Peter Francis Geraci A Bankruptcy Blog - Chapter 7 & 13

If you have a job offer and have debt, it’s time to file a bankruptcy. Your creditors cannot garnish unemployment benefits - but the deduction could be waiting on your first paycheck.  Call Peter Francis Geraci to file a Chapter 7 bankruptcy. Geraci attorneys can file a case in as little as one day.

 

You can eliminate your debt and enjoy your new income. Life after bankruptcy is about saving money! Peter Francis Geraci and bankruptcy attorneys eliminate debt so you can put the minimum payments in a savings account.

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.

I spoke to a woman today who hated credit card companies almost more than I do. She made payments on time every month for the last 30 years. Every month her letters were addressed as a valued customer and she took pride in the title.

 

Because of some bad luck, she lost her job and now is on unemployment.  She called the credit card company to ask for help. The lovely woman on the phone closed her account, reduced her credit line and demanded payment.

 

Thirty years of timely payments and when she called the only helped offered is an inevitable hit to her credit report. If the amount of debt she had on the card was close to the limit, she will now be charged high penalties because of the lower credit limit.

 

When you have debt, listening to financial advisors like Suze Orman does not get you out of debt. Talking to your creditors is not easy when you owe thousands and have reduced income. The Geraci Chapter 7 solution will eliminate all of her debt so she can start rebuilding.

 

Understanding that your creditors do not care about you is the first step to rebuilding. Your creditors want payment and if you are unable to do so, the valued customer title will change drastically.

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.

I just finished reading “The Pale King,” David Foster Wallace’s recent novel. It was... good. Not great, merely good. It’s frustrating because the notes and addenda clearly indicate that it could’ve been something really phenomenal if Wallace hadn’t died (the circumstances of which the book avoids mentioning), but instead, it’s really just a hodgepodge of vignettes and set pieces.

“The Pale King” centers on an IRS tax return examination center in Peoria, Illinois. It’s mostly stories about some of the examiners who work there. Some are funny, some are sad, some have little lessons, some look towards kind of a theme, one is memorably creepy, Cronenberg-style. Many are dense with jargon, tax code minutiae, and finance esoterica. And that brings me to my point, which is that, for a novel substantially about government policy and regulation, “The Pale King” totally fumbles on bankruptcy.

It’s a couple (literally, a couple) terribly minor errors. Bankruptcy is referenced only twice. On page 207 of the current edition, one examiner, Chris Fogle, says his mother wound down her feminist bookstore by way of a Chapter 13. Chapter 13 is exclusively for individuals who need the ability to repay their debt at a rate they could afford. Chapter 13 can stop foreclosure and garnishment and is super-great for lots of people – but it can’t wind down a business. As Fogle’s soliloquy isn’t exactly to-the-point – if his mom did her own chapter 13, he would’ve taken half a dozen extra words to say so – I’d chalk it up to a technical error on Wallace’s part. Especially considering:

On 265, David Foster Wallace (there’s a character by that name in the book, who is not the real David Foster Wallace) notes that the IRS is leasing a building from the proprietary trustees of a corporation that “vanished into the protections of UCC Ch. 7 in the mid-1970s.” And, well, no. A corporation can file a chapter 7 bankruptcy (whether they always should is a different matter; an S-corp or an individual’s d/b/a can often just be allowed to fade into the ether) but the UCC isn’t bankruptcy and UCC chapter 7 is actually a set of proposed regulations involving warehouse receipts and bills of lading.

I’m a fan of Wallace’s fiction and in love with his nonfiction - so it sits unwell for me that he botched something I know very well. Some of the book is clearly fiction (the IRS’ Peoria location does not have an edifice designed to look like a giant form 1040) but actual legal errors bring up a whole host of questions about Wallace’s rigor, whether there are other technical errors when he discusses tax law and regulations, his copyeditor’s research, and just how finished the beloved writer’s “final novel” might have been. And maybe his characters are unreliable narrators and everything was just as he intended. And maybe I’m way too concerned over a work of fiction and should just go ahead and relax. But I really want to know.

The worst part of the bankruptcy process is making the initial phone call. It’s inevitable –no one wants to file a bankruptcy and I do not think many people know enough about the benefits of bankruptcy to consider it an option. Bills are easy to ignore. No one wants to go to the mailbox to find collection letters and notices and if you have multiple creditors, the amount of bills can quickly become overwhelming and the idea of bankruptcy can become frightening.

 

Once you start opening the mail and bring out the calculator to add up your total debt, most people will try to call creditors to work out a payment plan.  The problem is, some creditors will refuse to work with you, most creditors will propose an unfeasible payment plan, and others will close your account, lower your credit limit and demand the balance in full. If you have ever tried to call your creditors, you understand talking to multiple “representatives” and feeling like nothing has been resolved. That is not very reassuring to someone calling for help.

 

After a failed attempt at working with creditors, many people try alternatives to get a handle on the debt.  Debtors seek out debt consolidation, credit counseling, or borrowing from retirement. Each option takes time.  Debt consolidation has no set time limit – you could very well be in a repayment plan for 10 years while paying interest, a payment to the debt consolidator and your monthly bills. A Chapter 7 bankruptcy on the other hand could be done (and you could be debt free) in as little as 3-4 months.

 

The majority of people who go through the agony of debt consolidation eventually seek bankruptcy relief. If you have more debt than income, if you can’t sleep at night because of worries about debt and if you are afraid to answer your phone – consider bankruptcy. It’s a sigh of relief when you hear the words, “we can help.”

 

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.

