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Author: CPAScott Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308468  
Subject: Why you should NOT file bankruptcy Date: 6/12/2003 1:42 PM
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There have been a number of posters on this board and others over the last few weeks that seem to be seriously contemplating filing for bankruptcy. Being in financial straits is not easy for anyone, and for those who are completely overwhelmed by their situation, the prospect of actively managing themselves out of debt seems daunting and near impossible. When the light at the end of the tunnel is too far away, it looks like there is no light at all, and when faced with seemingly insurmountable debt obligations, it may be only natural that one would consider trying to wipe the slate clean by filing for protection under the U.S. Bankruptcy Court.

For some, bankruptcy is really the only option. Their financial situation has deteriorated so much that there is no plausible way to amend it. It is for these individuals that our bankruptcy laws exist, and for those in that position, it can offer that fresh start.

But for most, the situation is not as grim as it seems. Bankruptcy courts are reasonable liberal in granting a bankruptcy petition and many of those who file didn't really need to. They just couldn't see the alternatives.

Even if there really is no hope, bankruptcy is a last choice -- always. In an effort to demonstrate to those of you who may be considering a bankruptcy filing, I've compiled a list of reasons why you don't want to. Yes, the list is meant to scare you a little, but worry not – once you understand why, unless absolutely necessary, you shouldn't file for bankruptcy, I'll then offer a number of ways you might be able to improve your situation without the aid of the courts. Whether you can see it or not, there IS a light at the end of the tunnel – and yes, you can get there!

8 reasons why you should NOT file for bankruptcy

1. Bankruptcy will ruin your credit for a minimum of 10 years. Filing for bankruptcy will release you from many of your debt obligations such as credit cards. Your inability to pay is reflected on your credit report and will remain there for a minimum of seven years. A bankruptcy filing is also one of the most damaging elements to your FICO score (the numerical assessment of your creditworthiness). With such a mark on your report, you will have extreme difficulty securing credit of any kind (including credit cards, automobile loans, and mortgages), and, even if you do, the interest rates will be exorbitant (think 24%). Even once the bankruptcy has cleared from your credit report, it may take much longer to repair your FICO score. Further, many credit applications ask whether you have filed for bankruptcy – not just in the last seven to ten years, but EVER.

2. You will lose some of your possessions. Although bankruptcy will often protect such necessary assets as a house or car, you may be forced to sell some of the things you own, especially luxury items, to help settle your debts prior to the bankruptcy's discharge. Part of filing for bankruptcy involves listing all of your assets, and it is a criminal offense to purposefully omit any of them. Cash, bank accounts, stocks, bonds and other investments, a second car or truck, your primary car or truck if over a certain value, second or vacation homes, stamp, coin, and other collections, and family heirlooms are all types of property.

3. You will lose your credit cards. It's highly likely that if you are considering filing for bankruptcy, it's credit cards that got you there, so the loss of your ability to “charge it” might not be a bad thing. But, as I said in point 1, you're not going to find it easy to get new ones for a long time and thus filing for bankruptcy will all but force you to be on a strictly cash basis. If your car breaks down, or some other unforeseen event occurs, you might find it difficult – or impossible – to be able to produce the cash necessary to deal with it. Although all Fools recommend having an emergency fund for such situations, it is likely that if you are at the point of bankruptcy that you do not. Regardless, the bankruptcy court will require you to use any money in your emergency fund to help settle your obligations. As such, spare cash will be sparse.

4. You cannot file for bankruptcy again for 6 years. But, hey, why would you need to right? Imagine this scenario. You file for bankruptcy to help ease the your financial burdens. Three months later you are involved in a traffic accident that is deemed to be your fault. The driver of the other vehicle is seriously injured. He sues you for millions of dollars and a judgment is entered against you. You have given up your only method of protection. As an additional note, certain types of judgments are not eligible to be discharged in bankruptcy. See point 5 for more information.

5. Not all obligations are discharged in bankruptcy. Student loans, income taxes less than three years due, and back alimony or child support are the most significant items that are non-dischargeable. In addition court judgments for injuries or death arising from your driving under the influence, debts incurred on the basis of fraud (such as lying on a credit card application), debts arising from a martial separation or divorce are other types of obligations that might be upheld in a bankruptcy proceeding.

6. You will become part of the public record. Bankruptcy proceedings are public record, and your name and certain details about you will be recorded in the court documents. Your filing will also likely be reported in the “Legal Notices” section of your local newspaper. Anyone who wants to find out information on you and your bankruptcy can – and this includes potential future creditors. There is also a stigma attached with the public notice of your financial situation. Most people tend to keep their financial lives very private – if you file for bankruptcy that will not be possible.

7. Bankruptcy is the admission of defeat. Although there are some situations that could happen TO you that could drive you into bankruptcy, the overwhelming majority of personal bankruptcies are caused by the individual's own actions. You agreed to the debts that you are now buried behind, and filing bankruptcy is saying you can't manage your own life – that your promise (in this case a promise to pay) is no good. It's a personal defeat.

8. Bankruptcy affects more than just you. When your debts are discharged in bankruptcy, the people and companies you owe are forced to write off the debt as uncollectible. Rather than you paying what you owe, they end up eating the loss. And, even if they are a large public corporation, a loss is a loss. Your debt doesn't magically disappear; it is absorbed by your creditors, who may, in turn, be forced to raise prices, reduce services, or even file for bankruptcy themselves. A single bankrupt individual might not have a big impact on the general economy, but a large group of individuals filing for bankruptcy could. Why contribute to the disintegration of the nation's financial state unless absolutely necessary?

8 ways you can avoid bankruptcy

1. Change your attitude. Step one in the path to avoiding bankruptcy is to start believing that it's possible. A positive attitude is paramount for affecting change. But a positive attitude alone will not get you to your goal. You can't simply wish away your debts. Other points will address how to ease the burden, but in addition, you need to change your approach to finances. If you're in this situation because you've simply spent to much and overextended yourself, what's to prevent you from doing the same thing again, even if you are bailed out by the bankruptcy court. Almost 10% of people who file for bankruptcy will file again in their lifetime. That is not success. Develop a plan, modify your behavior, and the path to financial freedom will unveil itself. And remember, you CAN do it!

2. Contact your creditors. Those that you owe money to would certainly rather you pay them something than nothing at all. Many will lose all rights to collect anything from you if you file bankruptcy. Given that, many creditors will work with you to develop terms that will allow you gain some financial breathing room while still satisfying your obligation to them. You may be able to negotiate a lower interest rate and/or longer payback periods. You may even be able to get a creditor to accept a partial payment as settlement. Rather than run to the courts, start with the people you owe. It's amazing what a few phone calls or letters can accomplish.

