According to an article in USA Today, even the top richest people are getting poorer.  Apparently the recession isn’t limited to ordinary people; even the super rich are hit. Bill Gates, for example, who has been the richest man in America for the last sixteen years, is $7 billion poorer this year.  Most of us have a hard time reconciling that kind of loss while retaining his “Richest American” title.  He isn’t the only one.  The collective “Top 400” have declined in net worth as a group.  Considering the current state of the economy, it’s likely that we will continue to see headlines and reports like these.  The decision for most consumers, though, is how to deal with it.  Even though most of us won’t make the “Top 400” list this year, watching how they deal with negative cash flow can generate some pearls of wisdom.

First, they stop the bleeding when they can. They don’t continue doing the same things that are loosing them money. You can do the same. Many people continue to struggle even when their financial situation has no hope of improving.  Sometimes your budget just needs minor tweaking, but when that’s not enough, bankruptcy is the best option to stop the bleeding and getting real relief.

Second, the “Top 400”, as a general rule, gather good information and weigh their options carefully before they make a decision.  In contrast, many consumers do every self-help remedy before they seek professional help through bankruptcy.  Many self-help remedies may seem like the right thing to do, but can actually cause more damage when you have to file for bankruptcy later.  One pre-filing mistake by many people is paying back debts that seem the most important to them or their situation.  For example, you owe your father-in-law $10,000.00.  You also owe Uncle Sam and your bank for the Harley you purchased when you had money and were going through the mid-life crisis.  You have just enough in savings to pay one of them off, so who do you pay?  Paying your father-in-law first might give you short term relief in that you won’t feel bad in still owing money to a relative.  However, if the bankruptcy court deems the repayment a fraudulent transfer, it could complicate your bankruptcy petition and result in your creditors now suing your father-in-law for their piece of the $10,000 pie.  In the end, he will be much more dissatisfied that he was brought into the lawsuit, instead of having to wait just a bit longer to get his due.  Before you jump into to a bunch of self-help remedies, talk to a qualified bankruptcy attorney in your area.  You may not want to file for bankruptcy immediately, but they can advise you how the choices you have made and are planning to make will impact an eventual bankruptcy petition.

Just about every company owned by the “Top 400” have pithy motivational sayings like:  a vision without a plan is just a hallucination. Take some of these lessons to heart in your personal finances.  Don’t just imagine what it would be like to have your debt under control.  Get with someone who understands how to get you where you want to be, and make a plan for own financial recovery.

If you’re considering bankruptcy, chances are that you don’t have a lot of expendable money.  This might cause you to go bargain basement shopping for a bankruptcy attorney.  The book, Personal Bankruptcy For Dummies, tells a story with the gist being, “you get what you pay for.”

The story says:

“Cheapskate Charlie figured he’d get a good deal going through the Fly-By-Night Bankruptcy Service.  But after his cut-rate bankruptcy, Charlie wasn’t a happy camper.  He was rather surprised to discover that the trustee was suing his grandmother to recover loan repayments that he’d made to her, that the IRS still was lurking about, that his beloved Harley Davidson motorcycle was in Hog hell, and that his credit was shot to smithereens.  These things didn’t need to happen.  A lawyer who knows the ropes would’ve advised Charlie to delay his bankruptcy for a month, so Grandma wouldn’t get sued.  The lawyer also would’ve had the sense to file under Chapter 13, so that Charlie could’ve paid off his taxes without interest or penalties and on a timetable he could meet.”

These scenarios do play out all of the time with bargain basement services.  Cheapskate Charlie probably could have even kept the motorcycle.

The truth is anyone can file for bankruptcy themselves.  The important thing to know is that people and cheap services make mistakes that end up costing the individual way more than they ever “saved.”  Many times you will find services that sound like a bargain, but it is no more than a salesman who knows very little about bankruptcy.

You need to speak to a bankruptcy attorney that will know exactly what type of bankruptcy will be right for you.  Also, a quality bankruptcy attorney will be someone who will have your credit headed in the right direction and who will not make mistakes that can cause you more grief.  A good bankruptcy attorney will have the experience necessary to know exactly what moves you should make.  If you would like to find out more, don’t hesitate to contact a bankruptcy attorney.

