At Halcomb Singler my clients often tell me that they want to make sure that they never have to file another bankruptcy. I have no doubt that each and every one of the clients I meet with means this from the bottom of their heart and has not intention of ever filing for a second bankruptcy. However, in order to avoid another bankruptcy fundamental habits must change or the outcome will not change. Have you ever heard the cliche that the definition of insanity is doing the same thing over and over again and expecting a different result? This also holds true with personal finance. In my opinion, the first step to financial health after a bankruptcy is to re-establish your emergency fund.
I was inspired to talk about emergency funds today because I read an article on CNN Money the other day titled "Many don't have $2,000.00 for a rainy day." According to the article, 28% of Americans said they were certain that they could not come up with $2,000.00 in 30 days for an unexpected expense or medical bill. Only 25% of Americans said that they were confident that they could raise $2,000.00 in 30 days for an unexpected expense. These numbers are disturbing to say the least.
As a bankruptcy attorney, it is typical for me to meet with people who have no emergency fund. Many times the person or couple had a fully funded emergency fund (6-8 months expenses) prior to hitting a financial wall that ate up their emergency fund. There is no guarantee that having an emergency fund will permanently insulate you from ever having to file a bankruptcy. Life can throw some stuff at us that is too much for any emergency fund to handle. However, re-establishing an emergency fund after bankruptcy is crucial to avoiding a second time in bankruptcy court.
The reason that an emergency fund is so important is that life happens. Your car will break down. Your child will need to go to the doctor. You will need to make repairs around the house. When your car breaks down you have to get it fixed. If you don't get it fixed you won't be able to make it to work and you will no longer have a job. So, when there is no emergency fund you must turn to credit to pay the mechanic. The fact is that these little expenses can get us into trouble when we have to use credit each time to make ends meet. This is true because after you put that first car repair on credit a portion of your income is going to pay off that credit. When another emergency comes up you still don't have an emergency fund because a portion of your income is going to pay off the first emergency. As you can see, it is easy for the cycle to progress over a number of years until you are left without enough money to pay your living expenses and you are back in bankruptcy.
So, if you have just filed a Chapter 7 Bankruptcy make it a priority to re-establish your emergency fund. Take advantage of the fact that your creditors have been wiped out in your bankruptcy proceeding and get back on a good financial track. This means sitting down and setting out a budget that includes emergency savings. It also means making hard choices and really differentiating between what you need and what you want. There will be no room for a new i phone, a vacation or getting your nails done in the budget until you have your full emergency fund in place. The faster you can build up your emergency fund to a full 6-8 months of expenses the better shot you have of avoiding bankruptcy for a second time.
At Halcomb Singler we are dedicated to giving our clients advice not just on bankruptcy, but also on how to recover from bankruptcy and how to hopefully avoid another bankruptcy. If you have a tip about how you rebuilt your emergency fund following a bankruptcy please share it in the comments. Halcomb Singler is conveniently located in Carmel, Indiana, Halcomb Singler provides a free legal consultation regarding bankruptcy or debt settlement. Please complete and submit our contact form or call us directly at 317.575.8222 for an appointment. Evening and weekend appointments are available.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Thursday, May 26, 2011
Monday, May 23, 2011
Can a Married Person File an Individual Bankruptcy Petition?
A married person is certainly permitted to file an individual bankruptcy just as he or she would be permitted to file an individual income tax return. However, this does not always mean that it is a good idea to leave your spouse out of the filing. Only a bankruptcy attorney who has met with you and understands your financial situation can recommend an individual versus joint filing. Many people that I met with at Halcomb Singler, LLP, are interested in filing an individual bankruptcy without their spouse because they accumulated the debt prior to the marriage, because the debts are primarily in one of the spouse's name or because they want to preserve the creditor of one of the spouses.
While there can be many reasons that just one spouse would file a bankruptcy, there are also many considerations to take into account prior to ruling out a joint bankruptcy filing. First, if both spouses have accumulated a significant amount of debt it may make sense to file jointly. There is no reason to file individually if, after the debt of the filing spouse was discharged in bankruptcy, that the couple would still not be able to afford a minimal standard of living and the ability to meet their debt payments. In that case it would likely make more sense for the married couple to file a joint bankruptcy because the couple would be no better off after one spouse filed a bankruptcy. In addition, attorneys fees charged by many bankruptcy attorneys are not based on whether the bankruptcy is joint or individual, so the couple may pay the same amount of attorneys fees for an individual bankruptcy as a joint bankruptcy filing.
