By eliminating the debt with a Chapter 7, your adult child can focus on job-hunting and eventually move out of your home. 

 

As a parent, you never want to say no to your child. By allowing them sanctum in your home, you are providing them shelter from the difficulties (especially financial difficulties) that come with adulthood.  Protecting yourself is also important, you want to live within your means and help your child find a solution their problem.

 

If you want some additional information and solutions, please click here.

 

If you were like me and set your alarm promptly at 5:00 a.m. to watch some of the Royal Wedding coverage, you saw the elegance and luxurious prince and soon-to-be- princess walk down the aisle.  Amidst economical turmoil and a never ending amount of rainy days, the sun came out and the wedding for this generation went on without a snag. 

 

The bride and groom decided to walk down the aisle during a terrible economic time. Britain’s economy is shrinking and the unemployment rate is close to 7.7% (as of January 2011). Taxpayers will pay close to $20 million for security for the affair.  During these hard times, who is going to pay for the costs? Taxpayers? No. It’s the Royal Family themselves. If you have a child, start saving now.  The wedding industry is estimated to be a $4 million industry.

 

When you convert the cost of Prince Charles and Princess Diana’s wedding (approximately $48 million in 1981) to today’s dollars the cost comes to an estimated $110 million.  The Royal Family is spending an estimated $34-$50 million in today’s dollars on Prince William and Kate’s wedding. 

 

Debt and a tight budget affect everyone including royal families.  According to Forbes in 2009, Queen Elizabeth II’s net worth was close to $450 million and now her majesty’s worth is closer to $420 million.  With income and net worth that high (despite a $30 million decrease in 2 years) a $50 million wedding seems like chump change. But the Royal Family said they would keep the wedding an elegant but restrained event to be mindful of the dreary economic times. 

 

When you compare the amount to the cost of Prince Charles and Princess Diana’s wedding, the royal family could be keeping a budget. The affair will generate revenue for the country itself but Budgeting is important to those even with tiaras.  Even though the Royal Family’s budget is much larger than us civilians, the principals are the same.  You need to live within your means. It’s just our means are a $40 ice cream cake from Baskin Robbins and theirs is two wedding cakes costing $80,000.

I went to use my debit card at this little bakery this past weekend and the cashier (who presumably was also the store owner) said she would offer me a 5% discount if I used cash.  Cash will always win over plastic. With cash, you know how much you have to spend and can easily budget to live within your means. My experience at the bakery opened my eyes; I saw gas stations offer cheaper gas prices if someone used cash. Self employed cab drivers will knock a couple of dollars off of the fare if you use cash.

 

It makes sense, cash is king.  Using credit cards often does not help you or the business.  While the good ole’ plastic maybe convenient, it costs the merchant money to accept your credit card payment.  Not to mention, if you are only paying a minimum payment on the credit card, it costs you money to use the plastic. When you are paying only minimum payments, you are throwing away good money to bad interest.

 

Filing a bankruptcy forces you to live within a budget. When you file a bankruptcy, you cannot use your credit cards and you see how to live within your means for at least the duration of your bankruptcy.  After your discharge, if you continue to use cash instead of getting into credit card debt again, you will stay debt free and begin rebuilding your credit.  Not to mention – 5% off a lemon meringue pie for using cash? Sold.

 

I thought public schools were free? Public schools are not allowed to charge tuition but high fees for a public education can send anyone’s budget into a tizzy.  In Chicago for example, most public schools require fees to rent or purchase books and the amounts can climb (quickly) to $400 per child.  That number is not going down anytime soon, last year and for the third year in a row, Illinois cut the school budget for textbook costs. So if you have kids and debt, get rid of the debt so you can afford your kids.

 

There is a calculator at www.bankrate.com to calculate the cost of raising a child.  The average cost for a child age 0-18 is $190,528 and this amount does not include the costs of college tuition or health care.  For example, according to www.finaid.org, the average costs for students attending four-year public colleges and universities were $15,213 plus an additional $4,000 for textbooks. 

 

If you have young children, start saving now.  If you have to pay $400 per child in textbook rental fees and you have 3 children, you’re looking at $1,200 to pay for your child’s public education. It would be nice if that was the only other hidden charge but Illinois schools also charge for:

 

- Use of school property (lockers, towels, laboratory equipment)

- Field trips

- Uniforms and equipment

- Participation in extracurricular activities

- School functions, i.e. prom

- Participation in class, i.e. home economics materials, shop, etc.

- Graduation fees

- School record fees

- Driver’s education fees

- School health service fees.

 

Fixed incomes beware – kids are expensive. Even when public schools claim to be free, you are looking at some money to pay for your kid’s future. We all want the best for our children and being able to budget and pay for school costs would be a lot easier eliminating or consolidating the other debt.  The $400 minimum payment going to credit card interest could be the $400 payment charged to rent books at your child’s elementary school. 