A recent Wall Street Journal Article describes recent concerns regarding abuses associated with reverse mortgages.  A reverse mortgage is a type of home equity loan available to persons who are over 62 years of age.  The benefit of the reverse mortgage is that it can free up the equity for the senior to use for other expenses.  There are no restrictions on how the proceeds can be used.  At first blush, this seems like a win-win for a senior who is struggling with the constraints of a fixed income in a bad economy.   The WSJ cautions, however, that incidents of fraud are on the rise when in the reverse mortgage fraud industry.  One consumer, Lawrence Ford, obtained a reverse mortgage that he thought would improve his finances and enabled him to pay off his existing mortgage.  When his lender threatened foreclosure, he learned that the reverse mortgage never went through because the title agent did not forward the funds to pay off the mortgage.  The foreclosure would have left him homeless at 68 years of age.  The even more disturbing part of the WSJ report is who is involved in the fraud.  Everyone expects there to be a white collar criminal in the background waiting to pillage.  Unfortunately, many of the new complaints of fraud also involve family members and caretakers.  The increase is attributed to a recent change in reverse mortgage rules which increased the maximum amount to be borrowed from $417,000 to $625,500.  Essentially, greed is still the motivator for fraud…. But you can reverse that trend.

A qualified bankruptcy attorney in your area can review all your options with you and help you make decisions that help you keep your home and resolve your debt issues.  Depending on your retirement status and your age you are eligible for certain government programs.  When you participate in a reverse mortgage program, you may obtain a sum of proceeds.  Even though these proceeds are not considered income, they are considered assets which could disqualify your eligibility for certain assets—in addition to the fraud risks discussed above.  Instead of risking your home or your much needed benefits, bankruptcy is a better option.  First, you don’t have to worry about being scammed by an unscrupulous lender.  The bankruptcy process includes safeguards like approval of plans by a bankruptcy judge to make sure that all parties are treated fairly.  Second, you can resolve high debt issues, which will improve your cash flow… so you can afford to live.  Third, you don’t get back lashed by the gains you obtain through bankruptcy being considered “assets” that would disqualify you for important programs.

If you are in retirement mode, or close to retirement mode, gambling with your finances is not an option.   Bankruptcy is the best way to protect what you have and re-align your debt.  To learn what options are available and are best for your situation, contact a qualified bankruptcy attorney to get more information.    Even if you’re not over 62 years of age, your house is more than siding and a roof, it’s your home.  Bankruptcy can help you protect your home.

Despite slight improvements in the housing market, many consumers continue to struggle with a less than perfect housing market.  The Wall Street Journal reports that many homeowners cannot sell their old homes after they have relocated for new jobs.  As a result, many are exploring creative options for dealing with their new living expenses and the expenses still attached to the old residence.  The have now been the dubbed the “Reluctant Landlord.”  Some are hoping to use the leasing options to get them through until the market rebounds and the property eventually sells.  Others simply are not able to afford the total upkeep on two homes.  Essentially, the concept is that some money coming in is better than nothing.  The landlord option may be a good fix for a temporary leak.  It can help you get through a short-term financial crisis with minimal impact to your credit history.  The downside is that the landlord business is not without risk and considerable expense.  Many are only able to lease their former homes by reducing the rent to less than the mortgage payment.  The homeowner is still left holding the tab for the balance of the mortgage payment each month and all the extras like insurance and taxes.  The other unknown variable is occupancy.  If your tenant leaves without giving you notice until the next payment is due, you are then stuck with an additional unplanned expense.  Probably the most unnerving aspect of being a landlord is the condition of a home after a tenant leaves.  New consumer reporting industries were born out of the aftermath of destructive tenants.  Just replacing a destroyed carpet one time before you sell or re-rent the property can consume your savings and drive you farther into the landlord money pit.

At the end of the day, the real question is whether it’s worth the emotional and financial stress to keep a house that is simply increasing your debt?   If you are in a housing market that is still depressed by the recession or you are still struggling with a job loss or reduction, a temporary plug is not going to make your situation better.  The best solution for you may be tackling all of your debt issues upfront through bankruptcy.  Bankruptcy provides immediate, long term relief rather than a temporary fix.  Instead of increasing your debt obligations, which in turn affects your credit history, bankruptcy works to reduce or eliminate your debt obligations.  Contact a qualified bankruptcy attorney in your area to review your financial situation and all of your debt management options.

For the last several months, most of the headlines regarding the current foreclosure crisis have involved what are considered sub-prime mortgages.  Consequently, most of the reform and rescue packages were designed to help lenders with sub-prime mortgages.  According to an article in the U.S. News and World report, prime mortgages are now an ever increasing part of the crisis.  Even more concerning, according to the article, is the lack of resources available to help this new group of distressed homeowners.  Many consumers don’t plan to be economically distressed.  You save a little here and there.  You budget your monthly expenses to fit what income you have coming in.  You have what is considered “good debt”, like a mortgage, a car payment, and a small to medium credit card bill that’s manageable.  Good and bad debt in excess of $100,000 can easily sneak up on you.  Then the plan melts down with a lay off notice as the company you work for decides to “right size.”  After that, nothing seems right.  The smallest credit card bill becomes difficult to pay with ever increasing fees and expenses.  Then you get a notice of a rate hike by your electric company.  Everything starts spiraling. To add insult to injury, you find out that you don’t qualify for any of the programs that have been touted in news to help you save your home or refinance your mortgage.