3. Consider debt counseling. There are a number of companies and non-profits out there that can help you in managing your debt. Many can negotiate with your creditors for you. What you really want to look for, however, is a service that will provide counseling on how YOU can manage your situation and on what to do to ensure that you don't end up in this situation again. Be wary, however, of the companies that make “too-good-to-be-true” claims such as those who offer to get bad credit information removed from your credit report. If you can, stick with the non-profit counseling agencies, and do plenty of research before you sign-on with any of them.

4. Consolidate your debts. One way in which to unload yourself from the month-to-month burden of your debt is to leverage your assets against your debts, such as taking out a home equity loan to pay off your credit cards. This is not a decision to be taken lightly, however, as shifting your burden can make you more susceptible to financial trouble by risking your property. If you pay off your credit card debt with a HELOC, for example, you must ensure that you don't begin to charge more on those now paid off cards.

5. Consider selling some of your stuff. As I mentioned above, the bankruptcy court may force you to part with some of your possessions should you file. Why let someone else dictate what you can and cannot keep? Do it yourself. Are there things that you own or subscribe to that you don't really need right now, especially when you consider the financial shape your in? Maybe it's time to give up that subscription to NetFlix, cable TV, or Broadband internet. Perhaps you should consider selling some of the things you've collected over the years. With internet auction sites, it's not so hard to do. Can you live with a less expensive car? Trade in or sell yours and buy a cheaper one. If you look around hard enough, I'm certain you'll find some things you can turn into cash, or at least stop outlaying cash for. Each may only bring a few dollars in extra cash or savings, but collectively they could add up to more than you expected.

6. Live below your means. Living below your means doesn't necessarily mean washing and reusing freezer bags, buying the absolute cheapest toilet paper you can find, or stopping to pick up every stray penny you find on the sidewalk. Sure, each of these tactics can help you save a nickel here-and-there (and many self-made millionaires are the most frugal people out there), but the concept is really much more simple. If you make X dollars each week or month, then X dollars is all you have to spend in that week or month. If you spend X+ dollars, then guess what? You're going to go into debt as a result. But, when you live below your means (spending less than X dollars each week or month) then you have cash left over – cash that can go towards eliminating your debt faster, building an emergency fund, or investment. Most important, having extra cash at the end of the day means you didn't incur any more debt.

7. Establish a budget. Budgeting is a integral part of financial responsibility and an absolute necessity for someone recovering from financial troubles. In order to live below your means, you first need to know what your means are. Budgets do not have to be large, cumbersome, Excel-based spreadsheets. They can be as simple as listing your income and subtracting your known expenses. The remainder is what you have available for discretionary spending. Don't exceed it. Budgets also help you to track what you're spending your money on. You might not realize that you spend 10% of your income on dining out until you've tracked your spending for 3 months or so. Often simple awareness is the catalyst to behavior modification. Plan your financial future and you'll have a nice road map to follow as you move toward your goal.

8. Ask for help. No one person can move a mountain, and here you are sitting with a mountain of debt. Yes, you need to bear the brunt of the work in clearing it up, but when you get frustrated or depressed, are unsure about how to proceed, or need an extra push along the way, reach out to the people closest to you. That could include family members, friends, or even the faceless and sometimes anonymous people here on these message boards. A fellow Fool might help you to get that budget started, your sibling might loan you than extra $50 you need to get by next month, and your best friend might be there just to listen to you when you get depressed and help encourage you to keep trying. Those that are close to you do not want to see you struggle; they want to see you succeed.

Resources
There are a plethora of resources available both here on TMF as well as in cyberspace. Here are a few that may help you most:

TMF Discussion Boards
Ask a Foolish Question - http://boards.fool.com/Messages.asp?bid=100000
Consumer Credit / Credit Cards - http://boards.fool.com/Messages.asp?mid=19175852
Fools and Their Money - http://boards.fool.com/Messages.asp?bid=100148
How to Negotiate Anything - http://boards.fool.com/Messages.asp?bid=100159
Living Below Your Means - http://boards.fool.com/Messages.asp?bid=100158

TMF Articles and Other Tools
Get Out of Debt - http://www.fool.com/ccc/debt/debt.htm
Savings Center - http://www.fool.com/savings/savings.htm?source=LN
Credit & Budget Calculators - http://www.fool.com/calcs/calculators.htm?source=LN#credit

Other Resources
Credit Talk: Debt Crisis - http://www.credittalk.com/debtcrisis/debtcrisis.html
Debtors Anonymous - http://www.debtorsanonymous.com/
AmeriDebt - http://www.ameridebt.org/
Myvesta - http://www.dca.org/

Remember, there is hope, there is a light at the end of the tunnel, there is a brighter tomorrow – you CAN do it!!


CPAScott
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Author: zigmund555 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162020 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/12/2003 1:50 PM
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great post

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Author: CPAScott Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162022 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/12/2003 2:05 PM
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Thank you.


CPAScott

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Author: W505a Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162025 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/12/2003 2:26 PM
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I particularly agree with #6 --- the public record.

I've known instances where folks have digged up the petition on a bankrupt co-worker from 12 or 15 years back, just to see when and how he/she "screwed up".

Somehow, it isn't as satisfying to your future gossip/enemy to go digging to find a 12-year old judgment that got satisfied, or some other "bad paper" that you settled on in an agreement with the creditor.

Even in the corportate bond world, when an "A" rated firm gets downgraded to "BBB" or "BB", it's treated differently than the corporation who announces it's going belly-up. (to "D" or default status.)

There are a lot of "junk bond" corporations out there, holding their heads up high, and I just don't see why more ordinary borrowers who trip up don't take the same approach . . .

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Author: Bweaver Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162026 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/12/2003 2:35 PM
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Bravo, CPAScott!

in your "actions to take" section, I'd move "sell some stuff" toward the top of the list, and probably change it to "sell everything you don't need and give $ to creditors."

It's easy, even reflexive, to think that each and every thing we own is necessary. But if hard times hit, I can easily find some items in each room in my house I can live without that could help me through, or help me make a big enough dent with one creditor that I could handle the others.

