Bankruptcy filings are down but they will rise after October 2013 when people realize that they can file again

bankruptcy 5Bankruptcy filings are down significantly across America.  I wrote about this in a previous blog.  Some areas have seen a drop-off of as much as 50% in the numbers of filings.  There Courthouse 2are many reasons for this.  One reason is that most homes that were in foreclosure after the recession began have now been dealt with one way or another.  Household debt is also down and household debt has always been an indicator of how many bankruptcies will be filed.

Some economists believe that there will be another wave of foreclosures that the banks have been holding off foreclosing until there are signs of an economic recovery.  But there is another factor out there that will hit this October.  In October 2005 millions of Americans filed for bankruptcy in order to get their filing done prior to the 2005 bankruptcy law change.

Bankruptcy underwent a major change in 2005 designed to make it harder for debtors to file a chapter 7.  As it turned out most people could still file even with the new “means test” that was added in the new law.  But the 2005 bankruptcy law change scared people into thinking that bankruptcy was not going to be an option so they had better file now.

So millions did and many of them probably should not have.  But after 2005 the country went through a major recession.  Jobs were lost, foreclosures were up, and debts could not be paid.  But one aspect of the new law was to increase the time between bankruptcy filings from seven years to eight years.

We are now about to reach the eight year mark in October 2013.  This means that if you filed bankruptcy before the law change in 2005 (and maybe didn’t need to) you can file again in October of this year (2013).  It is now okay for you to file again so if you need to contact an attorney about filing a second time.  Don’t worry about having to do it it’s okay.  No one could foresee the terrible recession of 2008 and it probably has left you will a lot of debt that you have not been able to pay.  Bankruptcy will again take care of this debt once and for all giving you a fresh start.

I am a San Diego bankruptcy attorney.  For further questions please visit my website at www.farquharlaw.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.

Bankruptcy photo courtesy of Stockmonkeys.com.  Courthouse photo courtesy of Robert Linder.

Forgive yourself for your debt. Debt forgiveness is in the bible and bankruptcy is the answer.

forgive yourself 3I have written in the past (here) about how bankruptcy is sanctioned by the bible.  In the old testament in the book of Deuteronomy (15:1) it states thatbible 2 debts must be cancelled every seven years.   The Jewish people considered it very important to forgive debt completely after seven years.  They realized thousands of years ago that it was good for people and good for society if people had no long-term debt.  If they could not pay the debt I seven years then it was better for all to have it forgiven and lifted off the shoulders of the people.

The Christians said the same thing in the New Testament.  The Christians believed in forgiveness.  Jesus himself emphasized its importance.  I believe this includes forgiving yourself for the debt you have incurred but you cannot pay.  You blame yourself and you hang onto the debt you incurred a long time ago thinking that you will be able to pay it one day.  But this goes on and on.

It’s time to forgive yourself for charging up the credit cards, or returning an automobile you could not afford, and especially for medical debt which you cannot pay.  You may have thought you would have the money to pay it later but the money never came.  And now the debt is still there and the collectors are calling every day for you to repay it.  Some of them may even have sued you for it.

But the repayment doesn’t happen and it probably won’t happen.  So it’s time to forgive yourself for getting into debt in the first place.  Forgive yourself like you forgive others.  It’s in the bible.  In the New Testament.  You have all heard the saying; “to err is human but to forgive divine”.

freedom 4 Once you forgive yourself for the debt then maybe you can take the next step to rid yourself of it which is to file for bankruptcy to cancel your debts.  A bankruptcy discharge will lift your debt burden and let you get a fresh start and give you the freedom from your debt burden.  This freedom will allow you to live like you should and not be burdened by debt.  People have known for thousands of years how important this is.  Debt forgiveness was good enough for the ancient Jewish people of the bible and it’s part of Christianity too.  Bankruptcy is your legal, moral, and ethical pathway to debt forgiveness talked about in Deuteronomy.

I am a San Diego bankruptcy attorney.  For further questions please visit my website at www.farquharlaw.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.

“Accidents” photo courtesy of merfam.  Holy bible photo courtesy of Steve Snodgrass. Freedom photo courtesy of Josef Grunig

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.

1 Trillion dollar problem. Student loan debt increases 275% over the last decade! When will they be bankruptable?

It’s true!  According to an article posted online by CNN Money student loan debt has tripled in the last 10 years.  The total amount of student loan debt in the U.S. is $904 billion in the first quarter of 2012 and that is up from $241 billion in 2003.  It is now the second highest form of debt behind mortgages which means that credit cards have less charged on them than these student loans.

As if this is not bad enough the debt keeps growing.  In fact it is the only type of debt that has substantially increased since 2008 according to a senior economist at the NY Fed.

