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

warningThere are many warning signs that can appear in person’s financial life that can signal that a person is insolvent and in need of warning 4declaring 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.

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Ashamed to file bankruptcy? Afraid of doing something wrong or worse, stealing? Forget that, get your fresh start!

ashamed 2 I have had many clients who are ashamed to even talk about the possibility of being bankrupt and are therefore extremely reluctant to file for ashamed 3bankruptcy even if they desperately need to.  These clients may have a huge debt load that they cannot pay where they are having trouble even paying the interest on the debt.  They may have had credit cards they charged up and maxed out, or automobiles that were repossessed with huge deficiency balances owing, or they may have medical debts that are high.

In addition these debts may have been sold to collection agencies.  This means that the collection “experts” have purchased these debts and they are now motivated to collect them.  The collection agents are experts because they are mean and angry and demanding and even threatening.  Like the terminator machine in the movies they have one goal in life.  This is to get as much money out of you as quickly as they can.

The collection agents believe nothing you say because they assume you are lying and even if they did believe you they do not care about anything you say.  They want your money now and they will pull out all the stops to get it.  The only way to stop them is to pay them or through filing a bankruptcy.

Many of  my clients are unemployed because they were laid of or they may be underemployed because they are now working part-time.  These people may have a job currently that pays far less than the one that they had when they incurred the debt in the first place.  In addition they may have had medical procedures that they had no insurance for at the time that is costing them far more than they can possibly afford.

All of this can be occurring in my clients’ lives yet some of them are still holding back on filing a bankruptcy.  They still think that some miracle will occur that will help them pay and they do everything they can to resist a filing.

I believe people avoid bankruptcy because of the stigma that bankruptcy carries and has carried for some time.  In the 1929 stock market crash people jumped out of windows to avoid what they believed to be the shame of bankruptcy.  People still believe that bankruptcy carries shame and signifies failure of some kind and as Americans we hate failure and we wrongly believe that it is always bad.

But things have changed considerably.  Bankruptcy is not bad as many think now or ever.  Corporations file bankruptcy regularly and reorganize and then continue to function.  Even towns and cities do this and they can continue to carry on.  There is nothing dishonest or immoral about this whatsoever for them or for you.

You also can file bankruptcy, discharge your debts, and reorganize like a business or municipality.  There is no shame and no disgrace to this.  In fact it is usually the moral and legal and best thing to do when you cannot pay your debts.  It frees you and the creditor from the charade that someday you will pay the debt.  You can move on and the creditor can now write off the debt as uncollectable and take a deduction on his taxes.

In fact part of bankruptcy law is the concept of you the debtor getting a “fresh start”.  Bankruptcy laws themselves that have been with us for hundreds of years contain the fresh start language.  This is because bankruptcy was not created to cause humiliation or to put a sense of defeat into people.  It was created to liberate people and businesses, and later municipalities from the crushing effect of debt which cannot be paid by anyone.

Once freed from the debt an individual or entity can utilize the fresh start by starting anew and carrying on without the previous debt burden.  The psychological boost one can receive from a bankruptcy discharge is tremendous.  I know because my clients regularly tell me so.

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.

 

Couple photo courtesy of Justin maier.    Polar bear photo courtesy of thelearnr.

The bankruptcy warning signs for America are the same as for individuals or small businesses

Ever see ‘Flight of the Phoenix”?  I mean the original version of the movie with Jimmy Stewart.  It was a great movie about a plane load of people who crash-land during a sandstorm in an Sahara desert.  Most of the passengers survive the crash and they realize quickly that they will not be rescued and thus they must rely on themselves to stay alive and to find a way out of the desert without outside help.

A German engineer comes up with an ingenious plan.  He says that they can build a new aircraft with one of the engines from the old aircraft but this would require to attach parts of the wings from the old aircraft to this engine.  This would require a significant amount of work and re-design but the German engineer (played by Hardy Kruger) informs the others that he builds aircraft and that it indeed can be done.  After an intense debate session the survivors decide that they have few other choices so they go ahead with the project.

They work diligently, mostly at night to avoid the heat, and they fight a great deal throughout the process.  Most of the movie is about their struggles during this aircraft conversion process.  Hardy creates more dissention as he takes extra rations of water for himself during the airplane conversion and several of the group die during this time.  When the aircraft is finally complete and ready to fly someone finally decides to ask Hardy Kruger what kind of airplanes he designed.

Hardy tells him proudly that he designs small model aircraft and that the largest one was may 3 feet wide.  The others are shocked but Hardy assures them that the mechanics are the same no matter how large or small the aircraft is.  He is proven right after the re-designed full-sized aircraft does indeed fly the crew to safety.

I would argue that we bankruptcy attorneys who deal with bankrupt individuals, couples, and small businesses every day can spot bankruptcy warning signs even if it is for something as large as the federal government.  We attorneys are just like the character Hardy Kruger played in Flight of the Phoenix.  We work on smaller bankruptcies everyday but the warning signsUSA are the same for our clients as they are for the feds.

They federal government has been borrowing and spending money to finance a lifestyle they cannot afford for some time now.  We have 16 trillion in debt and we will have 20 trillion in four years.  We keep spending and borrowing and we fail to cut our spending to equal what we get in revenue.  The interest on this debt is growing every day and if the interest rates rise then the interest alone will be beyond our ability to pay.

This is really the sign of bankruptcy for individuals, businesses, or municipalities.  And the signs are the same for the small entities and the large ones.  We attorneys deal with small entities but just like Hardy Kruger we realize that the dynamics are the same big or small.  Hardy’s plane flew and our government is bankrupt.

This is what Peter Schiff concludes in his new book, “The Real Crash: America’s coming Bankruptcy”.  He argues that the crash is coming due to the government’s continual lowering of interest rates that creates all of these bubbles; the dot-com, the housing, and now the government spending bubble.  The government will eventually have to raise interest rates to attract investment and when they do the interest we pay on our national debt could consume all of our revenue.  We would then be unable to function as a country.

Another book about the coming bankruptcy for America is “America’s Ticking Bankruptcy Bomb” by Peter Ferrara which appears to say virtually the same thing about our massive debt problem and what it will lead to.  Also there is the book by Senator Tom Coburn “The Debt Bomb: A Bold Plan To Stop Washington From Bankrupting America”.

Though these books so far are written primarily by conservatives I believe that everyone will agree that the debt belongs to all of us regardless of who got us there.  America must own the problem now and something must be done to avert the potential problems that the debt will create.

Forget for a moment that America as a sovereign cannot declare bankruptcy.  There is no higher governing authority than the nation-state at this point to oversee a bankruptcy of a country.  We must print money to inflate our way out of debt which could lead to something like the Weimar Republic with hyper-inflation or we must default.  If we default and just refuse to pay the debt then we will have extreme trouble in getting anyone to lend us money again without exorbitant interest rates.

But I am seeing a greater and greater number of authors, commentators, and others using the word bankruptcy in relation to America without knowing the warning signs as well as we bankruptcy attorneys do.  I agree with these people about the bankruptcy danger in America.  America seems to be headed in the direction of bankruptcy even though the federal government cannot actually file for bankruptcy.

We are spending and borrowing, spending and borrowing without a pause.  We are time and again failing to match our spending with our “revenue” and even if we do we have to somehow pay back all of the money we borrowed previously.  In the meantime we have to service the debt.  Our interest rates are low but our interest payments increase each year because we borrow more and we will have an impossible time paying back the debt we already owe, just like my clients.

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.

USA photo courtesy of Kevin Hutchinson.