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Banking on Bankruptcy

Bankrupted businessman showing empty pockets
Bankrupted businessman showing empty pockets

It should be avoided if at all possible but in these fast moving modern days bankruptcy is commonplace and actually rising as the struggling economic climate continues to struggle. This is a way for people or businesses who have too many debts to handle, either to work out a plan to repay the money they owe, or to eliminate their debts entirely.

This can happen for a number of different reasons of course and some of those reasons are very genuine, though it should always be the worst case scenario it can help individuals back onto a straighter path and give them a fresh start. This article will give a brief overview of the process in very simple terms and hopefully give you some great advice along the way! Bankruptcy doesn’t have to be the end of the world but you’ll need the best possible help.


Chapter 13 Bankruptcy

Under bankruptcy laws this is a well thought out plan for individuals to repay some or all of the money owed over a long period of time. In America this is the first route anyone should go down as it can give you very valuable breathing space.

The downside is this makes it very difficult for people to get any credit in the future, so you should always be very clear about this. Before anyone files for bankruptcy, and again before the Chapter 13 bankruptcy is finally discharged, you must obtain credit counselling from a non-profit credit counselling agency registered under the federal bankruptcy reform of 2005. This is to both give good advice and help you in the future.

The debtor starts the process by filing a petition with the bankruptcy court in their home district. Bankruptcy forms can be purchased at most stationery stores, or a bankruptcy attorney can help you prepare the forms. A confirmation hearing will eventually be held in court, and the bankruptcy judge will determine if the plan is feasible, and meets all Bankruptcy Code standards.

Creditors will be told of the hearing, and they may object to confirmation so be prepared to accept this as part of the ongoing scheme of things. Put yourself in their position? But get full advice from experts before even going down this road as filing bankruptcy can be a complicated affair.

Also remember the chapter numbers are different for farmers and corporations, and are taken from the sections of the Bankruptcy Code describing these procedures in much greater detail. If you fall into one of these categories you’ll need specialist advice!

Chapter 7 Bankruptcy

holding number 7 in hand

If any payments cannot be paid over any length time, an individual or a corporation can file a bankruptcy under this particular chapter, where assets are liquidated and most debts are discharged. This will make it even tougher for you to get credit in the future and should only come into play when no other road is open to you.

In order to file the debtor files a petition with the bankruptcy court serving the area where the debtor lives, or where the business debtor operates the business or keeps most of their assets. Once this has taken place most legal actions are what we call “stayed”, and creditors cannot start or continue lawsuits or make telephone calls demanding payment. In other words the creditors must stop chasing the individual involved!

20 to 40 days after the petition is filed a meeting of creditor’s takes place and the debtor must attend the meeting. The creditors will ask questions regarding both the debtor’s financial affairs and property. You need to take a thoroughly professional approach in this situation and prepare well for any such meeting so you have the answers they may need to hand.

Bankruptcy chapter 7 will conclude with the debtor being discharged. They are no longer liable for discharged debts, and creditors are prevented from taking any action against them. Again take the best possible advice before embarking on this road. A good bankruptcy lawyer will help!

Chapter 11 Bankruptcy

This all important bankruptcy Code is frequently referred to as a “reorganization” bankruptcy. Another technical term for a fresh start if you like! A person cannot file under this chapter or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed.

This could be due to the debtor’s failure to appear before the court or comply with orders of the court. It could also be down to the debtor being voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property. Hopeful you won’t ever find yourself in this position.

A relevant case begins with the filing of a petition with the bankruptcy court serving the area where the debtor resides. A disclosure statement or document containing information concerning the assets, liabilities, and business affairs of the debtor will be produced.

Let’s Be Clear About This!

 girl indicating towards her right

Unless the court orders otherwise, the debtor must file with the court:

  • Schedules of assets and liabilities;
  • A schedule of current income and expenditures;
  • A schedule of executory contracts and unexpired leases;
  • A statement of financial affairs.

This will be sufficient to enable a creditor to make an informed judgment about the debtor’s plan of reorganization and then act on this. A debtor will remain a debtor in possession until the debtor’s plan of reorganization is formally confirmed and rubber stamped.

The same applies until the debtor’s case is dismissed or converted to another chapter or a chapter 11 trustee is appointed. Bankruptcy lawyers should really be consulted as again, this can get extremely complicated depending on each individual’s circumstances and you can easily get bogged down in the scheme of things!

The experts will be able to hone in on your situation extremely quickly and come up with the best form of action. The truth is it will also make you feel a little better knowing you’re taking direct action and attempting to do something about the situation.