And the delinquency rates on these student loans are also rising.  They are up to 8.69% from just 6.13% a decade ago.  Does this mean that over 90% of people are not delinquent?  No!   Almost 50% of these loans are currently in deferment or grace periods according to another Fed. economist.  That means that 60% of these loans are basically not being paid because the borrowers who are still in school or unemployed don’t have to pay anything yet.

So you have a whole class of debts that has reached astronomical heights and almost two-thirds of that debt is not being serviced.  It sounds like a potential disaster to me.  The median amount borrowed is $12,800 but 25% of borrowers owe more than $28,000, and 10% owe more than $54,000, and 3% owe over $100,000.  90% of the lending comes from the federal government and borrowing is way up apparently because of the economic downturn.  Students are apparently rushing to take out new debt for this coming year.  Most likely debt which they cannot pay.

My experience with these student loans is that they don’t care if you get a job in your field or if you cannot pay your rent.  They want their money when you get out and get a job and they will wait forever to get you to pay.  They tacked on over $7000 to a student loan which a client of mine took out years ago after he did not make payments on the loan.  We attempted to settle with borrowed money but they would have none of it.

They wanted their whole amount plus their interest and fees and they were not interested in any settlement.  My client made $10,000 a year on menial labor with a pregnant wife and two children and the student loan collectors did not care even that he would probably never be able to pay the debts.  Nor did they care that he never got a job in the field which he studied for.  The lady on the phone told me that “lots of people are having hard times”.

Yes, and let them eat cake!  How long can this country tolerate this intolerable student loan problem?  It’s over A trillion dollars and growing and 60% of these loans are not being paid on.  Collectors don’t care whether you can pay or not and just want the money and the economy is down so people are lining up to get more loans which they will never be able to pay.

The whole problem could be solved by making these debts dischargeable in a bankruptcy.  It is ridiculous that these loans cannot be included in bankruptcy when car loans, credit card loans, personal loans and mortgage loans can all be taken care of through a bankruptcy.  How can it be that someone who tries to improve themself by getting an education must be stuck with that debt for life when others can get rid of their debts in bankruptcy when they reach the level which they cannot pay for them?

And it is not just a problem for government backed loans.  Private student loans are also not dischargeable in bankruptcy since 2005.  This has led to an explosion in private student loan debt too that leaves many with worthless degrees and debts they cannot pay for.  I also wrote a blog about private student loan debt.

I also argued in another blog that student loans should be dischargeable in bankruptcy.   If they made all student loans dischargeable in bankruptcy then the problem would go away for these students.  That is what bankruptcy is for.   It serves to help people get rid of debts which they have no hope of paying and then move on in life with a fresh start.  The whole bankruptcy process is looked over by a series of trustees and a bankruptcy judge.  They make sure that income and assets are insufficient to pay the debts and to make sure there is no fraud.  It is the perfect system to handle these debts.

How long can we kick the can down the road?  These students cannot pay these debts.  Like many of my clients they are barely surviving and they can only pay rent and food if they are lucky enough to get a job.  How can we pretend that they can pay 10s of thousands of dollars in student loan debt?  Are we to hound them to the grave?  The only solution that makes sense is to make these dischargeable in bankruptcy.  Take it from one who sees this situation every single day.

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 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.

What do I do after bankruptcy?

After your bankruptcy is over you can certainly begin enjoying your new life with your debts discharged and you don’t really have much that you need to do.  Your debts are now in the past and your future should be debt free.  There are just a few things that you can attend to:

1) Re-establish credit–  You will want to begin re-establishing credit right away after your bankruptcy.  There is no need to wait and you can certainly begin immediately.  You will want to get new sources of credit.  Loans, either secured or unsecured, that will appear on your credit report are a good way to begin to re-build your credit.  You can buy a car or furniture or anything that you pay off monthly and if you make your payments on time you will get positive points on your credit score.

You can and should also get 3 new credit cards after your discharge.  You should get solicitations from credit card companies right away after your bankruptcy is completed.   You can use these new cards to re-establish credit.  If you do not get solicitations then visit your credit union or bank where you have a deposit account.  They will probably give you credit there.

You can always apply for secured cards too.  These are cards where you give the creditor money and the creditor gives you credit based upon how much money you deposited with them.  These secured cards will report on you credit report just like regular cards so make your payments on time.  Remember also to keep your balances low.

 2) Check your credit report-  You will want to check your credit report after your discharge to see if all of your debts are properly reported as “discharged in bankruptcy”.   Challenge any debt not properly listed.  You can get your credit report for free at www.annualcreditreport.com.