As I indicated previously, if there is a mountain of debt in one of the spouse's name, but the other spouse has very minimal debt it can be a good idea for the debt-ridden spouse to file for an individual bankruptcy. One misconception that some folks have is that if his or her spouse files for bankruptcy that the bankruptcy filing will show up on his or her credit report. This is not true. In order for a bankruptcy to show up on your credit report you must actually file for bankruptcy. The major benefit of filing an individual bankruptcy is that the non-filing spouse's credit will not be harmed by the bankruptcy filing of his or her wife or husband. However, it is important to note that if both spouses are liable for a debt that the non-filing spouse will still be responsible for the debt even though his or spouse has discharged it in bankruptcy.
It is also important to acknowledge that even if a spouse does not file bankruptcy and even though the bankruptcy will not appear on the non-filing spouse's credit report that a non-filing spouse can be indirectly affected by the filing of their spouse's bankruptcy. The income and expenses of the non-filing spouse are taken into consideration in the preparation of the bankruptcy petition and if the filing spouse files a Chapter 13 bankruptcy it is not likely that the Chapter 13 will be successful without the support of the non-filing spouse. If you are interested in how a non-filing spouse can be affected by the bankruptcy, read my previous blog entry on bankruptcy and the non-filing spouse.
Whether the debt is in the name of one spouse or both spouses, it can certainly add a lot of additional stress to a marriage. I encourage couples to speak openly about their finances and debt issues. Debt is best dealt with when couples form a plan of attack together. Without a plan the debt can often drive a wedge between couples and may even be the primary cause of a divorce. If you and your spouse are living in central Indiana, have issues with debt and you would like to meet with me to discuss you plan of attack contact me at 317-575-8222 or click here. Bankruptcy is not the only option we can discuss and the initial consultation is free.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
While there can be many reasons that just one spouse would file a bankruptcy, there are also many considerations to take into account prior to ruling out a joint bankruptcy filing. First, if both spouses have accumulated a significant amount of debt it may make sense to file jointly. There is no reason to file individually if, after the debt of the filing spouse was discharged in bankruptcy, that the couple would still not be able to afford a minimal standard of living and the ability to meet their debt payments. In that case it would likely make more sense for the married couple to file a joint bankruptcy because the couple would be no better off after one spouse filed a bankruptcy. In addition, attorneys fees charged by many bankruptcy attorneys are not based on whether the bankruptcy is joint or individual, so the couple may pay the same amount of attorneys fees for an individual bankruptcy as a joint bankruptcy filing.
As I indicated previously, if there is a mountain of debt in one of the spouse's name, but the other spouse has very minimal debt it can be a good idea for the debt-ridden spouse to file for an individual bankruptcy. One misconception that some folks have is that if his or her spouse files for bankruptcy that the bankruptcy filing will show up on his or her credit report. This is not true. In order for a bankruptcy to show up on your credit report you must actually file for bankruptcy. The major benefit of filing an individual bankruptcy is that the non-filing spouse's credit will not be harmed by the bankruptcy filing of his or her wife or husband. However, it is important to note that if both spouses are liable for a debt that the non-filing spouse will still be responsible for the debt even though his or spouse has discharged it in bankruptcy.
It is also important to acknowledge that even if a spouse does not file bankruptcy and even though the bankruptcy will not appear on the non-filing spouse's credit report that a non-filing spouse can be indirectly affected by the filing of their spouse's bankruptcy. The income and expenses of the non-filing spouse are taken into consideration in the preparation of the bankruptcy petition and if the filing spouse files a Chapter 13 bankruptcy it is not likely that the Chapter 13 will be successful without the support of the non-filing spouse. If you are interested in how a non-filing spouse can be affected by the bankruptcy, read my previous blog entry on bankruptcy and the non-filing spouse.
Whether the debt is in the name of one spouse or both spouses, it can certainly add a lot of additional stress to a marriage. I encourage couples to speak openly about their finances and debt issues. Debt is best dealt with when couples form a plan of attack together. Without a plan the debt can often drive a wedge between couples and may even be the primary cause of a divorce. If you and your spouse are living in central Indiana, have issues with debt and you would like to meet with me to discuss you plan of attack contact me at 317-575-8222 or click here. Bankruptcy is not the only option we can discuss and the initial consultation is free.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Thursday, May 19, 2011
When is it time to seek the advice of a bankruptcy attorney?