You must be aware this is a very complicated area and each case will vary, but there are many experts out there to help you. It’s understandable to feel confused, lost or even overwhelmed at times when financial burdens become too great to bear. The system is there to help people out of trouble and try to satisfy everyone involved, though of course it’s sometimes not possible to fully satisfy all the parties.

In a great many cases it’s really all about reaching a compromise. There’s a wealth of specialist reading on the subject across the internet so even though it may take a little while, become fully informed and up to date with the process. This is a form of action you simply can’t afford to rush as it has long standing consequences for everyone involved.

If you know you’re getting into trouble take advice as quickly as possible and even though the temptation may be there don’t bury your head in the sand. Remember, a problem is just an opportunity turned around and it doesn’t have to be a sad end. Some great success stories have come from bankruptcy! good luck!


Credit Card Debt Levels Are Rising in America

credit union logo

These have been tough years for the American economy with families finding it hard to make ends meet. But the fact is the level of credit card debt continues to rise at an alarming rate! In 2012 alone debt figures showed a rise of 5 per cent from the previous year on credit cards.

It’s not rocket science of course to work out if people don’t have the money, then credit cards are an option. But there’s one thing that’s been prevalent in all of this:

Low Interest Rates!

This baby keeps borrowers borrowing – great you cry? But the problem is, this leads to higher and higher credit card balances. And this in itself can be extremely dangerous and lead to a whole range of financial problems for those involved. There could be other reasons as some experts have cited. It could be seasonal? Vacations, gift time, back to college or school? Well who knows, but this isn’t the only crux of the problem.

Here’s Some More Sobering Info for You!


credit card burden

At September of 2012 American credit card debt stood at more than $852 billion. This really is a quite staggering figure! More than six per cent up on the previous year. The average sum of credit card debt per household was a cool $15,328.

Only mortgages and student loans are at the front of the list. Remember credit cards can be a valuable tool – but households would seem to be relying on them too much!

But Wait – The Banks Have a Lot to Do With This!

You’d think in hard times banks would be become stricter – but the fact is they have been increasing the number of credit cards they issue. Even more worrying was the fact more than a quarter of these cards went out to consumers with credit scores below 700 or ‘nonprime credit scores’, if you like! What does this mean?



Now You’re Really Interested Here’s More Fascinating Figures for You

Those credit cards overdue for payment by 90 days were 0.75 per cent up on 2011. This of course is a direct result of banks and others lowering their lending criteria

But Hang On – Won’t This Help the Economy in the Long Run?

credit card increasing interest

Well to a certain degree this is true but of course individuals shouldn’t get themselves into trouble because of this. More debt means more interest – but of course this will re-route the cash flow from more essential things in households. Here’s the rub?


We should also remember more spending means confidence could be returning. In fact more jobs are going into the marketplace as each day passes. The end result is:

‘More Disposable Income’

And yet for all of this people generally seem to be a little less dependent on credit cards taking the picture as a whole! What we must do according to experts is make people more financially aware!

So What’s the Upshot Here?

While people are actually relying on credit cards a little less generally credit card debt is increasing. This is due to a number of different reasons. Yes this can certainly boost the economy but sometimes at great personal cost. It may spoil retirement plans or affect long term financial projects. If you can – then paying down debt instead of pushing up your spending will bring loner term benefits. But always remember credit cards can be valuable when used in the proper fashion – just be careful out there!


Can I Negotiate With My Credit Card Company?

dialing through a mobile phone while holding a credit card on the other hand
dialing through a mobile phone while holding a credit card on the other hand

Americans know all about recession and what it can do to households in every state. When the bills begin to bite people understandably begin to get anxious. But negotiate with a credit card company? It would be easier negotiating with Putin……….right?

Well actually………wrong! When money gets short and things are piling up on us, there are a number of things we can do to get a little financial breathing space. Take a deep breath, sit down and look at your options calmly. You’ll be surprised how easily you can take control again.

Your Country Needs you!

Just imagine you’re the President looking after the national debt – the scenario is the same only much bigger. But the first thing to do is admit we have a problem! Every problem is an opportunity turned around and we can repair the situation by addressing things head on. One of those options is negotiating with the credit card company!

As For the Ostrich Impressions!

girl cutting her credit card with scissors you should never do is bury your head in the sand as the problem won’t go away. ‘Oh the credit cards can wait you’ll say’……….but the truth is they can’t………that isn’t the answer Barack would be pleased with! And Superman won’t be able to whizz down and help either!!

