DebtStoppers USA Bankruptcy Blog

It looks like 2013 may be the year the U.S. economy finally regains some strength. Unfortunately, the same probably can't be said for consumer finances.

Nearly one quarter of Americans have credit card debts that exceed their savings, according to new data from Bankrate.com. Just 55 percent of those surveyed had more savings than debt.

Those numbers haven't changed much from similar surveys taken in 2011 and 2012, despite recent economic improvements.

Part of the problem is that, over the last several years, wages have been stagnant while prices have increased. With less money in their pockets, American consumers turned to plastic.

Many borrowers began taking on credit card debt to help stretch their paychecks. Others already had large credit card debts that they had been paying off, but were forced to start making minimum payments - or worse, defaulting on payments - during the recession.

When you're only paying the minimum, most or all of your money is going to interest. That means your balance is going unpaid month after month - and, if you're continuing to use your credit card, it's actually growing.

Let's say you're carrying $10,000 in credit card debt and your minimum monthly payment is 2 percent. You could theoretically pay $200 a month for 30 years (that's more than $70,000!) and still not pay off your debt in its entirety.

Our nation's current credit card debt dilemma may have been born in tough economic times, but it probably won't die with them. Economic experts predict that when the economic outlook improves, spending - not saving - will increase.

The truth is, people are tired of carrying debts. Maybe that's why, despite recent economic improvements, consumers are only growing more stressed about money.

Around 40 percent of people surveyed admitted feeling less comfortable about their savings level than a year ago. Roughly half said their feelings haven't changed. Just 14 percent reported feeling more confident about money this year.

For many borrowers, it's a Catch-22: we can't pay down debt until we save up some more money, but we can't save up money until we pay off some of our credit card debt.

When your debt seems like a puzzle that can't be cracked, there may be only one realistic solution: bankruptcy. By filing for bankruptcy, it's possible to reduce or eliminate credit card debt entirely, allowing you to lower bills, get current on mortgage payments, improve your credit and actually start saving money.

Overwhelming debt can keep you in the financial dark despite a brightening economy. But with the right bankruptcy plan, you can get your finances back on track - no matter what the market is doing.

Continue reading "Credit Card Debt Exceeds Savings for an Increasing Number of Americans" »

Traditionally, the stereotype of a consumer with too much credit card debt has involved a young person - perhaps a recent college graduate with student loans or a young couple with a mortgage.

But new data suggests that older Americans are struggling just as much - and sometimes more - than their children and grandchildren.

According to a recent study, low- and middle-income households of Americans age 50 and older owe more than $8,000 in debt on average. In comparison, those under 50 owed just over $6,000.

It's not so much the amount of debt that's troubling, but the amount of time it will take to recover from that debt, explain our bankruptcy lawyers.

Unlike young people, baby boomers don't have decades of time to tackle debt problems before they reach retirement age. As a result, many people in their 50s and 60s are planning to postpone leaving the work force - or to keep working indefinitely.

All too often, debt sneaks up on older Americans as they help their children with school and living expenses, shoulder increasing medical costs and deal with layoffs or reduced hours.

Soon, most of their income is going to minimum payments on credit card bills, requiring them to continue using plastic for everyday expenses like utility bills, gas and groceries - further increasing debt and associated interest.

To make the picture even bleaker, many older Americans are also dealing with upside-down mortgages and shrinking pensions.

By the time boomers realize they're in trouble, it's often too late for them to lower debts on their own. Yet they are frequently too afraid or embarrassed to ask for help.

The good news is that help does exist. When debts are too overwhelming to face alone, bankruptcy can offer a realistic solution.

There's no reason to be ashamed of filing for bankruptcy. In fact, baby boomers are filing for bankruptcy at higher rates than any other generation: It's estimated that nearly half of all bankruptcy filings are now by people over age 45.

Filing for bankruptcy makes it possible to reorganize debt payments, stop foreclosure and - in some cases - discharge debts entirely.

Rather than look at bankruptcy as a last resort, consider it one of your first strategies. The earlier you reduce your crushing debts, the longer you'll have to rebuild your savings in preparation for retirement.

Enjoying one's golden years doesn't have to be a pipe dream. When you take the right steps to get out of debt today, you pave the way for a rewarding and relaxing future.