Our economic system is far from perfect.  Consumer reform is finally seeping through the cracks, but it may not be available to you.  However, that does not mean that you have to throw in the towel and give up your home.  Before you give up on your mortgage or sell off everything you own, consider talking to a bankruptcy attorney.  A qualified bankruptcy attorney will go through your debt obligations and help you plan for an effective bankruptcy.  Part of that planning is determining which assets will be protected through bankruptcy.  If your house is homesteaded it will usually qualify as an exemption and be protected through bankruptcy.    Another part of your planning is determining which debts are best to pay off first and how to get the remainder discharged in bankruptcy.   When you are in a spiral, it is extremely tempting to pay off the creditor that is yelling at you the loudest.  Quite frankly, this is just debt collector bullying.  If you have funds available, a bankruptcy attorney can guide you on how to maximize those funds to resolve all your debt obligations through bankruptcy, instead of just the pushiest ones.  Bankruptcy protection is your personalized economic recovery package.  Call an attorney in the Dallas-Forth Worth area today to plan your recovery.

Many people avoid bankruptcy because they feel that it will affect their credit rating.  A bankruptcy will appear on your credit report, but so will unpaid medical bills.  The Dallas Morning News reported that the long lasting effect of medical billing on credit reports is finally gaining attention.  In two related articles, the mishaps and confusion between medical billing in general, insurance processing procedures, and consumer distraction tend to contribute to unpaid bills.

One consumer, Karen Rhode, didn’t find out that she had unpaid medical bills until she went to purchase a house and her credit report showed two unpaid accounts.  The two accounts totaled less than $100.00.  She lamented that if she had know about the accounts, she would have paid them.  As a result her credit rating was several points lower, and her interest rate higher.

Many people assume that their insurance company will take care of all the details.  One of the easiest ways to get buried in medical debt is to assume that your insurance will cover everything and they will let you know when they don’t.  The DMA article painfully highlights the issues associated with miscommunication in medical billing.  One example involves your primary care physician.  Many people again assume that if your doctor is in your network of providers that all the coverage associated with his services will also be covered.  Unfortunately, insurance coverage isn’t that simple.  If you are with a plan that is based on using a provider that is in the “network,” everyone that provides a service to you must also be in the network for you to avoid being stuck with the unpaid balance.

The best defense is a good offense—staying on top of medical billing is the best way to avoid collection efforts by a medical provider.  Sometimes, things just aren’t that simple though.  The medical bill is more than you planned and you can’t financially manage your way past it.  Your credit report is hit and now you’re paying a little bit more for everything because of a damage rating.  This is the point that you should start looking for other options.  One of your best defensive options is to talk to a bankruptcy attorney.  Just like the medical bill, bankruptcy will show up on your credit report, however, it will be a step that will eventually resolve your debts and get you back on track to rebuild your credit rating, instead of painfully dragging out your financial rehab for months.  When most people think of resolving debt through bankruptcy, they tend to focus on credit card debt because that is what is talked about the most.  The good news is that individual bankruptcy is a good remedy for any type of consumer debt, and medical debt is considered a consumer debt.  Because it is a consumer debt, you also get the same protections as any other debt, including automatic stay.  This means that an aggressive bill collector will have to immediately stop trying to collect on your account while the bankruptcy is pending.  The bottom line is that you would seek a specialist for a difficult medical procedure.  Your financial health deserves the same priority.  Contact a qualified bankruptcy attorney in your area to learn more about bankruptcy protection today.

As many Americans continue to desperately struggle with health care expenses, the debate over health care reform becomes more intense.  The United States Chamber of Commerce, the national umbrella organization for local chamber associations, posts updates on its website regarding their opposition to the proposed measures taken for health care and consumer reform.   Like most organizations, they will concede that reform in both areas is needed; they just disagree on how that reform should be accomplished.  Thus, the debate continues.  Even assuming that the President is successful in getting his reform package pushed through Congress, commentators are warning people that most of the programs will not be in full force until three years later.  If you were holding your breath that reform would come sometime soon, you may need to develop a new game plan, especially if medical bills are strapping your finances.

