bankruptcy en-US How to Do a One-Day, Do-It-Yourself Bankruptcy <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-do-a-one-day-do-it-yourself-bankruptcy" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="paperwork" title="paperwork" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>If your debts have become overwhelming and you&rsquo;re facing a significant financial blow, such as wage garnishment, vehicle repossession, foreclosure, eviction, or utility service disconnection, and you don&rsquo;t have the money for a lawyer, don't panic. While bankruptcy should be a last resort, you do have options. It&rsquo;s possible to file a Chapter 7 or Chapter 13 bankruptcy by yourself to avoid or stop these collection attempts. As soon as you file, the court invokes the immediate protection of the automatic stay, which stops creditors from pursuing all collection activities, including phone calls and letters, and mandates utility companies to restore any disconnected services. Filers may also be able to get back repossessed vehicles. By following this timeline, you can file bankruptcy in a matter of hours. (See also: <a href="">How to File for Bankruptcy</a>)</p> <h3>The Night Before: Gather Your Documentation</h3> <p>To file either Chapter 7 or Chapter 13 bankruptcy, you must provide documentation of your debts, expenses, and income.</p> <p><b>Debts</b></p> <p>Gather bills, account statements, and other correspondence for all of your creditors. This not only serves as a record of what you owe, it also ensures that you have accurate creditor information. Improperly identifying creditors can cause those debts to be excluded from the bankruptcy case, leaving you responsible for them. Pull copies of your credit report from Equifax, Experian, and TransUnion to ensure you list all creditors.</p> <p><b>Income</b></p> <p>The court also needs to see proof of your income for the past six months. This includes pay stubs, investment account statements, business profit and loss statements, and documentation of unemployment, Social Security, or other social service benefits. You must also include documentation of any child support or alimony payments you receive.</p> <p><b>Expenses</b></p> <p>The bankruptcy petition requires you to list your monthly household expenses as well, so gather the <a href="">bills you receive for utilities</a>, rent or mortgage, and other recurring expenses, such as medical care, and court-ordered support payments. You must also provide estimates of how much you spend each month on things like food, clothing, and education expenses for minor children.</p> <h3>The Night Before: Look for Help</h3> <p>If your financial situation is simple, you may not need any assistance with the filing process. However, if you run into any snags, it&rsquo;s imperative to know where to go for help. Visit <a target="_blank" href=""></a> or search the Internet for legal aid organizations in your area, most of which offer legal advice both by phone and in person. Although seeking assistance may put a dent in your one-day plan, filing an accurate petition is much more important than speed.</p> <h3>7 a.m. &mdash; Credit Counseling</h3> <p>U.S. bankruptcy laws require all filers to undergo 90 minutes of credit counseling and receive a certificate of completion. Luckily, many courses are available online and over the phone. You can complete the entire process within two hours. The price varies depending on the provider, but in general, the class should cost no more than $50. You can receive a waiver of the course fee if your income is below the poverty line in your state. You can find <a target="_blank" href="">approved credit counseling providers</a> on the U.S. Courts website.</p> <h3>9 a.m.&nbsp;&mdash; Completing the Petition</h3> <p>The bankruptcy petition consists of a multitude of forms, called &ldquo;schedules,&rdquo; to record your debts, income, expenses, and assets. You can <a target="_blank" href="">download the bankruptcy petition paperwork</a> from the U.S. Courts website, under the &ldquo;Official Forms, Instructions, and Committee Notes&rdquo; heading. The list may seem daunting, but the Courts website provides an <a target="_blank" href="">index of the forms</a> you need to file each type of bankruptcy. Give yourself at least five hours to compete the petition; more if you need to take breaks to stretch, eat, fish toys out of the toilet, etc.</p> <p><strong>Means Test</strong></p> <p>Officially known as the &ldquo;Statement of Current Monthly Income and Means Test Calculation,&rdquo; this is the first form you should download and complete. This form walks you through calculations to determine if your income requires you to file Chapter 7 or Chapter 13. If your income is above the median in your state and you have at least $150 in disposable income each month, you have to file Chapter 13 bankruptcy and create a repayment plan for your debts. If it falls below the median income, you must file Chapter 7 bankruptcy and surrender any non-exempt assets.</p> <p><strong>Income</strong></p> <p>Use the documentation you gathered earlier to give a complete account of your average monthly income on Forms B 22A, B 6I and B 7. Do not leave anything off, even if it is a small amount or it was given as a gift. The courts will examine your finances carefully, and any dishonesty here can be cause for the judge to dismiss your case for fraud.</p> <p><strong>Debts</strong></p> <p>List creditor names, addresses, account numbers, and the amount you owe on form B 1. Describe whether the debts are secured, such as <a href="">mortgages and car loans</a>, or unsecured, such as credit cards, on Forms B 6E and B 6F. If you file Chapter 7 bankruptcy and have secured debts, you must fill out Form B 8 and declare your intention to either keep the property serving as collateral for the debt and continue paying, or surrender the property and be free of the debt.</p> <p><strong>Expenses</strong></p> <p>Your average monthly expenses go on Forms B 22A and B 6J. As with the other forms, be thorough. Leaving off a valid expense could place you over the Chapter 7 threshold or cause you to make higher payments in a Chapter 13 payment plan.</p> <p><strong>Assets</strong></p> <p>If you file Chapter 7 bankruptcy, you must list your assets on Forms B 6B and B6C. This includes real estate, vehicles, jewelry, electronics, collectibles, fire arms, cash, and funds in bank accounts. The document requires a description of the property, as well as the current value. If you don&rsquo;t know the exact value of an item, look in the newspaper, in online classified ads, and on web auction websites for the cost of items similar to yours and estimate from there. The court will perform its own valuation if it seizes the property for creditors or thinks your figure is incorrect. Most of the time, the value of your property will not exceed the exemption threshold in your state, so it&rsquo;s unlikely that you will have to give anything up. You can check the exact exemption amounts by visiting your state&rsquo;s bankruptcy court website.</p> <p><strong>Chapter 13 Payment Plan</strong></p> <p>If you file Chapter 13 bankruptcy, you must come up with a three- to five-year plan to use your disposable monthly income to repay your debt. There is no official form, so if your state&rsquo;s bankruptcy court website doesn&rsquo;t provide one, you must create the plan in a word processing program. Bankruptcy laws require you to pay off priority debts first, or at least bring them current. These include non-dischargeable debts such as taxes and child support, as well as secured debts. Once you pay those, the plan requires you to pay as much of your unsecured debt as possible each month until the end of the plan term. The court discharges any unsecured debt remaining at the end of this time, and you will no longer be responsible for paying it.</p> <h3>2 p.m. &mdash; Filing the Petition</h3> <p>Filers without legal representation must submit the completed petition and the credit counseling certification in person to the court clerk and pay the appropriate fees by cash or money order. To file Chapter 7, you must pay a filing fee of $299. The Chapter 13 filing fee is $279. If you cannot pay the entire fee up front, the court will accept installment payments. People with income that is less than 150% of the federal poverty guidelines can receive a complete waiver of the Chapter 7 filing fee. There is no waiver available for Chapter 13 filers. The clerk will give you a document to prove that you filed.</p> <h3>3 p.m. &mdash; Mission Complete</h3> <p>Once the paperwork is in, the filing process is complete. You are under the full protection of the automatic stay, so you can fax or mail copies of the document to your creditors, who are then legally required to cease all <a href="">collection activities</a> immediately.</p> <a href="" class="sharethis-link" title="How to Do a One-Day, Do-It-Yourself Bankruptcy" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Lauren Treadwell</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Consumer Affairs Debt Management DIY bankruptcy Creditors emergency plan Fri, 18 Jan 2013 10:48:41 +0000 Lauren Treadwell 961916 at Slow and Steady Wins the Debt Race <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/slow-and-steady-wins-the-debt-race" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="running marathon" title="running marathon" class="imagecache imagecache-250w" width="250" height="240" /></a> </div> </div> </div> <p>When I woke up to the reality of having $20,000 of credit card debt, I had to face this hard truth &mdash; I didn&rsquo;t get into debt overnight, so I&rsquo;m probably not going to get out of debt overnight.