Continue reading "Crushing Credit Card Debt Causing More Workers to Postpone Retirement " »

It's still only February, and already 2013 is shaping up to be a better year for the housing market. Recently released data indicates that we've surpassed the peak of the foreclosure crisis.

According to RealtyTrac, foreclosure activity - which includes default notices, scheduled auctions and repossessions - fell 7 percent since last month and a remarkable 28 percent from January 2012.

New foreclosure filings last month dropped to the lowest level in six years.

However, most of the decline occurred in a single state: California, which has long suffered the highest foreclosure rate in the U.S.

On January 1, a new California regulation - the Homeowner Bill of Rights - went into effect. The law stops foreclosure proceedings once a homeowner has applied for a mortgage modification. As a result, new foreclosure filings in California are now down 65 percent from a year ago.

That's good news for residents of the Golden State, but it doesn't mean much for the rest of the country where foreclosure filings are still double what they were in 2005, before the subprime mortgage fiasco imploded the housing market.

Of course, even California residents who qualify for loan modifications aren't protected from foreclosure permanently. At best, most modifications will only lower a mortgage payment by a few hundred dollars per month - and that doesn't take into account the fees and tax implications that come with modification.

In some cases, loan modifications may actually increase a borrower's monthly payment; if a borrower has been delinquent for a long period of time, the unpaid amount can be spread on top of regular payments.

There's only one surefire way to stop foreclosure, and that's to get - and stay - current on payments. For many of us, this means eliminating overwhelming debts. And when it comes to getting out of debt, no solution is more reliable than bankruptcy.

Bankruptcy provides the ability to reorganize debts into payments determined not by your lender, but by the amount you can afford. Imagine how much more manageable it will be to make your mortgage payment when you're not struggling to also pay credit card bills, medical bills, car payments and more.

If you've fallen far behind on your mortgage, filing for Chapter 13 bankruptcy also has the power to legally stop foreclosure while you work out your new payment plan - whether you're a month behind or are just days from losing your home to the bank.

With bankruptcy, you can put your past behind you so you can move forward - to a more affordable home, fewer debts and a brighter future.

Continue reading "Foreclosure Rate Falls to New Low, But Most of Decline Occurs Only in California" »

Home prices are low, mortgage rates have hit rock bottom - and yet owning a home is more out of reach than ever for a growing number of Americans.

Why? Chalk it up to all that debt we carry.

Last year, the average credit card debt for a U.S. household was $7,194. However, if you only look at households that actually have debt, the number rises to more than $15,000, according to NerdWallet.

And of course, that doesn't take into account mortgage debt, student loan debt, car loans or medical bills. In all, Americans were $11.31 trillion in debt in 2012 - up 4.6 percent from 2011.

The more debt a person has, the more likely he or she will struggle to pay it, which could mean missed payments, exceeded credit card limits and debt defaults.

Not surprisingly, that kind of behavior has a negative impact on your credit score. When considering a loan, lenders evaluate a potential borrower's FICO credit score to assess risk.

Being deemed a high-risk borrower means higher interest rates and less favorable terms - if you can qualify for a loan at all, that is.

After the housing bust, lenders are understandably hesitant to make loans to anyone with a history of unpaid bills or subprime credit. Dealing with debt before you hunt for a home loan reassures banks that you're trustworthy.

Not only can cleaning up your finances before applying for a mortgage help with getting the loan, it will also help you pay that loan. Qualifying for a mortgage is only half the battle. If you want to keep your house, you might as well make sure you can actually afford to pay the bills.

If you have overwhelming debts that are interfering with your dreams of owning a home, bankruptcy can be the most effectual way to lower or eliminate them.

While many worry that bankruptcy will leave a black mark on their credit report, chances are their credit is already marred by their debts - for instance, negative credit card information stays on a credit report for seven years. But that doesn't mean you have to wait seven years to improve your financial life.

Once you reduce debt and start making timely payments, you'll be surprised at how quickly your credit - and good fortune - will rebound. Many of our bankruptcy clients are able to qualify for loans shortly after filing. And because filing for bankruptcy relieves the pressure of debt, it will be much easier to make payments on those loans.

