Many people get into financial trouble because they fail to make the distinction between a want and a need.  Bankruptcy is a valuable tool for getting your financial health back in order.    If you are successfully discharged from a bankruptcy, remember the choices and events that lead to your bankruptcy… so that you don’t relapse financially.  Just because credit card companies are advertising that “consumers are ready spend,” doesn’t mean that you should.  Medical expenses and credit card debt are two of the main debt obligations that lead to financial distress.  Many times you can’t control medical expenses, but you do have more options when it comes to controlling your credit card.

If you are already struggling with debt, the general message of using your cards wisely is even more important.  As the economy struggles to rebound, many people are having the same trouble rebounding from their high credit card bills.  Depending on the types of debt obligations you have, you can work out effective repayment or discharge plans through bankruptcy.  A bankruptcy attorney can review the different options with you to see which type of bankruptcy best fits your situation.   Instead of racking up more debt this holiday season, considering giving yourself the gift of relief by getting your debt under control.

One example is Cork and Olive, a small wine retail franchise chain located in Florida.  Owners of franchises had begun noticing issues with the parent company like not receiving requested inventory.  Eventually the parent company filed for bankruptcy.  At first the process was challenging because of public perceptions about bankruptcy and a slew of unanswered questions.    CNNMoney.com recommends that if you perceive that your franchisor is going towards liquidation then attempt to acquire the rights to the mark.  Richard Carlton, one of the owners of the Cork and Olive franchise, states that his store has actually become more profitable since the franchisor’s filing for bankruptcy.  He is able to make more decisions and implement changes with less franchisor oversight.  An added perk is that he no longer has to pay the monthly franchise fee.

Small businesses are feeling some of the tightest squeezing by this economy.  Companies, like CIT Group, that have historically helped small businesses are being forced to pull in the reigns on credit they previously allotted to small businesses.  When your franchisor files for bankruptcy, you don’t necessarily have to follow.  Regardless, your franchisor’s filing will have some type of affect on how you continue to operate.  Before you simply close up shop, get more information about your options and how restructuring debt can help you and your business.  Your financial situation may be such that it is better in the long run for you to also consider bankruptcy and restructuring.  More and more businesses, like Six Flags and Mrs. Fields, are using bankruptcy as a tool to emerge strong and more competitive to survive in this economy.  Deciding whether to file, is an important decision.  Contact a qualified bankruptcy attorney to explore all your options.  Bankruptcy doesn’t have to be rock bottom.  It can be a new beginning.

An article posted at examiner.com states that “[m]ost Americans who filed for personal bankruptcy due to health care costs were middle-class, homeowners who had gone to college” and that, of those, “75% reported having health insurance.”  Interestingly, these figures are contrary to previous studies looking at the causes of bankruptcy filings.  According to the Journal study, those studies failed to take into account bankruptcies that were due in major part to medical costs because of the way they were designed.

“Older studies on bankruptcy,” the article says, “were problematic because they were based solely on court records. Even though they showed that rates of medical bankruptcy were substantial, these court-based studies often understated medical bankruptcies. Why? Many medical debts were not recognizable on court records…Many medical debts were disguised as credit card debt or mortgages. Most medical debtors charged health care they couldn’t afford to credit cards or they mortgaged their homes to pay for medical bills. In addition, debts due to hospitalization or doctor visits–which were turned over to collection agencies–were not usually recognizable on court records.”

The researches in the Journal study decided to take a different approach: “They obtained 118,308 bankruptcy petitions filed in the United States between January 25, 2007 and April 11, 2007. A random national sample of 2,314 bankruptcy filers were surveyed and interviewed; their court records were also abstracted.”

Here is a bullet list relating some of the Journal findings:

* The highest out-of-pocket health care costs were associated with non-stroke neurological illnesses, such as multiple sclerosis, followed by diabetes, injuries, stroke, mental illnesses and heart disease.