</p> <p>In fact, it took me four and a half years to pay off my debt. There were plenty of times throughout that journey when I wished there was some easy way to just wipe it all out.&nbsp;But there was no easy way. I don&rsquo;t recall ever considering bankruptcy. I racked up all that debt. I needed to pay it all off.</p> <p>So I did. Slowly. Month after month, I sent big checks to creditors, paying dearly for trips I had taken long ago and restaurant meals I no longer remembered.</p> <p>Today, with the perspective that time brings, and with lots of experience helping others struggling with debt, I honestly believe that the slow and steady way out of debt is the best way. (See also: <a href="">How to Start Fighting Debt &mdash; Today</a>)</p> <h2>The Danger of Fixing Symptoms</h2> <p>For many people buried under a mountain of debt, bankruptcy looks appealing. A quick way to end the pain.</p> <p>However, according to a paper published by the <a href="">Bankruptcy Data Project</a>, a Harvard University-based research group that has studied bankruptcy for over twenty years, one year after filing for bankruptcy, one in four filers were struggling to pay routine bills, and one in three said their overall financial situation was similar to or worse than when they filed.</p> <p>Tossing your debt overboard may feel good for the moment. However, for many people, ditching debt without addressing the underlying causes often turns out to provide only short-term relief.</p> <h2>Lasting Changes Require Changes of the Heart</h2> <p>When I was blindly digging my way into debt, I saw buying stuff as the route to feeling good about myself. I bought things I couldn&rsquo;t afford in order to tell the world I <em>was</em> somebody.</p> <p>I also saw carrying a balance on credit cards as normal behavior. How else did most people get by?&nbsp;</p> <p>I probably could have learned some helpful new behaviors around money without changing these attitudes &mdash; how to use a budget, how to set up an emergency fund, and the like. But without a serious attitude adjustment, I doubt I would have been interested. Or, if I did start dabbling in new habits, they probably wouldn&rsquo;t have lasted very long.&nbsp;</p> <p>A psychiatrist friend tells me that attitudes and behaviors work in circular fashion to bring about change. Behavioral changes tend to alter our attitudes, and attitudinal changes tend to alter our behavior. However, they don&rsquo;t usually happen on the same schedule. While we may be able to force ourselves into some short-term behavioral changes, attitudinal changes take time. You can&rsquo;t just slap on a new conviction like cologne.</p> <h2>Getting on the Slow Track</h2> <p>To be sure, getting out of debt requires behavioral changes. You need to stop going any further into debt. You also need to gather the facts. How much debt do you have?&nbsp;Write it all down, and add it all up. Create a <a href="">cash flow plan</a> (AKA, a budget). Then start rolling a <a href="">debt snowball</a>.</p> <p>However, getting and <em>staying </em>out of debt also requires the slower work of heart change. Start by taking a close look at your financial attitudes. Are there any ways of thinking that have contributed to your debt? Have you been buying things you can&rsquo;t afford in order to feel better about yourself, like I did?</p> <p>Acknowledging those attitudes is the first step toward changing them.</p> <p>One of the key attitudinal factors that helped me turn things around was accepting responsibility for my debts. The credit card companies didn&rsquo;t manipulate me into carrying balances on my cards.&nbsp;My parents didn&rsquo;t fail me in some way.&nbsp;</p> <p>It wasn&rsquo;t about beating myself up about my debts; it was about acknowledging the truth. I was responsible for my debts.</p> <p>To be sure, some people with debt problems have gotten into financial trouble by way of horrendous life circumstances. A divorce, an extended period of unemployment, catastrophic medical bills. I don&rsquo;t mean to be insensitive to any of that. But it&rsquo;s been my experience that when a person with debt owns their role in the debt &mdash; and most people with debt played at least <em>some</em> role &mdash; they have a far greater chance of getting and staying out of debt.</p> <p>If you have a lot of debt and you&rsquo;re just beginning the process of getting out from under, I&rsquo;m sure the idea that it may take several years doesn&rsquo;t sound the least bit appealing. However, I&rsquo;m thankful to have taken the long way out. It took time to change my money-related attitudes and cultivate some healthy financial habits. Since paying off the last of my debts some 15 years ago, I have carried no debt other than a reasonable mortgage.&nbsp;</p> <p>I firmly believe that taking the slow road was the key to making changes that have stuck.</p> <a href="" class="sharethis-link" title="Slow and Steady Wins the Debt Race" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Matt Bell</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Debt Management bankruptcy debt relief slow and steady Fri, 11 May 2012 10:36:11 +0000 Matt Bell 929129 at Book Review: Debt Free for Life <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/book-review-debt-free-for-life" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="Cover of Debt Free for Life" title="Cover of Debt Free for Life" class="imagecache imagecache-250w" width="250" height="126" /></a> </div> </div> </div> <p><a href=";tag=wisbre08-20&amp;linkCode=as2&amp;camp=1789&amp;creative=390957&amp;creativeASIN=0767929861"><em>Debt Free for Life: The Finish Rich Plan for Financial Freedom</em></a> by David Bach</p> <p>There are really two steps to getting out of debt. First, cure whatever problem lead to you getting into debt. Second, pay down the debt.</p> <p>David Bach's new book seems to be aimed at people for whom taking the first step is mainly a matter of exhortation &mdash; that is, people who are in debt primarily because they've been unable to resist the lure of easy credit. The right message for them is simply &quot;don't do that,&quot; and the book does a good job of delivering that message, hitting all the right notes &mdash; how expensive credit is, how risky it is, how dangerous it is, and how it utterly thwarts your ability to build capital. (See also: <a href="">Good Debt, Bad Debt</a>)</p> <p>Having delivered that message, Bach goes on to walk people through the second step &mdash; getting the debt paid down &mdash; with careful attention. He calls his procedure the DOLP method, short for Done On Last Payment. (He says that it was formerly Dead On Last Payment, but that readers suggested that Done was more motivating than Dead).</p> <p>The DOLP method is a variant of the classic debt snowball, where (after making the minimum payment on each debt) you apply all your additional cash to one debt. (The name comes from the way your additional cash snowballs as you extinguish each individual debt and are able to add its minimum payment into the additional cash to apply to the next debt.)</p> <p>The two main variants are:</p> <ol> <li>Pay down the highest-rate debt first.</li> <li>Pay down the smallest debts first.</li> </ol> <p>Option two is often recommended as &quot;more motivating&quot; because you can see some early success (the first debt quickly paid off) and you get to see the snowball effect in action &mdash; that minimum payment getting added to the additional cash to apply to the next debt.</p> <p>Bach's DOLP method aims to improve on option two by arranging to pay off <em>whichever debt can be paid off most quickly</em> (not necessarily the smallest, because different debts have different minimum payments).</p> <p>Option one (highest-rate debt first) is generally the cheapest way to get out of debt, if you can manage it. But Bach makes a good case that his DOLP method may well be cheaper in practice, because the more debts you have, the more opportunities you have to miss a payment, pay the wrong amount, or have a payment go astray &mdash; and just one late fee can easily eat up all the savings from getting the high rate debt paid off first.</p> <p>There's a lot to like here.</p> <p>I particularly like Bach's look at student loan debt, with a careful analysis of just how pernicious that system has become in the United States (leading so easily to the <a href=" ">wage-slave, debt-slave trap</a>), with the bad news nicely ameliorated by a thorough look at the various alternatives for dealing with student loan debt. If you've got debt problems and any of it is from student loans, that chapter alone could be easily worth the price of the book.</p> <p>Bach also has a good chapter at how to find any money that you've misplaced &mdash; forgotten bank accounts, lost tax-refund checks, savings bonds that have gone astray, etc. (See Lindsay's post on <a href=" ">Everything You Need to Know About Unclaimed Property</a> for a quick look at the same topic.)</p> <p>The sections on credit counselors and debt-settlement companies are also very good and well worth reading if you're considering using either one. (There's nothing they can do that you can't do yourself, if you're willing to put some effort into learning how such things work.)</p> <p>Two things in the book struck wrong notes for me.