 

You cannot blame the schools – with budget cuts you have to make due. But you should be cognizant and the costs of public education and your finances. Filing a bankruptcy would eliminate your debt and allow you to put money away for your child’s future. 

Homeownership is said to be a pillar of American values.  Many immigrants moved to our fair country with the prospect of owning a piece of land.  Bankruptcy is not the end to the American dream – on the contrary, getting yourself out of debt might afford you a better opportunity to some day own a home. 

 

Despite having a bankruptcy on your credit report, you may still qualify for a loan.  Before you purchase a house, look at your monthly income and your expenses. Ideally, you should not spend more than 30% of your monthly gross income on your mortgage, taxes, homeowners' association dues and insurance.  Too many people find themselves “house poor” and are not able to save money or actually enjoy the home.

 

A resource available to potential homeowners is a Federal Housing Administration (FHA) insured loan.  Since 1934, FHA loans have been an option for low down payments, low closing costs and for people with not-so-stellar credit. 

 

According to the FHA’s Web site, a person can qualify for a FHA loan in as little as two years after filing for a Chapter 7 bankruptcy and could theoretically apply for an FHA loan while in a Chapter 13 repayment (with court approval and timely payments).  For potential homeowners with a foreclosure or an executed deed in lieu, the wait time is three years.  So, with a foreclosure and NO bankruptcy – a potential homeowner would have to wait (theoretically) longer to purchase a home and still have unsecured debt?

 

After bankruptcy, you may not need an FHA loan.  A major factor for lenders is the size of a down payment – preferably a 20% down payment could eliminate the need for private mortgage insurance or PMI and show you are a serious purchaser.  For example, let’s say you have $70,000 in credit card debt and are making minimum payments of $700 per month (according to www.bankrate.com, you will be paying $700 with 18.9% for more 30 years).

 

If you took the $700 per month and put the money in an interest-bearing account, you could save $42,000 for a down payment on a home in as little as 5 years.  Post-bankruptcy, you have no other debt and would be able to save money for your goal of homeownership.

 

As Former President Bill Clinton said, “[T]he objective for young people, with their futures before them and their dreams fresh in their minds, starting out their families, to be able to own their home and to start a family in that way, that’s a worthy objective.” Bankruptcy is not a bad thing - it is a solution to become debt free and can be a way for debtors to achieve financial goals.

 

To look at other FHA requirements, please visit www.fha.com.

To read President Clinton’s speech on the National Homeownership Strategy, please click here.

On Check N' Go's Web site there is an advertisement of a young hound puppy with the phrase, "Life can be unpredictable. For those times we're here. Quick approval time. Less than perfect credit. Pay back on your next pay period" The ad also includes a quaint sign stating "Veterinary Hospital."  Way to play on emotions, Check N' Go.

Payday loans can be considered a necessary evil – when you need money for food, rent, Fido’s check up, etc. and have no where else to turn a payday loan seems like a good option. When you're desperate, it is easy to skim the lines of the contract and mindlessly hand over a check. But, the payday loans will make you pay, and then pay, and then pay some more.

 

The consequences seem to heavily outweigh the actions of taking a payday loan. For example, you are short on rent and need some extra cash for your landlord.  You take out a payday loan for $500 and with an APR of 842.31% in as little as 13 days the bill will go to $650.00 if all payments are made on time. If you need to extend the loan, it is an additional charge for the extension. If you miss a payment, the lender can take the money from your bank account or proceed with a wage assignment and deduct the funds directly from your paycheck. It’s a vicious cycle – often to stay current with payday loan payments, you take out another payday loan, and another and another….

 

Filing a bankruptcy will stop payday loan harassment. A chapter 13 bankruptcy will stop the crazy 1000% interest on some payday loans and a chapter 7 will just eliminate the debt.  Geraci attorneys can send over notice to your payday loan lenders to stop the deductions from your account before your case is even filed.  If you have zero debt then you should be able to afford a vet visit without the payday loans.

 To see full ad, please click here.

We hear it all over the place: “Be smart with your spending.” But how does that apply to charitable giving?

Many people who are filing a bankruptcy often deal with this dilemma. They are confronted with a choice: give to the needy, or keep what’s needed to pay the insurance/day care/prescriptions. While giving money to charity may be a moral obligation and/or gratification to you, you must consider it as one of your monthly expenses and budget your donations appropriately. $10 every week at church could mean a year’s worth of electricity, or $50 per paycheck could be the difference between your car in the garage or in the “repo” lot. A lot of the time, people struggling with their finances simply don’t have someone to tell them that it’s better, for the time being, to save their monetary contributions at least until they have their feet back on the ground. Well, I’m here to tell you now that if you need it, you’ve got to keep it.