* For 48% of medical debtors, hospital bills were the largest single out-of-pocket expense. Prescription drugs for 18.6%, doctors’ bills for 15.1% and insurance premiums for 4.1% of other debtors were the largest expense. Medical equipment and nursing homes where the largest expense for the remainder of medical debtors.

* Illness-associated loss of income also contributed to financial problems related to medical bills. In 37.9% of medical debtors, the illness resulted in the patient’s family member losing or quitting a job; in 24.4% of debtors, the illness led to getting fired.

* Unaffordable healthcare costs contributed directly to the bankruptcy of 92% of medical debtors.

The Journal authors draw this sobering conclusion in their study:  “[T]he U.S. healthcare financing system is broken not only for the poor and uninsured, but also for insured, middle-class families – they frequently collapse financially under the strain of the current health care system.”

For many, filing for bankruptcy protection may be the best chance to pay off staggering medical debts while holding on to their homes and automobiles.  People stuck in this tough financial situation should consult with an experienced bankruptcy attorney for a free case evaluation so they can start getting their life back on track.

So far, however, home foreclosures appear to remain one of the number one causes of consumer bankruptcy filings.  The American Bankruptcy Institute (ABI) reported that personal bankruptcy filings in the U.S. jumped 36.5% in the first half of 2009 versus the same time in 2008.  Relying on data from “the National Bankruptcy Research Center (NBKRC),” ABI says that “[t]he overall June consumer filing total of 116,365 was 40.6 percent more than the 82,770 consumer filings recorded in June 2008″ and does point to a small silver lining in the sky: Even though “the June total represented an increase over the previous year, it was a 6.8 percent decrease from the May, 2009 total of 124,838 consumer filings.”

On the flip side, though, “Chapter 13 filings constituted 27.7 percent of all consumer cases in June, a slight increase from May.”  That would mean that approximately 70% of filings were most likely Chapter 7 cases, meaning more consumers are liquidating rather than working out payment plans.  “As unemployment, foreclosures rates and health care costs continue to rise, more consumers are turning to bankruptcy as a last financial resort,” said ABI Executive Director Samuel J. Gerdano. “We expect that there will be more than 1.4 million new bankruptcy filings by year end.”

Unfortunately, it seems like President Obama’s plans to help keep homeowners home sweet home is having a tough time gaining ground.  The San Jose Mercury News reported on July 16 that “Banks say they’re swamped with inquiries and are just now completing the first mortgage ‘loan modifications’ under the Obama administration’s Making Home Affordable plan, the program begun in April requiring borrowers to make three months of renegotiated payments before securing new loan terms.”  The unpleasant reality is that “frustrated borrowers are still battling red tape and delays in their attempts to negotiate lower payments, even as hundreds of thousands of them lose their homes every month.”

Some do their absolute best to work out a fair compromise, but to no avail:  “Angelo Gallo, 46, of San Jose, sought help from his bank lowering his monthly payments in January, before the Obama plan was announced. He said he and his wife, Mary, worked with their lender for five months, fulfilling numerous requests for more documents, but recently they were told they had to start over. ‘I was so frustrated,’ Gallo said. ‘Every time you call it’s a different person, and it seems like the files are all over the place.’ “

“There is an amazing lack of staffing to support the flood of modification requests the banks are getting,” said San Jose bankruptcy lawyer Norma Hammes, past president of the National Association of Consumer Bankruptcy Attorneys. “Lenders lose stuff all the time, and they ask for stuff they don’t need. We have to jump over hurdles and through hoops.”

Bankruptcy lawyers, the article says, “are particularly critical of the banks. The banks’ current efforts are ‘largely a farce,’ according to Cathy Moran, a bankruptcy lawyer in Mountain View, CA. She said most of her clients have been unable to modify their home loans.

‘I don’t think the people in the loan modification departments at banks are empowered to make deals,’ Moran said.”

San Jose bankruptcy lawyer James “Ike” Shulman agrees: “I’m seeing several people each week with the same hard-luck story of how mortgage lenders have led them on for months, lose the paperwork and then find one excuse or another to turn them down.”

