For the last 30 years, I’ve been drawing pictures and timelines to explain to my Chapter 7 bankruptcy clients how the process works. I finally decided to make a video and hope you find it helpful.
A common emotion for most Chapter 7 bankruptcy filers is REGRET. Not regret for filing bankruptcy, but regret for not seeking legal help earlier for their financial struggles.
This may sound self-serving coming from someone who has helped more than 3,000 clients in Rhode Island file for bankruptcy relief, but ask anyone who has filed a Chapter 7 bankruptcy. Most debtors waste time and money on weak attempts to solve an unfixable mess.
Recently, I spoke to married client who hadn’t saved much for retirement. He sold his house a few years ago and put the $ 120,000 profit in the bank, hoping it would supplement the $ 40,000 kept in a 401k plan.
Over the years, he spent $ 80,000 of his precious savings and all of his 401k in order to pay substantial credit card debt. He still owes $ 37,000 and asked me if he could NOW file a Chapter 7 bankruptcy to discharge the remaining debt.
Under federal bankruptcy protection laws, he would have difficulty protecting his remaining $ 40,000 in the bank. Because the account is joint, he may be able to protect half, but the rest is fair game for the bankruptcy trustee to go after. Now in his 70’s, there is no way this retired man could afford to lose $ 20,000.
What went wrong? What should he have done?
If he had called me years ago, I would have explained how under Rhode Island law, he could have exempted all the equity in his modest home and still file bankruptcy to discharge his considerable credit card debt. I would have also explained how it almost never makes sense to liquidate qualified retirement assets to pay credit card obligations. Instead of taking a 10% penalty on the early withdrawal, paying income tax on the gain, and forfeiting the future growth of the account, he should have known that bankruptcy exemption laws are quite generous in protecting retirement assets.
In other words, he could have kept his house and retirement account and discharged all his credit card debt . . . with ease!
It is unfortunate that he spent most of his life savings on debt that could have been eliminated with a simple Chapter 7 bankruptcy filing.
Here is my point. You may never want to, or need to, file for bankruptcy relief. But you should talk with a skilled bankruptcy lawyer who can explain all of your debt options.
So, when do you know its time to seek help? Do you have more than $10,000 in unsecured debt, are you robbing Peter to pay Paul, are debt collectors calling you at home or at work? If so, something is seriously wrong.
Bottom line: You would be surprised what you could learn from sitting with a qualified bankruptcy attorney. A good bankruptcy lawyer can offer a free consultation and patiently explain all of your debt-relief options.
Bad college credit?
In all but a few isolated cases, student loans are not dischargeable in bankruptcy. However, this is not the case for student credit cards, which can be cleared of debt under Chapter 7 bankruptcy.
Banks and credit card companies are all too eager to cash in on the spending habits of American college students. College students tend to use credit cards indiscriminately, creating a profitable market as far as credit card companies are concerned. Meanwhile, banks use the college years to establish financial relationships with young adults.
The CARD Act, a recently passed motion to limit the marketing reach of lenders to students, established a minimum age at which a person can obtain a credit card. Unfortunately, this did not prevent credit card companies from discovering some very large loopholes in this new law.
For example, the CARD Act specified that people under 18 years old need cosigners in order to acquire cards. While this was intended to refer to parental permission and oversight, college teens twisted the word of the law in some serious ways, having older classmates or fraternity brothers function as cosigners. And all along, this activity was encouraged by those who made their livings selling plastic cards. While the CARD acts was intended to prevent credit card companies from selling their goods on campus, sellers managed to skirt that issue as well.
The evidence is telling: last year, Bank of America spent $62 million for the right to market their credit cards to kids on campus alumni associations. Meanwhile, at the University of Southern California alone, it invested $1.5 million in attracting almost 700 new accounts. Ultimately the total amount invested for all banks to get on college campuses in the past year alone amounted to over $82 million, creating 53,000 new accounts.
If you are a student struggling with credit card debt, bankruptcy can offer you a fresh start. Contact the Law Offices of Mark Buckley to schedule a free initial debt consultation.