I understand that people are often hesitant to seek the advice of a bankruptcy attorney. Individuals are often afraid of the unknown, reluctant to talk about their financial difficulties with someone they have never met and are putting all of their extra time toward working in an attempt to pay all of the bills. However, I believe that it is smart to seek the advice of a bankruptcy attorney when you are experiencing some or all of the following factors:
1. You are working but not able to keep up with your bills or you know that you will fall behind on your bills shortly.
2. A lawsuit has been filed against you for a credit card, mortgage foreclosure or other collection action and you don't have the money to pay the amount due.
3. You are considering taking a hardship loan from your 401k.
4. You are always putting your groceries on a credit card or taking credit card cash advances to pay your living expenses or on other credit card payments.
5. You are stuck in a cycle of cash advance loans.
6. You have been attempting to get out of debt for years and you are coming to the conclusion that you are not able to escape. The stress of debt is keeping you awake at night and causing issues in your family and/or marital relationships.
7. You have borrowed money from relatives several times to get out of debt and have not been able to pay them back. However, you still have a lot of debt and you don't want to ask them for any more money.
8. You have stopped making a contribution towards your retirement because you need every cent of your paycheck to pay debt payments.
9. You are going to getting a divorce shortly or are in the process of divorce and neither you nor your spouse can afford the house you were living in as a couple. The house has been on the market for an extended period of time and there have not been any offers. On top of the house you have additional credit card, medical or other debt.
10. You owe income taxes over several years. You are not able to make the payments required by the IRS or Indiana Department of Revenue on these taxes.
At Halcomb Singler, LLP, we do not charge for an initial consultation regarding bankruptcy. We understand that you don't know everything about bankruptcy. You have questions regarding the process and whether it could help you or not. We want to encourage people to get the information that will aid them in making an informed decision about bankruptcy. I typically tell people that only they can make the decision whether they need to file a bankruptcy and that I am simply there to give them the information, answer their questions and let them know whether I believe they might benefit from bankruptcy. Since there is no charge for the initial consultation there is nothing to gain except knowledge. If you live in Indianapolis, Carmel, Westfield, Noblesville, Fishers or in any other place surrounding Indianapolis and you would like to meet with me to discuss bankruptcy please contact me at 317-575-8222. I am happy to speak to you without judgment and in an effort to help you come to a plan to solve your financial problems even if it does not include bankruptcy!
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
1. You are working but not able to keep up with your bills or you know that you will fall behind on your bills shortly.
2. A lawsuit has been filed against you for a credit card, mortgage foreclosure or other collection action and you don't have the money to pay the amount due.
3. You are considering taking a hardship loan from your 401k.
4. You are always putting your groceries on a credit card or taking credit card cash advances to pay your living expenses or on other credit card payments.
5. You are stuck in a cycle of cash advance loans.
6. You have been attempting to get out of debt for years and you are coming to the conclusion that you are not able to escape. The stress of debt is keeping you awake at night and causing issues in your family and/or marital relationships.
7. You have borrowed money from relatives several times to get out of debt and have not been able to pay them back. However, you still have a lot of debt and you don't want to ask them for any more money.
8. You have stopped making a contribution towards your retirement because you need every cent of your paycheck to pay debt payments.
9. You are going to getting a divorce shortly or are in the process of divorce and neither you nor your spouse can afford the house you were living in as a couple. The house has been on the market for an extended period of time and there have not been any offers. On top of the house you have additional credit card, medical or other debt.
10. You owe income taxes over several years. You are not able to make the payments required by the IRS or Indiana Department of Revenue on these taxes.
At Halcomb Singler, LLP, we do not charge for an initial consultation regarding bankruptcy. We understand that you don't know everything about bankruptcy. You have questions regarding the process and whether it could help you or not. We want to encourage people to get the information that will aid them in making an informed decision about bankruptcy. I typically tell people that only they can make the decision whether they need to file a bankruptcy and that I am simply there to give them the information, answer their questions and let them know whether I believe they might benefit from bankruptcy. Since there is no charge for the initial consultation there is nothing to gain except knowledge. If you live in Indianapolis, Carmel, Westfield, Noblesville, Fishers or in any other place surrounding Indianapolis and you would like to meet with me to discuss bankruptcy please contact me at 317-575-8222. I am happy to speak to you without judgment and in an effort to help you come to a plan to solve your financial problems even if it does not include bankruptcy!
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Thursday, May 12, 2011
The Little Things Add Up When it Comes To Your Budget
Practicing mostly in the areas of debt settlement and bankruptcy, I often review the bank statements of my clients. What I often find after speaking to a client is that he or she simply doesn't know where the money is going every month. The client simply knows that after they pay the bills there is little or nothing left and are frustrated with the constant strain finances are putting in his or her life.