</p> <p>The first has to do with what Bach chooses to present as unbreakable rules versus what he presents as suggestions. There <em>are</em> unbreakable rules in personal finance &mdash; for example, you have to live within your means &mdash; but many other things are just a matter of style. When Bach suggests &mdash; in italicized capital letters &mdash; that to succeed &quot;you must make your plan automatic,&quot; I know that he's wrong. (I've <a href=" ">never made an automatic payment</a> in my life, and yet here I am: debt-free, with enough savings and investments that I can afford to be a full-time writer.) I don't doubt that he's speaking from experience, having seen many people who had failed in the past succeed once they put their bill payments on automatic, but it would work better for me if he'd just said that.</p> <p>The second has to do with that first step for getting out of debt &mdash; curing whatever problem got you into debt in the first place. As I mentioned above, Bach's audience seems mainly to be people whose problem with debt comes from the fact that they overspend. All you have to do is look around to see that, even as the great recession winds down, there are a lot of people who need that message. But there are also people who don't fall into that category. For example, people who borrowed <a href=" ">perfectly ordinary amounts of money</a>, and then suffered a loss of income, need to take a different approach to curing the problem &mdash; as do people who are in debt because of huge medical bills.</p> <p>It's worth comparing this book to Feeney and Connolly's <a href=";tag=wisbre08-20&amp;linkCode=as2&amp;camp=1789&amp;creative=390957&amp;creativeASIN=0470498862 "><em>Road Out of Debt</em></a> that I <a href=" ">reviewed</a> last month. That book, written by a bankruptcy judge and a bankruptcy attorney, is probably a better choice for someone whose debt is so large that it cannot be paid back (although Bach's book also has an excellent chapter on bankruptcy).</p> <p>For its target audience, though &mdash; people whose debt problem is mainly a result of overspending &mdash; <a href=";tag=wisbre08-20&amp;linkCode=as2&amp;camp=1789&amp;creative=390957&amp;creativeASIN=0767929861"><em>Debt Free for Life</em></a> is a great choice.</p> <p><em>Disclosures: I received a free copy of </em>Debt Free for Life<em> for review. This post contains affiliate links, and I will earn a commission for any purchase made through these links.</em></p> <a href="" class="sharethis-link" title="Book Review: Debt Free for Life " rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Philip Brewer</a> and published on <a href="">Wise Bread</a>. Read more <a href="">Debt Management articles from Wise Bread</a>.</div></div> Debt Management bankruptcy book review debt advice Wed, 13 Apr 2011 09:48:19 +0000 Philip Brewer 523954 at Book Review: The Road Out of Debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/book-review-the-road-out-of-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="Cover of The Road Out of Debt" title="Cover of The Road Out of Debt" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p><a href=";tag=wisbre08-20&amp;linkCode=as2&amp;camp=1789&amp;creative=390957&amp;creativeASIN=0470498862"><em>The Road Out of Debt: Bankruptcy and Other Solutions to Your Financial Problems</em></a> by Joan N. Feeney and Theodore W. Connolly</p> <p>You've read stories of people becoming debt-free. In personal-finance blogs, the stories are always ones of debt problems overcome through hard work and frugality. Sadly, in the real world, that doesn't always work. For reasons like illness, divorce, job loss, economic downturn, business failure, natural disaster, war &mdash; some debts entered into in good faith simply cannot be paid back. (See also: <a href="">CitiMortgage Told Me to Default on My Loan</a>)</p> <p>Feeney and Connolly's new book is about how to find the dividing line between these cases, and what to do once you know which side you&rsquo;re on.</p> <h2>Money-Management Skills</h2> <p>The authors provide a good short course in money management much like you&rsquo;d find in any personal finance book or blog &mdash; how to budget, how to cut expenses, and how to take control of your finances. Then the book starts talking about debt &mdash; mainly about the many, many ways to use debt unwisely. In particular, they&rsquo;ve got a great chapter on the sort of debt that people with financial troubles turn to in a usually futile effort to stave off financial catastrophe for one more month &mdash; payday loans, car title loans, pawn shops, loan sharks, etc.</p> <p>Even before that, they provide some basic advice on negotiating with your creditors. Especially in the world of finance as it is today, there are plenty of people who could actually fulfill their obligations &mdash; except that the creditors have written rules that let them lard up a debtor&rsquo;s obligations with late fees and penalty interest rates. A knowledgeable debtor with good negotiating skills can often cut through those problems and get their obligations settled reasonably cheaply.</p> <p>One bit in that section that I particularly like is on the psychology of debt collectors: Some will browbeat you, some will humiliate you, some will pretend to be your friend &mdash; but however they act, they&rsquo;re all just trying to get as much money from you as possible. They don&rsquo;t care what other debts you have or whether you can support your family. If you don&rsquo;t understand this &mdash; if you allow yourself to imagine that the ones who act like friends are actually friendly &mdash; you&rsquo;re going to be less successful in your negotiations. (I talk about the same psychological issues in my post <a href="">Don&rsquo;t Treat Businesses Like People</a>.)</p> <p>The authors provide some useful advice on seeking help (credit counselors and the like) if your financial problems are beyond what you can manage with those basic skills &mdash; and about avoiding the scams that often masquerade as help for people with debt troubles.</p> <p>Sometimes, even with help, debt problems cannot be overcome. Specifically, if you can&rsquo;t cover your minimum expenses plus interest on your debts and have money left over to pay down the principle on your debts, then you're over the line. Once you're in that situation, your financial situation can only get worse &mdash; your debt burden will rise every month, even if you don't borrow any more money.</p> <h2>When to Consider Bankruptcy</h2> <p>If you could support yourself &mdash; pay for your family&rsquo;s shelter, food, and clothing &mdash; except that other obligations drain away more than all the rest of your money, then it&rsquo;s time to consider bankruptcy.</p> <p>Even if it&rsquo;s time to consider bankruptcy, it may not be the best choice. Some obligations (child support, student loans) cannot be wiped out in bankruptcy. Alternatively, if you can&rsquo;t even afford the necessities, then your household is not a viable economic unit and bankruptcy won&rsquo;t help.</p> <p>The core of the book is the information you need to figure whether bankruptcy is worth considering &mdash; and the information to consider it and make an informed decision.</p> <h2>Navigating the Rules</h2> <p>Bankruptcy is basically a bunch of rules for recognizing that some debts will never be paid back, and then sorting out how that situation will be dealt with. But because they're <em>rules,</em> it&rsquo;s possible to break them &mdash; and get into kinds of trouble that ordinary people don&rsquo;t need to worry about.</p> <p>For example, it&rsquo;s legal (although perhaps foolish) to borrow money even if you don&rsquo;t know how you&rsquo;re going to pay it back. But if you&rsquo;ve already decided to declare bankruptcy and have no intention of paying the money back, it&rsquo;s probably fraud. Normally you can choose to pay back some creditors (such as a relative who lent you money to keep the electricity turned on) before others (such as the credit card company). But once you've decided to declare bankruptcy, those decisions must be made according to the rules.</p> <p>A big chunk of the book is about threading a path through those rules &mdash; protecting your ability to make a fresh start while making sure that you meet your obligations to the extent required by law.</p> <p>A <a href="">system of bankruptcy</a> is a good thing. Some debts are never going to be paid back. A system that refuses to recognize that just drives economic activity underground (ruining lives in the process).</p> <h2>An Important Story</h2> <p>There's a reason why the story of overcoming debt problems through hard work and frugality is so compelling: The story models successful financial behavior. The behaviors that it takes to work through debt problems &mdash; spending less than you earn, taking control of your finances &mdash; are the same behaviors that lead to financial security in general.</p> <p>That, I think, is why the story of bankruptcy is less compelling: It doesn&rsquo;t serve as much of a model for households that aren't in debt. The skills &mdash; understanding an arcane area of law, filling out government forms correctly &mdash; don&rsquo;t contribute much to an average person's life.</p> <p>But that doesn&rsquo;t make it an unimportant story. For those who are in trouble with debt, bankruptcy can free up the time and effort they&rsquo;ve been spending trying to handle the demands of creditors and put that effort toward supporting their families.</p> <p>Written by a bankruptcy judge and a bankruptcy lawyer, <em><a href=";tag=wisbre08-20&amp;linkCode=as2&amp;camp=1789&amp;creative=390957&amp;creativeASIN=0470498862">The Road Out of Debt</a></em> does a good job of integrating these two stories in a way that illuminates the line between the sort of debt that can (and should be) worked through, and the sort of debt that will never be paid back.