Be aware of the bankruptcy warning signs in your own life!

There are many warning signs that can appear in person’s financial life that can signal that a person is insolvent and in need of declaring bankruptcy.  If you can recognize these signs then it is possible for you to prepare to file for bankruptcy.  A timely bankruptcy filing can avoid the pitfalls of irreversible financial mistakes.  I often discover that my clients have made these mistakes prior to coming to see me.

I wanted to warn people in this blog so they could consider bankruptcy when the financial danger first appears so they can avoid the mistakes that come with the failure to recognize the warning signs of an impending bankruptcy.  If these signs appear you may be in a situation where bankruptcy makes more sense than continuing with a charade or outright lie that you are “someday” going to pay your debts.

Many people continue with this denial for years and years and some make many financial mistakes because of it.  Some will cash in their retirement funds or sell other property to raise cash in an attempt to pay down their debts.   Retirement funds and many other types of property are exempt in bankruptcy.  It is always a mistake to cash in retirement funds or many other types of property that are exempt in a bankruptcy.   You can keep these assets in a bankruptcy and still get rid of your debts.

Some people will struggle along for long periods paying partial payments to creditors which will often cover only interest on their debts.   This only results in them their spending endless amounts of money which could have been saved had they only admitted to themselves that bankruptcy made sense.  Some will even borrow some money from friends and relatives in an attempt to pay down the debt.  This money is completely wasted and probably lost forever if these people eventually do file a bankruptcy.

1) The first warning sign is when you are paying interest only on credit card or other debts.  If you cannot pay down the debt itself but you are paying interest only then that is a sign of trouble ahead.  Interest rates will rise and just like our government you will eventually reach a point where your interest on your debts takes up a huge share of your income so that you cannot cover your basic monthly expenses for living.   This is an unsustainable situation and one which signals that bankruptcy make s a lot of sense for you.

2) Unemployment or underemployment.  If you have debts that you could afford to pay on when you high paying job but then you lose that job (or you get a job which pays far less) then you may be headed for bankruptcy.  Some will believe that they can magically still pay these debts even though they now need their now reduced income to continue to pay their monthly expenses.

3) When your expenses exceed your income each month before you pay your debts.  If you have no money left over after you pay your current monthly bills to pay past debt payments then it is probably time to consider bankruptcy.

4)  If you have had a vehicle repossessed and you have been hit with a large deficiency balance because of it then you may need a bankruptcy.  Some of my clients have multiple cars repossessed and they thus have multiple deficiency balances that can add up to tens of thousands of dollars.  If they cannot afford to keep up with payments on the vehicles prior to repossession then they will probably not have enough income to pay off the deficiency balance on the old car and somehow secure a new car to drive.

5) Another sign is if you suffered some outrageously high medical debt that is unpayable.  Many of my clients are uninsured or underinsured.  This works for some unless there is a need for an expensive medical procedure.  It is not long before the collectors are calling you to pay tens or even hundreds of thousands of dollars in medical bills.  They will demand that you repay just like any collector and you may not have the income to do it.

6) Then there is the constant steady unabated calls from creditors that you cannot pay so you do not answer your phone.  And this leads me to the all important  psychological  effects of long-term debt upon people.  The constant harassing calls and the knowledge that there is a debt out there that you have no way of paying is a tremendous psychological burden to people.  Bankruptcy lifts this burden, eliminates the debt and the terrible unending stress that goes with it.

7) Some people have multiple court judgments against them for unpaid bills.  These judgments could be for credit cards, deficiency judgments, unpaid medical bills, or debts of any kind for which a creditor has sued you and obtained a court judgment against you.  That creditor can now garnish your wages, seize your property, or demand you come into court for a debtor’s exam.  These “exams” will allow creditors to pry into your finances no matter how much you wish to keep them private.  These are to be avoided at all costs.

8) You may already have garnishments taking 25% of your income.  You now are operating with a reduced income and each creditor is standing in line to get his 25%.  You could pay this virtually forever if you owe enough money to creditors.  Bankruptcy will stop the garnishments, return your income level to what it should be, and banish the debts forever.

All of these are signs that bankruptcy probably would make sense for you and you should get some advice from a bankruptcy attorney.  If you have several of these warning signs (and even if you have only one) then bankruptcy is an option to consider.  There is a little bit of a miracle in bankruptcy.  It can wipe out your debts and free you from your debt burdens.  It is the only way I know of but we don’t need another because it works so well.  So think about if you have any of these signs and if you do then consider bankruptcy.