The bank statement is helpful because I find most people estimate they spend less each month than they actually spend. A bank statement puts hard numbers in front of you that clearly show what you are spending each month. A bank statement may also point out where expenses can be cut to get out of debt or save more money. When I review bank statements for clients, I often find small charges several times a day each day that the client is not factoring in to his or her budget. These charges are often less than $15.00 per transaction, but can really add up over the weeks and months. For example, I often see small charges for fast food, liquor stores, coffee shops, convenience stores and ATM withdraws. It is typical for there to be six or eight of these transactions showing up per week and these transactions add up to quite a bit of money. For example, if we assume that a person swipes his or her debit or credit card six times per week with the average transaction of $8.00, that person would have spent $192.00 by the end of the month. If that person is married it is a good bet that $192.00 can be multiplied by two, for a total of $384.00 in expenditures each month.
My point is that everyone knows that if they are trying to save money that they shouldn't splurge on an expensive vehicle, designer handbag or vacation. However, what many people who are trying to budget their money to either get out of debt or simply to save money they tend to overlook the small purchases as being insignificant. The bottom line is that the little things add up in a big way.
To truly understand where your money is going take out a bank statement and add up the transactions where you stopped for a quick snack at the fast food restaurant, bought a drink and pack of gum at the gas station or bought a 6-pack of beer. Most folks are amazed when they add all of these little purchases up that it is easy to spend a few hundred dollars a month on things that they don't really need.
I am not saying that any person can or should go a whole month without making a small impulse purchase or two....I am just saying that for many of us, these small purchases add up into a decent amount of money. For those trying to get out of debt every extra dollar counts and it is important to be aware of these purchases so that they don't get out of hand and get you off track from your financial goals.
I would love to hear about any tips or tricks that you use to keep your spending in check and your results. Please post these to the comments section. As always, feel free to contact me at 317-575-8222 for an appointment if you feel like you cannot escape from debt and are considering bankruptcy. I would be happy to meet with you at Halcomb Singler and there is no fee for the initial consultation.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
The bank statement is helpful because I find most people estimate they spend less each month than they actually spend. A bank statement puts hard numbers in front of you that clearly show what you are spending each month. A bank statement may also point out where expenses can be cut to get out of debt or save more money. When I review bank statements for clients, I often find small charges several times a day each day that the client is not factoring in to his or her budget. These charges are often less than $15.00 per transaction, but can really add up over the weeks and months. For example, I often see small charges for fast food, liquor stores, coffee shops, convenience stores and ATM withdraws. It is typical for there to be six or eight of these transactions showing up per week and these transactions add up to quite a bit of money. For example, if we assume that a person swipes his or her debit or credit card six times per week with the average transaction of $8.00, that person would have spent $192.00 by the end of the month. If that person is married it is a good bet that $192.00 can be multiplied by two, for a total of $384.00 in expenditures each month.
My point is that everyone knows that if they are trying to save money that they shouldn't splurge on an expensive vehicle, designer handbag or vacation. However, what many people who are trying to budget their money to either get out of debt or simply to save money they tend to overlook the small purchases as being insignificant. The bottom line is that the little things add up in a big way.
To truly understand where your money is going take out a bank statement and add up the transactions where you stopped for a quick snack at the fast food restaurant, bought a drink and pack of gum at the gas station or bought a 6-pack of beer. Most folks are amazed when they add all of these little purchases up that it is easy to spend a few hundred dollars a month on things that they don't really need.
I am not saying that any person can or should go a whole month without making a small impulse purchase or two....I am just saying that for many of us, these small purchases add up into a decent amount of money. For those trying to get out of debt every extra dollar counts and it is important to be aware of these purchases so that they don't get out of hand and get you off track from your financial goals.
I would love to hear about any tips or tricks that you use to keep your spending in check and your results. Please post these to the comments section. As always, feel free to contact me at 317-575-8222 for an appointment if you feel like you cannot escape from debt and are considering bankruptcy. I would be happy to meet with you at Halcomb Singler and there is no fee for the initial consultation.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Tuesday, May 10, 2011
Bankruptcy and Co-Signers
Practicing as a bankruptcy attorney at Halcomb Singler, LLP, there are some questions I hear more often than others. One of those questions is how will bankruptcy affect my co-signer? This is a very good question, because often the co-signer is a relative or friend and the last thing my client wants to do is stick the co-signer with the debt or involve him or her in the bankruptcy.
