Do debt settlement companies have some “new information that credit card companies don’t want you to know”?

No!  They don’t have any secret information.  They don’t have access to some new law and they are not working on your behalf.  I believe that they are in fact working for the credit card companies.  They are acting, in effect, as collection agents for the credit card companies and they collect your money to pay off these big banks which you owe money to.

What the don’t want you to know is that bankruptcy can discharge the full balance of all of your credit cards!

I don’t know if the debt settlement companies are owned and/or financed or controlled by the credit card companies or if the debt settlement companies are actually independent.  All we hear are rumors of control.  But it makes little difference to you as the debt settlement companies are operating as if they were collection agents for the credit card companies.

These debt settlement companies make good money settling your debts by charging you very high fees.  They often want an up front fee, a percentage of what they save you, and you still have to pay off the credit card companies a portion of your original debt.  Check out my earlier blogs to see how expensive this process can be.

Also you are not protected from a lawsuit if one of your credit card companies does not want to wait to get paid by this system.  A credit card company can easily sue you when you are in a debt settlement situation and you will have no protection if they do.  (If you are in bankruptcy they cannot sue you because of the automatic stay).

Remember though that there is no new information that these debt settlement companies have access to that credit card companies don’t want you to know.  The credit card companies in fact want you to settle with them for less than the full balance if you cannot pay them in full.  What they don’t want is for you to file bankruptcy and pay them nothing.

Bankruptcy is probably what you want and need though and information about bankruptcy is what the credit card companies really don’t want you to know.

I am a bankruptcy law practicing bankruptcy law in san diego.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call me for a free consultation on debt or bankruptcy.  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.

Clothes were the first type of property you were allowed to keep in a bankruptcy

Bankruptcy exemptions are what allow you to keep property in a bankruptcy.  We have very generous exemptions here in California and you can keep a lot of property in a bankruptcy but the question is how did this all start.

The very first exemption allowed in bankruptcy was for your clothes.  It used to be that creditors could take everything from you in a bankruptcy to satisfy your debts.  That included your clothes.  Then laws were passed in England in the 1800s that mirrored English common law that allowed you to keep your clothes in order to prevent breaches of the peace caused by naked people walking the streets. 

Public nudity was illegal then as it is now.  Laws had to be passed to allow people to keep their clothes so that they would not be forced to break the law after they went bankrupt.

Pots and pans, personal items, and tools of the trade were also allowed to be kept by debtors so they could cook and earn money to live.  These exemptions were gradually expanded until we have the generous exemptions of today where your clothes, furnishings, equity in your home, car, tools of the trade, jewelry, retirement funds, and other property can be kept in a bankruptcy.  We also have a wildcard exemption that allows $23,000 of any kind of property to be protected.

It all started though in old England with naked people walking the streets after losing the shirt off their backs because of their bankruptcy.  Fortunately things have changed for the better.

Jobless benefit claims rise again to 484,000- sign of a coming double-dip recession?

Fox News and MSNBC both reported recently essentially the same information.  Jobless benefit claims rose by 2000 to 484,000 which is the highest level since February (six months ago).  These higher claims for unemployment benefits signal that unemployment is increasing and not decreasing like some had predicted.

These claims are “initial” claims or new claims presumably from new unemployed persons and these initial claims have risen in three of the last four weeks.  Also these claims are edging up towards the 490,000 number reached in January 2010 which was the highest for this year.  Could they possibly exceed that number soon?

Both news agencies report that this is “grim” news for those expecting recovery.  Apparently economists watch these numbers closely because they reflect employers’ willingness to hire.  These numbers seem to indicate that private employers are unwilling to hire new workers and that they are unsure about the direction of the economy.  Some are probably expecting it to tank again.

This poor outlook in the private sector is accompanied by layoffs in the public sector.  Government entities at the city, county, and state levels are all laying off workers to meet budget gaps.  The higher the unemployment, the less tax revenue they receive and they already have a huge shortfall with these unfunded pension liabilities.

So what does this mean to you?  Remember that there could be more layoffs coming so if you have a job you could be one of the unlucky ones to lose it.  If you don’t have a job then it could become increasingly hard to get one. 

 If the economy does go into a double-dip recession then now could be a good time to file bankruptcy and unload that debt that you can’t pay for now and that will be even harder to pay for if another recession hits.

Bankruptcy myth #3- Your credit is ruined forever- Wrong!

Your credit could and often does actually improve after bankruptcy.  That is because the negative information that is probably now being reported to the three credit bureaus will turn to positive information.

If you are currently behind on your payments on a number of credit cards then that information is reported to your credit reporting agencies monthly.  This has a continuing negative effect on your score until you take some action.  You can either pay these debts or file bankruptcy and get the debts discharged in bankruptcy.

If you file bankruptcy and receive a bankruptcy discharge your debts will be listed on your credit report as “discharged in bankruptcy”.  The debts cannot then negatively impact your credit score anymore.  Your credit will go down immediately after the filing but you can then begin to build it up.  Your score will not remain low if you take action after the bankruptcy to raise it.