 3) Stay out of debt- Be sure to be careful to stay out of debt.  You do not want to fall back into debt after your bankruptcy is over.  This is a good time to develop new habits with credit.  Use your cards to improve your score but pay the balances each month.  It is a good time to live debt free.  Remember too that you cannot file bankruptcy again for 8 years and you don’t want a second bankruptcy unless it is necessary due to some calamity.

 4) Move on with your life- You can now move on and get a new job or buy and sell property or travel and do anything you wish after your discharge.  You are required to report any large amounts of money you receive after your discharge but only for 6 months.  After that you can do anything you want and you are free of the system (as long as there was no fraud involved in your original bankruptcy).

5) Enjoy your new-found freedom Rmember that you are debt free.  Enjoy your new life!

I am bankruptcy attorney in San Diego.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com for more info. about any of these topics or call me for a free consultation at (619) 702-5015.  Call now for 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

Bankruptcy and the Bible. Yes, debt forgiveness is in there!

bible 3You may have heard it quoted.  It is written in the bible in the Old Testament.  I quote it here:  Deuteronomy 15:1-2, “At the end ofDeuteronomy 3 every seven years you shall grant a release.  And this is the manner of the release:  Every creditor shall release what he has lent to his neighbor.  He shall not exact it of his neighbor, his brother, because the Lord’s release has been proclaimed”.  Yes it is in the bible.  A “release” from your debts shall be granted every seven years by your creditors.

This verse therefore commands creditors to release people from the debts owed by debtors every seven years.  You could argue that the bankruptcy just enforces this biblical passage through the use of law.  You could easily argue that bankruptcy is indeed the very debt forgiveness talked about in this biblical passage.  (And I doubt the creditors will follow this biblical principle without bankruptcy law but you can try).

You could ask why is debt forgiveness in the bible.  Most of us in the debt relief business believe that it is in the bible because people knew in ancient times what we should all know now.  Debt is damaging to people, damaging, to society and damaging to the future of mankind.  It can’t be carried by people forever and it can’t be allowed to follow them and put them in debtor’s prison forever.

Debt slavery is extremely undesirable and indeed intolerable.  Debt must be released and people must be freed from it.  Ancient peoples knew that then and most of us who have lived with debt know that now.  And some would say that God commanded a seven-year debt forgiveness through this verse in case people forgot.  But it is clear that the bible sanctions debt release/forgiveness and it appears that it must be done on a regular seven-year basis.  It is hard to argue that this verse could mean anything else but that.

I believe that it is true that this forgiveness is necessary because people who are burdened with debt can’t spend, save, invest in homes or retirement and therefore can’t truly be productive members of society.  Sadly many of them check out and some even commit suicide because of debt.  Many of my clients have told me that they have considered suicide with all their debt prior to their consideration of bankruptcy.  Debt burdens are potentially the ruin of individuals and nations.  (see here for my article on my website on why you should file bankruptcy)

Bankruptcy is not the bad thing that many people believe it to be.  Many believe that it is irresponsible, somehow sleazy, underhanded, and in effect cheating.  Many believe that they must pay back their debts no matter how large they are and no matter how long it takes.

But then what is the purpose of your life?  To be a slave to your debt?  To spend you entire days on earth paying something to someone else that enriches them and impoverishes you?  With interest?  They knew better thousands of years ago.  I often believe that in modern times we make silly mistakes and have ridiculous beliefs that our ancestors would laugh at.

Bankruptcy is a liberator of people.  It frees them from debt and gives them a fresh start.

For all of our modern science and technology we still sometimes forget lessons they learned long ago,  One of them is that debt is bad.  It must have a limit in years.  It must be forgiven periodically.  This is good for everyone so let’s get on with it.

The next time someone disparages your thoughts of bankruptcy mention to them that it has been recommended for a very long time by some very trusted sources.  Enjoy your freedom and God bless!  Check out my blog about bankruptcy and Christianity here.

I am bankruptcy attorney in San Diego.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com for more info. about any of these topics.  Or call my office for a free consultation at (619) 702-5015.  Call now for 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.

Holy bible photo courtesy of Jemimus.  Deuteronomy photo courtesy of Billy Alexander.

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.

Is filing for bankruptcy the “responsible” thing to do?

(See my blog about bankruptcy and the bible).

I would argue that yes it usually is not just smart to file for bankruptcy if your debts have gone beyond your ability to pay but that it is also the responsible thing to do.  That is because bankruptcy gives you and you creditors finality and it puts you on the road to good credit as you can now re-build our credit score and become a more productive person.

Many people ask me this question about responsiblity because they seem to think that filing bankruptcy and discharging your debts is somehow not honoring their promise to pay for the debts that they have incurred.  They feel that they are being irresponsible and dishonorable.

I remind them that debts have a creeping quality that can slowly accumulate and take over all of your available resources until there is nothing left to pay your ongoing bills.  This can happen insidiously without your noticing and with out you intending for it to happen.  It is just a miscalculation on your part but one that can lead to disaster if left unchecked.