But, before I address how a co-signer is affected by the filing of a bankruptcy petition, allow me to back up and explain my stance on co-signing. In my opinion, one of the most important financial rules to live by is don't co-sign any loan for anyone. Yes, this ban includes student loans and cars for your children. If you do decide to co-sign you should understand that you are just as liable for the debt as the person who took out the loan and you should be prepared to pay the loan should the other person fail to pay. Ok. Now that I have said that lets move on to bankruptcy's affect on co-signers.
How a co-signer is affected depends on the type of bankruptcy filed as well as the action taken in the bankruptcy. In a Chapter 7 bankruptcy, the debtor is typically protected by an "automatic stay." This is a protection afforded to those who file bankruptcy from their creditors. The automatic stay prevents creditors from attempting to collect from those who have filed bankruptcy. Unfortunately, in Chapter 7 the protection of the automatic stay does not protect a co-signer who has not filed bankruptcy . So, for example, if "Cindy" files for Chapter 7 bankruptcy and her mother has co-signed on the vehicle, the creditor cannot contact Cindy in an attempt to collect the debt (assuming the creditor has not received relief from the automatic stay), but the creditor can contact her mother regarding the debt. If Cindy decides that she cannot afford the car and surrenders it back to the bank during her bankruptcy and subsequently receives a discharge of her debts Cindy would no longer be liable on the debt. However, in this example Cindy's mother would still be liable for any amount owed to the bank after they sold the vehicle to a third party. However, if Cindy reaffirms on the vehicle, which basically means that she continues to be liable for the debt even after bankruptcy, and continues to make the payments on the car until it is paid in full her mom likely won't hear from the creditor during the bankruptcy because the creditor is continuing to receive payments just as Cindy never filed for bankruptcy.
One of the benefits of Chapter 13 bankruptcy is that co-signers are afforded some protection. If you file a Chapter 13 bankruptcy the stay that prevents your creditors from attempting to collect the debt from you is also afforded to your co-signer(s). This means that if Cindy took out a personal unsecured loan two years before filing for Chapter 13 bankruptcy that was co-signed by her mom that mom is protected by the stay. So long as Cindy's Chapter 13 remains in place Cindy's mom is protected in most circumstances. Even if a lawsuit has been filed against Cindy and her mom to collect on the loan, the lawsuit will be stayed as to both Cindy and her mom so long as Cindy files a Chapter 13. The stay against a co-debtor does not mean that the creditor could not petition the court for permission to collect against Cindy's mom. The bankruptcy code allows a creditor to request relief from the stay as to the co-signer if the co-signer actually received the money or property, if the Chapter 13 repayment plan proposes not to pay the creditor's claim or if the creditor's interest would be irreparably harmed by the continuation of the stay to the co-signer. However, this cannot happen without a hearing in front of the judge.
As you can see, it can be difficult to understand how the filing of your bankruptcy may affect your co-signer. If you are considering filing bankruptcy and live in the Indianapolis or surrounding areas please contact me if you are in need of assistance at 317-575-8222 or click here to explain how we can help. My firm will contact you to schedule an appointment and there is no fee for the initial consultation.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
But, before I address how a co-signer is affected by the filing of a bankruptcy petition, allow me to back up and explain my stance on co-signing. In my opinion, one of the most important financial rules to live by is don't co-sign any loan for anyone. Yes, this ban includes student loans and cars for your children. If you do decide to co-sign you should understand that you are just as liable for the debt as the person who took out the loan and you should be prepared to pay the loan should the other person fail to pay. Ok. Now that I have said that lets move on to bankruptcy's affect on co-signers.
How a co-signer is affected depends on the type of bankruptcy filed as well as the action taken in the bankruptcy. In a Chapter 7 bankruptcy, the debtor is typically protected by an "automatic stay." This is a protection afforded to those who file bankruptcy from their creditors. The automatic stay prevents creditors from attempting to collect from those who have filed bankruptcy. Unfortunately, in Chapter 7 the protection of the automatic stay does not protect a co-signer who has not filed bankruptcy . So, for example, if "Cindy" files for Chapter 7 bankruptcy and her mother has co-signed on the vehicle, the creditor cannot contact Cindy in an attempt to collect the debt (assuming the creditor has not received relief from the automatic stay), but the creditor can contact her mother regarding the debt. If Cindy decides that she cannot afford the car and surrenders it back to the bank during her bankruptcy and subsequently receives a discharge of her debts Cindy would no longer be liable on the debt. However, in this example Cindy's mother would still be liable for any amount owed to the bank after they sold the vehicle to a third party. However, if Cindy reaffirms on the vehicle, which basically means that she continues to be liable for the debt even after bankruptcy, and continues to make the payments on the car until it is paid in full her mom likely won't hear from the creditor during the bankruptcy because the creditor is continuing to receive payments just as Cindy never filed for bankruptcy.