Before you file you could probably not afford to keep up with your payments.  Now, after bankruptcy, you no longer owe the debts and you therefore no longer have to service that debt.  You are relieved for the burden of having to make the payments any longer.

Without having to pay on those old cards you can now get new cards that you can use to re-build your credit.  You will be offered new cards after the bankruptcy so use them to improve your credit score.  Now your credit score can rise as you use these new cards wisely and pay them on time each month.

Bankruptcy myth #2- “You can’t keep anything in a bankruptcy” Not true!

This one is also untrue.  Exemptions are the property that you are allowed to keep in a bankruptcy.  Exemptions have been allowed in bankruptcy for hundreds of years.

 We have very generous exemptions in California.  There are many separate exemptions for many types of property.  All of your furniture and clothes and personal belongings can be put into the household items and personal effects exemption.  Even a television and computer can be exempted here. 

 There are exemptions for your house and your car.  There is another for your tools of the trade and one for jewelry.  So your wedding ring is safe and so are those tools you need for work.  You can keep your retirement too.  Your 401k or IRA are safe from seizure as the 2005 law allowed debtors to keep their retirements up to a value of $1 million. 

  There are other exemptions depending upon the property involved but my favorite is the “wildcard” exemption.   This one allows you to save over $23,000 in any type of property you want.  Cash, stocks, bonds, real estate, you name it and you can keep it in bankruptcy as long as it’s value doesn’t exceed these limits.

So it’s a fallacy that you can’t keep anything in bankruptcy.  California has very generous exemptions which allow most people to keep all of their property in a bankruptcy.

Bankruptcy Myth #1- “You can’t file bankruptcy anymore”- Don’t believe it!

This one is totally untrue and one of the worst fallacies out there.  Bankruptcy is still safe, legal, ethical, and available to you if you need it.  This misconception arose after the 2005 BAPCA bankruptcy law changes occurred.  After that law came into effect people believed that bankruptcy was either completely eliminated or now so hard to do that it was in effect no longer available.

I still remember the long line snaking around the Bankruptcy courthouse in San Diego in October of 2005.  Everyone was trying to file before midnight when the new law was coming into effect.  There were hundreds of people there on the last day.  There was real fear in the air.  The credit card companies had won.

Though the credit card companies did their best to lobby the Congress to write the law to benefit them, they could not limit it as much as they wished.  85% of people who could have filed a chapter 7 bankruptcy under the old law can still file under this new one.  The means test that was added is designed only to push you into a chapter 13, not to push you out of bankruptcy.

If you look at a chart of bankruptcy filings in the last 5 years you see that there was a huge spike in the number of filings prior to the change in the law in October of 2005.  In 2006 there was a huge drop off I the number of filings.  There has been a rise in filings each year since then but they have not yet risen to the number that they reached in 2004.  They have certainly not risen to where they would have been had they increased each year without the new law.

The law therefore accomplished what it set out to accomplish.  It scared everyone out of bankruptcy.  People actually thought that bankruptcy was no longer available to them.  This is not true.  This fear they instilled in people means that a lot of people who can and should file are not filing.  They are continuing to be debt slaves to these giant banks just like the banks want them to.

Don’t fall into this trap.  Bankruptcy is still available to you so file if you need to.

For more info. check out my websites at:   www.farquharlaw.com or www.freshstartsandiego.com.

I am a bankruptcy lawyer in San Diego.

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.

Is there anything to be ashamed of if I file for bankrupcy? Corporations do it all the time and we taxpayers bail them out.

No!  You have legal right to do so.  When you file bankruptcy you are doing something legal, ethical, and moral.  There is no shame in it and you can hold your head high after you file because you did the right thing.  In fact discrimination against you because you filed bankruptcy is illegal.  You cannot be fired from your job or be thrown out of your house or apartment because you filed bankruptcy.

 Also bankruptcy is something that is done all the time by large corporations.  Even the banks that you owe money to go bankrupt and discharge at least part of their debts.  I advertise with IDEARC (which is now called Superpages) and they went bankrupt but they did not miss a beat when they came to collect what I owed them.  I got no bailout on my debt but they did with their bankruptcy.

The very same banks that you owe credit card/line of credit debt to will go bankrupt whenever they get in a tight situation.  It’s in fact considered just a good business practice for these corporations to go bankrupt, shed and reorganized their debts, and then move on with a lessened debt load so they can function.  But rest assured, like with IDEARC, they will not forget about what you owe them.  They will still come after you to collect what you owe them!

Remember too that your tax dollars go to bail them out.  When they can’t pay their bills they extend their hands to the politicians and they get money thrown their way.  How about if you try that next time you can’t pay your bills.  The truth is that you are not going to get anything unless you become a mega-corporation.

Bankruptcy is in fact your bailout.  There is no shame in it in fact it is the only chance you will get to receive help with your bills that you can’t pay.  Go ahead and file if you need to and be proud that you made a smart decision.

Should I continue to charge on my cards before bankruptcy?

No!  Stop charging things on your cards prior to the bankruptcy.  Once you decide to speak to a bankruptcy attorney about bankruptcy I would stop making any charges on your cards.  You could invite a fraud challenge to your charges if you do charge so just don’t do it.