The more you give does not make you a better person. Remember that saying, “it’s the thought that counts”? It didn’t just apply that one time you burned the casserole at Thanksgiving. The greatest acts of charity don’t start and end with a checkbook; if you’ve got the heart and the time, you can positively impact your community (and beyond) through volunteer work virtually anywhere. These acts of kindness can say a lot more than just “here you go” from Abraham Lincoln, Andrew Jackson, or even Benjamin Franklin. If you believe in karma, you’ll have a lot more coming back to you, and the return on investment is immediate.

At least for now, instead of giving away your much-needed dollars, spend a little time giving back to your community. You’ll never know how much fulfillment it’ll give you until you try it.

Retirement. I cannot wait to relax and enjoy the well-deserved rest after years of waking up to an alarm and living by deadlines. I have years to go but many people are getting closer and closer to the golden years. With social security going - well bankrupt, many soon-to-be retirees need to take a good hard look at their 401Ks, IRAs, and pension accounts once they shut the door on full-time work.

A study done by Boston College called, “The New Unemployables,” found 30 percent of people ages 55+ owed more in credit card debt than saved in retirement accounts. So continuing the minimum payments (getting them no where) means come retirement, the person has more credit card debt and less income. If you’re working full-time and are struggling with the credit card debt, paying the debt off or down will not get easier with retirement – actually with less income and potential increases in medical expenses will make payments more difficult.

Most experts agree using retirement savings to pay off credit card debt is a bad idea. More often than not, a person will take a 401K withdrawal only to pay a portion of the debt. This is problematic because debt still exists and the minimum payment is still due the following month. Not to mention, the tax penalties for early withdrawals. Unless you qualify for a tax exemption for the withdrawal, you are subject to an early distribution penalty of 10% additional tax.

Moral of the story is to file a bankruptcy before thinking about retirement. Filing a Chapter 7 bankruptcy will eliminate all of the debt so you are able to readjust to your new income. While you're working, a Chapter 13 repayment plan will pay off your debt in 3 – 5 years, protect all of your assets so you are debt free before your retirement party.

You’re going into retirement – you are supposed to enjoy it. Spend time with the grandkids and go on sunny vacations. You do not need the sleepless nights and headaches of creditor harassment and 30% interest rates.

To read the study by Boston College, visit http://www.bc.edu/content/dam/files/research_sites/agingandwork/pdf/publications/IB25_NewUnemployed.pdf .

One reason many people find themselves in debt is because they are simply living beyond their means. It’s an easy trap to fall into - advertisers want you to spend money on products and creditors initially offer great zero-low interest rate credit cards. The problem is once you start missing payments, the creditor claiming to be friend quickly becomes foe. Below is a list of different types of expenses and example of how to save for a luxury item. Maybe you recently filed a bankruptcy and want to create a budget or you need to file a bankruptcy but want to get a jump start on financial management. Either way, knowing your expenses is important so when you do want a little extra cash for the next “big thing,” you’re able to save for the expense. So let’s run through an example on budgeting for an iPad 2.

The new iPad is sleek and cool and starts around $499 according to Apple’s Web site. You want to save so you do not have to purchase on credit. Our example saver makes approximately $3,192.00 net per month working a full-time job and recently filed a Chapter 7 bankruptcy and has zero credit card or medical debt.

Creating a budget to save for the wants is important (I know, I feel like I need one too). Step one is listing your fixed expenses. Your fixed expenses do not change from month to month. For example, your rent or your mortgage payment (if paid on time) will be the same amount each month. In our example, our person pays a $989.00 mortgage payment including taxes and insurance. Another fixed expense is car insurance and our person pays approximately $100 per month. So subtracting fixed expenses from the $3,192.00 net income leaves our guy with $2,103.00 for other expenses.

After listing fixed expenses on your blossoming budget, you need to list your variable expenses. As evident by the name, these expenses vary. Examples included clothing, food and utilities. Unlike the fixed expenses, you can save by spending less on your variable expenses. For example, if our saver wants to purchase an iPad 2, then maybe he eats at home more instead of going to a restaurant. Variable expenses will change and the saver (for the most part) can control major fluctuations. With utilities, clothing, and food costs, our example person spends on average $800.00 per month leaving him with $1303.00 for other expenses.

Periodic expenses only happen once or twice a year. Holiday spending, taxes and vehicle registration are all examples of periodic expenses. Like the variable expenses you can curb how much you want to spend by cutting costs on gifts for Christmas, etc. In our example, the man owes some back taxes and is currently on a payment plan for $450.00 per month leaving him with $853.00 per month.

Now, our saver has a budget. Each month he has $853.00 to put toward periodic expenses and other variable expenses. By creating a budget, he can safely set aside $166.33 per month and purchase the iPad2 in as little as 3 months. Budgets are important especially post-bankruptcy – your debt free and want to stay that way.