A Bankruptcy Lawyer’s Blog

With the rising cost of college and university classes these days and the almost mandatory need to get a credit card (or two, or three) to initially establish your credit, it is almost impossible to reach your mid-20s and not be in some sort of debt to someone. So it only makes sense that when you get that first big income rush once you have established a well paying job and a positive income flow to start paying down that debt as fast as you can. While paying off your debt is always a good idea, you need to be careful you dont endanger your financial future to be (temporarily) debt free right this very second. Here are a few tips on how to pay down your debt and not endanger yourself financially.

First off, make a complete list of all of your debt, your interest rates and your income, as well as your savings. This will give you a complete picture of how much you owe, which accounts should be getting your attention first and how much of your savings you can put towards your debt without wiping yourself out completely. For those that are new to managing their money, it can be tempting to do the simple math of: $5,000 in debt minus $5,000 in savings equals no debt! While this equation is accurate, it also leaves you without a leg to stand on if emergencies should strike. No matter how much it may benefit you to be completely debt free, it is never, ever a good idea to completely wipe out your savings to pay off debt. A little bit here and a little bit there is a much sounder financial approach.

The second thing you should do is research the different kinds of debt you have, a credit card, car payment and student loans, and see if any of the debt comes with a pre payment fee. These fees are most common on mortgages, especially sub prime ones, but they can pop up on car payments and they are actually becoming common on credit cards, as well. Credit card companies want you to carry a balance, and when you dont, they make less money. So some fiendish card companies have decided to start charging you a fee for NOT carrying a balance. If you have one of these cards, you should seriously consider getting rid of it and switching over to a card that doesnt have this crazy fee. If your car payment comes with pre payment penalties, weigh the pros and cons of paying it off early. If you end up saving significantly more in interest than you would end up losing in the penalty, it is still a smart move to get rid of that car payment.

The smartest thing to do if you are young, have a nice paying job for the first time and want to get out of debt is to simply budget out your expenses and income and then try to shave off some of your expenses and take that money and pay off your debt. You should have, minimum, two months of living expenses stashed away as savings, and as tempting as it is to use that to pay off debt, it just isnt a good idea. By budgeting wisely, you can pay off your debt and be in good financial shape for the future.

Life after bankruptcy can have a great impact on your financial life. For some, bankruptcy provides a fresh start and debtors receive numerous loan and credit offers before their debts are even fully discharged. For others, bankruptcy prevents them from getting a decent interest rate on a house or other major purchase. It is always important to consider all of the ramifications and other options before making the final decision to file bankruptcy.

One of the biggest complaints that people have about bankruptcy for the sake of a new start is that it does not change a person's habits. Oftentimes, people get deep in debt because of bad spending habits or because of letting their credit cards and consumer debts get out of control. The actions you take after bankruptcy are vital to keeping the management of your finances under control.

This is one reason that bankruptcy does not actually help people. Without behavior change, the majority of filers fall back into the same destructive spending habits that they had before their debts were discharged. Therefore, recognizing that you have a spending problem is vital before considering bankruptcy.

If you file bankruptcy without going through some type of financial management training, you have a greater chance of repeating the same mistakes. New laws require filers to complete a money management course before their debts are discharged. This is a step in the right direction to help people realize how to use credit as a responsible aspect of their finances rather than abusing it until it is too late to climb out of the debt that they have accumulated.

The final step following a bankruptcy is to deal with the negative ramifications it has on your credit. For purposes of getting a home mortgage, bankruptcy will stay on your credit record for the rest of your life. This could be bad news for the interest rate or the repayment terms of your mortgage even several years after bankruptcy. If you file bankruptcy due to one single major setback in your life, such as an illness that resulted in huge medical bills or a job loss, some mortgage companies will work with you.

While it still shows up on your credit, mortgage companies that do manual underwriting can customize your home loan and they will consider your specific situation. Be sure to save any papers related to the event so you can present them to the mortgage company when it is time to buy a home.

Your life after bankruptcy can return to a sense of normalcy if you take steps to limit its negative implications. Changing your spending habits is the most important thing you can do to ensure that you do not get in the same predicament again. Examine how you spend your money and use a written monthly budget. Only spend money that you have rather than buying things on credit, too.

If your bankruptcy was a result of a single life event, keep the papers associated with the event in case you ever need proof of your circumstances. The best thing is to realize your mistakes and move on with your life.

Congress decided to make major changes to the United States bankruptcy code in recent years because of the problem the current code was creating. With more people filing for bankruptcy protection and discharging their debts, companies that extended credit to the debtors were forced to cease trying to collect on the money that was owed to them.

Under the new guidelines, it is much more difficult for debtors to simply discharge their debts and they are forced to enter into repayment options if they choose to file. The most recent reformations were a result of many years of abusing the bankruptcy system.

The new bankruptcy code resulted in the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, but changes in bankruptcy code are not new for citizens of the United States. Congress was authorized to make changes to the rules and regulations that govern the relationship between debtors and creditors since 1801. Since then, the legislators have amended the bankruptcy code many times. The 2005 changes, however, created the most significant changes in the code in nearly two decades.

In April of 2005, President George Bush signed into law some new regulations to be added to the existing bankruptcy code. Under the new bankruptcy regulations, debtors who file for any form of bankruptcy protection must meet several requirements. Firstly, debtors who file for new bankruptcies are required to complete a financial counseling course.

Since a large number of bankruptcy filings are due to irresponsible personal finance management, the counseling course is designed to help people recognize and change their spending behaviors. This also helps to deter future bankruptcy filings because statistics show that many people who file bankruptcy will do it again in the future.

One way that the new code discourages abuse of the bankruptcy system is that it requires the signature of a lawyer for those who are considering bankruptcy. With the new guidelines, a bankruptcy petition cannot officially be filed unless a debtor has consulted with an attorney about other options that are available.

This encourages a second look at the person's finances and the circumstances regarding the debt rather than just rushing to have them discharged. A comparison of the debtor's finances against the average income of the state's population plays a major role in the investigation.

Other restrictions of the new bankruptcy code make it more difficult for debtors to file Chapter 7 bankruptcy to simply have their debts discharged. With the new regulations, the majority of cases are forced into a Chapter 13 bankruptcy that requires debtors to repay their debts with a scheduled payment plan.

This process involves a court-appointed trustee to handle the finances of the debtor and a certain percentage of their regular income is delegated to the creditors. Repayment schedules are typically arranged so that the debts are paid within five years. Under the old bankruptcy code, however, it was much easier for debtors to file Chapter 7, which simply erases their debts without any form of repayment.

As of October 17, 2005, these and other changes were added to the United States bankruptcy code for several reasons. Because of the toll that unpaid debts have on the economic status of society, major changes were needed to lessen these detrimental effects. Since the focus of these amendments was placed on behavior change and reducing the abuse of the bankruptcy system, the new code should be able to force debtors to think about their financial decisions more carefully.