You don't have to let debt drag you down. If your debts are letting opportunity pass you by - whether it's buying a home, getting a better job or taking your dream vacation - bankruptcy can help you take control of your finances and your future.

Continue reading "Large Debts and Bad Credit Preventing More Americans from Buying Homes" »

Falling behind on debt payments is stressful enough as it is. But for all too many borrowers, the situation is made even worse by harassing debt collectors.

Collection agencies are paid by creditors to help persuade delinquent borrowers to pay up. For their work, they often receive a fee or percentage of any repaid debt.

As you might imagine, that gives collection agencies a strong incentive to do anything and everything they can to coerce borrowers into making debt payments - whether those borrowers can afford to pay or not.

Debt collectors are required to follow certain guidelines under the Fair Debt Collection Practices Act. However, with so many Americans defaulting on debts, more and more agencies are shirking the rules and resorting to outright bullying.

A recent article in CNN Money documented some of the worst instances of harassment: threatening to throw debtors in jail, take away their children, do harm to their pets or - in perhaps the most outrageous case - dig up dead relatives who were delinquent on their debts.

In many situations, bill collectors attempt to wear down debtors by calling incessantly at home and even at work. Sometimes they've been known to harass the wrong person about a debt that isn't theirs to begin with.

Often times, debtors are suffering from so much stress and guilt that they don't realize the harassment they are receiving from debt collectors may qualify as abuse. The truth is that collection agencies that don't play by the rules are breaking the law.

Debt collectors are prohibited from inflating debts, posing as attorneys, using offensive language, and threatening any kind of violence. And without a court order, they cannot make threats to garnish wages, repossess property or have a borrower arrested. By law, borrowers are not even required to communicate with collectors.

If you live in fear that every phone call will be another debt collector calling to hassle you about late payments and overdue bills, it may be time to seek outside help.

You may be behind on your debts, but you are still entitled to your rights - and respect - as an American citizen.

If debt collectors are making your life a living hell, bankruptcy can be your saving grace. When you file for bankruptcy, you put a legal stop to collection efforts - and contact with debt collectors.

With the pressure of collection calls lifted, many folks find that it's a lot easier to work out a repayment plan for debts. Whether you're behind on mortgage payments, credit card bills or medical expenses, bankruptcy can give you the time and the flexibility you need to get your family's finances back on track.

Continue reading "For Borrowers Relentlessly Hounded by Debt Collectors, Bankruptcy Can Bring Peace and Quiet" »

More than half of student loans in the U.S. are going unpaid due to financial hardship, according to recent data.

As of last spring, 51 percent of education loans were in deferment or forbearance - periods in which borrowers are able to temporarily delay payments during times of unemployment, underemployment or other financial difficulty.

As opposed to defaulting, deferring payments doesn't damage credit - at least not immediately, say bankruptcy attorneys.

However, as student debt grows, fewer students are able to make payments on their loans - even after they've been given a break through deferment or forbearance.

In most cases, interest continues to accrue while payment is on hold, resulting in a larger debt when it's time to begin paying.

When many college grads finally begin repaying debts, they're usually dealing with a growing set of bills related to "real world" costs like home ownership, personal loans, and the expense of raising a family.

It seems that the program intended to offer relief to borrowers may only end up making their situation worse.

Federal loans, which allow for the longest period of nonpayment - up to eight years compared to the one year offered by private loans - also have the highest rate of deferment.

And more borrowers across the board are choosing to put off repayment. Between 2007 and 2012, the amount of debt borrowers postponed paying increased by 70 percent.

Instead of delaying the inevitable - and, in many cases, only making things more difficult - borrowers may be better off seeking ways to lower their overall expenses each month.

By, say, reducing credit card debt and mortgage payments, consumers can free up more funds to budget toward repaying student debt.

While bankruptcy can't usually eliminate education loans, it can relieve the pressure of those loans by tackling many other common financial burdens - things like credit card debt, medical expenses and mortgage debt.

If your financial situation has you struggling to keep your home, Chapter 13 bankruptcy even has the power to stop foreclosure.

A college education is supposed to help you move forward, not hold you back. If your debts are holding you hostage, bankruptcy can be the most effective way to break free.