One of the benefits of Chapter 13 bankruptcy is that co-signers are afforded some protection. If you file a Chapter 13 bankruptcy the stay that prevents your creditors from attempting to collect the debt from you is also afforded to your co-signer(s). This means that if Cindy took out a personal unsecured loan two years before filing for Chapter 13 bankruptcy that was co-signed by her mom that mom is protected by the stay. So long as Cindy's Chapter 13 remains in place Cindy's mom is protected in most circumstances. Even if a lawsuit has been filed against Cindy and her mom to collect on the loan, the lawsuit will be stayed as to both Cindy and her mom so long as Cindy files a Chapter 13. The stay against a co-debtor does not mean that the creditor could not petition the court for permission to collect against Cindy's mom. The bankruptcy code allows a creditor to request relief from the stay as to the co-signer if the co-signer actually received the money or property, if the Chapter 13 repayment plan proposes not to pay the creditor's claim or if the creditor's interest would be irreparably harmed by the continuation of the stay to the co-signer. However, this cannot happen without a hearing in front of the judge.
As you can see, it can be difficult to understand how the filing of your bankruptcy may affect your co-signer. If you are considering filing bankruptcy and live in the Indianapolis or surrounding areas please contact me if you are in need of assistance at 317-575-8222 or click here to explain how we can help. My firm will contact you to schedule an appointment and there is no fee for the initial consultation.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Friday, May 6, 2011
Don't Make Financing the American Way
Someone once told me that financing was the American Way.....ugh. As a bankruptcy attorney at Halcomb Singler, LLP, I meet with people all the time who are drowning in payments to various finance/credit card companies. Most of these folks really, really wish that they had not taken out loans or used credit cards to get themselves through the tough times. However, in my experience it seems that more and more people in Indianapolis and central indiana are looking financing more of their possessions over a longer period of time and I wanted to address that today.
It is true that Americans are inundated with offers for financing on a daily basis. I know that when I go out to my mailbox it is not uncommon to find two credit card applications in the mail. If Americans want to go get another car most have no trouble (although sometimes at very high interest rates) obtaining some sort of financing to get a vehicle. I have also seen a rise in the ability to finance other less traditional goods and services such as dental work, medical procedures, and vacuum cleaners (yes, you did read that correctly).
I readily admit that the ability to finance is important. Loans allow people to buy homes, further their educations and drive to work. However, I would like to urge people to think hard about taking a loan for just any reason. In my opinion loans should be avoided at almost any cost with a few exceptions. To me, there is no problem with taking out a loan to finance the purchase of your home so long as it is a home that you can afford. By afford, I don't just mean that as of the time you buy it you have the ability to make the mortgage payment, but that is a good topic for another blog posting. In addition, I am not against taking out student loans to finance your own education. Although, I would recommend that you take out as few student loans for the minimum amount necessary and work during school to try to minimize the required payment once you graduate. In addition, don't take out $100,000.00 in student loans for a job that is going to pay 30k a year. Make sure that taking loans for an education is a good business decision.
You are now probably wondering why I did not mention vehicle loans as a type of loan that I believe is an exception to the general rule against financing. I am on the fence about vehicle financing. I think that ideally, no one would finance a vehicle and would drive the car he or she could afford to buy with cash until it died. However, I also know that people need a vehicle to get to work and sometimes simply just don't have the cash to buy a car outright. So, I am saying that I am ok with the financing of a used vehicle in some circumstances. This means that you should not finance for over 36 months and during that time you should start putting money aside in savings towards purchasing your next car so that you don't need to finance again. And don't turn around right after you have made your last payment to buy a newer car. Drive the one you have until it dies and use the time without a car payment to boost your savings.
In my opinion, one of the most disturbing trends in financing today is that many people are financing a vehicle over a period of 72 months. This means that every month for six entire years that he or she is going to be sending in a payment. It also means that if you drive an average of 15,000 miles each year that at the end of 6 years you will have 90,000 miles on the vehicle. We all know that most vehicles are going to need some costly repairs prior to the 90,000 mile mark. So, on top of your payment you are going to have to shell out extra money for repairs. Trust me, the repairs are much easier to stomach if there is no payment. As Dave Ramsey says, a vehicle seems to run a lot better when it isn't pulling a payment book behind it.