Kitchen: blender, toaster, microwave, clock, phone answering machine, glassware, solar-powered sculpture
Living room: stereo, large houseplant, CD collection, fireplace tools, clock, rug, bobbleheads, radio
office: file cabinet, computer, desk, printer, digital camera, cellphone (& plan)
bedroom: speakers, clothes, weights, books
guest room: couch, rug, lamp, chair,
bathroom: scale, hair clippers, rubber duck, hand mirror, heating pad
basement & garage bicycle 1, bicycle 2, car, hammock, tools, croquet set, darts & board, camera and darkroom gear, rollers, television, phone

I suspect this would all be protected under bankruptcy. Ignoring the car, the sale of which would require a drastic lifestyle change, I could scrape together $2k or $3k from things I use, appear to need, but could easily survive without. That couple of thousand might provide the cushion I need to sneak through a rough patch, or it could free me from a single creditor to allow me to meet other obligations.

If the car had to go, it would.

I have two points, I guess.

First, despite what I consider to be a pretty spartan life, I can find stuff to sell. I think we all have possessions we regard as necessary that really aren't. They make life easier and more enjoyable, but hardly impossible.

Second, if it really hits the fan, I can adapt to what would be a nightmare of public transit. But I couldn't adapt to who I would become if I walked out on obligations I'd willingly assumed.

Thanks for a great post!

Bruce



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Author: llamalluv Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162031 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/12/2003 3:23 PM
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bathroom: scale, hair clippers, rubber duck, hand mirror, heating pad

Only a man would say a heating pad was not a necessity.



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Author: Bweaver Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162037 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/12/2003 3:32 PM
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Only a man would say a heating pad was not a necessity.

But either gender might be as sexist as your comment, eh?

Good luck,

Bruce

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Author: Gimmeaminute Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162038 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/12/2003 3:40 PM
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For some, bankruptcy is really the only option. Their financial situation has deteriorated so much that there is no plausible way to amend it. It is for these individuals that our bankruptcy laws exist, and for those in that position, it can offer that fresh start.



This was the truth for me and my husband 10 years ago. Here is my story: http://boards.fool.com/Message.asp?mid=11966836

We tried everything Scott recommended and only after much soul searching and crying decided it was the only option left for us. It took me years to get past the guilt that was associated with it and the feeling of failure. But I know now that I did everything I could to avoid it but with the medical bills and the lack of jobs and the baby, it was impossible.

For those who are thinking of it as a way to start fresh, get a clean slate and that's it, you will be right back where you are now in no time at all. Make every effort to change now, learn your lessons, pay those bills and ask for help before filing and if that is your only option left, don't just trust your lawyer and that they will take care of everything. We didn't have a lawyer and of 6 or so people who were at our hearing with lawyers, 4 of them had to file amendments or they could have lost personal items as well as real property. Do your homework, know what is going on before you go in, know what can be exempted and don't hide anything and CLAIM EVERYTHING, including your underwear and your socks!

Deannda
One woman did not claim any personal property and almost lost all her household possesions as well as clothes, jewelry and ANIMALS!

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Author: susan400 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162042 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/12/2003 4:02 PM
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Scott,
What happens to kids savings accounts, say grandparents have given 300$ / yr an it is in a custodian acct mother/cust for the child.

The parents flie, does the kid's $4000 in savings go to pay parents creditors?

Thanks.

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Author: Gimmeaminute Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162046 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/12/2003 4:18 PM
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Scott,
What happens to kids savings accounts, say grandparents have given 300$ / yr an it is in a custodian acct mother/cust for the child.

The parents flie, does the kid's $4000 in savings go to pay parents creditors?

Thanks.


My daughter did not lose any of her savings bonds when we filed. We made sure they were in her name only. Laws may vary from state to state.

Deannda
Who is currently fighting with said daughter

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Author: epdharma Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162047 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/12/2003 4:23 PM
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1. Bankruptcy will ruin your credit for a minimum of 10 years... Even once the bankruptcy has cleared from your credit report, it may take much longer to repair your FICO score.

This is a gross generalization. My road back to good credit started immediately after filing. I managed to re-affirm one credit card that had a zero balance when I filed. After one year, I got a new credit card and used it, paying it back on time. After two years, I got another. After four years, I paid through the nose for a used car loan (24%) until I could re-establish good payments for two years, then I refinanced for 15%. After six years, I qualified for a mortgage at prevailing market rates. I'm saying that BK doesn't have to ruin one's credit for 10 years. One doesn't need to make a good living either. I was pretty much scraping by when I struggled to make my monthly credit card payments on time.

I am in the mortgage business, and can tell you that although a BK does hurt one's credit score, it is the record of re-establishing credit that has more weight than the actual filing. One would likely pay sub-prime rates for a couple of years, but if one is patient, it doesn't have to take 10 years to get back on your feet. After nearly nine years, my score is up over 720, considered prime by most lenders.

The rest of the post is dead-on. Never file BK unless there is no other alternative. My home was heavily damaged in an earthquake, and was worth significantly less than the mortgage balance. I could have negotiated for relief rather than file, but when I looked at the price of asking for relief -- staying in a house I hated for another 10 years to recover my lost equity, it didn't make sense. As fate would have it, I lost my job 30 days after I filed. It was a great move all things considered. I could have looked at it as a failure, but I chose instead to see the opportunity as a blessing, and to work my tail off to get back into the good graces of the credit world again. It was hard, and sometimes I thought I wouldn't make it, but I stuck it out and recovered far better than where I had been before filing.



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Author: llamalluv Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162048 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/12/2003 4:37 PM
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But either gender might be as sexist as your comment, eh?



Please explain....

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Author: krissylou Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162058 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/12/2003 6:41 PM
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But either gender might be as sexist as your comment, eh?



Please explain....


He doesn't understand why heating pads are particularly more valuable for women and is succumbing to the notion that all gender differentiations are sexist.

However, frissy, I more than understand what you were saying. :)

KrissyLou

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Author: dtschet Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162079 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/12/2003 10:41 PM
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Scott - awesome post, but remember there are many various reasons out there why folks can see BK as the only option before living on the street in a cardboard box.

My filing saved me and my children from foreclosure and heading for a shelter to live.

Scott's 8 reasons why you should NOT file for bankruptcy:

1. Bankruptcy will ruin your credit for a minimum of 10 years.
~ Agreed

2. You will lose some of your possessions.
~ Had nothing - had nothing to lose. ( Got to keep my old VW rabbit!)

3. You will lose your credit cards.
~ No great loss. I kept one open for emergencies for the lower interest rate and the good customer service I received when I told them about the filing. They were very understanding. The credit card offers came pouring into my mailbox within a month after the bankruptcy was finalized. ( High interest rates and secured cards, BTW)

4. You cannot file for bankruptcy again for 6 years.
~ True.

5. Not all obligations are discharged in bankruptcy.
~ True. IRS would not let me off the hook for $1500 in taxes I owed from working extra part-time jobs while I was trying to get my head above water.