The first step is to know what and who you owe.  Medical bills are a slightly different beast than credit card bills in that they seem to come out of nowhere.  A friend of mind still laments her trip to the emergency room three years ago when she broke her ankle.  Within a few months she was receiving a plethora of bills from companies and people she never remembered meeting:  a radiologist, the hospital, the company that did her blood work, and the even the nurse that gave her an aspirin.  They don’t come in on a planned monthly schedule.  They pile on you like a stack of bricks from the sky.  It can be difficult to actually determine who you owe and how much you owe when your care has involved multiple services.  So, start by organizing what you have with a simple binder and some inexpensive tabs.  When you can get your hands around the binder, you can then feel a bit more in control over what will happen next.

The second step is to get the debts resolved.  You don’t have to wait three years for reform legislation to take effect.  Relief is available now through bankruptcy.  Take your medical binder and any other debt obligations to a qualified bankruptcy attorney in your area and review the options that are best for your situation.  Timing of your petition is an important discussion to have with your attorney.  Just like with major corporations, you can plan when is best for you to proceed with your filing so that you can maximize the benefits of bankruptcy protection.  However, keep in mind that the sooner you get a handle on high, lingering debt, the sooner you will be able to prepare for the proposed reform changes.  One of the more contentious aspects of the President’s plan is the requirement that all families carry health insurance by 2013, much like they are required to carry auto insurance.  If you are struggling with the paying your bills already, adding another mandatory expense to your bottom line could flat line your financial health.  Bankruptcy will enable you to free up more of your income so that you will have the finances to comply and not be hit with penalties on your income tax returns.

Supporters of the latest proposal justify the implementation delay in that it takes time to insure effective execution.  Bankruptcy also takes some pre-planning, but fortunately, relief is available much sooner.  Contact a bankruptcy attorney today to learn what remedies are available.

People follow different paths on the way to debt, but some roads are more fraught with peril than others.  Chances are you may have done at least one of the following before you had to file for bankruptcy.  Here is a list of five things to avoid in the future if you don’t want to drive yourself back into bankruptcy.

1.) Cash advances on credit cards

Do not do this unless there’s absolutely no other option.  Credit card cash advances typically carry both an upfront fee and a higher interest rate than normal credit card charges.  Interest begins accruing the instant you borrow the money, and most credit card lenders require you pay down the balance on your credit card purchases before you can even pay off the cash advance.  SOLUTION:  Use your credit card to charge purchases normally, or stick to your ATM card.  You’re not going to accumulate credit card interest on normal purchases for at least a month, and using your ATM card is free if you use your bank’s machine.  Even in situations where you have to use another bank’s ATM, the usage fee is much more reasonable than using your credit card for a cash advance.

2.) Loaning money to family or friends or co-signing for a loan

Loaning money to family or friends can definitely turn into a sticky situation, even when expectations are established from the get-go.  Often the parties fail to specify when the loan should be returned, and whether or not they want interest.  Sometimes one party may think it’s a gift rather than a loan, and any of these situations can lead to strained or ruined relationships.  SOLUTION:  If you have the money to give, consider giving it as a gift rather than a loan.  If you can’t afford that, it’s not too hard to go online and find a good sample form to use to establish the loan’s details definitively.

3.) Playing the lottery or gambling

“You have higher odds of contracting a flesh-eating bacterial virus than winning the lottery,” said Dara Duguay, Director of Citi’s Office of Financial Education and author of  Don’t Spend Your Raise and The Citi Commonsense Money Guide for Real People.  While gambling or playing the lottery can seem quite appealing, the odds of winning are abysmal.  SOLUTION:  You’d probably be better off taking a gamble on the stock market if you simply must have that rush.  Alternatively, consider spending your money on a sure bet like traveling to an exotic vacation spot.

4.) Payday loans and refund anticipation loans

Tax refund loans are becoming more and more popular.  Often touted as a surefire way to get quick access to your tax refund, these loans  have become a major profit driver for tax preparation firms.  Keep in mind, though, that they have interest rates fairly equivalent to payday loans.  Payday loans often carry upfront fees, hidden fees and administration fees, not to mention a potential APR of up to 200%.  SOLUTION:  Be patient!   Waiting a little bit to get your money isn’t going to kill you.  And in cases where you do absolutely need the money, it’s better to use a credit card.

5.) Rent-to-own furniture and appliances

Going the rent-to-own route is just not a very good decision.  Typically, rent-to-own customers end up paying two to five times the department store cost of the item, with annual APR amounts running anywhere from 100% to 300%.  Maybe that couch only costs you $50 a month, but it’s going to cost you a lot more in the long run.  Putting it on a credit card with a much more reasonable interest rate and paying it off as you can makes a lot more financial sense.  That, or making due with what you have until you can save the money to buy it outright.  SOLUTION:  Save up money and purchase the item outright.  Also consider buying used furniture that can be found easily via the Web through sites like Craigslist.

