What bankruptcy can do for you!

Have you considered bankruptcy?  If you have many debts which you cannot pay then it may be good idea to consider filing.  If creditors are calling you 50 times a day and your credit score is shot then it might be time to consider it.  If you have lost a job, or faced medical issues and debt, or retired with huge debts, or if the debts have just been building for many years then it might be time to consider it.  (See here for additional reasons of why you should file for bankruptcy).

Don’t just put off the filing bankruptcy because the problems and the debt won’t go away.  The creditors will keep calling and will keep selling your debts to other collectors who will take the same actions.  Eventually they will sue and get judgments which could result in your wages being taken or your bank account being taken or your house being liened and sold.   Your credit score will never improve as long as you are in this cycle and you will have no peace.

The good news is that bankruptcy can eliminate all of this negativity and give you a fresh start in life.  You can get the creditor calls to stop immediately even before you file bankruptcy if you hire an attorney to represent you concerning your debts.  The Fair Debt Collection Practices Act states that all calls must stop once you hire a lawyer and all of those calls must go to the lawyer.

Once you file bankruptcy a “stay” descends upon you and everything you own.  This stops any and all attempts to collect these debts.  This would include any lawsuits that were filed against you as well as any garnishments or other collection efforts.  Even some of the money taken by garnishment or attachment can be returned to you.  Contact an attorney for this step.

Once you receive your bankruptcy discharge then you are no longer legally liable for those debts and they are effectively extinguished.  The former debts will appear on your credit report now as “discharged in bankruptcy” and they will no longer drive down your score each month.  The bankruptcy itself will lower your credit score in the short-term but you can rebuild your score in the long-term.  You will get new credit and use it wisely and rebuild your score that way.  People have financed homes in as little as two years after a bankruptcy.

So bankruptcy can do a lot for you to eliminate your debts and give you a fresh start but most of all it will give you piece of mind!  Now what is that worth?

I am a San Diego bankruptcy attorney.  Please visit my websites for more help at www.farquharlaw.com or www.freshstartsandiego.com.  Or call for a free consult on any bankruptcy or debt issue. at (619) 702-5015.  Call now for a free credit report and analysis!

If you or someone you know may need to file a bankruptcy then please get my FREE E-BOOK: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” by e-mailing me at farquharesq@yahoo.com.

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Failure becomes success! Bankruptcy can turn what you think is failure into success.

We live in a country that worships success.  We are trained to seek success and successful people and we hold those who are successful in high esteem and we wish success desperately for ourselves.  Being called a “loser” is for some the worst kind of insult in our success driven culture.

We also have an aversion to failure.  Failure is something to be avoided at all costs.  It means in America that you must hang your head, get depressed, and it can mean worse.  After a failure you feel alone, isolated, and unworthy.  You may even feel that something is wrong with you as you look around you and it seems that everyone else has no problems.

Over the last few years a different paradigm has become more popular.  The idea that we learn more from our failures than from our successes has rung true for many.  People have come to realize that though a success may give you a false sense of superiority or invincibility and cover up other weaknesses, a failure may reveal to you areas in your life that need improvement or areas where you need to do more work.

You truly can learn from failures or experiences of failure more than you can from a success.  After a failure most people inevitably examine everything they did to get to that point with an eye to the future so they don’t repeat the failure.  In that critical examination a whole lot is learned about oneself and one’s actions and beliefs and goals. With a failure you are forced to ask what is truly important or what does success really mean.  Rarely does such a critical reexamination take place when one is successful in anything and if success comes too easy to people then they are robbed of a very great opportunity.

Think of the child stars for instance.  How many of them are functioning, well-adjusted, and happy adults?  And how many would you consider to be a success?  Very few.  Many child stars have extreme success at a very early age.  They get money, fame and fortune enough at an early age to set them up for life.  But we all know that these children usually grow up to be very disturbed adults.  Why is that?  Because fame and fortune came too early and too easily.  They were truly robbed in life of the opportunity to struggle and fail.  The struggles and the failures are a necessary and essential element of life.

According to a Harvard grad success is not all it’s cracked up to be anyway.  It can often feel like failure.  A Harvard student wrote an article on how he didn’t feel successful even after graduating from Harvard.  This should have been a time for him to celebrate success but his graduation left him feeling empty.

He began to describe in the article how students are taught at Harvard to be risk averse.  They are protected from failure and never allowed to fail.  These Harvard kids have known nothing but success as they graduated with honors from high school and now they have a Harvard degree.  But the author concludes that Harvard students have been robbed of their chance to fail.  He makes my point that failure is a tremendous learning opportunity and people need to risk failure instead of avoid it.  When it happens embrace it and learn from it.

The old adage that we learn more from our failures than our successes is true.  I have learned more from my failures than my successes in life and if you think about it the same will be true for you if you have been lucky enough to have failed at something.

I had a failed in a business venture that I desperately did not want to let go because I did not want to appear to be a failure.  It was very difficult for me to close the business and admit failure even though the business was losing money and obviously needed to be closed.  But after I did close the business I engaged in the mandatory self reflection that was a great benefit.  I learned to never make some of the mistakes I made again.  I readjusted my life and went out and retried everything.

The same can be done with your financial failure.  You at first will resist and try to make your situation work.  All of my clients do.  You will try to work harder and smarter and pay off your credit cards and other bills.  When this doesn’t work you will resist failure strongly.  When you finally break through and admit that a fresh start will help you then you will be ready.

Your debts can be wiped away while you move on debt free.  A financial meltdown can be a tremendous learning experience just like any failure can be.  You will learn more from this experience than the person who has no such problems will.  You can and will learn to live with in your means and manage your credit wisely as we all must.  Very few people are “serial filers” who continue to file bankruptcies.  Most learn their lesson and move on debt free and change their lives.