6. You will become part of the public record.
~ In my case, I did not care. I told everyone anyways. No stigma. All the major companies that filed bankruptcy emerged with their reputations intact so I figured I would too.

7. Bankruptcy is the admission of defeat.
~ I totally disagree. I was not defeated. Worked my butt off at three jobs to provide for my children after an unforeseen layoff and a house that was nearly 200 years old and in constant need of repair. I saw a lifeline and I grabbed it to save us. Actually, I felt like a hero in my ability to recognize the help extended and accepted it.

8. Bankruptcy affects more than just you.
~ OK - Tell that to the Airlines, Big Retail and other corporate entities that file.

Bankruptcy is a last resort, but for many of us, in financial trouble, need to take advantage of the law as it is are grateful that it is there.

Tax shelters are there for those who choose to hide assets from taxation.

In my opinion - some of the folks who selfishly use those shelters to their advantage have much more to be ashamed of.



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Author: Cromely Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162085 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/12/2003 11:41 PM
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1. Bankruptcy will ruin your credit for a minimum of 10 years.

It can stick around longer, too. Many employment applications will ask if you've ever filed bankruptcy. If you filed 15-20 years ago and answer "no" on the application, you can be terminated immediately for falsifying an application.

A larger number of job opportunities may be closed to someone who files. They will gradually open up again with time, but some may stay closed forever.

Cromely.

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Author: eblover Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162100 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/13/2003 9:24 AM
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4. Consolidate your debts. One way in which to unload yourself from the month-to-month burden of your debt is to leverage your assets against your debts, such as taking out a home equity loan to pay off your credit cards. This is not a decision to be taken lightly, however, as shifting your burden can make you more susceptible to financial trouble by risking your property. If you pay off your credit card debt with a HELOC, for example, you must ensure that you don't begin to charge more on those now paid off cards.

NO! NO! NO!!!!

How can this author in good conscience tell a person with such debt to consolidate their non-secured debt into a SECURED LOAN?!?! HELOCs should only be handled by people that have shown themselves to be fiscally responsible.


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Author: xtn Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162101 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/13/2003 9:43 AM
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4. Consolidate your debts. One way in which to unload yourself from the month-to-month burden of your debt is to leverage your assets against your debts, such as taking out a home equity loan to pay off your credit cards. This is not a decision to be taken lightly, however, as shifting your burden can make you more susceptible to financial trouble by risking your property. If you pay off your credit card debt with a HELOC, for example, you must ensure that you don't begin to charge more on those now paid off cards.

NO! NO! NO!!!!

How can this author in good conscience tell a person with such debt to consolidate their non-secured debt into a SECURED LOAN?!?! HELOCs should only be handled by people that have shown themselves to be fiscally responsible.


The author can do so in good concience by including a disclaimer-like description of the risk involved. Did you read it? Did you read what was written or what you wanted to read? The author says it is one way to unload the monthto-month burdon, and it is. Nothing wrong there. The author explains that should be a careful decision, not to be taking lightly. Care is given to point out the risk to your property. Nothing wrong with that. Even an example is given about being fiscally responsible. All sounds good to me.

Are you suggesting the possibility shouldn't ever even be mentioned? When you refer to "a person with such debt," are you making an assumption about the author's target audience? Don't you think someone considering bankruptcy might be financially responsible? It is possible you know. Should those people be deprived of the information about this possibility? Don't you think it is POSSIBLE that the occasional individual might actually learn a little something about being responsible by becoming educated about the possibilities and their risks?

xtn

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Author: CPAScott Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162103 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/13/2003 9:52 AM
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NO! NO! NO!!!!

How can this author in good conscience tell a person with such debt to consolidate their non-secured debt into a SECURED LOAN?!?! HELOCs should only be handled by people that have shown themselves to be fiscally responsible.


IMHO, for someone contemplating bankruptcy, consolidating your debts may be the most dangerous and risky of any of the suggestions I made, and I can understand your apprehension at my mentioning it. But I think you must consider that it is a viable and legitimate option to assist in improving cash flow and decreasing the financial burden one might face.

The key to this strategy (which you alude to) is that it can easily backfire putting the person in an even worse financial situation -- that is, if they fail to correct the financial behavior that put them in that situation in the first place. If one is burdened so much with credit card debt that they can't make their montly payments, consolidating those debts with a HELOC can legitimately ease that crunch and get them free of some of that cash flow burden, BUT if once those cards are paid off, they simply run out and buy more stuff on them, then they've gained nothing. Conversely, they've lost something -- and have put the risk of losing there home out there too.

If, however, they are responsible enough NOT to use those credit cards (or better yet close them), then the tactic can work.

But you are right, if you are not financially responsible (or at least ready, able, and willing to reform) then this strategy is one to avoid.

As I said, a decision not to be taken lightly.

Thanks for your thoughts.


CPAScott

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Author: llamalluv Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162112 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/13/2003 10:30 AM
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He doesn't understand why heating pads are particularly more valuable for women and is succumbing to the notion that all gender differentiations are sexist.

However, frissy, I more than understand what you were saying. :)


Oh. Well, it would be because we (women) have a mixture of mucus and blood wrung from our uteruses (uteri?) each month (or thereabouts) which causes not only cramps in the uterus, but in many cases, back spasms. (At least in my family, we get back pain @ TTOTM.)

And I try to avoid taking drugs when possible. Especially since I have discovered that I get headaches from aspirin and ibuprofen. So, I don't take anything if I can deal, and I can't deal without my heating pad--which cost all of $12. (And who would buy a USED heating pad? Ick)

I just found it amusing that as a guy, he would sell the heating pad and hair dryer, but not the couch and TV. But then, he doesn't find the heating pad to be medically necessary, like I do.