</p> <p><em><span>Disclosure: This post contains affiliate links, and I will earn a commission for any purchase made through these links.</span></em></p> <a href="" class="sharethis-link" title="Book Review: The Road Out of Debt" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Philip Brewer</a> and published on <a href="">Wise Bread</a>. Read more <a href="">Debt Management articles from Wise Bread</a>.</div></div> Debt Management bankruptcy book reviews books credit counseling Mon, 07 Mar 2011 12:36:07 +0000 Philip Brewer 500426 at 10 Massive Companies That Crashed in 2010 <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="" target="_blank"></a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/10-massive-companies-that-crashed-in-2010" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="Woman in video store" title="Woman in video store" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <a href="" class="sharethis-link" title="10 Massive Companies That Crashed in 2010" rel="nofollow">ShareThis</a><p>It was a tough year for some major companies. Many of the largest closed their doors in 2010, some after being in business for more than 150 years. Media outlets, car manufacturers, and grocery chains all felt the sting of bankruptcy or worse.</p> <p>Below is a list of 10 large and established brands that folded in 2010. Most suffered from not being able to keep up with the changes in technology, and others simply grew too fast for the current economic climate.</p> <p>Whatever the reasons behind each company's sad story, there is plenty we can learn from their demise to ensure that we don't make the same mistakes with our own businesses. Remember: Each of the companies below started out as a small business.</p> <h2>1. Blockbuster</h2> <p>In the last few years the video rental industry has changed drastically. Netflix abolished the notorious late fee, instead relying on the trusty subscription model. RedBox now serves video rentals in convenient kiosks for only a $1. Caught in the middle is Blockbuster. It seems renting a video at a brick-and-mortar establishment may be a thing of the past, and traditional rental companies like Blockbuster are having a hard time finding their place in the digital world.</p> <p>Blockbuster filed for bankruptcy in September of 2010, 25 years after the movie rental chain was started in Dallas, Texas.</p> <p>Changing with the times is (and always has been) critical for sustainable success, and Blockbuster is an excellent example of not adjusting.</p> <h2>2. Canwest</h2> <p>Canwest was one of the largest media outlets in the world, covering assets in radio, television, and other media throughout Canada and other countries. In fact, the vast size and growth of Canwest may have been the leading factor in the company filing for bankruptcy in 2010. Canwest was notorious for gobbling up Canadian media outlets and was soon using the bulk of its income to pay off high-interest debt for their acquisitions. The company never recovered after the financial meltdown of 2008.</p> <p>Fast-paced growth can kill a company just as easily as stagnant growth.</p> <h2>3. <em>Newsweek</em></h2> <p><em>Newsweek</em> is one of the most popular magazines in U.S. history. Started in 1933, <em>Newsweek</em> has become the second-largest magazine in the U.S., with a circulation of around 2 million subscribers.</p> <p><em>Newsweek</em> shifted focus in 2008 with hopes of attracting a different audience and improving the financial outlook of the company. Unfortunately, the combination of a bad global economy and different business directions caused the company to lose 38% of their revenue from 2007 to 2009.</p> <p>Sometimes change can do more damage than good in tough times.</p> <h2>4. Pontiac</h2> <p>It's an age when conservative, economical cars with high miles-per-gallon rule the roads. But Pontiac, at the height of its day, was exactly the opposite. The car manufacturer was once known for its muscle cars like the GTO and Trans-Am, and it was the first high-performance division of General Motors.</p> <p>Pontiac was shut down in 2010 after a massive restructuring at General Motors. The brand never fully recovered from the increased fuel costs, higher insurance prices, and federal emissions from the 1970s on.</p> <h2>5. A&amp;P</h2> <p>The Great Atlantic and Pacific Tea Company (A&amp;P) is one of the oldest companies on the list, started in 1859. The supermarket chain has 395 stores along the East Coast. In 2009, A&amp;P was the 34th largest retailer in the U.S.</p> <p>The company has faltered during the recession, and rising real estate prices and more competition have left the chain in rapid decline. A&amp;P added a chunk of debt when it acquired Pathmark in 2007 as well, which added to the increasing overhead of the chain. A&amp;P declared bankruptcy in December.</p> <h2>6. Mercury</h2> <p>Car manufacturers are having a tough time in the current economic state. The Mercury division was shut down as part of Ford's restructuring. Ford's focus on fewer models has helped the company become more profitable, and unfortunately the Mercury brand had to be sacrificed. By 2010, Mercury only made up about 1% of the entire automobile market in North America.</p> <h2>7. Hollwood Video</h2> <p>Hollywood Video joined Blockbuster as the other video and game rental chain that declared bankruptcy in 2010. Like Blockbuster, Hollywood failed to keep up with the changing market of video rentals, relying on the older models of distribution and mostly discounting the Internet as a platform to distribute movies.</p> <h2>8. Saturn</h2> <p>Saturn was started in 1985 as a direct response to the growing popularity of foreign cars in the U.S. During its heyday Saturn competed with Japanese car manufacturers like Toyota and became popular for its &quot;no haggle&quot; pricing. Yet Saturn could never really <em>convert</em> car buyers, as 41% of Saturn owners were previous General Motors owners.</p> <p>Saturn eventually met the same demise as its sister company, Pontiac, and was shut down after the massive restructuring of General Motors.</p> <h2>9. Uno Chicago Grill</h2> <p>The original Uno Chicago Grill claims to have started the deep dish pizza in Chicago in 1943. The company has since grown to 216 restaurants and various other enterprises.&nbsp;</p> <p>Uno Chicago Grill filed for Chapter 11 bankruptcy in January of 2010.</p> <h2>10. Hummer</h2> <p>General Motors' Hummer was a hot commodity for the first half of the 2000s. The Hummer was based off of the rugged, all-terrain, military-issued Humvee that was made popular for its role in the Gulf War. In fact, the Hummer was partially pushed to be manufactured as a civilian vehicle by Arnold Schwarzenegger, who had seen a convoy while filming a movie.</p> <p>As oil prices rose and the economy fell in the late 2000s, demand for large SUVs like the Hummer waned. On April 7, 2010, General Motors officially shut down the Hummer line.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Glen Stansberry</a> and published on <a href="">Wise Bread</a>. Read more <a href="">Small Business Resource Center articles from Wise Bread</a>.</div></div> Consumer Affairs Small Business Resource Center bankruptcy Blockbuster Hollywood Video small business Thu, 03 Feb 2011 18:00:13 +0000 Glen Stansberry 483249 at Life After Bankruptcy: What's Next? <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/life-after-bankruptcy-whats-next" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="life after bankruptcy" title="Life After Bankruptcy" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Having to file for bankruptcy is something we all hope we never have to do in our lifetimes. Whether you file for Chapter 13 or Chapter 7, there are repercussions to going through this process. However, like with other setbacks in life, you can recover. There may be different paths to recovery for each form of bankruptcy, but there is always hope!</p> <p>You may have done everything you can to avoid bankruptcy but those sweet 0% interest credit cards may have gotten the better of you. Or your health or unemployment issues may have taken center stage in recent years, and you were left with no recourse but to declare bankruptcy. When considering your financial future following such an event, you can expect that trying to secure credit for the next 3 to 5 years is going to be tough. Also, you can expect this negative mark to appear on your credit report for the official length of time of 10 years; although sometimes you may get lucky and the time can be reduced to 7-8 years. For those who need to weigh their options further, check out <a href="">How You Know When It's Time For Bankruptcy</a>.</p> <h3>Bankruptcy And Your Credit History</h3> <p>It&rsquo;s legal for creditors to keep financial events on your report for 10 years, but that&rsquo;s not a hard and fast rule. So how does bankruptcy actually affect your credit? It does so by lowering your credit score by 200 +/- points &mdash; usually because of late payments on accounts and not just because you filed for bankruptcy. If you find yourself becoming overwhelmed by payments, then this is an ominous sign. This is one symptom that can eventually lead to serious financial consequences for you if you fail to make any changes about your situation.</p> <p>Now the good news: if during the bankruptcy proceedings, you decide to reaffirm or keep some of your debt and you continue to take responsibility for these loans (e.g. your car loans or house mortgage), then you may have a shot here (to some degree) to preserve your credit score and future credit worth in the eyes of lenders.