Continue reading "As College Costs Rise, More Borrowers Delay Student Loan Payments on Growing Debts" »

Americans are scrambling to find money to pay the bills - and for some, that now means dipping into retirement savings.

According to a new study by HelloWallet, one in four consumers have raided a 401k to help cover a mortgage or credit card payment.

But while cashing in that IRA early may seem like a short term solution, it doesn't actually solve the problem, say bankruptcy attorneys.

If you can't afford the bills when you have a regular paycheck, imagine trying to pay those same bills - which may be even larger if you continue to add to credit card debt - when there's no paycheck coming in.

In addition, borrowing from a retirement fund comes with tax consequences, penalties, and lost interest.

Already, the average baby boomer is roughly $500,000 behind on retirement savings, according to a recent USA Today article. At the rate we're going, many Americans will be unable to retire at all.

In the vast majority of cases, the problem is too much debt.

With today's seniors carrying escalating amounts of mortgage debt, credit card debt, and even debt from student loans, too much money is going toward covering interest and fees - rather than actually paying down debt. And that's not even taking into account the medical bills that frequently derail retirees' budgets.

The only surefire way to save money for retirement is to lower debt to a manageable level. Bankruptcy can be the best way to do just that.

If debt is the source of your financial troubles, the sooner you file for bankruptcy the better.

While many put off seeking help for their debt, eliminating debt through bankruptcy when you're younger and still working means more time to rebuild credit - and your nest egg - before retirement.

For instance, bankruptcy can free up enough of your paycheck to help you finally start an emergency fund. Financial experts recommend socking away enough cash to sustain you through months or years without a paycheck.

With enough of a cash cushion, you can handle unexpected circumstances such as medical costs, car repairs or home improvements without robbing your retirement savings blind.

Retirement should be something to dream about, not dread. Bankruptcy can get your financial ducks in a row today - so that, in the future, you can enjoy your reward for a lifetime of hard work.

Continue reading "Credit Card Debt Making Retirement Savings Impossible for Growing Number of Americans" »

Homeowners struggling to stay current on mortgage payments may soon have an unlikely ally: big banks.

Last week, the Consumer Financial Protection Bureau debuted a new set of rules requiring U.S. banks to start evaluating defaulting borrowers for all possible loan assistance options, from programs available via mortgage giants Freddie Mac and Fannie Mae to help from private investors.

Additionally, lenders would be forced to hold off on beginning the foreclosure process until a homeowner has fallen behind on at least four months of payments, giving borrowers much-needed time to seek loan assistance or file for bankruptcy.

If an application for help is submitted at least 37 days before a scheduled repossession, homeowners will be protected from foreclosure while they attempt to receive help.

The only bad news? The new rules don't go into effect for a year. And, of course, there's the reality that loan assistance will not be available - or effective enough - for every homeowner.

In the last five years, American borrowers have defaulted on a staggering $585 million in debt. Today's debts are three times what they were in 1998, just 15 years earlier.

While some of that amount includes mortgages and personal loans, the vast majority is made up of credit card debt.

Options like mortgage modification and refinancing may be able to lower mortgages slightly, but they have their limitations - especially for borrowers who are saddled with large debts.

If you've been drowning in debt, you may not qualify for rates low enough to make a significant change in your mortgage payments, especially not when you factor in the fees associated with refinancing or modifying a mortgage.

In some cases, applying for loan assistance only puts off the inevitable. Many homeowners who apply for help end up in foreclosure in the long run, whether it's because they failed to qualify for assistance or their new mortgage terms didn't address the underlying cause of their late payments - more often than not, overwhelming debt.

There's no doubt that banks should be doing more to help borrowers stay in their homes. But many homeowners don't realize there's already a program that's helped millions of families stop foreclosure and dig their way out of debt: Chapter 13 bankruptcy.

While loan assistance addresses a mortgage, bankruptcy addresses a wide variety of debts - including credit card debt, medical bills and personal loans - that are often the underlying source of mortgage default.

Like the new rules, Chapter 13 bankruptcy puts foreclosure on hold. But bankruptcy goes even further by reorganizing debt into manageable payments and, in some cases, eliminating certain debts altogether.

Why spend time and money to lower your mortgage payment by a fraction, only to have credit card debt continue to get in the way of payments? For many, bankruptcy has the power to solve all debt problems - once and for all.