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Author: eudaimon6 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162148 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/13/2003 1:56 PM
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How can this author in good conscience tell a person with such debt to consolidate their non-secured debt into a SECURED LOAN

exchanging unsecured debt for secured debt is rarely a good idea. but sometimes it is the smartest thing a person can do.

think about this picture

total credit card balance-$50,000
average interest rate- 11.9% apr
interest not tax deductible
minimum monthly payments to stay current of 2% of balance-or $1000/month just to stay current. that would translate into a payback period of approximately 70 months.

all other obligations (mortgage, car, insurance, utilitiies, food, etc, total $2500/month-so total monthly outgo is $3500. mortgage balance is the bulk of that-$175000 mortgage at 6% on a home worth $225000, monthly payments of 1256, with 20 years left to pay on the mortgage.

now we restructure the whole thing, putting all the credit cards on the home loan, and refi at prevailing rates (some sort of 80/20 combo loan) with an average rate on the total debt of $225000 of say 5.5 apr for fifteen years.

new monthly outgo is is 1244 (household expenses aside from mortgage) plus mortgage payment of $1842, for total outgo of $3086, or $400 less than before. if that $414 extra monthly cash flow allows our example to make monthly payments on time, and provided OUR EXAMPLE BEGINS TO USE CREDITCARDS RESPONSBILY AND LIVE WITHIN HIS/HER MEANS isnt our example better off after the refi and conversion of unsecured debt to secured?

oh-and we've ignored any advantage of the new debt maybe being tax advantaged. im not qualified to comment on such things.


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Author: eblover Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162149 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/13/2003 2:01 PM
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Are you suggesting the possibility shouldn't ever even be mentioned? When you refer to "a person with such debt," are you making an assumption about the author's target audience? Don't you think someone considering bankruptcy might be financially responsible? It is possible you know. Should those people be deprived of the information about this possibility? Don't you think it is POSSIBLE that the occasional individual might actually learn a little something about being responsible by becoming educated about the possibilities and their risks?

I am making assumptions about the target audience of this article because the FIRST rule this author gives is to "change your attitude" about spending $$. Do you really think the author is telling a person who is normally very responsible, but has fallen on hard times, to "change their attitude"? I highly doubt it.

you read what was written or what you wanted to read?

Maybe I should turn this question around TO YOU?

There was no reason to be so durn condescending, thank you very much.

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Author: eblover Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162150 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/13/2003 2:04 PM
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I did not say you shouldn't have an HELOC to get better rates under any circumstance. I said it shouldn't be handled by a person that has proven not to be fiscally responsible.

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Author: snie Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162151 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/13/2003 2:17 PM
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I did not say you shouldn't have an HELOC to get better rates under any circumstance. I said it shouldn't be handled by a person that has proven not to be fiscally responsible.

And why are you assuming that someone on the verge of bankruptcy is fiscally irresponsible?

It is entirely possible for bad things to happen to good people. That is, someone who is fiscally responsible can get in a serious accident or lose their job and be pushed to the brink of bankruptcy by mounting bills. If consolidating the debt into a secured loan allows someone to get cash-flow-positive* again, then it might be the very step that is necessary to avoid bankruptcy.

Snie

* by 'cash-flow-positive', I mean that it lowers the minimum debt payments enough that food and shelter and debt can be covered each month without increasing the debt. (Cash flow negative is when your minimums are more than you can pay in a month).

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Author: eudaimon6 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162154 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/13/2003 2:38 PM
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I am sorry if i clouded the issue talking about interest rates. my intent was to emphasize the improvement in cash flow-a $414 reduction in minimum payments. sorry if that made my post less clear.

thanks

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Author: xtn Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162189 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/13/2003 9:49 PM
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There was no reason to be so durn condescending, thank you very much.

You are absolutely right. My appologies.

I was only trying to make the counterpoint to your position. I wish I had done so without a trace of superiority, but I guess I failed at that, and thus find myself to be slightly inferior.

Please forgive my poor tone.

xtn


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Author: eblover Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162420 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/16/2003 1:58 PM
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Thank you very much, xtn. Apology accepted. :)

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Author: eblover Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162424 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/16/2003 2:05 PM
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And why are you assuming that someone on the verge of bankruptcy is fiscally irresponsible?

Why are you assuming I was talking about EVERYONE on the verge of bankruptcy? I was talking about the audience in which the author was trying to pinpoint...


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Author: debbie815 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162680 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/18/2003 2:35 PM
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Thank you very much for this post. My husband has been suggesting to me that we should file bankruptcy. I am opposed to doing this for the reasons you listed (and you listed some I hadn't even thought about).

This is my first post on a Fool board, so I will give a little background of how we got where we are. We are currently $204K+ in debt (yes, that's 204 thousand!) This includes our home mortgage, a truck, a HEL, a personal loan from my parents, and the remainder is credit cards (approx. $76K on credit cards). The HEL, the personal loan, and over half of the credit card debt is related to a business that my husband bought in July 2001. At the time, I didn't feel we were financially ready for him to be self-employed, but he desperately wanted this and we were able to get financing through the HEL and my parents so we went ahead. He swore he would be able to continue bringing home the same paycheck as he was bringing home from his dot-com job, so I went along. That lasted about 2 months. When things continued to deteriorate financially, he didn't share this info with me because he wanted to “protect” me! By the time I found out what was going on, he had already missed several credit card payments and was behind in paying state sales taxes. After several more months, he decided to close the business and get a regular job again. He was fortunate to find a good-paying job with good benefits. We are now working to pay off our debt. We make enough to pay all of our bills and pay the minimum on all of the credit cards, applying as much “extra” money as we can find (we're using the snowball approach). Progress is very slow and for this reason, he thinks we should file bankruptcy. I think since we are able to make the payments we should just continue to do so, and reserve filing bankruptcy for when we can't make the payments – like if one of us were to lose their job, or we had some major medical catastrophe (although we both have good insurance through work). I know the going will be slow and hard, but I am resolved to pay all of this money back.

So, again, CPAScott, thank you very much for this very timely post. I will be forwarding the information to my husband for him to review, and hopefully that will be the end of the discussion of filing bankruptcy for now!

For those of you who have read this far, I apologize for the lengthy post.

Debbie


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Author: rosietomato Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162684 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/18/2003 2:48 PM
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>Progress is very slow and for this reason, he thinks we should file bankruptcy.
>
Of course progress will be slow! But there is a light at the end of your tunnel. You just have to accept the fact that it will take you a while before you can even spot it.

Are you working from a written budget to see your spending patterns and where you can cut back so you can throw more money towards the cc debt? Can one/both of you do freelance or partime work in your spare time? Garage sales/e-bay sales are popular ways of generating some quick cash that can be used to knock down debt.

My suggestion is to approach debt reduction in the following order
1) cc's
2) HEL
3) parents
4) home loan
Somewhere after step 1 is completed you can work on uping your retirement planning and savings.

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Author: CPAScott Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162686 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/18/2003 3:06 PM
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Yes, Debbie, you CAN do it! There IS a light at the end of the tunnel!

First, eliminate the mortgage debt from your "total amount owed" thought. Homes are not inexpensive -- here in the Boston area, you could barely find a fixer-upper starter home for $204,000, and I wouldn't be surprised if the average home price here well exceeds $300,000. So, a new home owner is in the hole for a lot!