I am a San Diego bankruptcy attorney.  For further questions please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation or for any other advice about bankruptcy or debt at (619) 702-5015. Call now for free credit report and analysis!

For a free e-book on “13 things to do to prepare for your bankruptcy filing” please e-mail me at farquharesq@yahoo.com.

Warning sign courtesy of Free Grunge Textures.  Danger sign courtesy of Atomicjeep.

Are gambling debts a problem in bankruptcy?

The short answer is that they can be.  In general the bankruptcy trustees who oversee your case seem have the opinion that gambling debts are somehow frivolous, shady, or just not respectable and thus possibly not eligible for a bankruptcy discharge.  The same trustees don’t blink an eye at credit card debts as long as they are aged (more than one year old) but they do seem to have something against gambling debts.

I believe that it is a belief that somehow gambling is not the type of debt that the bankruptcy system was designed to discharge.  You are somehow acting irresponsibly in the eyes of a bankruptcy trustee if you engage in gambling and you borrow money to do so.

But wait a minute that is not the end of the story!  The judges don’t always agree with them.  Bankruptcy was designed to give debtors a fresh start and a relief from debts the cannot pay.  Those debts come in many types and gambling is just another type of debt.  They too should be dischargeable in bankruptcy.

I had a case years ago where a client had gambling debts and the trustees raised an objection to their discharge so I looked up what the judges at that time had ruled.  To my surprise they seemed far more understanding than the trustees.  The judges pointed out in a series of cases that gambling is a legal activity.  Not just in Las Vegas but in casinos around the country.  Here in San Diego we have many Native American casinos that are fully legal.  Millions go each year to these casinos and legally gamble.  There simply is no illegality about it.

If a debtor engages in an entirely legal undertaking then we can’t deny a debtor’s right to engage in it as well as borrow money to finance it like he would a car or clothes that he was buying.  So if the debtor accumulates debt related to the gambling then that really is no different from him running up his credit cards for some other item.  This is what I understood from reading a number of cases on gambling a few years ago.

There were a few caveats though.  The debtor with gambling debts could not have run up his credit cards in anticipation of filing bankruptcy.  One judge referred to this as a credit card “bust out” scheme.  If this was the case then that could be seen as credit card fraud.

Credit card fraud occurs when a person borrows (charges) on a credit card with no intention to repay.  That is why if you run up credit cards and then immediately file bankruptcy you probably will have a credit card fraud problem.

When you sign your card you signed that you will borrow money on the card but you have an intention to pay it back.  That intention can change later though and you can find yourself in a position where you cannot pay.  At that point you stop paying and possibly file bankruptcy.

The gambler then is just like the guy who charges consumer goods on his card except he gambles.  As long as he believes he will eventually win and then pay the car back then there is no fraud because fraud is subjective.  We may look form the outside and say that he will never win at gambling.  His chances are great that he will lose.  But if the gambler believes honestly (but unreasonably) that he will win then there is no subjective fraud.

So it is best to wait for some time after a debtor borrows money on a credit card to gamble.  It will then look less like the debtor had any fraudulent intent.  Any questions about gambling debts and bankruptcy should be directed to a knowledgable attorney.

Don’t forget that there is the gambling addiction problem too.  It is possible that a debtor has an addiction to gambling.  If the debtor is in treatment for this addiction and has ceased all gambling there is a possible argument there to counter any fraud charges.  A good bankruptcy attorney can help you with these arguments.

I am a San Diego bankruptcy attorney.  For further questions please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation or for any other advice about bankruptcy or debt at (619) 702-5015.  Call now for free credit report and analysis!

For a free e-book on “13 things to do to prepare for your bankruptcy filing” please e-mail me at farquharesq@yahoo.com.

 

Risk Free photo courtesy of Sean MacEntee.  Roulette wheel photo courtesy of Zdenko Zivkovic.

Can I file bankruptcy a second time? Yes, and with stubbornly high inflation, unemployment rates, and the housing crisis you might well need to!