Continue reading "New Rules Mandate Banks Must Do More to Help Troubled Homeowners Avoid Foreclosure" »

Youth isn't always what it's cracked up to be, at least not these days. According to a recent study, U.S. consumers in their 20s and 30s have more credit card debt than any age group.

Not only that, but they're also slower to pay off debt and more likely to ultimately die in debt when they fail to address their spending habits.

Americans born between 1980 and 1984 were found to carry the most debt - $5,670 more than their parents had at the same age, on average, and a whopping $8,150 more than their grandparents.

The researchers pointed out what our DebtStoppers bankruptcy attorneys have known for a long time: Young consumers who don't curb their credit habits today will likely die still owing debts, leaving their children responsible for their debt burdens.

If consumers continue to take on debt at the same pace, the future elderly population will be unable to afford retirement due to their massive credit card bills.

The problem isn't just the amount of credit card debt accumulated by young people, but the way in which they handle it.

Because credit is more widely available and debt is more socially acceptable, young adults are more willing to take on new debts before they've paid off old ones and to make minimum payments while allowing debt to grow.

While credit card debt no longer comes with the same stigma, it still has the ability to wreak havoc on your financial future. As debt grows, so do late fees and high interest rates; phone calls from harassing debt collectors; and the risk that your tarnished credit score will make it impossible to qualify for loans or future credit.

On the other hand, personal bankruptcy continues to carry a stigma, but remains the most effective way to break free of overwhelming debts.

Many young people fear filing for bankruptcy will damage their credit without realizing that their credit scores have already hit rock bottom thanks to late payments, busted credit limits, and enormous balances.

When you've dug yourself deep into a dark hole of debt, bankruptcy can give you the traction you need to claw your way out.

The sooner you resolve debt with bankruptcy, the sooner you can begin rebuilding your credit - and your life - for a brighter financial future.

Continue reading "For Young Americans Trapped Under Crushing Credit Card Debt, Bankruptcy Can Be Saving Grace" »

With mortgage rates hovering at record lows, many homeowners are scrambling to lock in savings by refinancing - in some cases, multiple times.

According to new data, nearly 2.2 million homeowners have refinanced a mortgage at least twice since 2009.

Many of these borrowers are being lured in by lenders offering to waive some or all of the closing costs associated with a refinance. Unfortunately, these deals are frequently too good to be true.

Remember, mortgage lenders and banks are in the business of making money, not making consumers' lives easier. They won't do anything if they don't think they'll be able to turn a profit from it.

A lender may claim to waive closing costs or other fees, but what they're not telling you is that those fees are either rolled into the loan itself or paid for via a higher interest rate - or both.

When you refinance, you're essentially taking out a whole new mortgage. That means fees for inspections, document preparation, applications, administration, escrow, title policies, recording, and more. Add yet another refinance down the road, and your costs will double.

In most cases, say our bankruptcy attorneys, homeowners who refinance end up with a bigger loan and longer term. That may be okay for those who have plenty of money and don't mind staying in their home for the next few decades. But if you're like most of us, the benefits just don't add up.

Let's say your new mortgage costs you $3,500 to secure. If you're able to knock off $100 a month due to a better rate, you won't break even for almost three years.

Then there's the issue of credit. Most homeowners seeking to refinance are doing so in hopes of lowering their monthly mortgage payment. But if you've been struggling to stay current on your mortgage, it's unlikely that you'll be able to qualify for a rate that makes a refinance worthwhile.

For financially strained consumers, loan modifications - which modify the terms of an existing mortgage instead of taking out a new one - may seem to make more sense.

Unfortunately, lenders have little incentive to perform modifications, even when pushed by government programs like the Home Affordable Modification Program (HAMP), because lenders know they can charge more fees and late penalties when families are facing foreclosure.

What lenders won't tell you is that even if you refinance or modify your mortgage, you may still lose your home in the end. Refinances and modifications don't work for most people because they don't address the real problem: non-mortgage debt.

Most people have trouble making payments because they're drowning in high-interest credit card debt. Chapter 13 bankruptcy has the power to not only legally stop foreclosure, but to eliminate the most pressing forms of debt - from credit cards to unpaid medical bills. With your credit card debt gone, you may be surprised at how quickly your mortgage payment becomes affordable.