But, equity in homes rise, and in the general world of debt-free living, mortgages are one of the very few debt vehicles that are completely acceptable.

So, keep paying it, but leave it out of our discussion.

The HE loan is one that, if possible, we'd like to eliminate at some point, but it's the lowest on the totem pole for much of the same reasons we are not considering the mortgage. It's likely a low rate and is tax deductible. We'll worry about that one later too.

Depending how much you owe on your vehicle, you have an option -- selling it. As long as you are "above water" (the vehicle's value exceeds what you owe) it might be worthwhile to consider selling or trading it in for something less expensive -- a smaller car or an older model, perhaps. Don't worry if you can't afford the car you want -- you will be able to again in a few years!!

The loan from your parents might be negotiable. I don't know the terms (if there is interest, etc.), but if they are willing to forego some of the cash flow, then you have some flexibility. This is the easiest loan to negotiate the terms of, so I recommend you do so.

That leaves credit cards. Take a look at some of those bankruptcy-avoidance tips and try as hard as you can to renegotiate those cards -- balances and rates. Let's say you have a card in which you owe $6000 at 15%. You might be able to get the company to accept a one-time payment of $5000 as settlement of the obligation. If the credit card company believes you have no other option but to file bankruptcy, then you have leverage -- and could free up a $1000 in the process. At a minimum, you may be able to negotiate a lower interest rate or have late charges, etc. waived.

There are options. Take the actions I suggest, keep reading these boards and posting your questions, and maintain hope. Remember, there is hope, there is a light at the end of the tunnel, there is a brighter tomorrow -- you CAN do it!

Best of luck.


CPAScott

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162706 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/18/2003 6:34 PM
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debbie815: "Thank you very much for this post. My husband has been suggesting to me that we should file bankruptcy. I am opposed to doing this for the reasons you listed (and you listed some I hadn't even thought about).

This is my first post on a Fool board, so I will give a little background of how we got where we are. We are currently $204K+ in debt (yes, that's 204 thousand!) This includes our home mortgage, a truck, a HEL, a personal loan from my parents, and the remainder is credit cards (approx. $76K on credit cards). The HEL, the personal loan, and over half of the credit card debt is related to a business that my husband bought in July 2001. . . . We are now working to pay off our debt. We make enough to pay all of our bills and pay the minimum on all of the credit cards, applying as much “extra” money as we can find (we're using the snowball approach). Progress is very slow and for this reason, he thinks we should file bankruptcy. I think since we are able to make the payments we should just continue to do so, and reserve filing bankruptcy for when we can't make the payments – like if one of us were to lose their job, or we had some major medical catastrophe (although we both have good insurance through work). I know the going will be slow and hard, but I am resolved to pay all of this money back.

CPAScott: "Yes, Debbie, you CAN do it! There IS a light at the end of the tunnel!

The loan from your parents might be negotiable. I don't know the terms (if there is interest, etc.), but if they are willing to forego some of the cash flow, then you have some flexibility. This is the easiest loan to negotiate the terms of, so I recommend you do so.

That leaves credit cards. Take a look at some of those bankruptcy-avoidance tips and try as hard as you can to renegotiate those cards -- balances and rates. Let's say you have a card in which you owe $6000 at 15%. You might be able to get the company to accept a one-time payment of $5000 as settlement of the obligation. If the credit card company believes you have no other option but to file bankruptcy, then you have leverage -- and could free up a $1000 in the process. At a minimum, you may be able to negotiate a lower interest rate or have late charges, etc. waived."


Any creditor that forgives debt will create income on which income tax will be due (and the federal government swings a big stick compared to most other creditors).

In addition, the mortgage, HEL, and truck loan are all presumably secured (either fully or in part). Bankruptcy is not the end of the world for secured creditors, to the extent of their security, so it is unlikely that those debts will be going anywhere even if you file bankruptcy, except to the extent someone creditor is undersecured -- possibly truck loan or HEL, but not enough data to say.

Thus, bankruptcy will do the most WRT to credit cards and unsecured (presumed because nothing else mentioned) loan from your parents. I note that DH appears willing to stiff your parents! I am not sure how you feel about that, but if might DW suggested than approach, I would be livid and suggest that my in-laws (or your DH's parents) pay-off the debt before I filed BR. It was DH's business.

Also, I suspect (though I am not certain, and am too lazy to go look) that the loan from your parents might well be considered a loan from a related party for preference analysis; which would mean lokking back at payments for the last year rather than the 90 days that is normal for thrid-party loans. If I were headed toward BR with a parental loan, I would be extremely careful to have been advised in detail by a knowledgeable bankruptcy lawyer about preference analysis related to such loans. Nasty surprises after filing, like orders to disorge, are virtually impossible to remedy after the fact.

Regards, JAFO


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Author: criscarson Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162750 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/19/2003 6:28 AM
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Test was postponed until today. Apparantly the docotor thought a stroke victim who needed the same room ASAP was more important than li'l ol' me.

Homes are not inexpensive -- here in the Boston area, you could barely find a fixer-upper starter home for $204,000, and I wouldn't be surprised if the average home price here well exceeds $300,000. >>>>>>


Just as a lark I picked up real estate handbooks on my connecting in D.C. I saw apartments there as high as $2,500 a MONTH for a 1 br.

Also saw homes advertised in Middlberg routinely for more than a milion, 1 as high as 6 million. Most of these were with acreage; the same estate in West Alabama would go for 500K, tops.

Talk about location, location!

-criscarson-

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Author: debbie815 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162792 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/19/2003 11:34 AM
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Rosietomato,

Thank you for your helpful suggestions. No, we are not currently working from a budget. I just haven't ever taken the time to make one. I know this is something I need to do just so I can have a better grasp on the big picture. I'm investigating the budget process now, and I hope to get started on this within the next month.

DH has been talking about getting a part-time job, but has taken no action on this yet (and I hate to nag!) I also do some direct-sales on the side. Right now I am trying to focus DH on selling off the remaining pieces of his closed business that might bring in some cash (he sold a couch this week!) I have been selling some of our unneeded items on ebay - this has the added benefit of helping in my new decluttering project, too! And as I sell items, I am inspired to find more items that I don't need and can be sold!

Thanks again!

Debbie



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Author: debbie815 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162801 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/19/2003 12:17 PM
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CPA Scott,

Thank you for your encouragement and helpful suggestions.