There are also a few things that I can confidently tell you there is just no earthly reason to finance. One is a vacuum (no explanation needed). Others include boats, 4 wheelers, motorcycles, camper trailers or any other "toy" or luxury item. The bottom line is that no matter how hard you try to talk yourself into these purchases, you do not need them. So, if you are going to buy them you better be able to pay for them with cash. Not only should you have the cash to pay for these items, you should have 6 to 8 months of income left over in your emergency fund after paying cash for any of these items.
I think I will always work with people who need to file bankruptcy and are struggling to pay debt. I enjoy being able to help people with their financial struggles through creditor workouts and bankruptcy. But I see the stress that debt puts on individuals and families on a daily basis and I hope following a few of these rules will help some people avoid financial stress. As always, if you are looking for more information on bankruptcy or debt check out Halcomb Singler's website or click here and we will contact you for an appointment.
It is true that Americans are inundated with offers for financing on a daily basis. I know that when I go out to my mailbox it is not uncommon to find two credit card applications in the mail. If Americans want to go get another car most have no trouble (although sometimes at very high interest rates) obtaining some sort of financing to get a vehicle. I have also seen a rise in the ability to finance other less traditional goods and services such as dental work, medical procedures, and vacuum cleaners (yes, you did read that correctly).
I readily admit that the ability to finance is important. Loans allow people to buy homes, further their educations and drive to work. However, I would like to urge people to think hard about taking a loan for just any reason. In my opinion loans should be avoided at almost any cost with a few exceptions. To me, there is no problem with taking out a loan to finance the purchase of your home so long as it is a home that you can afford. By afford, I don't just mean that as of the time you buy it you have the ability to make the mortgage payment, but that is a good topic for another blog posting. In addition, I am not against taking out student loans to finance your own education. Although, I would recommend that you take out as few student loans for the minimum amount necessary and work during school to try to minimize the required payment once you graduate. In addition, don't take out $100,000.00 in student loans for a job that is going to pay 30k a year. Make sure that taking loans for an education is a good business decision.
You are now probably wondering why I did not mention vehicle loans as a type of loan that I believe is an exception to the general rule against financing. I am on the fence about vehicle financing. I think that ideally, no one would finance a vehicle and would drive the car he or she could afford to buy with cash until it died. However, I also know that people need a vehicle to get to work and sometimes simply just don't have the cash to buy a car outright. So, I am saying that I am ok with the financing of a used vehicle in some circumstances. This means that you should not finance for over 36 months and during that time you should start putting money aside in savings towards purchasing your next car so that you don't need to finance again. And don't turn around right after you have made your last payment to buy a newer car. Drive the one you have until it dies and use the time without a car payment to boost your savings.
In my opinion, one of the most disturbing trends in financing today is that many people are financing a vehicle over a period of 72 months. This means that every month for six entire years that he or she is going to be sending in a payment. It also means that if you drive an average of 15,000 miles each year that at the end of 6 years you will have 90,000 miles on the vehicle. We all know that most vehicles are going to need some costly repairs prior to the 90,000 mile mark. So, on top of your payment you are going to have to shell out extra money for repairs. Trust me, the repairs are much easier to stomach if there is no payment. As Dave Ramsey says, a vehicle seems to run a lot better when it isn't pulling a payment book behind it.
There are also a few things that I can confidently tell you there is just no earthly reason to finance. One is a vacuum (no explanation needed). Others include boats, 4 wheelers, motorcycles, camper trailers or any other "toy" or luxury item. The bottom line is that no matter how hard you try to talk yourself into these purchases, you do not need them. So, if you are going to buy them you better be able to pay for them with cash. Not only should you have the cash to pay for these items, you should have 6 to 8 months of income left over in your emergency fund after paying cash for any of these items.
I think I will always work with people who need to file bankruptcy and are struggling to pay debt. I enjoy being able to help people with their financial struggles through creditor workouts and bankruptcy. But I see the stress that debt puts on individuals and families on a daily basis and I hope following a few of these rules will help some people avoid financial stress. As always, if you are looking for more information on bankruptcy or debt check out Halcomb Singler's website or click here and we will contact you for an appointment.
Tuesday, May 3, 2011
Will Filing Bankruptcy Damage My Credit?
In a word......yes. A bankruptcy filing will remain on your credit for up to 10 years. A bankruptcy is certainly a negative on your credit report.