So step up to the podium and hit back……….contact the credit card company and explain the situation. There’s no shame in this as problems can occur for all sorts of reasons. And you don’t always need a debt consolidation company if you feel confident enough to talk to your own creditors. They’ll feel you are taking responsibility and will try and help.

What is Debt Settlement?

It might sound straightforward to some but there are certain implications you need to understand. This occurs when someone contacts the credit card company to discuss reducing the amount of money owed. They might agree to change the payment plan, pass on fees or even freeze interest in certain cases.

And the Downside?

thumbs down

Well of course this will harm your credit history though some companies will go lightly on you if a debt settlement is reached in full. In the near future you’ll have problems obtaining credit or loans from most companies – but this can be repaired even though it may take some time in various cases.

This may sound harsh but at least when you contact companies and accept responsibility, this will go in your favour. Credit Card Companies like anyone else will see this as the fact we are getting close to bankruptcy – even if we aren’t and the situation for us personally suddenly improves.

So they’ll try and get what they can back in the meantime. This is because credit card companies are the last to be paid in a bankruptcy. It’s difficult but try and see both sides of the problem.

Negotiate with Them as This Will Help in the Long Run!

“The best thing to do is ring the creditor and politely explain the problem,” says Julie from Chicago. “You want to take responsibility and are willing to come to some arrangement, so can they help. If you are in a position to pay off a reasonable sum then begin with around a third of what you owe. Up to this point the company will negotiate with you. It may take a couple of calls, but a compromise can be reached so don’t worry too much.”

Hopefully we can get a plan to help in the long run and resolve our problems completely. But if you feel it’s not working or you have numerous debts then a good debt management company will both help you and protect you to a point.
So don’t worry too much as this really doesn’t achieve anything – but wise up and contact the credit card company! You’ll be glad you did!


Building a Good Credit History

good credit score
good credit score

The fact is if you ever need to borrow money, get finance on an auto loan, sing up for a credit card or even buy a house, then having a decent credit history is invaluable.

Even if it isn’t great at this moment in time there are steps you can take to build a better history and improve your FICO score.

What you need to do first of all is to take stock of your own personal financial situation and ask this question?

Where am I going wrong?

Sometimes we can affect our credit history without even thinking about it by applying for all the offers coming through the mailbox. These might include offers on credit cards and other financial products from personal loans to credit lines.

rejected stamp

Each time we apply for these a footprint is left on our credit file, and of course each time we are rejected then this affects the overall score. It’s the same when we’re invited to take out a store card – this is big business for the companies involved but can be bad news for the individual consumer.

The fact is you don’t need lots of credit cards or credit lines, and they don’t help your FICO SCORE especially if you’re a new citizen of the United States.

What shall I do first?

Make sure you check your credit report on a regular basis just to make sure everything is ok. The whole point of the Fair Credit Reporting Act is to guarantee you can see your own credit report free of charge every 12 months. There are three top companies and these are: Experian, Equifax, and TransUnion. These will help you keep track of any changes and you can even see your FICO score going up bit by bit. It’s there to help you in the long term.



So how can I build and improve my history?

man climbing on his credit report

Well apart from ensuring your bills are paid on time take a look at any credit or store cards you may have. If you have too many then cut these down to just one or two.

Make payments to them on time and keep an eye on your own personal bank account making sure you manage it well. Only apply for a personal loan, credit union loan and any other loan if it’s absolutely necessary. Keep your financial commitments in terms of credit down to the minimum.

If you have to take out more credit make sure you can meet the payments and on time. Don’t apply for every offer coming through the mailbox and don’t be tempted by lots of store cards or credit lines. Do all of this and you’ll find keeping a good credit score will become second nature.

What if I don’t have a credit history?

This affects many people of course and you’ll need to build a history of credit at a steady pace over time. If you are new to the country and on an H1B visa, then you’ll need to open a checking account with a top bank like ‘The Bank of America’, for example. They can issue you with a secure credit card whereby you give them a sum of money upfront which is put onto the card itself. Always pay this on time each month and you’ll soon be able to get an increase in the limit. By doing this you are slowly building good credit. Ideally you need to give things two years and be careful not to overburden yourself financially.

Remember don’t despair as building or even re-building your credit history is always possible. Start today for a better financial future!

Products, Bankruptcy

Free Credit Score

free credit score

It’s seems wherever we turn these days the phrase ‘credit score’ comes bearing down like a vulture looking for prey.

From TV ads to magazines, newspapers and emails we’re constantly being told to check our score on a regular basis. And of course for many services out there it can be big business offering to keep tabs on the slightest movement. Continue Reading