</p> <p>Additionally, there will be credit card companies (yes, they are out there) that will solicit you after the bankruptcy. You'll be debt free after all, right? You should certainly be cautious and wary, although you may think of this as a second opportunity to do things the right way. While taking on new credit and applying for a secured credit card can be a way to rebuild your credit history, you'll have to evaluate just how responsible you can be with handling debt all over again. You'll need to tread down this road very carefully because if caution is not heeded, your actions could lead you back down the same path towards bankruptcy. Here's more on how to build good credit (and clean up your bad history).</p> <h3>Bankruptcy And Your Living Situation</h3> <p>For those who have gone through bankruptcy, you may wonder just how your living situation may become affected. If you're a prospective tenant, you may be surprised to know that in many cases, landlords who own individual homes will be open to considering your application: after all, you've got no debt after you've filed for bankruptcy, and you're eager to build up your finances. Your living expenses and rent are surely a high priority for you. On the other hand, you may find it more difficult to deal with some large apartment complexes and management companies that frown upon those with a record. At any rate, you're likely to still find housing, and things may not be as bad as you thought it would be.</p> <p>Now if you&rsquo;re a homeowner, reaffirming your mortgage is the sole way to keep your home. Let&rsquo;s consider the advantages of this move. The most obvious benefit is that you get to keep your home! This helps your credit and puts a roof over your head while keeping your bank or lender happy. But if you do decide to include your mortgage in the bankruptcy, you&rsquo;ll be handing your home back to the bank and walking away. If you aren&rsquo;t a homeowner yet, keep in mind that you can get approved for an FHA (HUD insured government loan) mortgage after two years from the date you are discharged from bankruptcy.</p> <h3>Bankruptcy And Your Financial Future</h3> <p>Do keep in mind that you'll need to continue making payments if you have other credit lines, and that you'll need to keep an eagle eye on your credit score. What most people may not realize is that this is precisely what credit monitoring services are intended for. You can best keep track of your FICO credit score by using myFICO products, which offer visibility to the most widely used score that lenders use.</p> <p>It may take 3 years before you can qualify for a conventional loan once more, and when you do, the credit score requirements will no doubt be pretty stringent. or such loans, you'll typically need a credit score of at least 620 or higher, while you'll need a score of at least 680 to snag the best mortgage rates. For the lowest unsecured personal loan interest rates, you'll need your score to be in this general vicinity. Approval for these various loan scenarios will be up to the underwriter&rsquo;s discretion. If you&rsquo;re considering a mortgage after bankruptcy, I would consider talking with a financial advisor or mortgage banker about specific bank guidelines and your specific scenario so you can get a better understanding of your situation.</p> <p>Given everything that we've discussed, anyone facing bankruptcy can hopefully see that there's light at the end of the tunnel. Recovery from bankruptcy can happen, and will happen if you're diligent, committed, and positive.</p> <a href="" class="sharethis-link" title="Life After Bankruptcy: What&#039;s Next?" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Silicon Valley Blogger</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Personal Finance bankruptcy filing bankruptcy managing debt Tue, 23 Feb 2010 14:00:39 +0000 Silicon Valley Blogger 5396 at How to File For Bankruptcy <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/debt/bankruptcy" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="Bankruptcy time" title="Bankruptcy time" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>Bankruptcy is the last resort to dealing with <a href="" title="Debt Management Guide">debt</a>: when a person finds himself in so much debt that paying it off simply isn't an option, bankruptcy can be the only way to handle the situation. It may not be the result of reckless spending &mdash; medical bills and other factors can contribute to the need to declare bankruptcy.</p> <h2>The Types of Bankruptcy</h2> <p>There are two different types of personal bankruptcy available to most people: Chapter 7 and Chapter 13. Chapter 7 requires that nonexempt assets are sold to reduce unsecured debt, such as credit card balances and medical bills. Any unsecured debts remaining after the sale are excused. You are allowed to keep your retirement accounts along with any other exempt assets. While exactly what counts as an exempt asset differs from state to state, most people will be able to keep a car and their home as long as they keep making payments on them.</p> <p>In order to qualify for Chapter 7 bankruptcy, you'll typically need to complete a means test. If the test determines that your income is sufficient to make payments on your debt, you will be unable to file for a Chapter 7 bankruptcy and will need to file Chapter 13. Under a Chapter 13 bankruptcy, you keep your property and agree to a repayment plan for part of your debt that will last either three or five years. As long as you follow the repayment plan, the rest of your unsecured debt will be excused.</p> <p>No matter which type of bankruptcy you file for, you will receive an automatic stay as soon as your paperwork is filed. An automatic stay stops all collection attempts. In the case of secured debt (such as a mortgage or a lien), the stay is only temporary and you must continue to make payments or risk repossession or foreclosure. You'll also be asked to attend a personal finance course and a creditors meeting, although it is unlikely that creditors will attend.</p> <h2>A Smoother Bankruptcy</h2> <p>Bankruptcy is a hard process, both emotionally and financially. It's important to make the process go as well as possible, both to speed it along and reduce the stress.</p> <ul> <li>Put all your paperwork together. When you begin the bankruptcy process, you need documentation of both your debts and income for your lawyer to prepare your paperwork. Gather your pay stubs, deeds, titles, letters from collection agencies, tax returns and any other documentation your attorney requests. You'll also need to prepare a complete list of your <a href="" title="Wise Bread's Guide to Credit Cards">credit cards</a>.<br /> &nbsp;</li> <li>Hire a reputable attorney who specializes in bankruptcy cases. The laws governing bankruptcy are complicated and using a cheap service or a lawyer who is not knowledgeable can result in problems that will cost you extra money, as well as risk your home and other assets.<br /> &nbsp;</li> <li>Reduce your spending as much as possible. If you run up a big bill on your credit cards just before you declare bankruptcy, you may be accused of fraud. The court can require you to pay what you owe on those cards.<br /> &nbsp;</li> <li>Make plans for <a href="" title="Wise Bread's Guide to Credit Scores">building your credit</a> back up as soon as your bankruptcy is complete. It can be very difficult to obtain new lines of credit after a bankruptcy and options like secured credit cards may be necessary. After a year, you'll likely be able to apply for a regular credit card.<br /> &nbsp;</li> <li>Request your credit history from each of the three credit bureaus after your bankruptcy is complete. You want to make sure that the reports list that all of your unsecured debts have been &quot;discharged in bankruptcy.&quot;</li> </ul> <h2>After Bankruptcy</h2> <p>Once your bankruptcy is complete, you'll have a clean slate for your finances &mdash; mostly. If you have <a href="" title="Wise Bread's Guide to Federal Student Loans">student loans</a> or a secured debt, such as a mortgage or a car loan, you'll still be obligated to make payments on those loans. You may also be asked to sign a reaffirmation agreement for your car loan, guaranteeing that you intend to keep the vehicle and make payments on it. It's important to make payments on those loans on time and in full to help rebuild your credit. Having an additional line of credit, such as an installment loan or a secured credit card can also help.</p> <p>Keep a close eye on your finances and work hard on rebuilding your credit. If something happens, it is possible to file for bankruptcy again &mdash; the limitations are that you can only file once under Chapter 7 every eight years and once under Chapter 13 every two years &mdash; but the consequences for your credit are dire. If a lender sees multiple bankruptcies on your credit history, it can become impossible to get credit, even at high interest rates.</p> <h2>When Not to Declare Bankruptcy</h2> <p>If there are debts piling up, bankruptcy may seem like the only way out. However, it's important to consider all the alternatives before choosing bankruptcy. After all, bankruptcies can ruin your credit for years to come. Once you've declared bankruptcy, you'll be looking at higher interest rates on new loans, including credit cards, higher insurance premiums and even a harder time renting a new apartment. Any time someone pulls your credit history, they'll see your bankruptcy on it.</p> <p>There may be alternatives:</p> <ul> <li>Negotiating with creditors to reduce your interest or payments may make your debts manageable.<br /> &nbsp;</li> <li>A <a href="">credit counseling</a> agency may be able to help you handle your debts and pay them off.