However, most of the people I meet with at Halcomb Singler have already tried everything they can think of (and then some) to avoid the filing of a bankruptcy. Many of them have already gotten behind on payments to some of their creditors or know that it is just a matter of time before they fall behind. If you are already behind on payments have have mounting debts the fact is that your credit has already been damaged. And, if you behind on several debts it is unlikely that you are going to be able to obtain a loan (or at least a loan without paying a horrible interest rate) even if you do not file bankruptcy.
The way I see it a credit score is really one of the least important reasons to file or not file a bankruptcy petition. What I typically tell my clients is that if you can pay off your debts you should not file bankruptcy and if you are not able to pay your debts while still maintaining a minimal standard of living bankruptcy may be an option. While this a very oversimplified way of thinking about bankruptcy (and there are many more factors to be taken into consideration before I will advise a person to file bankruptcy), looking at it from a strictly credit score perspective I believe it is really that straightforward.
Another good way for those considering whether to attempt to pay down their debts or to file bankruptcy is start by writing down a budget. This should be a realistic budget that takes into account not only set expenses such as mortgage/rent payment, vehicle payment, and utility bills, but also variable expenses such as food, clothing, and entertainment. I chose to list food, clothing and entertainment because people so often either leave these items off or completely underestimate. Everyone is going to spend some money from time to time on entertainment even if it is just renting a few movies and everyone spends some money on clothing at some point. Also, if you can feed a family of 4 for $150.00 please let me know because I would like to go shopping with you so you can teach me how you do it. What I am saying is that it is important in setting out this budget that you are very realistic because that is how you can see whether you have enough money left over at the end of the month to make payments on your debts. I typically tell my clients that if you would not be able to pay off your debts (not including house payments) in 5-6 years it might make sense to consider bankruptcy.
Please understand that there are many other considerations regarding filing a bankruptcy other than credit score and if you meet with me or any other bankruptcy attorney in the Indianapolis area they are going to take them all into consideration prior to advising you as to whether they believe you could benefit from the filing of a bankruptcy. No two cases are alike so it is important to obtain individualized advice regarding your situation. As always, if you would like to meet with my at my Carmel law firm please call me at 317-575-8222 or click here and we will get in touch with you to set an appointment. There is no fee for this initial consultation.
However, most of the people I meet with at Halcomb Singler have already tried everything they can think of (and then some) to avoid the filing of a bankruptcy. Many of them have already gotten behind on payments to some of their creditors or know that it is just a matter of time before they fall behind. If you are already behind on payments have have mounting debts the fact is that your credit has already been damaged. And, if you behind on several debts it is unlikely that you are going to be able to obtain a loan (or at least a loan without paying a horrible interest rate) even if you do not file bankruptcy.
The way I see it a credit score is really one of the least important reasons to file or not file a bankruptcy petition. What I typically tell my clients is that if you can pay off your debts you should not file bankruptcy and if you are not able to pay your debts while still maintaining a minimal standard of living bankruptcy may be an option. While this a very oversimplified way of thinking about bankruptcy (and there are many more factors to be taken into consideration before I will advise a person to file bankruptcy), looking at it from a strictly credit score perspective I believe it is really that straightforward.
Another good way for those considering whether to attempt to pay down their debts or to file bankruptcy is start by writing down a budget. This should be a realistic budget that takes into account not only set expenses such as mortgage/rent payment, vehicle payment, and utility bills, but also variable expenses such as food, clothing, and entertainment. I chose to list food, clothing and entertainment because people so often either leave these items off or completely underestimate. Everyone is going to spend some money from time to time on entertainment even if it is just renting a few movies and everyone spends some money on clothing at some point. Also, if you can feed a family of 4 for $150.00 please let me know because I would like to go shopping with you so you can teach me how you do it. What I am saying is that it is important in setting out this budget that you are very realistic because that is how you can see whether you have enough money left over at the end of the month to make payments on your debts. I typically tell my clients that if you would not be able to pay off your debts (not including house payments) in 5-6 years it might make sense to consider bankruptcy.
Please understand that there are many other considerations regarding filing a bankruptcy other than credit score and if you meet with me or any other bankruptcy attorney in the Indianapolis area they are going to take them all into consideration prior to advising you as to whether they believe you could benefit from the filing of a bankruptcy. No two cases are alike so it is important to obtain individualized advice regarding your situation. As always, if you would like to meet with my at my Carmel law firm please call me at 317-575-8222 or click here and we will get in touch with you to set an appointment. There is no fee for this initial consultation.
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