 

 

A common question for potential bankruptcy filers is what will bankruptcy do to my credit?  Your credit score is based off of multiple factors including: payment history, amount owed to all creditors, length of credit history, amount of new credit, and types of credit in-use. Your credit score will range generally from 300-800 and a financer contributes a low credit score to high credit risk.

After filing a bankruptcy, you are able to improve your credit score. People have been filing bankruptcies for centuries and rarely have issues getting more credit.  Taking on too much debt after a bankruptcy is where people get into problems. Once you file a Chapter 7 bankruptcy, you are not able to file again for eight years. Creditors want you to be in debt and may send offers with higher interest rates to entice you to get back into debt and you would not be able to file again until your time bar is up. 

 

Rebuilding your credit is important so if you want to take on more credit again you are able to do so with better interest rates and contract terms.  Understanding your credit score and can help you rebuild your credit so you do not need to file again in eight years.

 

So how is your FICO score calculated?  Your payment history is the biggest contributor to your credit score accounting for 35% of the credit score calculation.  Multiple late payments are the biggest hit to your credit score, even without a bankruptcy if you are not making payments your score will be in the 300s or 400s. If you file a bankruptcy, the debt is eliminated and you have a fresh start to rebuild your credit.

 

The amount of debt you are in is another big contributor to your credit score – the debt amount is 30% of the calculation.  After your bankruptcy is complete, you have ZERO debt. If you have zero debt, your debt-to-income ratio is stellar and if you make your payments on time post-bankruptcy you should be significantly better off than before you filed.

 

Length of credit history accounts for 15%, the amount of new credit for 10% and the remaining 10% is for the types of credit in-use. If you file a bankruptcy, you want to prevent filing again and applying for more credit with higher interest rates is not the way to do so.

 

Ultimately credit is not important after a bankruptcy. Saving money is the way to get back on track. If you want to make a large purchase, be prepared for a 20% down payment because it shows the financer you are investing in their loan to you. Give yourself some time to get back on your feet financially and you will be able to afford new debt if you choose to take more on.

 

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.

 

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. 

In this current housing market, the word foreclosure is becoming as popular of a dinner conversation as which celebrity is going to rehab this month.  Foreclosure (and bankruptcy) is not as taboo since you probably have a neighbor or a family member facing the big f-word.

 

Once most families hit the 90^th day of arrears (when most mortgage companies start reporting to the bureaus), most start thinking about whether the home is worth saving.  You think your children grew up at the home but you owe $250,000 and the house is worth $150,000.  So let’s look at some options to look at the big financial picture

 

Option 1. You want to save the house. You have invested too much blood, sweat and tears to let the house go and you are about even on what you owe and how much the home is worth.  But you are a couple of payments behind, your mortgage company has stopped returning your calls and you can afford the house.  Affording the house is key – you need to be able to make your mortgage payment and be able to buy food, water, gas, etc. So, you file a Chapter 13 bankruptcy. A filed Chapter 13 will stop all foreclosure proceedings and allow you to spread out the arrears of your home in a 3-5 year repayment without the crazy penalties imposed by your mortgage company.  You can save your home up to the day of the sheriff sale with a filed Chapter 13 bankruptcy.

 

Option 2.  You cannot afford your home because of a home equity loan you took out a couple of years ago. So now, you have a first mortgage payment with a balance of $250,000 and a second mortgage with a balance of $50,000 and your home was recently appraised at $200,000. You are able to make your first mortgage payment but live off of credit cards in order to stay current with your second mortgage. It is possible to strip the second lien – meaning you file a Chapter 13 bankruptcy consolidate the credit card debt and at the end of the repayment plan the balance of the second mortgage could be eliminated. Now, there are no guarantees here and you would need to meet with an experienced bankruptcy attorney to possibly get rid of the second mortgage.

 

Option 3: You cannot afford the house but you cannot afford to move quite yet.  Maybe there was job loss or an income reduction but you are choosing between food and your mortgage payment each month.  You have tried working with your mortgage company and the idea of a loan modification is laughed at by your lender. The silver lining is foreclosure takes time – stay at the house, keep it insured and you have free rent. Think about it – the $1500 mortgage payment you are struggling to keep current each month could go toward getting back on your feet. The average time foreclosure takes 17 months. You have 17 months of free rent – that is $25,500 of mortgage payments that could go to getting yourself back on stable financial ground. Your bank took advantage of you so why not take advantage of the bank. I constantly get asked about the morality of staying in a home rent free. My answer is – is it moral for a bank to give you a $350,000 mortgage loan with zero money down when your annual income is $30,000?

 

Deciding the future of your home is not an easy decision. When you are faced with financial hardship, it is difficult to stomach the loss of an investment. But what are you supposed to? Geraci Law, LLC are professionals at saving homes or providing legal resources to homeowners struggling with mortgage payments.

At some point, everyone will apply for a loan.  When you apply for a loan it is important to look at the terms, the APR and actually read the contract.  If the lender tells you a co-signer is required for the loan, then it’s time to walk away.  I know the new car is pretty but think about the long term repercussions if you cannot afford a loan on your own. Co-signing a debt for someone can be a dangerous undertaking.  You are asking someone to pay for the debt or loan if you are unable to.  If a co-signer is required to get the loan, you should look at your loan application to see what you can improve.

 

The amount of debt you are in compared to your income can affect your ability to get a loan.  If you have more debt than your annual income, your loan servicer is taking on a risk by giving you more credit. Filing a Chapter 7 bankruptcy would eliminate the other debt allowing you to rebuild your credit to qualify for a better loan.