We are very fortunate in the home dept. We bought our house 17+ years ago for $65K (Austin, TX) so our house payment is not exorbitant, and we refinanced it several years ago, so the interest rate is not bad. We have the HEL added on to it, but even with that, our interest on these combined is not enough to be tax-deductible (I don't know a whole lot about that - DH is an accountant, and I don't mess with the taxes any more than I have to!) HEL interest rate is also low. The one thing about these two loans is that I'll pay them even if I have to go hungry - I will not lose my house!

I don't know if we are above water on the truck or not. It is DH's vehicle. I drive a paid-for 7 year old car that I love. Living in TX pretty much requires a vehicle for each of us. Public transportation in Austin is not very good. Repairs/maintenance for my car have not been too bad, yet - knock wood! I don't think DH would even consider selling his truck, and I don't think I could ask him to. I think we have two more years to pay on it.

The loan from my parents is negotiable and I may do that after I set up a budget. I have been making fairly small payments to them since February of this year, so they're not exactly used to the cash flow yet and don't depend on it as a part of their income. They have been very good about this, and I know if things got really bad (like if we were about to lose the house) they would be there for us. I don't want to use them if I don't have to, though, because they are both retired and not wealthy by any stretch of the imagination.

About those credit cards: Are we in any kind of position to negotiate lower rates since several payments were missed earlier this year and last year? I noticed one of the cards that DH used for his business has a very high interest rate, and I don't think it used to be that high. I think they raised it when he started missing payments. We have caught up on all missed payments and have not missed or been late with any payments since February. How many months of "good" payment record before they might consider adjusting the interest rates back down?

I fully understand that this is going to take a long time. I'm hoping to be debt free (completely!) within 10 years...well, I might have to replace my car before then, but hopefully most of the credit cards will be paid down or off by then. It has been a bit of a struggle to deal with this with DH because he feels bad about putting us into this financial mess (we weren't in all that good shape to begin with). I like to think of it as a learning experience: I have learned to be a lot more frugal, I've learned to do more cooking at home (which I really enjoy), and I'm going to be learning how to budget and manage what money we do have better. I've also learned it would be good to be more involved in DH's business, if he decides to ever go that route again! We are very fortunate in a lot of ways - we both have good-paying jobs, with good benefits, that appear to be very secure. We are building up some retirement money through our jobs, although I think we will need to add to this greatly as soon as we can (after the debts are gone). To me, the hardest parts have been that I thought I'd be better off financially as I approach 50, and that I didn't know where to go to get good knowledgeable advice about what to do. I've been with the Fool for several years but never really taken advantage of the vast amount of information here and relied on the helpful folks on the boards. Y'all have been wonderful!

Again, I really appreciate your helpfulness. Thank you so much for sharing your knowledge and being so supportive and encouraging!

Debbie


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Author: sybilicious Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162813 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/19/2003 2:13 PM
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CPAScott you have some really great info! Filing BK should always, always be a last resort. I had to file in Nov 2001, and it was not an easy decision. It is a shameful stigma, but you cannot allow it to ruin your life.

If you do have to file, do so, and take immediate steps to increase your FICO. You can recover your credit fairly quickly if you come up with a plan to go into strategic debt. I financed a car (a new Ford Focus) in February 2002 at 4.9%, with 1K down. I make extra payments every month. The credit extended to me was through Ford Motor Credit. Even though your FICO is the pits after you file, your debt-to-income ratio is awesome. You can use that in your favor. Get yourself a secured credit card, and pay the balance EARLY every month. Make it a priority to never pay late on a credit card again, and your FICO will shoot up more quickly than you would expect. I qualified for a home loan exactly one year after my BK, and moved into a brand new house last February that I own. My mortgage company commented on how good my credit score was in spite of the BK. My percentage rate on the home loan is 8.03% and I will be able to refinance without penalty in two years. At the time I was approved for a home loan, my FICO was 700, and now that I own the home, I am sure it is higher.

Having a BK on your credit report is not financial disaster. Not changing the circumstances that led you to file BK IS. Stop beating yourself up, learn from your mistakes, make a concerted effort to recover, and you certainly can! I am proof. Take classes at the Consumer Credit Counseling Service in your area. They will teach you how to make a budget and manage your money without making you feel like a failure. Also, read Stephen Snyder's "Credit After Bankruptcy" for some awesome tips on how to live below your means, and improve your credit FAST.

I hope this helps. You CAN recover. And when someone tells you "No," thank them for their time, and go ask someone else. Someone out there will tell you "Yes."

Sybilicious

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Author: bird901 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 162857 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/19/2003 9:38 PM
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This is my first post so please bear with me. CPAScott makes some very good points about personal bankruptcy. But over all there are many different ways to think about bankruptcy. I have worked in the consumer and business credit world for 25 years and have also filed chapter 7 personal bankruptcy. American society is built so that people can take financial chances. If there was no bankruptcy court no one would ever take a financial risk. In the old world bankruptcy was and still is a life time stigma. Our federal court system understands the need for a 'fresh start' and leaves plenty of room for it. In general the consumer takes the worst hit in bankruptcy. Business is another story. I have seen many people run small businesses into the ground by paying themselves exorbitant salaries and taking lavish vacations but they couldn't pay their suppliers when the bills came due. Because these businesses were registered corporations no one is held personally responsible for the bankruptcy. The same people will start another small business and again do the same thing except the second time the business will be in their wife's name. The third time it will be in their mother's name. It goes on and on and has been going on for many years before Enron.

I remember when I filed for bankruptcy and a chain retail store where I had an account called me about my past due bills. I told them I had filed for bankruptcy and gave them my lawyer's name and phone number. The called me names, etc. the funny thing was this retail chain had also filed for bankruptcy. I asked them what was the difference between their bankruptcy and my own they couldn't answer.

If you are really considering bankruptcy find the best bankruptcy lawyer you can find. It will cost you more but it's worth it. You pay for them to handle every detail for you. Don't try do it yourself or look for the cheapest lawyer in the phone book. Find a lawyer who is also a trustee of the court. I paid about $1,200.00 ten years ago. I was in court for five minutes and it was over. That was it. I got a letter in the mail from the bankruptcy court three months later stating all debts were forgiven. Call me a cynic if you want. I had credit cards again three months later, got a low interest car loan six months later and have never looked back. I now own my own home outright. Have $100,000.00 invested in the market and take vacations frequently. But I have no debt and I keep it that way. Bankruptcy should be thought of similar to divorce it happens and you move on.