And while lenders may claim bankruptcy will hurt your credit score, in most cases it actually paves the way for you to clean up your score by allowing your family to finally become debt-free.

Chapter 13 lets homeowners reorganize all their debts, not just their home loan. At DebtStoppers, our bankruptcy lawyers have helped thousands of families keep their homes - and their dignity - through bankruptcy.

Continue reading "Homeowners Rushing to Refinance Mortgages Often Overlook Drawbacks" »

For the second time in two years, U.S. banks have agreed to pay a major settlement to homeowners who were improperly foreclosed upon. As to whether it will be more effective than the first agreement, only time will tell.

USA Today reports that 10 of the nation's largest banks claim they will shell out $8.5 billion - some in direct payments and some in the form of loan modifications and other adjustments - to borrowers who were victims of servicing errors.

Federal regulators put foreclosure processing on hold in 2011 to investigate accusations that banks were improperly handling paperwork and ignoring important regulations in order to push a glut of foreclosures through the system as quickly as possible.

As a result, millions of people who may otherwise have been able to save their homes ended up losing the properties to lenders.

It's estimated that 3.8 million borrowers who lost a home between 2009 and 2010 to one of the 10 banks listed in the settlement could qualify for a piece of the pie.

The banks included are Wells Fargo, Citigroup, Bank of America, JPMorgan Chase, U.S. Bank, MetLife Bank, Aurora, PNC, Sovereign, and Sun Trust. Four more banks still negotiating with lawmakers could be added later on.

But as the past has shown, promising to make good with consumers and actually doing it are two different thing entirely.

A much larger $26 billion settlement deal was made with major mortgage lenders in spring of 2012. Ultimately, however, that agreement only ended up helping less than 1 million of the 11 million homeowners with an underwater mortgage, not to mention the millions more who had already lost their homes to foreclosure.

Some consumer advocates have been quick to point out that the new, smaller settlement will likely do even less to help those who need it most.

To even be considered, a borrower's mortgage must have been held by one of the 10 banks. Even if you qualify for a loan modification, you may not see a significant change in your payments. And if you receive a direct payment, it's unlikely to be enough to make staying in your home more affordable.

For most homeowners, the settlement is merely a formality acknowledging that banks were in the wrong. But when it comes to actually stopping foreclosure, it's too little too late.

But just because your bank won't bail you out doesn't mean you can't change your fate. Chapter 13 bankruptcy remains the most powerful tool to stop foreclosure and reorganize debt so it's possible to regain control of your finances.

If you're delinquent on your mortgage and facing foreclosure, you don't have time to wait for a loan modification that may never come - or may not do enough to change your financial situation when it does.

Filing for bankruptcy is a guaranteed method to lower debt once and for all. When you're free of overwhelming debt, your bills will become more manageable, you can bid goodbye to degrading harassment by debt collectors, and you can work on improving your credit and finances.

Bankruptcy is more than a chance to save your home - it's a chance at saving your future.

Continue reading "New Foreclosure Settlement to Distribute $8.5 Billion to Millions of Eligible Borrowers" »

Lawmakers may have stopped us from going over the dreaded fiscal cliff, but the deal reached on Jan. 1 isn't a perfect solution.

The agreement hammered out just in the nick of time will extend many tax cuts that were set to expire this year, from the Mortgage Forgiveness Debt Relief Act of 2007 to the $5 million threshold on estate taxes.

Unfortunately, one very important tax cut wasn't preserved: the payroll tax cut.

In 2009, the federal government temporarily lowered the amount of taxes taken out of workers' paychecks from 6.2 percent to 4.2 percent in an effort to boost the economy. Since the cut applied only to the first $113,700 of annual earnings, it was mostly beneficial to middle class earners.

Because the cut wasn't extended in the fiscal cliff deal, an estimated 160 million workers will receive noticeably smaller paychecks in 2013.

If you earn $30,000 a year, for instance, that means $50 less in your pocket each month.

With many Americans shouldering large burdens of post-holiday credit card debt, the timing probably couldn't be worse, say bankruptcy attorneys.