 

Another factor is timely payments.  A big contributor to your credit score is payment history.  Missed payments are a sign of your ability to pay creditors – if you have a poor payment history, a potential lender may require a co-signer to ensure payments will be made.   You can get a free annual credit report from our Web site, www.infotapes.com, and look at it. If you have more debt than you can handle, consider a bankruptcy. In the long term, you will probably have a better loan than you would right now and possibly better relationships with your potential co-signers.

 

If someone asks you to co-sign on a loan, say NO! It is becoming more and more common parents of adult children file a bankruptcy because of the additional financial burden.  Even if you trust the person, things happen. Many people do not plan on losing jobs or defaulting on loans but it happens everyday. If you are a co-signer for someone with bad luck, you are just as responsible for the debt as they are. Often, a car will be repossessed (for example) and if the person you co-sign for is out of work, the creditor will come after you and your wages. 

 

When applying for a loan, the servicer will look at the amount of your down payment. The recommended amount is 20 percent. If you try to increase the size of your down payment there is less of a loan to finance.  A co-signer attaches themselves to your financial future – you are asking them to pay the debt if you do not. Instead of co-signing, ask your friend or family member if they will gift you money for your down payment if they love you that much. You friend or family could give you the money and protect themselves from possible financial hardship.

 

Ultimately you are probably helping your family member or friend by refusing to co-sign for a debt. You are telling the person to get a handle on their financial situation – whether by filing a bankruptcy or finding a better loan provider.

  

It’s getting close to wedding season when people like me trek back and forth to Bed, Bath and Beyond every other weekend.  I get the love stuff – like replacing I with we and how she’s met the man of her dreams but what about the financial repercussions? Marriage is a binding contract between two people to join their lives and their financial futures.  How does one person with zero debt and “perfect” credit fuse finances with another person with $50,000 in debt? The answer can be found in bankruptcy.

 

Now, depending on your state, assets and financial decisions of one spouse do not necessarily affect the other. Illinois, for example, is not a community property state but Wisconsin is. Community property related to bankruptcy means any debt that occurred while you were/are married can be either spouse’s responsibility.  If you have no debt but your spouse abuses the credit cards, all of sudden your good credit is tying the knot with your spouse’s debt.

 

Boy meets girl. Boy falls in love. Girl maxes out her credit cards.  Before the boy proposes, there should be a serious discussion about a bankruptcy. If the girl files and eliminates all of her debt, the boy and girl can enjoy debt-free marital bliss. A chapter 7 bankruptcy can eliminate all the old bad debt and provides an opportunity to rebuild credit as a couple.

 

So what if you and your betrothed both have debt? You could file separately before the wedding but instead of paying one attorney fee you would be paying two. Instead wait until after the wedding so you are able to file a joint bankruptcy and again, enjoy debt freedom as newlyweds. You could register for a family member to pay your attorney fees.  It’s a great bargain – financial freedom as a gift for you and your soon-to-be spouse.

                                                                            

When I was growing up, my parents stressed the importance of education – not only high school but higher education. Like many families, the cost of college for their children is not only daunting but can be downright frightening. According to a study done by the Department of Education, the average costs for both private and public institutions went from $3,499 per year for the 1980-1981 to $20,435 in 2008-2009 school years. Many parents do not have $20,435 saved up for one year of school for their children, let alone $81,740 for four years of education (in 2008 numbers).

 

With costs of living increasing every year and the current economy forcing many to return to school, the availability of scholarships is becoming scarcer.  Parents want their children to go to college and are often forced into taking on student loan debt. When many families are facing the reality of their debt and decreasing household income, the question becomes, “will a bankruptcy make me illegible for student loans?”

 

The easy answer is no. According to the Bankruptcy Reform Act of 1994,

 

“A governmental unit that operates a student grant or loan program and a person engaged in a business that includes the making of loans guaranteed or insured under a student loan program may not deny a grant, loan, loan guarantee, or loan insurance to a person that is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act”

 

Now the actual text reads like a lot of mumbo-jumbo, but in short it means a bankruptcy alone cannot deny your student loan eligibility for federal student loans including the Perkins Loan. But there are other factors a student loan lender will look at. Lenders can consider debt discharged in bankruptcy as evidence of a bad credit history but cannot deny a potential student based on the bankruptcy alone.  My argument is, if you have $75,000 in debt and $40,000 in income – your ability to pay back the new student loan debt becomes skewed.  If you file a bankruptcy, you eliminate the debt and all you have is income?

 

Post-bankruptcy credit history can be another factor. So, if you just received your discharge – make sure to make your payments on time and put money into a savings account. Who knows – getting rid of debt could allow you to save enough money to pay for college and the student loan eligibility becomes moot?

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.

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 .

Happy St. Patrick’s Day! Today, everyone has a little bit of Irish heritage and will chase the clever Leprechaun to find fortune. Bankruptcy is a debtor’s pot o’ gold. Getting rid of bills and eliminating the pain-staking minimum payments every month is like finding the end of the rainbow. All of a sudden, the $700 per month you are spending on credit card payments can go toward a new green shirt or an ice-cold Guinness. Today, enjoy the warm weather and consider a bankruptcy attorney your lucky charm.

It’s 8:01 a.m. You’re trying to get the kids out the door and get a semblance of yourself for the meeting you have at work. Then the phone rings – it’s a creditor. The FTC guidelines state creditors are not allowed to call you before 8:00 in the morning or after 9:00 at night. So of course your creditor waits the extra minute to adhere to guidelines. Creditors do have rights to collect on debt but some take collection to the extreme. It is important to know your rights as a consumer. Number one being – file a bankruptcy and the calls must stop.

While you work on deciding if you want to struggle with debt or feel the relief of being debt-free, below are a list of things your debt collections cannot do from the Federal Trade Commission.