Bankruptcy Relief For RI Seniors
“An increasing number of Americans aged 65 and older are declaring bankruptcy,” writes Reuters in a recent report. “Those aged 65 and older represented seven percent of bankruptcy filers in 2007, a mind-boggling jump from 1991. They are easily the ‘fastest-growing age demographic…’”
The sad fact is that many older Americans cannot help living beyond their means. Age discrimination, paired with fewer job openings, makes it almost impossible to increase their income. American seniors are dealing with an unsettled economy, decreasing pensions, increasing medical expenses, and unstable investments. Because members of America’s senior population rely mostly on fixed incomes, they are increasingly forced to rely on credit just to survive.
In the end, the only course of action left for many senior citizens is to file for Chapter 7 bankruptcy relief. Although the idea of filing bankruptcy may initially be hard to accept, it is important to understand the benefits of filing for bankruptcy when there are no other reasonable options for debt repayment.
One of the biggest misconceptions about filing for bankruptcy is that you automatically have to give up certain assets. This is clearly not true. In Rhode Island, for example, those who meet the residency requirements can protect up to $ 300,000 worth of equity in their home. Rhode Island exemption laws also allow protection of up to $ 12,000 worth of equity in motor vehicles (cars, trucks, motorcycles).
There is also generous protection of retirement accounts, household furniture, clothing, jewelry and a Rhode Island “wildcard” that can be used to protect an additional $ 5,000 worth of other property. Bottom line, most who file a Chapter 7 bankruptcy in Rhode Island don’t lose any property at all.
An ideal Chapter 7 debtor should be current on the secured debts for property she intends to keep, like mortgages and car loans. In as little as 100 days after filing her Chapter 7 bankruptcy petition, her case concludes and her dischargeable debt is wiped out.
While the number of seniors filing for bankruptcy relief is increasing, many others still do not understand their rights under the law. They are often bullied by creditors to hand over their social security checks and not have enough money left over to buy food or medicine. It becomes increasingly important to seek the help of a qualified bankruptcy attorney in these situations.
You’ve tried calling each credit card company to work out a debt settlement plan, but they aren’t interested. Interest rates have only skyrocketed in the past year. The bills keep coming and you are drowning in debt.
What if your “minimum payments” on credit cards add up to $ 1,000 a month? Few debtors can honestly afford repaying such a high amount without using other cards for their daily living expenses. It becomes a game of robbing Peter to pay Paul.
It would seem like a miracle for a “credit counseling” company to get your payments down to $750 per month by decreasing your interest rates. Who wouldn’t want to save $ 250 a month? Although saving $250 per month may sound good at first, here is the bigger question. Do you honestly even have the $ 750 available?
If you can only afford $300 a month, a plan that requires you to pay $750 per month will not do you much good. You are still in debt. For this reason, “credit counseling” companies and “debt management” companies focus exclusively on the amount of savings they offer, rather than whether you can actually afford your payments. Many clients who ended up filing bankruptcy in Rhode Island wasted thousands of dollars on unrealistic repayment plans first.
Added to the misleading nature of “debt management” company claims are hidden fees and fraud. Consumer Reports claims that
” Many [“debt management” companies] advise rolling high-interest debt into a second mortgage. But by using your house as collateral for what was unsecured debt, you risk losing your home. Some firms can persuade creditors to cut your debt. But if you miss payments they can later back out of the deal and demand full payment, potentially landing you in bankruptcy court after you’ve already paid a large portion of your debt.” Consumer Reports online report, June 2005.
Filing Chapter 7 bankruptcy offers a straightforward, honest, effective alternative to the misinformation propagated by “debt management” and “credit counseling” companies. Federal bankruptcy laws were created by Congress for the purpose of helping hardworking citizens pay off their debts. Unlike DMPs, bankruptcy actually reduces both interest and debt. In fact, bankruptcy is the only way to completely eliminate a debt.
Bottom line: Before you look into signing up for an unrealistic debt management plan, consider consulting a qualified Rhode Island bankruptcy lawyer.