Donald Trump and many others who are considered very successful have used bankruptcy to get a fresh start, learn from their mistakes, and move on with new knowledge and a new life.

So embrace failure and welcome it as an opportunity to reflect, learn, grow and adjust.  Think of failure as a blessing and as a pathway to success and you truly will get success through failure.  (See my article on why you should file for bankruptcy).

I am a San Diego bankruptcy attorney.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Please call for a free consultation on any bankruptcy or debt related issue at (619) 702-5015.   Call now for free credit report and analysis! 

If you or someone you know may need to file a bankruptcy then please get my FREE E-BOOK “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” by e-mailing me at farquharesq@yahoo.com.

Should American states like California and Illinois file for bankruptcy? Turns out it can be done but with a cost!

A number of the states in the USA are completely broke with little chance of paying off their debts.  California is one that reportedly has a $500 billion unfunded pension liability problem.  $500 billion is obviously more than the citizens of the state of California can pay so some have talked about the possibility of a federal bailout.  I am personally against a bailout because it will only continue the problem of overspending and unfunded pension liabilities that California can’t afford.

Numerous other states have huge debt problem often related to their unfunded pension liabilities.  Hawaii, Connecticut, and Massachusetts, Oregon and New Jersey are among the small states mentioned.  California, Illinois, and New York are the large states with huge debt problems.  One article says as many as 46 states need bankruptcy.  According to reports I’ve read Utah seems to be the best financially managed state in the union and it has little debt.

For many states it was the housing collapse that resulted in a great reduction in tax revenues that started the slide.  For other like California the unfunded pension problem has been building for years.  For states like New Jersey and Nevada, who relied on gambling taxes, times are really tough as people have slowed down on gambling because of the slow economy. But most states that are in financial trouble seem to have some level of this same unfunded pension liability problem.  A state bankruptcy would allow the bankruptcy courts to throw out these pension contracts just like with a city if the law can be changed to allow states to go bankrupt.

As I wrote in a previous blog, states are sovereign entities and they thus cannot go bankrupt.  But there is a way for California and the other states to make it happen anyway.  Congress can pass a law allowing the individual states to declare bankruptcy but the states would have to petition the Congress for such a right.  Without the petition the law won’t change and states will be stuck with their debts.

Congress passed the law that originally created chapter 9 municipal bankruptcy seventy years ago during the great depression.  Chapter 9 allowed cities and counties to file for bankruptcy protection and 600 such entities have taken advantage of this law since it was passed in the 1930s.  Presumably Congress could now authorize a whole new chapter in the bankruptcy code.  We could call it “chapter 10.”  A chapter 10 would eliminate the barriers to states filing and eliminate the “sovereign entity” problem that still exists today.

Apparently Newt Gingrich is in favor of just such a law.  Ironically it is the republicans, who are not normally bankruptcy friendly, who seem to be more in favor of just such a law.  This appears to be because the republicans do not want any state to receive a federal bailout which would impose a tax on the whole country to pay for the worst fiscally managed states.  If  states like California, Illinois and the others would file bankruptcy then a federal bailout would be unnecessary.

With a bankruptcy these states can eliminate their debts such as the unfunded pension liabilities that have plagued cities.  With a bankruptcy the state can also save its assets.  In a chapter 9 bankruptcy the law is clear that the bankruptcy court cannot interfere with the city’s day-to-day activities and the cities can even borrow money during the bankruptcy.

In a chapter 9 municipal bankruptcy the court also cannot force the city to sell any of its assets like city land or buildings.  Presumably this would apply to states’ bankruptcies too.  A state could therefore keep all of its assets during and after the bankruptcy.  As I reported in a previous blog this is because of constitutional protections like separation of powers that prevent a court from interfering with any day-to-day functioning of a city because a city is a public entity.  A public political entity like a city (or a state) simply cannot be operated or directly interfered with by a bankruptcy court.  This is made clear on the federal courts website under chapter 9 bankruptcies.

A state could presumably enjoy these protections in a chapter 10 bankruptcy just like the cities can protect their assets under chapter 9.  Bankruptcy would mean for these states that they could continue to run their affairs as usual with no interference from the bankruptcy court and they would not have to sell any assets.  They could just cancel the debts of all kinds including these pension contracts that were negotiated with the unions.  They could renegotiate new contracts that the states could afford and that were on par with what people earn in the private sector.  Bankruptcy could indeed save the states from disaster and financial ruin.

But there is a price to pay for all of this.  State bond interest rates will have to  increase to reflect the new threat that a state can go bankrupt.  There is currently no such threat as states cannot now go bankrupt so state bonds are given a very good rating.  Since bond investors will now have to risk that the state can go bankrupt and wipe out their investment, the state will have to pay a higher interest rate to attract investors.  Presumably once the law is passed allowing states to go bankrupt then any state can declare bankruptcy as often as the law allows.

I would argue that if the states don’t get this debt problem under control then the bond rates could increase anyway as they would have a greater risk of defaulting on the bonds.  The bond issue can be dealt with so the effect of a bankruptcy on state bonds will be lessened.  Bonds could be given some kind of special preference for instance.  If the states can protect the bond holders position in the bankruptcy or reaffirm (agree to pay) the bond debts then the harm to the bond market could be minimized.  Then states could still find buyers for bonds in the future when they need a new road or bridge or airport.

My advice to the states with the most debt is to strongly consider the bankruptcy option.

I am a San Diego bankruptcy attorney.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call me for free with any bankruptcy or debt related question you might have 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.