If you want to file for bankruptcy a second time you just have to wait the required eight years since the last time you filed.  Don’t worry it goes by quickly!  Many people find that they get into the same situation as they were in before after eight years have gone by.  The country’s unemployment situation does not appear to have improved, the price of everything is going up as inflation worsens, and the nation’s housing crisis continues. (See here for additional reasons for why you should file for bankruptcy).

I read an article yesterday that gas prices have increased by over 80% in the last three years.  Many food prices have increased by 20% in the same period but the government uses an inflation measure that excludes food and energy prices so their statistics do not reflect real inflation.  This seems ridiculous because food and gas are the items that people buy the most.

With our astronomical 15 trillion deficit many of us believe that massive inflation is coming for America which will render our currency increasingly worthless.   I heard a story the other day about inflation in the Wiemar Republic in Germany in the 1920s.  There the cash was so worthless in 1920s Germany that crooks stole only the wheelbarrows that people carried the cash in and dumped the cash in the street.

Unemployment is also staying high and is also under counted by the government. We are told that unemployment is declining but we also find out that increasing numbers of people are leaving the job market altogether and are thus not being counted in government statistics.  We apparently have the lower number of adults working in America that we have ever had before in our history. (See here for my blog on the unemployment is rising because people are leaving the labor force).

As we have known all along many people are giving up on finding a job and are either living off the government or are living on money earned under the table and off the radar.  These people usually are surviving on such little money that they should be counted as at least underemployed if not as unemployed.  This many unemployed people not being counted makes the unemployment situation look far better than it really is.  I hate to say it but it appears that the government has an agenda to advance in these statistics on inflation and unemployment and these government supplied numbers should therefore be questioned or ignored.

The housing crisis also seems to have no bottom.  Houses are still being foreclosed in in great numbers and thus housing prices are not rising in some areas and still falling in others.  Many are facing an iminent foreclosre of their home due to this crisis in real estate and the realtors I talk to say they don’t see any end in sight for this.  With the glut of foreclosed homes on the market the prices of homes will not increase again for some time.  Many who are unemployed cannot afford to pay their mortgages now.

Many people believe that with our massive debt at the federal, state, and local levels we are headed for financial collapse.  I don’t know if a massive collapse is coming but it’s clear that massive inflation and continued high unemployment are a distinct possibility.  Collapse has happened before in history with the Wiemar Republic and with other societies that failed to get their debts in order.  If we are headed for these increasingly difficult economic times then it would certainly be easier to enter them without a tremendous debt load.  Bankruptcy can accomplish that.

If massive inflation comes will help pay down the government’s debt but it will devastate individuals and families financially as it dramatically increases the prices we pay for everything.  If unemployment remains high too then many people will continue to have medical, credit card, auto repossesssion, and other personal debts they  pay.  Many will continue to borrow on their credit cards as they have in the past out of necessity and not irresponsibility.

If any of this sounds familiar then you might want to consider filing bankruptcy.  Don’t be like the government and put you head in the sand.  Deal with your debt in a responsible, legal, and ethical way which is what you get with a bankruptcy discharge.  You can also significantly slow down or stop your home being sold at foreclosure with a bankruptcy.

All of this debt, unemployment, and foreclosure will lead many individuals and couples right back into a situation where they cannot pay their debts.  Once they stop paying these creditors the phone will start ringing again 24 hour a day from collection agents who ceaselessly try to collect these debts.  The result of this will be more people will need second time bankruptcies.  So don’t despair if you have accumulated debt in the last number of years because you can file bankrupty again.

If you filed in 2005 like millions did to avoid the bankruptcy law changes then you will be able to file next year in 2013.  You only have to wait eight years.  If you filed in October of 2005 like many did the you should look to file again around October of 2013.  Remember that millions of individuals are in the same position as you are so don’t despair.  Just call a good bankruptcy lawyer now and he will help you survive financially until the eight years has elapsed.

There are many strategies for managing these debts in the mean time including paying them something to get them off your back.  A good lawyer will help you manage you finances until the date arrives that you can file for bankruptcy again.  For an update on filing bankruptcy a second time see here.

I am a San Diego bankruptcy attorney.  For further information please visit my website at www.freshstartsandiego.com or www.farquharlaw.com.  Or call my office for a free consultation at (619) 702-5015.  Call now for a free credit report and analysis!

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

The economy is so bad photo courtesy of Mark Holloway.  Guess again photo courtesy of Damian Gadal.  Unemployment photo courtesy of Sean MacEntee.