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Author: JanetNW Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 163132 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/24/2003 12:00 PM
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CPA Scott

At the bottom of your “Reasons Not to File Bankruptcy,” you have a link to a Debtors Anonymous Dot Com, which is a commercial rip-off of the name of a 12-step program, which can be found at

http://www.debtorsanonymous.org/

Debtors Anonymous has no official policy regarding bankruptcy. However it is a broadly held view that while no absolute rule can be given, bankruptcy is to be avoided. It is not uncommon for people to end up in DA after having gone through a bankruptcy only to find themselves in the same situation all over again. Bankruptcy can change a person's debt load, but it doesn't change the person.

How did the person get into trouble in the first place? Personal problems like compulsive spending, (buying stuff to fulfill needs that cannot be filled by the things purchased); or compulsive under-earning (working jobs below your skill and education level, selling yourself short in the marketplace); these are problems that are hard to solve on one's own. Sometimes people use bankruptcy as a way of ducking these issues.

DA is a program for change, and personal change and growth is challenging. It is a common experience to watch someone-- with the help of the DA program-- use the process of fighting their way back from the edge of bankruptcy into solvency as vehicle for personal change and growth.

I personally ended up in DA as the last stop on the block before bankruptcy. For years I had been taking the risk of doing without health insurance, and I ended up buried under a mountain of hospital bills for a completely unexpected health issue. Now those hospital bills are paid off, I have health insurance, a mortgage, and a better than average credit rating. But most importantly, I've completely changed the way I deal with money, and the way I put my work forward into the marketplace. I come from a long line of people who worked very hard but didn't do very well financially. There was a great deal about money that my family couldn't teach me, because, God bless 'em, they didn't know.

Fighting my way back to solvency was a great learning experience. And I couldn't have done it without DA.



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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 163543 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/29/2003 2:57 PM
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<<1. Bankruptcy will ruin your credit for a minimum of 10 years.

It can stick around longer, too. Many employment applications will ask if you've ever filed bankruptcy. If you filed 15-20 years ago and answer "no" on the application, you can be terminated immediately for falsifying an application.

A larger number of job opportunities may be closed to someone who files. They will gradually open up again with time, but some may stay closed forever.

Cromely.
>>


If you are applying for a job paying above a certain amount of money, ($50,000-60,000 or so I believe) the employer is entitled to a credit report with ALL reported problems without any time limitation.

And depending on the job, employers may figure that if you haven't been able to manage your own business, they don't want you managing theres.



Seattle Pioneer

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Author: xraymd Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 163546 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/29/2003 3:51 PM
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If you are applying for a job paying above a certain amount of money, ($50,000-60,000 or so I believe) the employer is entitled to a credit report with ALL reported problems without any time limitation.

Greetings, Seattle Pioneer, I hadn't heard of this before. Is it true for specific industries? I wholeheartedly agree that declaring bankruptcy is a fate best avoided for many reasons but I am not familiar with the stipulation above. I am a physician with an annual salary above this range, but my employer has not requested a credit report (nor made mention of the employer's right to obtain it). It would have been okay with me if they had - my credit is fine - but I did not know of this entitlement. Would you know of a source for this stipulation?

xraymd



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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 163547 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/29/2003 4:02 PM
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<<If you are applying for a job paying above a certain amount of money, ($50,000-60,000 or so I believe) the employer is entitled to a credit report with ALL reported problems without any time limitation.

Greetings, Seattle Pioneer, I hadn't heard of this before. Is it true for specific industries? I wholeheartedly agree that declaring bankruptcy is a fate best avoided for many reasons but I am not familiar with the stipulation above. I am a physician with an annual salary above this range, but my employer has not requested a credit report (nor made mention of the employer's right to obtain it). It would have been okay with me if they had - my credit is fine - but I did not know of this entitlement. Would you know of a source for this stipulation?

xraymd
>>



It's in the Fair Credit Reporting Act, in the last paragraph cited below, and the limit is $75,000 now that I've found the relevent section of the law:



<<§ 605. Requirements relating to information contained in consumer reports [15 U.S.C. § 1681c]

(a) Information excluded from consumer reports. Except as authorized under subsection (b) of this section, no consumer reporting agency may make any consumer report containing any of the following items of information:

(1) Cases under title 11 [United States Code] or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.

(2) Civil suits, civil judgments, and records of arrest that from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period.

(3) Paid tax liens which, from date of payment, antedate the report by more than seven years.

(4) Accounts placed for collection or charged to profit and loss which antedate the report by more than seven years.(1)

(5) Any other adverse item of information, other than records of convictions of crimes which antedates the report by more than seven years.1
(b) Exempted cases. The provisions of subsection (a) of this section are not applicable in the case of any consumer credit report to be used in connection with

(1) a credit transaction involving, or which may reasonably be expected to involve, a principal amount of $150,000 or more;

(2) the underwriting of life insurance involving, or which may reasonably be expected to involve, a face amount of $150,000 or more; or

(3) the employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000, or more.
>>




Seattle Pioneer

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Author: xraymd Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 163568 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 6/30/2003 2:35 AM
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It's in the Fair Credit Reporting Act, in the last paragraph cited below, and the limit is $75,000 now that I've found the relevent section of the law:

Greetings, Seattle Pioneer, THANKS for the source! I learned something today and I appreciate it.

xraymd


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Author: climbingsummit Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 163722 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 7/2/2003 6:25 AM
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Can't seem to figure how to pull up the TMF discussion board recommendations at the end of CPAScott's post. The post number is larger than what I see available. What am I doing wrong? Climbingsummit

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Author: CPAScott Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 163758 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 7/2/2003 2:32 PM
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Can't seem to figure how to pull up the TMF discussion board recommendations at the end of CPAScott's post. The post number is larger than what I see available. What am I doing wrong? Climbingsummit

You should be able to simply click on the link. Is that not working? You can alternatively do a search for the boards at the bottom of the page.


CPAScott

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Author: TMFSelena Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 227953 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 5/16/2006 7:14 PM
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Folks --

I'm thinking of reviewing this terrific post from 2003 in an upcoming small article:

http://boards.fool.com/Message.asp?mid=19178296

I invite anyone with additional thoughts to share on the topic to do so, especially given the recent changes in bankruptcy rules. Just respond to this post or any other one in the thread, and we'll be able to keep all the thoughts in one place (and I'll be able to direct readers to the conversation in one place, too). :)

Thanks!

Selena

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Author: CPAScott Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 227969 of 308468
Subject: Re: Why you should NOT file bankruptcy Date: 5/16/2006 11:20 PM
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Why, thank you, Selena. I'd help you update it (especially in lieu of the newest bankruptcy legislation), but I'm afraid I don't have the bandwidth to do so right now.


CPAScott

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