Growing credit card debt often pushes folks deeper into financial trouble by putting a steadily increasing strain on the ability to handle everyday expenses, from the mortgage payment to gas and groceries.

It's all too easy to get caught up in a cycle of debt that includes increasing minimum payments that never seem to touch your actual debt, rising interest rates and fees, and unrelenting harassment by debt collectors.

Often times, people don't realize their debt is spiraling out of control until it's too late. Or maybe they're waiting for that pay raise or windfall to come along so they can pay off debt once and for all.

The truth is that creditors design repayment structures so that borrowers will have to keep paying for a long time. If you're making minimum payments on your bills, it's unlikely that you'll be able to pay down debt without help - especially now that your paycheck may be shrinking.

For many of us, bankruptcy can provide the means for getting debt under control while protecting important assets.

Bankruptcy has the ability to reorganize, reduce and even eliminate debt. When you're free from the burden of growing debt, interest rates and fees, your paycheck will suddenly feel a lot more substantial - with or without the payroll tax cut.

Continue reading "As Paychecks Shrink and Debts Grow, Bankruptcy Becomes a Viable Solution for More Americans" »

U.S. consumers had more money in their pockets this year. Unfortunately, those fatter wallets may not last long.

The household debt service ratio, which looks at the amount of mortgage and consumer debt in relation to disposable personal income, fell to its lowest level since 1983 - nearly 30 years ago - in the third quarter of 2012, according to the Federal Reserve.

U.S. household debt reached its highest point during 2007, as consumers took on home equity loans and other debts.

Since then, credit card debt has risen as borrowers struggled to pay down unaffordable mortgages on homes that were now underwater.

The news should mean that consumers will have more money to spend, giving the economy a much-needed boost in 2013. Right now, though, the looming fiscal cliff stands in the way.

According to the Tax Policy Center, nearly 90 percent of households would be impacted if a deal isn't reached by Jan. 1. But with just days left until dozens of tax cuts expire and spending cuts take effect, lawmakers are still bickering over what to do.

What happens if they are unable to agree on a deal? Here's a taste.

Payroll taxes would rise by 2 percent as a temporary tax cut expires. Income taxes would go up across the board. Over 2 million out-of-work Americans could lose unemployment benefits.

Most significantly for families facing foreclosure, the Mortgage Forgiveness Debt Relief Act of 2007 - also known as the mortgage tax break - would expire.

As our bankruptcy attorneys have pointed out, that means homeowners will owe income taxes on the amount of their mortgage forgiven by lenders in a foreclosure, principal reduction or short sale. In other words, if you owe $200,000 and your house goes for $150,000 in a short sale or foreclosure auction, you're on the hook for taxes on that $50,000 gap.

Additionally, lower debt levels aren't always a good thing. Some debts - such as mortgages and car loans (when you can afford them, of course) - help improve personal credit and grow the economy through demand for loans.

But right now, many Americans are resistant to or unable to take on new debt, choosing to rent instead of own and to continue driving the same vehicles.

When it comes to debt, it's all about balance. In a perfect world you'd be free of overwhelming and unnecessary debts - such as credit card debt - that hurt your credit score and impact your ability to keep up on your mortgage and pay your tax bill.

However, you'd also be able to qualify for a home loan with decent rates and a credit card for emergencies.

For millions of Americans, bankruptcy can turn that dream of financial freedom into reality.

Whether you're behind on mortgage payments and facing foreclosure, drowning in credit card debt, or buried under a mountain of medical bills, the right bankruptcy plan can grant a clean slate by reducing or eliminating debt.

Whether or not we go over the fiscal cliff is up to lawmakers. But it's up to us to take steps to protect our family finances, regardless of the decision in Washington. If debt has been a thorn in your side for far too long, bankruptcy can be the relief you need.

Continue reading "Household Debt Hits New Low, But Expiring Tax Cuts Could Obliterate Savings" »

It's common knowledge that filing for bankruptcy takes a toll on credit. But it turns out that most of us overestimate the extent of the damage.

As a result, millions of people may be missing out on the opportunity to escape a mountain of debt or save their homes from foreclosure with help from bankruptcy.

According to a recent column on Bankrate.com, many consumers are able to begin rebuilding credit immediately after filing.