If you do make charges prior to a bankruptcy the credit card companies could say that you did not intend to pay the money back.  You sign a contract with them when you sign up for the card that states that you intend to pay back the money you borrow when you make charges on the card.  If you make a large charge prior to the bankruptcy that is close in time to the bankruptcy filing then they can challenge that charge as a fraud.  They will claim that when you charged the card you knew that you did not intend to pay them back.

The charges you made longer ago before you considered bankruptcy are okay but stop charging once you consider actually filing.  It is true that the smaller the charges the safer they are but be careful and consult an attorney before charging any thing if you are considering bankruptcy.

If you have to charge some necessity like food so you don’t starve then that is probably the safest charge to make as long as it is for a small amount.

What is the most important thing you will get from bankruptcy? Probably freedom!

Yes freedom will probably be the most important benefit you will get from filing bankruptcy.  Sure you will get the calls from creditors to stop bothering you so you will have a greater sense of peace.  You will also not have to worry about how you will pay debts you cannot pay.  You will also be able to finally re-build credit that you could not before.  You will get these benefits from bankruptcy and many more.  I expect that like most of my clients you will be relieved, elated, and extremely happy once you get your discharge.

But the greatest thing you will get from bankruptcy is freedom.  Think about it.  The opposite of freedom is slavery.  Being enslaved to someone and being enslaved by something is the antithesis to freedom.

Well you are now a slave to your debts and to your creditors who hold them over your head.  Your hard-earned money must now go to pay off those debts and there is never enough.  Most people pay all they can and they still are getting in debt.

Being in debt is a little like being in prison.  It is said that you can get more time in prison than you can on the outside.  Your sentence can be extended easily in prison for different types violations.  More easily than on the outside in the courts.  The same thing happens when you are in debt.  I have often seen debts triple over time as my clients could not pay and the creditors tacked on fees and penalties and interest.

This is prison!  You are not free when you are in this type of debt and without a bankruptcy you could be in this debt forever.  This kind of enslavement of you is exactly what I believe the credit card companies want.  They can get you to work for them forever and never be free.  It’s amazing how as things change, they stay the same.

File bankruptcy and free yourself!

7 reasons why the timing of your bankruptcy filing is crucial

Over the years I have seen that time and time again the timing of the filing of the bankruptcy is crucial for a debtor to receive the most out of the bankruptcy as he or she possible can.  Your filing discharges all debts before you file.  You can amend and add debts during the bankruptcy but after it’s closed it’s more difficult.

1)  If you are going to incur some unavoidable debt– in the near future you don’t want to file too soon.  You may want to wait until after the debt has been incurred.  Many people have a medical issue like an upcoming operation that is going to occur in the near future.  If that is the case then it is best to wait until that medical procedure is finished and you are billed for it.  Then we can add the debt to the bankruptcy and the debt can be discharged.

So if you have debts that will be incurred in the near future it is a good idea to wait to file so you can include them in the bankruptcy.

 2) If it has been less than 8 years since you file a chapter 7- Then you want to wait until the 8 years elapses before you file again.  If you file too soon the case will be dismissed.  We need to carefully examine when your last filing occurred before we file for you again.

 3) If some creditor has sued you– then you want to be sure to file in around 30 days after the suit was served on you (not 30 days after the suit was filed).  So try to remember when you were served with the suit and you have 30 days from that day to file the bankruptcy before the creditor can default you and begin to attempt to collect on your debt.

 4) If foreclosure has been started then you want to probably get the maximum time to stay in your house.  In this case you want to wait to file until the last possible day before the trustee sale where your house will be sold.  A filing the day before the sale will stop the sale and the creditor will have to file a motion for relief from stay to proceed with the sale.  From my experience this will delay the sale for around two more months on average in a chapter 7.

If you file a chapter 13 you can stop the sale but if you want to keep your house then you would have to have sufficient income to pay for it and in addition you would need disposable income to at least partially pay your unsecured creditors.

 5) If you are currently unemployed or underemployed and you believe that you might get a higher paying job in the future then you might want to file soon.  It is possible that the new job could pay you sufficient income that you would fail the means test and thus lose your ability to file a chapter 7 because you waited.

I have encountered this case a few times and would be a shame to not file quickly here.  To lose a chapter 7 can mean that you would be in a 13 where for up to five years you would be paying debts you could have discharged if you filed sooner.

 6) If you have recently charged some large amount on your credit card then you might want to wait for some time to elapse so that this charge ages.  This also occurs with cash advances.  Both can invite a fraud challenge from a credit card company if the charges are too large and too soon before the bankruptcy filing.

Here I like to look at the charges and see when they were made, for how much, for what purpose, and how recently.  I analyze the risk of filing on a case by case basis.

 7) If you just want to get started re-building your credit then you would want to push the bankruptcy forward and file right away.

For more info. check out my websites at:   www.farquharlaw.com or www.freshstartsandiego.com.

I am a bankruptcy lawyer in San Diego.

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.