If you haven’t already filed for bankruptcy but have done any or all of the above things and are now in over your head, it’s a good time to contact a good, experienced bankruptcy attorney to see what your options are.

The new wave of consumer reform is on the way and credit card companies are already beginning to initiate “compliance” procedures.  These procedures include sending you notices and advising you of changes in your interest rate.  Bank America for example has already sent notices advising customers that they will no longer have fixed interest rates, and instead are replacing your rates with variable ones.   If you’re not afraid, at least a little bit, you should be.  The variable interest rate is what bit thousands of homeowners when their payments increased beyond their capacity over the last two years.  A variable rate means it is subject to change when the credit card company would like to change it, resulting in a potential increase in your usually monthly payment due.  Credit card companies are now required to advise you of important changes likes these, but keep in mind that the changes may sneak up on you.  Laura Rowley, of Money and Happiness, warns that one of the worst mistakes you can make in your finances is to toss the junk mail without reading it.  Many of these important notices resemble junk mail, meaning you may toss them without reading them or realizing the importance of the notice.  In a month or so, you will then receive you bill and be surprised by a whopping increase in you minimum monthly payment due.  The result is more spiraling of debt.

Your first line of defense in avoiding getting further into debt is knowing what you owe and how you owe it.  Don’t just inspect your bill for the recent transactions.  Review your finances charges and the terms, like your interest rate, so that you can be aware of changes and how they affect your monthly budget.

Your second line of defense is simply finding a way to get rid of the debt.  As credit card companies continue to gouge, many consumers have become literally stretched beyond capacity, especially those with fixed incomes.  If you are struggling with debt, talk to a qualified bankruptcy attorney in the Dallas/ Fort Worth area so that they can advise you of the advantages of bankruptcy and how to finally resolve high credit card balances.  Credit card debt is dischargeable in bankruptcy.  If you have other debts that are affecting your ability to make even the minimum monthly payments, they may also be dischargeable. When the debt is discharged, it means that you are finally relieved of obligation.  If the obligation is not dischargeable, you can still make plans through the bankruptcy court to pay off the debt.  You don’t have to worry about the credit card company’s junk mail game when you have good information from a qualified bankruptcy attorney.

Individuals, who file bankruptcy, will file for either Chapter 7 or Chapter 13 bankruptcy.  The type of bankruptcy you file will depend on several factors, including your income.  The bankruptcy process starts with a thorough discussion with your bankruptcy attorney before you file your application.  Providing an accurate accounting of your income to your bankruptcy attorney is an extremely important component in this process.  Last week, former Louisiana congressman, William Jefferson, learned this lesson the hard way.  By the time he was convicted of federal corruption charges including soliciting bribes and money laundering, Jefferson racked up legal bills in excess of $5 million.  His total debt obligation is expected to be around $10 million.  The Louisiana state Supreme Court has suspended his license, and as such, it is unlikely that he will have the funds anytime soon to satisfy the ballooning debt.  Jefferson filed for Chapter 7 bankruptcy protection.  However, the procedure for qualifying for Chapter 7 became more stringent in 2005.  Ironically, the change to make filing for Chapter 7 more difficult was supported by Jefferson when he was still a congressman.  A bankruptcy judge has since ruled that because of Jefferson’s income, he will be subject to the more stringent standards, which includes his income over the next three years being earmarked for debt repayment.

The news is ironic on several levels.  One would think after incurring convictions for money laundering and corruption, Jefferson would feel a bit more compelled to dot his “i’s” and cross his “t’s”.  For some reason, he slipped up in providing good information to his attorney.  Probably the paramount lesson to be learning from Jefferson, other that avoiding corrupt practices, is to give your bankruptcy good information.  The quality of their advice to guide you through the bankruptcy process will only be as useful to you as the quality of the information that you provide.  The sanctions for providing filing false or misleading information can be extremely critical to your financial health.  A bankruptcy attorney will not be happy once he finds out that you attempted to manipulate the bankruptcy process.  In order to avoid complications with your bankruptcy filing, disclose every source of income to your bankruptcy attorney so they can correctly determine which type of bankruptcy you qualify for through the means test.   If you are not sure whether or not an item qualifies as income or a loan, provide that information as well to your attorney out of an abundance of caution.  A good bankruptcy attorney can help you make your filing as smooth as possible.  However, the eventual success of your bankruptcy starts with gathering good information.  So take the time to plan for a successful bankruptcy.