Of course, bank reps say they’re doing the best they can.  “Chase is moving through a backlog of 155,000 loans ‘as fast as we can, having hired nearly 3,000 people to help in the process, including 950 loan counselors,’ spokesman Thomas Kelly said. The bank, which took over failed subprime lender Washington Mutual, has approved 87,100 trial loan modifications under the federal plan, Kelly said, and an additional 50,900 under the bank’s own program.”

But the Mercury’s reporter, Pete Carey, says this in his article: “Though the reasons are many,” he writes, “the problem is simple: Banks aren’t renegotiating enough loans to stem the rising tide of foreclosures, either through the federal program or on their own.

‘If the banks wanted it to work, it would work,’ said Fred W. Schwinn of the Consumer Law Center in San Jose.”

Those at their wits’ end with trying to negotiate with unhelpful mortgage lenders would do well to consult with an experienced bankruptcy attorney to find out whether bankruptcy could be the solution to their financial woes.

Despite the fact that the United States has consistently gone through seasons of economic ups and downs which placed ordinary, hard-working people in desperate situations, many still complain and criticize efforts to assist those struggling with financial stability.  We are not the first generation of Americans to suffer an economic drought or to be caught off-guard by a stock market tumble.  As you walk through the gardens, you can understand what those people were feeling, as they laid each brick, and appreciate that they were doing what they could to make it through.  Also keep in mind that they didn’t do it alone.  Unfortunately, a host of public works projects are not available today.  More and more cities are also being caught off-guard with deficit budgets.  The Star-Telegram reported that the City of Fort Worth has eliminated 150 jobs in response to a $61 million deficit for the 2010 budget year.  Additionally, according to the Fort Worth Business Press, they are also looking at pruning another 190 positions and potentially cutting funding for homeless projects.  Last year the city council voted to discontinue funding benefits for employees and their dependents who retire after January of 2009.

Even though relief is limited through city government, you still have other options to help you make it through.  Most debt is dischargeable during bankruptcy, including credit card and medical bills.  Others may not be dischargeable, but a plan can be developed through the process to arrange for repayment of those obligations.  Allmand and Lee can assist you with making informed decisions regarding your debt management plan.  These are hard times, but good things can still happen when you receive good information from a qualified bankruptcy attorney.

Like most consumers, non-profits have also been hit by the recession and increased costs for goods and services.  The chief executive officer of Meals on Wheels, Marilyn Stidham, explained that increases in demands for services, higher gas and food prices, and fewer donations essentially outstripped available funding.  According to the DMN article, the demand for the agency’s services has more than tripled in the past seven years.

The board has attempted to cope with budget shortfalls by requesting assistance from local governments.  However, many municipalities are suffering from their own budget shortfalls and competition for donations is increasing with so many hurt by tough economic times.

Unfortunately, everyone’s budget is being “outstripped’ by the combination of increases in food and gas prices and job losses.  Most city governments and many non-profits are being forced to make tough decisions on how to deal with the current economic situation of budget deficits.  Without assigning any blame as to how any agency or local government incurred their economic crisis, it is interesting to note that their economic situation is almost always described as a response to a “budget deficit.”  However, when a consumer faces the same situation on a personal level, it is much the same.  The point to this comparison is not to point fingers, but just to point out that you shouldn’t beat yourself up for a financial crisis that is plaguing some of the best city governments and non-profit organizations.  If we use “financial crisis” as the guideline for who is deserving and who is not, then the reasoning would continue that the seniors in Collin County don’t deserve assistance with meals— and that type of reasoning is just wrong.  The seniors in Collin County have done their service to their community and they certainly didn’t ask for this recession.  The volunteers for that organization have been dedicated to doing the right thing.  The simple truth of the matter is that sometimes bad things happen to good people.  The purposes of the bankruptcy process is to try to make right, some things that went wrong.  If you are strapped financially and need help, contact a qualified bankruptcy attorney to get accurate information regarding your debt management options.