<br /> &nbsp;</li> <li>A combination of cutting expenses and earning extra income, along with a debt repayment plan may make your financial situation manageable.</li> </ul> <p>If you have a chance of paying off your unsecured debts, such as credit cards, in less than five years, declaring bankruptcy could actually do more harm than good. Because a bankruptcy can stay on your credit history for up to ten years (Chapter 7 bankruptcies remain listed for seven to ten years, while Chapter 13 bankruptcies are listed for seven years), any alternative that would let you handle your debts and get the negative information off of your credit report faster is preferable.</p> <a href="" class="sharethis-link" title="How to File For Bankruptcy" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Thursday Bram</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Personal Finance bankruptcy debt management Thu, 04 Feb 2010 22:50:52 +0000 Thursday Bram 6321 at How You Know When It's Time For Bankruptcy <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-you-know-when-it-s-time-for-bankruptcy" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="" title="" class="imagecache imagecache-250w" width="250" height="190" /></a> </div> </div> </div> <p>While producing news stories and researching books (here's my latest: <em><a href="">Life or Debt 2010</a></em>), I've explored virtually every way to deal with debt. This story is about the nuclear bomb of debt destruction: bankruptcy.</p> <p>When I produced the news story you&rsquo;re about to see, I was just looking for a lawyer to interview regarding the basic facts. What I got in addition was a heartbreaking, personal story from just one of the 1.4 million Americans who filed <a href=" " title="Wise Bread's Guide to Bankruptcy ">bankruptcy</a> last year.</p> <p>Watch this 90-second news story, then meet me on the other side and we&rsquo;ll go into more detail about what bankruptcy is how it compares with other ways of dealing with a debt dilemma.</p> <p><embed height="390" width="480" src="" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true"></embed></p> <p>So bankruptcy is the ultimate debt destroyer, because rather than paying it back, you're often wiping it out, or at least partially so. But it&rsquo;s not the only way out.</p> <p>You could obviously try to repay your debts yourself. You can try to repay them in full on better terms by <a href="">going to a credit counselor</a>. You can try to satisfy specific debts by <a href="">paying less than you owe</a>. Or you can try to take out a new loan to pay off your old ones in a process known as debt consolidation.</p> <p>When is bankruptcy the right choice? Ultimately, you file bankruptcy because there&rsquo;s no other way out. For example, in Ron's case, his monthly payments were higher than his monthly retirement income. He couldn't repay the debt, even with help from a credit counselor, debt consolidation or settlement.</p> <p>But before you even contemplate bankruptcy, <a href="">understand it</a>. For individuals (as opposed to corporations) there are two types:</p> <ul> <li><strong>Chapter 7</strong>, which wipes out all your debts</li> <li><strong>Chapter 13</strong>, where you&rsquo;ll be required to pay some of your debts back over time</li> </ul> <p>Which you&rsquo;ll be eligible to file depends on how deeply in debt you are relative to your ability to pay, as well as other factors, including the median income where you live. But even a Chapter 7 won&rsquo;t rid you of all your debts. You can&rsquo;t ditch student loans (except in rare cases), IRS liens (unless you successfully file a tax bankruptcy), child support, or alimony. You can&rsquo;t use Chapter 7 to discharge debts you incurred through fraud. And bankruptcy isn't a way to get rid of mortgage debt.</p> <p>It will probably come as no surprise that bankruptcy will also cost you big time when it comes to your credit score. According to Fair Isaac (creator of the most popular credit scoring model), you&rsquo;ll lose from 130 to 240 points out of a possible 850. That&rsquo;s enough to turn even a perfect score into a subprime one. (Here's a story I did about <a href="">three ways to improve your credit score</a>.)</p> <p>Is there credit after bankruptcy? Yes, if you can afford it. There are people who will sell you a car on credit or give you a <a href="" title="Ultimate Credit Card Debt">credit card</a>, but expect to pay exceedingly high rates of interest, since you&rsquo;ll be a high-risk borrower.</p> <p>And bankruptcy will remain in your credit history for 10 years. Most other infractions only last seven. But a bankruptcy won&rsquo;t leave you living in the streets. Depending on the state where you file, you might still end up with some home equity, a car, clothing and furnishings.</p> <p>The cost of bankruptcy filing varies, but expect to pay at least $1,500. (Here are <a href="">three tips to lower lawyer bills</a>.)</p> <p>Does all this sound like I&rsquo;m discouraging you from filing bankruptcy? Not if you're like Ron.</p> <p>Bankruptcy involves hiring a lawyer and going to court, which makes it by far the most serious way to deal with debt. It also means getting rid of most of your assets and really screwing up your credit history. That's why it's a measure of last resort. But most people don't mess up by filing. They mess up by not doing it soon enough.</p> <p>Because my news story was so short, you didn&rsquo;t get to hear much from Ron, the guy who filed bankruptcy. You didn't get to see the tears in his eyes when he described how he had sacrificed everything he had to take care of his grandchildren. Or the relief on his face as he talked about putting his pride aside and getting help.</p> <p>For months before he walked into that lawyer&rsquo;s office, he&rsquo;d been verbally abused by creditors and frozen like a deer in the headlights by shame. He admitted feeling suicidal.</p> <p>When you're in major trouble, whether it's legal, health, or financial, hesitation is natural. But recognize that when you hesitate, you waste stress, time, and money. Before he got help, Ron wasted all three trying to stay ahead of bills he had no hope of ultimately paying. Especially since rather than helping him, his lenders chose instead to bury him with impossibly high rates and penalty fees.</p> <p>So if you ever consider this path, or know someone who does, remember that. Assess your situation honestly, forget your embarrassment, and talk to a lawyer or credit counselor sooner rather than later. They can give you advice on your options and, if bankruptcy is the right one, they can help with a strategy to maximize what you keep and minimize what you lose.</p> <p>If you're a proud, responsible person like Ron, you'll probably feel that bankruptcy is the end of your life. But it might just turn out to be a new beginning.</p> <a href="" class="sharethis-link" title="How You Know When It&#039;s Time For Bankruptcy" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Stacy Johnson</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Consumer Affairs Credit Cards Debt Management bankruptcy credit counseling Debt Problems Mon, 25 Jan 2010 15:00:02 +0000 Stacy Johnson 4762 at Protecting Yourself from Medical Billing Mistakes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/protecting-yourself-from-medical-billing-mistakes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="credit care bill" title="credit card bill" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Even though many of us may take our health for granted, one thing that strikes a chord in everyone is the high price of medical care. Between the rising cost of routine doctor visits and medication to the regular increases in our insurance premiums, health care is on most people&rsquo;s minds.</p> <p>And yet, how many of us really take the time to understand all that we&rsquo;re being charged for? Granted, medical bills can read as if they were written in another language, and for all intents and purposes, they are. That is because medicine, not unlike law, is filled with the esoteric language of the profession. Sprinkle in a generous amount of Latin, and it can leave you feeling pretty helpless and lost. </p> <p>Furthermore, many of us don&rsquo;t go to see a doctor or a lawyer until we need one, and at that point we are not necessarily in the best position to argue every nickel and dime. On the other hand, is complete ignorance the answer? Or is it better to take the time to understand all that we are being charged for, even if it&rsquo;s a hassle and may intimidate us?</p> <p>Well, it&rsquo;s worth it when you consider this: as seen recently on <a href=";page=1">Good Morning America</a>, it turns out that up to 80% of medical bills contain errors in them, according to <a href="">Medical Billing Advocates of America</a>. These errors arise from a variety of sources, from simple clerical errors like typos or duplicate charges, to more serious incidences that include charging patients for drugs or services that were never rendered and inflating the price of drugs or supplies. And, of course, there is always the possibility of outright fraud.</p> <p>Whatever the reason, the end result is the same - it ends up costing you more. Medical debt, after all, is the second leading cause of bankruptcy in this country, second only to credit card debt. And to make matters worse, these mistakes might even result in your insurance carrier refusing to cover services that you might need.</p> <p>It is therefore important to take the time to really understand what you&rsquo;re paying for, even if the people who are supposed to answer your questions (that would include doctors, nurses and hospital administrators) are not going out of their way to help you.