It's often assumed that it will be difficult to qualify for a credit card or loan after bankruptcy. In reality, however, the majority of people who file get credit card offers shortly after receiving a bankruptcy discharge.

In fact, according to the article, the number of companies offering credit to people who have filed for bankruptcy are on the rise.

It's true that bankruptcy will remain on a credit report for up to 10 years. But though it may sound counterintuitive, bankruptcy can also make you a prime candidate for credit.

If you've filed for Chapter 7 bankruptcy, you won't be able to file again for another 8 years - if you ever file again, that is. The reality is that most people will only file for bankruptcy once in their life, and creditors know this.

Of course, just because you're receiving credit card offers doesn't mean you should apply for multiple credit cards.

Credit card issuers also know that, because bankruptcy initially compromises your credit, they can charge a higher interest rate. Having a low credit score means less favorable terms, lower credit limits, and extra costs like annual fees.

The good news is that it's possible to begin improving your credit score - and your chances of obtaining better rates on car loans, mortgages and credit cards - from the moment your debt is discharged with bankruptcy.

By taking steps such as paying your bills on time, staying under your credit limit, and paying off your balance each month, your credit score will slowly but surely begin to increase.

If you can't qualify for an affordable rate or don't trust yourself with a traditional credit card, a secured card or loan is a smart alternative. With a secured line of credit, you provide a sum of money to a bank upfront and receive a credit limit for the paid amount.

If you're considering filing for bankruptcy, chances are your credit is already suffering and only getting worse by the day. With the right bankruptcy plan, it's possible to stop the financial bleeding and start the healing process.

Filing for bankruptcy isn't the end of the world - for many, it can be a brand new beginning.

Continue reading "Rebuilding Credit After Bankruptcy May Be Easier Than You Think, Say Experts " »

As the holidays draw nearer, so does something else: the so-called fiscal cliff.

At midnight on Dec. 31 of this year, spending cuts and new taxes are set to go into effect, while a series of tax breaks are on track to expire, potentially culminating in an economy-crippling financial pickle.

If lawmakers can't agree on taking action, for instance, 2013 will bring the end of current payroll tax cuts, changes to Medicare, and - maybe most disturbingly - the expiration of tax exemptions for homeowners facing foreclosure or a short sale.

As our bankruptcy attorneys discussed earlier this month, delinquent borrowers who give up or lose their properties will be on the hook for paying income taxes on the portion of their mortgages forgiven by lenders.

But while the media is focused on the national economic effect, experts caution consumers to look inward to avoid their own personal fiscal cliffs.

A fiscal cliff is really just a situation in which feared major financial events happen simultaneously, creating an overwhelming economic effect.

In reality, many individuals are driven off their own personal financial precipices every day.

Maybe it's the day too much credit card debt finally interferes with your ability to pay the mortgage. Perhaps it's the point when your massive student loans finally come due - and you can't afford to pay them. It may be sudden unexpected car repairs that eat up your paycheck.

Maybe ordinary everyday expenses have become a problem because you lost your job months ago and are still looking for work.

The good news is that, unlike bureaucratic lawmakers, consumers actually have the ability to quickly do something before they reach the point of no return.

Experts encourage consumers to build up a liquid emergency savings they can fall back on to pay for unexpected financial challengers, such as lost wages, unmanageable medical bills or car repairs.

Of course, that's easier said than done when all your money is going to your debts.
For millions of Americans overwhelmed by credit card debt and mortgage debt, bankruptcy offers a fresh start.

The deeper the hole, the harder it is to dig your way out. Filing for bankruptcy allows consumers to reduce or eliminate debt, freeing up funds for covering other important expenses.

If you're behind on mortgage payments, for instance, Chapter 13 bankruptcy has the ability to stop foreclosure and other collection proceedings while you repay a portion of debts in an installment plan over 3 to 5 years. If you're out of work - and thus funds to pay credit card bills - Chapter 7 bankruptcy can stop creditor action and completely eliminate crippling unsecured debts.

If you can see a fiscal cliff coming, don't wait until you're soaring over the edge toward rock bottom. Take action! Bankruptcy has helped thousands of families get out of debt - and get on with their lives.

Continue reading "Instead of Worrying About Washington, Experts Encourage Consumers to Prepare for Personal Fiscal Cliff " »