Harassment

Your collectors cannot threaten you with violence or harm. Despite what some of your creditors tell you they cannot publish a list with your name because you refuse to pay your debt. However, your creditors can send the information to the credit bureaus. The harassment of constant phone calls will stop with a filed bankruptcy. A meeting with an attorney will not stop the calls – you need a petition filed with your local bankruptcy court.

False Statements

Your creditors cannot pretend they are:

- Attorneys or government officials

- Police stating you committed a crime

- Representative from a credit reporting agency

Your creditors cannot say:

- You will be arrested for not paying your debt

- They will seize, garnish, and repossess your personal property or income unless they have a court order.

Your creditors may not:

- Give incorrect credit information about you to anyone including a credit reporting agency.

- Send you anything that looks like an official court document if it isn’t.

- Use a false company name.

Unfair Practices

Your debt collectors cannot do the following to receive payment on the debt:

- Try to collect any interest or penalty unless the contract (that you signed originally) allows

- Deposit a post-dated check early

- Take or threaten to take personal property unless court-ordered

- Contact you by postcard

To read about additional debt collection rules, please visit the FTC’s Web site here.

Increases in taxes, expenses and minimums, increases in taxes, expenses and minimums – oh my! Like the mysterious world of Oz, the current financial situation of the average debtor seems to be as confusing as to why Dorothy wore red glittery shoes in windblown Kansas. Like the veil being pulled off the wonderful wizard of Oz, the sheath of financial naiveté needs to be yanked off.

There are vague percentages about increases and decreases being tossed around in various newspapers addressing how the economy is bouncing back. Maybe, but it seems like the rich are getting richer and the middle class are joining the poor. Pardon my criticism but how is the economy bouncing back when the Illinois legislature approved a 66% income tax increase? A percentage of the population may be returning to work, but paychecks are being spent on taxes, increased living expenses, and unbelievable interest rates and minimum payments.

Income taxes went up 66 percent in Illinois to attempt to balance the state budget. The average median income for a single person in Illinois is $46,355. Currently, this single person is paying $1,330.65 in income taxes. With the income tax increase, the person will now pay $2,222.19 in income taxes. That is $891.54 more! If you have a tight budget as is, the bigger deduction from your check is not going to help anything. For your average single working person, the economy is not good – especially if you have debt.

Think about it, if you are paying a $500 minimum payment toward your credit card every month, the tax increase eats up your minimum payment and then some. Filing a bankruptcy does not mean the tax hike will disappear but at least you’ll be debt free to rebudget and afford things like food, water and gas.

Living expenses continue to increase particularly gas prices. You need gas to fuel the car to get to work but you have to pick up extra shifts to be able to afford the gas. According to a survey, the average distance for a commuter in Illinois is 16 miles and when gas prices are expected to climb up to $4.00+ by summer, gas for a 32 mile round-trip add up. Jobs may be available (according to ads in the Chicago Tribune) but a person returning to work has to pay to get there. There is no money left over to pay minimum payments after fueling up.

Lions and tigers and minimums – oh my! When you have a significant amount of debt, making minimum payments on $10,000 worth of debt is really not going to get you anywhere. The minimum payments go primarily to interest not to the principal. If you struggling to make the minimum, an increase in interest or the payment itself can throw an already tight budget out of whack. File a Chapter 7 bankruptcy to eliminate the debt or a Chapter 13 which will eliminate interest.

For example, a statement provided by an Illinois debtor for a payday loan store showed an original loan amount of $6,065.00. This loan had an APR of 300% and the debtor will pay a total of $9,105.79 by the end of the loan. This person should file a bankruptcy and feel free to dance down the sidewalk singing, “ding dong the witch is dead.”

Follow the yellow brick road to financial freedom. Take some time and actually look at your credit card statements and see how your payment is broken up. If you are an Illinois resident visit this site to calculate how much the tax increase will affect your monthly budget. As for now, the economy doesn’t seem to be getting much better. Click your heels together and investigate your bankruptcy options.

For years, Michael Scott and his office clan have entertained millions of Americans on the hit NBC mockumentary series, “The Office.” Its popularity is due, in large part, to the old comedy trick that the audience knows something that the characters don’t. In the case of “The Office,” the television audience is aware that the events on the show are fictitious, and can therefore find humor through satire. However, in the fourth season episode “Money,” the show completely misleads its viewers about the life-saving system of bankruptcy, and actually leads them to believe that it’s a procedure to be avoided. So, where’s the comedy when it’s the audience that’s been tricked?

“I…DECLARE…BANKRUPTCY!” Haha, very funny, Michael Scott. We all know that that’s not how it works. The audience does realize that Michael’s excessive spending and poor budgeting has led him to reevaluate his lifestyle (like, not buying magic kits or bass fishing equipment), but in our real world, the audience probably understands just about as much about bankruptcy as he does. Michael believes and even states, “In Monopoly, you go bankrupt, you lose.” Well, that is true, but Monopoly is also a 1930s-era board game and this is real life: in this world, you go bankrupt, you get another chance at financial freedom.

After Michael literally declares the word bankruptcy, one of the office accountants decides to look over his budget and offer some professional advice. This is where experienced accountants, attorneys, and burned debtors know that “The Office” is doling out some pretty bad advice. Michael is advised to meet with a debt consolidator by Oscar Nuñez, the office accountant – red flag! Wrong! An educated accountant would know that debt consolidation is really a scam: first of all, it rarely works, and second, the program tricks clueless debtors into extending the terms of their repayment (which is why interest is lowered). I don’t know about anyone else, but I’d like to see what university gave Oscar Nuñez a degree in accounting!