</p> <p>So in an effort to protect your rights as a patient and possibly even save some money, keep these things in mind the next time you get your bill:</p> <p><strong>1. Read your bill.</strong> Pay attention to every charge, making sure that things are in order. If something seems wrong, like a redundant charge or something you don&rsquo;t recognize, ask questions. And don&rsquo;t worry if they don&rsquo;t seem thrilled to decipher every acronym for you. It&rsquo;s your money, not theirs, so take the time to account for every charge, and if they can&rsquo;t help you, ask for someone who can.</p> <p><strong>2. Know your options</strong>. Question high charges for everyday things that cost a lot less outside the hospital, like tissue or bandages, and find out if you have lower cost options. This is especially true for prescription medication, where generic equivalents that do the same job can cost a lot less.</p> <p><strong>3. Keep track of time</strong>. For a hospital stay, keep careful track of the duration that you are there and understand how they charge for your stay. The cost of an additional day could amount to hundreds of dollars in extra expense.</p> <p><strong>4. Be organized</strong>. Keep careful records of your conditions, including when they were first diagnosed or treated. Insurance companies can be picky about things like pre-existing conditions that could lead to a denial of coverage.</p> <p><strong>5. Be persistent, and don&rsquo;t give in too easily</strong>. This is important when dealing with your doctor&rsquo;s office as well as your insurance company. If you&rsquo;re not satisfied with a response, keep trying until you get an answer. Remember, the squeaky wheel gets the oil, and the people who are helping you are not as invested in your interests (it&rsquo;s your money) and more than likely won&rsquo;t be as enthusiastic to resolve the issue, so it&rsquo;s up to you.</p> <p><strong>6. Talk to people</strong>. This includes friends, relatives, and colleagues. Chances are they&rsquo;ve traveled through the medical maze themselves or know someone who has and can offer some advice.</p> <p><strong>7. Seek out help</strong>. If it seems as if your efforts are going nowhere, there are professional services that can help. Outside of getting an attorney, several advocacy groups have formed designed specifically to help people sort out their medical bills, and a simple Google search for &ldquo;medical billing errors&rdquo; will turn them up. They generally charge a fee, but it can be worth it if they end up saving you thousands of dollars, and many of them work on a contingency basis.</p> <p>It you think you might be the victim of fraud, contact your insurance company or the <a href="">FBI</a>. For more information, the website of the <a href="">National Health Care Anti-Fraud Association</a> can provide information and advice.</p> <p>Whatever you do, be informed, because your money and your health might be at stake. Always keep in mind, however, that hospitals are not necessarily out to rip you off and many of these situations arise from simple and innocent human errors that can easily be resolved if you just take the time.</p> <p>And time, as the saying goes, is money. Speaking of which, maybe the next step will be to find out what all those legal fees that lawyers charge are actually for.</p> <p>Then again, you&rsquo;d probably have to hire an attorney to do that. </p> <p>Do you have a medical billing experience that you'd like to share with us? If so, we'd love to hear it, and thanks.<br /> &nbsp;</p> <a href="" class="sharethis-link" title="Protecting Yourself from Medical Billing Mistakes" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Fred Lee</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Consumer Affairs bankruptcy health care Fri, 10 Apr 2009 10:18:33 +0000 Fred Lee 3033 at Could Your City Go Bankrupt? <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/could-your-city-go-bankrupt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="" title="" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>I never knew that cities in America could file for bankruptcy until recently a Northern California city named Vallejo made the news for being on the edge of bankruptcy. So how does this happen, and what happens to a bankrupt city or municipality?</p> <p>Apparently municipalities go bankrupt for the same reasons why individuals and corporations go bankrupt. Basically, when a city or county does not have enough money to cover it debts and payroll obligations, it could file for <a href="" target="_blank">Chapter 9 bankruptcy.</a> This type of bankruptcy was created during the Great Depression and allows the locality in trouble to negotiate a plan with its creditors. It also protects against the liquidation of assets. Here are some real situations where cities and counties faced bankruptcy:</p> <p><strong>Losing at lawsuits</strong> - The scenic coastal city near me named Half Moon Bay was nearly forced into declaring bankruptcy last year when a judge handed down a $37 million judgement against the city for delaying a developer&#39;s chance to build on a piece of land he acquired in Half Moon Bay. After 14 years the land became wetlands and the developer sued and won. Half Moon Bay&#39;s general funds are only about $10 million per year and it could not afford the judgement.</p> <p><strong>Mismanagement </strong>- The largest bankruptcy of a municipality happened in 1994 when the entire Orange County declared that they could no longer pay their debts. This was due to the county treasurer betting the county&#39;s money on highly risky investments. Unfortunately, he bet the wrong way and the county lost billions of dollars. If you want to read more about this incident, this paper titled <a href="" target="_blank">When Government Fails: The Orange County Bankruptcy</a> is a very detailed summary of what happened. </p> <p><strong>Distressed economy</strong> - When the greater economy goes south, cities and localities collect less taxes, but still have to meet their financial obligations. Vallejo&#39;s current plight is partially due to the rapidly falling real estate prices in Solano County. Out of the nine counties that make up the San Francisco Bay Area, Solano is hardest hit by the housing crisis.</p> <p>So what happens to a city or county after bankruptcy? Well, it seems that generally life goes on, but the government could be dissolved, and services may be vastly reduced. Property taxes and other public service charges could also be increased. Any new developments such as public swimming pools and schools would generally not happen. All of these things could happen even when a financially troubled locality does not file bankruptcy. For example, New York City faced bankruptcy in the 1970s during the economic stagflation and was bailed out by a large federal loan. Even though the city did not go bankrupt, city services were cut drastically and crime rates rose. Public transit fees rose even though the maintenance on the subways were largely neglected. It is safe to say that life goes on, but the quality of life in a financially distressed place would be vastly reduced.</p> <p>Another side effect of the bankruptcy of one city is that nearby cities&#39; credit ratings may also be affected. Locales surrounding a bankrupt city or town may find that they may have a harder time borrowing money from creditors. Less access to money means that the services in these cities may also be reduced. Basically, bankruptcy could destroy the reputation and quality of life of a large area, and that is a reason why many municipalities do whatever they can to stay out of it.</p> <p>Will we see more cities and counties filing for Chapter 9 in the near future? I hope not, but with falling property values and rising inflation, it may be tough for the places we live to foot their bills. </p> <a href="" class="sharethis-link" title="Could Your City Go Bankrupt?" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Xin Lu</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Personal Finance Consumer Affairs Lifestyle Real Estate and Housing bankruptcy city county money real estate Tue, 18 Mar 2008 21:01:52 +0000 Xin Lu 1929 at Credit Counseling: When you Need it and When you Don't <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/credit-counseling-when-you-need-it-and-when-you-dont" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="ladder" title="ladder" class="imagecache imagecache-250w" width="250" height="168" /></a> </div> </div> </div> <p class="MsoPlainText">So you are up to your eyeballs. Drowning in debt, expenses, and struggling to keep your head above water. You have been reduced to the life of a monk and are still making no headway. Is it time to see a credit counselor?</p> <p class="MsoPlainText">First, let&rsquo;s take a look at the typical symptoms that may require credit counseling:</p> <ul> <li>You use <a href="" title="Guide to Using Credit Cards Wisely">credit cards</a> to pay for groceries and other household expenses because you don&rsquo;t have the cash.</li> <li>You don&rsquo;t even know how much debt you owe any more.</li> <li>You use one credit card to pay off another.</li> <li>You use cash advances as the only way to get some cash.</li> <li>You are denied when you ask for an increase in your credit limit.</li> <li>You ask for a credit increase in the first place because you think it will help you manage your expenses.</li> <li>You worry about money all the time.