So, who is responsible for giving millions of Americans bad advice? Is it the producers, the writers, maybe even the network? It looks like that adage “Don’t believe everything you see on T.V.” remains true to this day. It’s really up to the American people to make themselves aware of the subjects presented on television, especially regarding finance and debt. Don’t be like Michael Scott – consult real bankruptcy attorneys, like those at Geraci Law, LLC. They’ll give you the kind of advice NBC didn’t – good advice!

It will be close to 50 degrees in the Chicago area today and it's a glimmer of hope - spring is on its way.  The warm weather means people emerge from hibernation and spend time outside. In Chicago, the path along Lake Shore Drive fills with joggers, bikers, rollerbladers and the general passerbys. Spring turns into summer and instead of fidgeting with bills, lawsuit summons, and the endless stream of creditor calls, I would rather join the careless joggers on Lake Shore Drive. Spring clean your debt just like you spring clean the dreaded hall closet.

Filing a bankruptcy is the ultimate spring cleaning. Think about it, you file a Chapter 7 bankruptcy now - wait the 60-90 days for your discharge and you could be debt-free by June! It's a big decision to make but when you actually look at your bills, your budget and your income - what else are you going to do? You can waste another wonderful spring day doing balance transfers or barely meeting minimum payments or you can contact a bankruptcy attorney and get out of debt.

I understand a person is not going to be convinced to file a bankruptcy overnight. It actually takes the average family 2 years of fighting creditors to actually make the decision to file a bankruptcy. But look at the numbers, why torment yourself for the next 30+ years when you could file a bankruptcy and actually enjoy some relief (and a sunny afternoon). Plug your numbers in to Bankrate if you want to see how much you are actually spending on minimum payments.

Get yourself out of debt. Throw away the stress and hassle like you throw away old dusty brooms from the hall closet.

Below is a list of rules created (and enforced) by the Federal Trade Commission (FTC) for debt settlement or debt relief. If you are currently enrolled in a debt relief program, look at the list maybe the agency you hired isn't meeting the standards. Filing a bankruptcy can eliminate your debt or you can file a Chapter 13 repayment plan through the court. A bankruptcy works within the law to provide you with a fresh start. Attorneys have an ethical obligation to do what’s best for their clients and you have the bankruptcy code on your side.

In 2010, the FTC amended the Telemarketing Sales Rule to prohibit debt relief firms from collecting fees before certain guidelines are met. An organization offering to settle a debt for a fee cannot collect said fee until the following guidelines are met:

- The debt relief service successfully settles or changes the terms of at least one of the consumer's debts

- There is a settlement agreement debt management plan, or other agreement between the consumer and the creditors that the consumer has agreed to; and 

- The consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.

Information courtesy of the FTC

Many of these organizations require debtors to have a "dedicated account" to put in funds to pay creditors. The Better Business Bureau (BBB) has received numerous complaints regarding access to these funds. To have a dedicated account the organization must meet the following guidelines:

- the account is maintained at an insured financial institution

- the consumer owns the funds including any interest

- the consumer can withdraw from the debt relief service at any time without penalty and will receive all unearned fees within 7 business days 

- the provider is not affiliated with the bank nor receives referral fees.

Information courtesy of the FTC

Now you have some of the regulations for a debt relief agency. The reality is the majority of agencies do not meet these guidelines. In a study done by the FTC, only 10 percent of consumers in a debt relief agency actually succeed despite the majority of advertisements claiming 100% success rates. Knowledge is power - if it sounds too good to be true, it probably is.

There is a great article called "Knee Deep in Debt" on the FTC's Web site. To read the article, click here.

Apparently everyone is having money trouble. Our elected officials are having as difficult of a time as you or I creating and maintaining a budget. The big difference is when the federal government can't create a budget, the government stops.  Federal employees do not go to work because there potentially is no money to pay them.  Despite a budget extension to March 18th, the federal government is hitting the bomb shelter and preparing for a shutdown, including the federal courts.

When there is a shutdown, the costs charged with almost every filed bankruptcy petition can actually fund the adminstration of the majority of courts - not just the bankruptcy court. However, the funds could simply run out. The money spent by bankruptcy petitioners is actually funding other courts...the irony.

If the court were to shutdown and if the pool of money from court costs were to dry up, it is possibly bankruptcy attorneys could be affected. If there is no money to fund PACER (an electronic filing system used by attorneys to process bankruptcy petitions - including Geraci Law, LLC), the system could be shut down.

What does this mean to you - potential bankruptcy filer? You want an attorney who can survive the shutdown! Peter Francis Geraci and Geraci Law, LLC have been in practice for the last 35 years.  When there were other government shutdowns in the mid-90s, the firm survived and ensured petitions were filed.  

When you are considering a bankruptcy, keep in mind our towns, our states, and our federal governments are in similar positions. There is simply no money left over at the end of the month to pay the bills.

The rumors circle around the water cooler, a supervisor says hours will be cut, and a couple of months later the dreaded e-mail comes out saying you're losing your job. Unemployment is scary especially when you have debt. When you live paycheck to paycheck, the loss of that paycheck and a chunk of your income is a big hit. Filing a bankruptcy to eliminate the debt can alleviate the loss. Think about it, getting rid of the credit card or medical debt can free up your income so when the first unemployment check comes in it doesn't have to go directly to interest. Instead the money can go toward your mortgage, your vehicle, and things like gas to fuel the inevitable job hunt.

The job hunt becomes a full-time job - you are constantly applying for jobs, updating resumes and trying to get back on your feet. While you are dealing with the stress of job loss, the last thing you need is a creditor calling demanding payment or they will take your dog from your front yard (true creditor story).  When you're on unemployment, it becomes close to impossible to maintain credit card payments with high interest rates and minimum payments. Since we are currently in a "buyers market" when it comes to employment, employers are looking closely at credit reports to weed out potential employees. If you miss a couple of payments or have serious negative information on your credit report, it could be enough to be denied a job.

In an interview with the Dallas Morning News, attorney Mark Shank said there's no federal law that prohibits employment denial because of a bad credit report or score. When you have a tremendous amount of debt to the point where the negative information column on your credit report is starting to look as long as War and Peace, it's time to consider other options. You file a bankruptcy, eliminate the debt, and post-bankruptcy make your payments on time, put some money aside and rebuild.

Will it help you get a job? There's no way of knowing. But you'll be debt free so you can continue the job hunt and actually be able to answer your phone without the fear of being berated by a creditor.

People who file for Chapter 7 and Chapter 13 bankruptcies are relieved to find out that the majority of their household goods and personal property can be protected by exemptions (that vary depending on each state). That means you won’t need to expect the trustee to march into your home, have some breakfast, and walk out with your blender and DVD collection. But what worry a lot of filers are those “priceless” bands they wear around their fingers. Those are exempt…or are they? The short answer is no, there is no automatic exemption for sentimental value. However, there are ways to determine and even protect valuable assets like engagement and wedding rings.

Here’s a question: “Can I just pretend I don’t have any?” Now ask yourself this: would you swear to this lie in front of a judge, knowing it can land you in an even bigger mess? Remember that bankruptcy is a solution only for honest people. It’s both smart and constitutional to be up front about your assets so that we at Geraci Law can help you. Let your attorney know your concerns. He or she will probably recommend one of two things: one, get a low, trade-in valuation at a place like a pawn shop. You may be shocked to find that wedding and engagement rings won’t bring in more than several hundred dollars. Don’t take it as an insult, however; the lower the value, the easier it will be to protect your priceless asset. If it turns out that your jewelry is worth more than what our exemptions can protect, you may be able to “buy out” the equity of the rings from the trustee. And if all else fails, you can always file a Chapter 13 bankruptcy to save your assets.

A final suggestion: don’t wear anything excessively sparkly or obviously expensive to your meeting of creditors. It is not unheard of for the trustee to demand those assets right then and there! A bankruptcy court hearing isn’t Studio 54 or the opera: it certainly is not the place to show off what you have when you’re convincing people you can’t pay your debt.

“I love romantic walks on the beach, bubble baths, and losing sleep over my $10,000 in credit card debt!” …not a likely response you’ll hear on The Dating Game, is it? According to a 2009 survey issued by Credit Card Statistics, people are more likely to discuss classically taboo topics like their weight and political views before they admit to how much they owe. Those recognized off-limits topics hold the same possible consequence as debt: rejection. So, why is it that Bachelor #1 would rather dish the saga of his man gut or his political crush before ever admitting that he – like most Americans – gets the occasional call from a bill collector?

For one, debt is hardly something to brag about. Even saying that you’re paying down a debt sets off the red flag that you owe at least one creditor money; do you think your date wants to stick around to find out how many more you owe? The fact alone that people are keeping this dirty little secret hidden under the rug indicates they’re not only ashamed of it, but they’re scared of it. And yes – debt is scary. It means constant harassment from creditors, lawsuits, garnishments, foreclosures…the future is long and grim when you’re buried with debt. Unlike weight and political association, which fluctuate by the day, debt either goes down at a snail’s pace or grows quietly and ominously like a tumor. “So, can I call you later?” No, thank you.

Fortunately, there is a way to clear one’s debt faster than it took President Bush to leave office, and definitely more efficiently than a liquid-only diet. For those who qualify for a Chapter 7 bankruptcy, they can go from debt-stressing to debt-free in as little as four months. With a Chapter 13 bankruptcy, people start seeing their debt drop consistently every month – beat that, Biggest Loser! Before you know it, your debt will be the last of your problems and then the only numbers you’ll be paying attention to will be the ones on your phone, and not on your credit report.

Continuing Attorney Curtis entry, "Selecting the Right Bankruptcy Attorney for You - Experience Counts," the right attorney is one who will file your case in a timely matter and correctly the first time. When the economy turned, attorneys who file bankruptcy are appearing like campaign ads in November. These attorneys are ones who quote $400 bankruptcy fee and disappear after the case is filed. You know the saying you get what you pay for.

Recently, two Illinois bankruptcy attorneys have been charged with several counts of bankruptcy fraud. Including lying under oath, filing false documents, and hiding case dismissals from clients. This attorney also allegeldy collected fees to file for Chapter 13 bankruptcy protection with the promise to put the money toward the mortgage. However, the court alleges they used the money for their own benefits. When it comes to your financial situation you want an attorney to file your case correctly - and legally - so you are not paying an attorney to get you further in the hole.

When considering an attorney, it is important to look ahead to the future. A Chapter 13 bankruptcy can range anywhere from three to five years meaning you want to know your attorney will be around for the next three to five years. Peter Francis Geraci and his firm have been practicing for 35+ years helping numerous people get out of debt. When a previous client calls needing a reprint of bankruptcy information, a person answers the phone instead of a dial tone for attorneys who have closed up shop.

You can read more about the indictment in today's Chicago Sun Times.  

One in four people do it…Facebook stalking, that is. Over 500 million people actively use Facebook today. They’re checking out photos of family vacations, commenting about their friend’s beautiful new Corvette, even doing a little updating of their own. Since 2004, the world’s population has been at your fingertips…and at your debt collectors’, too.