</li> </ul> <p class="MsoPlainText">Let&rsquo;s also assume that you have tried every way possible to <a href="/finding-money-11-ways-to-save-money-you-are-spending-without-sacrificing-anything" target="_blank">&ldquo;find money&rdquo;</a> in your current budget and are still financially suffering.</p> <p class="MsoPlainText">Now it may be time to see a credit counselor.</p> <h2>What Credit Counselors Do</h2> <p class="MsoPlainText">First of all, a credit counselor will (or at least should) spend some time with you to get a handle on your situation. If it&rsquo;s appropriate, they will prescribe a <strong>Debt Management Program (DMP)</strong>. Basically a DMP will consolidate your debts at lower interest rates. The actual interest rates you get vary by creditors and what they can offer to credit counseling firms &ndash; it&rsquo;s fairly standardized. As part of the DMP, late fees and other penalties you have incurred will also be waived &ndash; which can be substantial if you&rsquo;re at the point of needing credit counseling.</p> <p class="MsoPlainText">Once you&rsquo;re in the DMP program, you will pay the credit counselor monthly, and they will distribute the money among the creditors you owe. You have the advantage now of not having to juggle a million debt payments, and in turn you agree not to charge anything further to your cards or apply for any credit increases.</p> <p class="MsoPlainText">For this service, credit counselors get paid in two ways:</p> <ul> <li>They receive a rebate from the creditors</li> <li>You will also pay an upfront and monthly fee for this service</li> </ul> <h2>Not All Credit Counselors are Created Equal</h2> <p class="MsoPlainText">As with any business service, you need to do your research before you sign up for a DMP plan. There are some shady credit counselors out there.</p> <p class="MsoPlainText">Here is a checklist of things you should look for:</p> <ul> <li>Not-for-profit status</li> <li>A good Better Business Bureau status with minimal complaints (ideally none)</li> <li>Certification with the National Foundation of Credit Counselors (NFCC) or the Independent Association of Credit Counselors (IACC)</li> </ul> <h2>Questions to Ask a Credit Counselor</h2> <p class="MsoPlainText">Before signing on the dotted line (or even agreeing to an appointment), here are a few questions you should ask of your potential credit counselor:</p> <ul> <li><strong>How long is the initial appointment?</strong> You are looking for them to say they&rsquo;ll spend at least &frac12; an hour with you. They need to assess your entire financial situation, which can&rsquo;t be done effectively if you are shuffled in and out the door in record time. <br /> &nbsp;</li> <li><strong>What will you do? </strong>The best answer you can get is for them to say they&rsquo;ll examine your situation, and only if it is appropriate, they can arrange a Debt Management Plan suited to your situation. Sometimes after a consultation, they will advise you to tackle your debts on your own because they&rsquo;re not bad enough yet, or conversely will advise you to see a <a href="" title="Wise Bread's Guide to Bankruptcy">bankruptcy</a> attorney.<br /> &nbsp;</li> <li><strong>What kind of debt can you help me with?</strong> You don&rsquo;t want a counselor who will just address your credit card debt if your student loans, mortgage, and other debts are also eating away at your finances.<br /> &nbsp;</li> <li><strong>How much will this cost?</strong> Ideally you should not pay more than $75 up front, and no more than $35/month ongoing.</li> </ul> <p class="MsoPlainText">Don&rsquo;t be too embarrassed about your financial situation to see somebody who can help you. The best way to move forward with your life is to take ownership of your current predicament and make the right moves towards financial freedom. It is still possible.</p> <a href="" class="sharethis-link" title="Credit Counseling: When you Need it and When you Don&#039;t" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Nora Dunn</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Budgeting Credit Cards Debt Management bankruptcy credit counseling Wed, 05 Mar 2008 01:11:52 +0000 Nora Dunn 1887 at Bankruptcy is a good thing <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/bankruptcy-is-a-good-thing" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="Farms lost in foreclosure" title="Farms Lost in Foreclosure" class="imagecache imagecache-250w" width="250" height="320" /></a> </div> </div> </div> <p>I don&#39;t mean that declaring bankruptcy is a good thing--obviously that sucks for everyone involved. But a system of bankruptcy is a good thing. It&#39;s good for creditors and debtors, and it&#39;s good for the economy.</p> <p>There are actually three situations that need to be dealt with:</p> <ul> <li>Some debts were not incurred in good faith--the borrower never intended to pay the money back. Debts of that sort should be dealt with as the cases of fraud that they actually are, and not as a bankruptcy at all. </li> <li>Some debts <strong>could</strong> be repaid, but the debtors would rather not. Ordinary legal processes for collecting unpaid debts generally suffice in these cases, without a need to resort to bankruptcy.</li> <li>Some debts, though, simply cannot be paid back. Bankruptcy is a legal framework for recognizing that fact.</li> </ul> <p>Many debts--most debts--are incurred in good faith. The people who borrow the money have every intention of paying it back, and have good reason to expect that they&#39;ll have the means to do so. Sometimes, though, those expectations are not fulfilled. Death, illness, family crisis, legal trouble, business reversal, economic downturn, natural disaster, war--these are just some of the kinds of situations that can lead to a borrower simply lacking the means to repay a debt.</p> <p>We know what happens when there&#39;s no functioning bankruptcy system. The details may vary--debtors prisons are optional--but what happens is that <strong>everything gets stuck</strong>. Borrowers fight tooth-and-nail to hold on to any collateral, as it&#39;s often the only leverage they have. At the same time, they attempt to hide any income they might have, spending it on the necessities of life before the lenders grab it. Lenders stop spending their time and energy finding new customers to lend to, devoting it instead on trying to track down any collateral or cash that their deadbeat customers might have--a never-ending quest, because there is never going to be enough money to pay all the interest and fees owed.</p> <p>This is bad for the whole economy.</p> <p>Productive assets sit idle, because the borrower doesn&#39;t have enough money to put them to use, but nobody else can use them either, until the legal processes grind on to a conclusion.</p> <p>At the same time, the borrowers aren&#39;t working at whatever would make them the most productive, because whatever they earned would be taken from them. Instead, they chose to work at whatever will get them food and shelter, often in the underground economy, taking cash under the table or payment in kind.</p> <p>Bankruptcy is the way to clean up when a debt isn&#39;t going to be repaid. In theory, the borrower gives up the collateral and any wealth beyond a necessary minimum to start over again. (Bankruptcy laws have always, for example, permitted the bankrupt to retain the tools of his or her trade.) In exchange for that, the lender gives up on getting anything more. The productive assets and the productive people are then free to go back to being productive (rather than wasting their time in a pointless game of hide-and-seek).</p> <p>People generally accept this structure for businesses, but individuals don&#39;t always get the same indulgence.</p> <p>There&#39;s a certain amount of bitterness when a company goes belly-up with invoices unpaid, pensions unfunded, and workers let go, but people generally don&#39;t think of it as a moral failure. It&#39;s quite common for managers of a bankrupt business to pay themselves large bonuses (to make up for the fact that their stock options have become worthless), and that does arouse some ire. But it&#39;s nothing compared to the reaction that some people have to individuals who go bankrupt.</p> <p>Part of this, I think, is a result of getting hung up on those first two categories of debtors--people who never intended to pay their debts (or who incurred them with reckless disregard for whether they could ever be paid back) and people who <strong>could</strong> pay the money back, but just don&#39;t want to. Any bankruptcy system includes provisions to deal with these situations. The bankrupt is required, for example, to disclose any assets, and a failure to do so is cause to undo any discharge of debts. Still, the notion that there must be some money there somewhere, leads to a desire for punitive measures to extract money. That&#39;s what the last major revisions to the US bankruptcy code was all about--a determination to get as much money out of borrowers as possible. (It&#39;s the logic of loansharks as well.)</p> <p>To the extent that moral opprobrium encourages people to incur debt cautiously and to apply themselves diligently to paying what they owe, it&#39;s probably a good thing. But some debts are never going to be repaid. In those cases, having a system of bankruptcy to get things sorted out and let everybody get on with their lives is a good thing.</p> <a href="" class="sharethis-link" title="Bankruptcy is a good thing" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Philip Brewer</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Personal Finance bankruptcy Thu, 14 Feb 2008 20:58:26 +0000 Philip Brewer 1798 at