Facebook is a debt collector’s dream: not only is it free, it can potentially give them unlimited access to personal information like your job, family contacts, hobbies, recent purchases, vacations…are you scared yet? These days, your debt collectors don’t have to be secret agents to uncover evidence against you and legally force you to pay your debts.

What you can do to protect yourself? First of all, know your privacy settings and adjust them to the highest levels. Second, be careful whose “friendship” you accept. You may see a good-looking person with a conventional name from your old school and assume you once knew them. Don’t be fooled! That may very well be Joe Creditor, the scum-sucking collector terrorizing your home phone and family members. Lastly, it’d be smart to go through all of your photos, status updates, and personal information so as not to reveal anything you wouldn’t want your debt collectors to know…

Start considering your debt collectors as dangerous and ruthless as identity thieves – they’ll go anywhere and do anything to get your money. Debt collectors are not your friends – especially not on Facebook.

You file a bankruptcy, your debt is eliminated and now what? Being debt-free is a great thing and you want to rebuild your credit but maybe you don't know how? Post-bankruptcy brings credit cards and financing options but with higher interest rates. Creditors want you to be in debt - if you apply for one of these credit cards and get overwhelmed again, the safety net of a Chapter 7 bankruptcy is not an option again for eight years.  It is easier said then done to create a budget and save money. Many people are not educated in handling finances and bankruptcy can eliminate the old debt but to manage future debt they need the tools to succeed.

When the bankruptcy laws changed in 2005, certification of credit counseling and debt management became mandatory for a case to filed and a case to be discharged. The debtor is required to spend time learning financial management to receive his certification. The credit counseling course focuses on reasons a person gets into debt and possible solutions. So, a person filing for a bankruptcy completes the course and can identify possible reasons as to how they got into debt in the first place. The debtor education course outlines short term and long term goals along with creating a budget so post-bankruptcy, the debtor has background in financial management.

The courses are important. The majority of bankruptcies are filed due to factors like divorce and medical problems.  But, there are people who used credit and were possibly not educated in the ramifications of missed payments, high interest, etc. For a person who is overwhelmed by their debt, these courses can provide the tools for a better financial future.

When you’re stuck in debt, your life is stressful enough as it is without balancing the angel and devil on your shoulder (let alone your checkbook). A lot of people take the debt they’ve acquired very hard on themselves and many wonder, “is it better for me to live under the weight of my mistakes if it’s what I deserve?” The answer, for hundreds of years, is: no. No one – not your family, your government, your religion – can force this weight on you forever. And, if you’re an honest, hard working, out of luck American, then bankruptcy is not stealing; it’s saving you.

Let’s examine the definition of the world “steal.” Scary word, isn’t it? A universal definition goes, “To take (the property of another) without right or permission.” When somebody has to file for bankruptcy, nine times out of ten, it’s for a debt they were approved for. You can’t walk into a bank or a store and apply for their credit card without getting approved, after all. If your intention was always to pay it back, then filing bankruptcy on that loan is certainly not stealing. Stealing, simply said, is illegal. Even a simple shoplifting charge can land anybody in jail for up to a year! Bankruptcy, on the other hand, is a perfectly legal process based off of the ideals of our founding fathers: a chance for a fresh start for honest people who want a better life.

So, if “Thou Shalt Not Steal” is keeping you up at night, keep in mind that even the Old Testament approves of debt elimination (Deuteronomy 15: 1-2). You’re living in the 21st century, and life isn’t much longer now than it was then. Don’t spend it eating away at your conscience while your debts acquire interest. Bankruptcy is your golden, legal answer: time-tested, shoulder angel approved.

The idea of filing for bankruptcy is a scary one for most people. So, when you have made the decision to file for bankruptcy protection, you want to be certain you find the right firm to help you. Not all bankruptcy lawyers and law firms are the same, and having an experienced bankruptcy lawyer is a huge benefit.

Attorneys with a larger number of bankruptcy filings are usually more familiar with the different types of bankruptcy, and the various issues that can arise in a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. They are more familiar with the bankruptcy trustees and the procedures used in the local US Bankruptcy Court. More experienced attorneys can answer your bankruptcy questions, go over your bankruptcy alternatives, and ensure you receive the bankruptcy help you are requesting. Having a less experienced law firm file your bankruptcy could lead to loss of property in a Chapter 7, or a dismissal of your Chapter 13.

Peter Francis Geraci and his law firm Geraci Law L.L.C. have been representing debtors in consumer bankruptcy (personal bankruptcy) for almost 35 years. The experienced attorneys are familiar with all aspects of the new bankruptcy laws and can ensure the best result for you in your time of financial distress. Filing bankruptcy is such an important decision. Make sure you have the right people helping you.

It’s very complex to discharge student loans in bankruptcy. Section 523(a)(8) of the Bankruptcy Code requires a separate process in the bankruptcy and a finding of undue hardship – basically, the inability to make any payment ever. There are too many client-specific particulars, multi-part tests, and litigation strategies for anyone to address in a (hopefully) pithy blog post. Our firm has repeatedly overcome these hurdles on behalf of educational borrowers, but it’s not easy and can never be guaranteed.

 

There’s currently a measure of hope out there for those with sizable student loans, however. Two laws have been introduced to expand the ordinary bankruptcy discharge to include some educational debt.

 

But first a tiny bit of context: By 2014, the government is going to be the originator of all student loans, unless the college itself is doing the lending. The changeover has already started, but for now, there are two types of student loans: public (originated by the government or nonprofit educational institutions) and private (originated by the big banks or for-profit educational institutions).

 

Even after 2014, though, borrowers who have already borrowed would be saddled with their debts as they are. The House’s Private Student Loan Bankruptcy Fairness Act (H.R. 5043) and the Senate’s Fairness for Struggling Students Act of 2010 (S. 3219) would treat private student loans the same as other loans – these debts would be easily dischargable in bankruptcy alongside (for example) credit card debt and medical bills.

 

Both proposals were first presented last year, but because the new Congress is now in session, they'd need to be reintroduced. If you, or someone you love, would be helped by this reform, please contact your legislators and make sure your voice is heard.

Will it ruin my credit?

- You probably don’t have great credit now! Filing a bankruptcy can eliminate your debt and provide you with the opportunity to rebuild your credit. Even if you have a 700+ credit score, having too much credit is not good credit.

 

Will I lose my house?

- Not if you don’t want to. To keep your house, you must stay current with your mortgage payments. The attorney you meet with will determine which bankruptcy will allow you to keep your home. Geraci Law has not lost a house in over 35 years and doesn't want to start with yours.

 

Do I have to include all of my credit cards?

- You cannot pick and choose your debt and why would you want to? Filing a bankruptcy can eliminate all of your debt giving you an opportunity for a fresh start.   

 

Can I keep my boat/motorcycle/rocket ship?

- You can keep your assets if you can afford to keep them. The attorney you meet with will determine which bankruptcy will protect all of your assets.

 

Do I have to be behind on my bills to file for bankruptcy?

 

- No! You can be up to date with the minimum payments and still have a tremendous amount of debt. Making the minimum payments is probably not getting your anywhere close to being debt free. For example, if you have $2,500 in credit card debt with 21% APR and you are only making the minimum payment – it will take you 40 years and 8 months to pay back the original charge of $2,500!

 

How much is it going to cost?

- Going and meeting with an attorney is like going to the doctor. A lawyer like a doctor needs to diagnose what the problem is and assess the amount of work to be done to fix the problem. After filling out our forms and meeting with a lawyer, your fee will be quoted to you. Our fees can be done in payment plans and will be based on your case and your financial situation.

 

I talk to people all day, every day. People who by overspending, medical issues, divorce, etc. have found themselves in a hole they can't dig themselves out of.  Knowing they are in fact "buried" there is still hesitation to filing a bankruptcy. Somehow, bankruptcy has been dubbed the end all, be all to your financial future. The somehow could be answered with the boisterous words of people like Sue Orman. In an interview with "Us Money Talk" she said bankruptcy is the worst choice to make and it will have a negative impact on a credit score. Obviously, Ms. Orman! Applying for too much credit, multiple inquires into a person's credit, debt settlement and missed payments can also have a negative impact. 

Orman's brilliant solution is creating a budget with a credit counseling agency. Sure, credit counseling with a non-profit, legitimate agency can help people budget and plan for their future. BUT - how does it help when you have $50,000 in credit card with 30% APR. There's a negative impact on a budget, if a person can't meet the minimum payments due to a job loss, income reduction, etc. how will budgeting with a loss of income help plan for their financial future. 

A person with $50,000 in credit card debt at 30% APR is looking at a minimum payment of $1,725.00 per month and it will take the person 525 months to pay off the debt! That's over 43 years and the person will pay $124,263.52 in interest! Instead the person files a Chapter 7 bankruptcy, eliminates the debt and the money spent on minimum payments is allocated to their financial future. If a person is so overwhelmed by their debt, with interest rates and minimum payments skyrocketing, debt settlement and budget planning are a Band Aid for a massive debt wound.

Orman and others like her ignore the real numbers and consider one of the country's oldest laws the worst option for struggling people. Why spend thousands upon thousands of dollars in interest, lose sleepless nights from stress and still have Orman's "negative impact" on your credit when you can file a bankruptcy and be debt free!

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What is really surprising is that only 1 of 100 people who should file bankruptcy, actually do! Example: You get a foreclosure notice. Instead of filng Chapter 7 or Chapter 13, to get rid of credit cards and other debt, so you can afford your mortgage, you just keep on paying your credit cards, and worse yet, abandon your home. Another example: You get sued by a creditor for $3,000 money you owe, for an uninsured accident, or credit cards, or medical bills. Instead of taking care of it and either eliminating it in Chapter 7, or getting a low payment you can afford for all bills in Chapter 13, you do nothing, your drivers' license gets suspended, your checking account is subject to garnishment, and so are your wages. Both are sad. Creditors are so so happy when you do nothing.

Under Chapter 7, you submit a list of your debts, and a list of your assets.  I only file Chapter 7 cases where your assets are exempt from creditors, and you will keep them. After your attorney files this list, or petition, the Clerk of the U.S. Bankruptcy Court sends notice that you will appear at a "meeting of creditors" to testify about your petition.  That meeting is short, your attorney goes with you, and any creditors that want to ask you questions relating to your debt, can do so.  Typical questions are:  "Do you have a car?, What happened to the merchandise you bought?" and How much is your house worth?"  These are questions you have already answered in your petition, so the "meeting of creditors" is often very short and painless.

Next, under Chapter 7, the creditors have 60 days to object to your discharge in bankruptcy.  Your attorney will be working on any deals, or "reaffirmations", which creditors who financed your house or car or other things will want. Then the Bankruptcy Judge will issue a notice of a hearing on these "reaffirmations", at which time you will appear to state that you want to make these deals, and then, the Court will issue a "Discharge", which states that all dischargeable debts are gone.  Of course, debts which are exempted from discharge will remain, such as certain taxes and student loans.