Also it is true that your financial situation can change where you income is cut by a job loss or just a loss of hours at work.  There can be divorce, sickness, a new baby, an accident or a business downturn or any of a whole host of reasons why you cannot honor your debts like you originally intended.  These intervening circumstances can cause your financial situation to become critical in a hurry like a nuclear meltdown.  One day you find that you can’t afford to buy groceries but the phone is ringing fifty times a day from some collection agent who is trying to get you to promise to pay money that you don’t have.  It’s not responsible to let this situation continue.

So it is not irresponsibility that usually leads a person to need a bankruptcy.  It is just the facts of life with its ups and downs and twists and turns.   It is also true that we are human and therefore inherently imperfect.  We make mistakes all the time.  We can’t predict the future but we are naturally optimistic about it.  We always expect things to turn out well but that expectation is not always realistic.  When things don’t turn out well some may need bankruptcy.

Now I would argue that if your finances get far out of hand and your ability to pay your debts is not there then it is time to throw in the towel and do the responsible thing.  Admit that you were wrong.  I have done it personally many times in my life.  Once you admit that then you can notify your creditors that you are choosing the legal, moral, right, and responsible thing which is filing bankruptcy.  You are notifying them that you will not be paying their debts back.  The creditors will go away and stop bothering you for debts you cannot pay and they will move on to someone else and use your bad debt as a tax write-off.

Now you can re-build your credit score.  With that you can once again get financed to so you can buy things like a car and a house if you choose to.  Your score will be better on average three years after bankruptcy and a fresh start than if you choose to try to pay those old debts back because on average most people will fail to do so.

So do the responsible thing.  File bankruptcy.

I am a bankruptcy attorney practicing bankruptcy law in San Diego, CA.  Please visit my websites for further information on bankruptcy at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office to speak to me about any bankruptcy issue for free at (619) 702-5015.

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.

Do you need a “mulligan”? How about a do-over? Try bankruptcy. It gives you a fresh start.

According to Wikipedia a “Mulligan” was first used in the game of golf.  According to one version of the story the name came from a Canadian golfer who during a golf game claimed the right to hit the golf ball a second time after his first errant shot.  His friends then decided to call this a Mulligan and so was born the name.  It is also called a do-over and other sports have picked up on this concept and gone with it to allow players to re-do a bad play of some sort.

If its good for sports then how about you?  Everyone makes mistakes in life so why should financial mistakes be any different?  People borrow too much from credit cards or buy cars which are too expensive or buy houses that are too large.  Some people buy these things and then lose their jobs and then can’t afford to pay for them.  Others start businesses with every intention to make the business a success but then the business fails for some reason or another.

The point is that people make mistakes.  Some mistakes are forseeable and others are not but all humans are fallible.  We forgive people in sports and in other areas of  life so why not forgive them with their financial mistakes.  The Jews in the old testament forgave debt every seven years.  They knew back then that people without debt were better members of society than those with debt.  They were happier, more productive, and more of an asset to society when their debts were wiped away.  This type of debt forgiveness is as old as the bible itself.  (See here for my blog about bankruptcy and the bible).

Bankruptcy has been in the western world at least since the middle ages when the Venetians used it to stop doing business when they were broke.  It was used in England for many hundreds of years and it came over to America where it has been used extensively for businesses and individuals.

Bankruptcy became the preferred choice for many with large debts.  It is true that a stigma of failure attached itself to bankruptcy which caused many to avoid this choice for longer than they should have.  That stigma is still around today but as many see corporations emerging from bankruptcy stronger they say why not using bankruptcy to liberate individuals.  Why not use bankruptcy to clear out your own debt and to give you a fresh start?

Bankruptcy allows you to wipe away old debt that you cannot possibly pay and get a fresh start.  So if you need a Mulligan, a do-over, or a fresh start without debt then consider bankruptcy.  We forgive all kinds of mistakes in society so why not your financial ones.  You may have had the most honest of intentions when you incurred the debt but things did not work out.  Sometimes the reasons for your financial troubles can be totally beyond your control like the current recession.

So file bankruptcy and lose these debts and give yourself a much-needed Mulligan.  You, your family, and the whole of society will benefit from your decision. (See here for my article on 12 reasons why you should file 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 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.

Why you should file bankruptcy if you have debts you cannot pay

In celebration of reaching 50 blogs I thought I would update one of my most popular articles to date.  In this article I talk about all of the reasons why you should file bankruptcy.

I find that my clients want to file and they need to file but they are also apprehensive about  filing bankruptcy and they are concerned that bankruptcy is somehow shameful, wrong, or deceitful.  I try to get them to see that it is none of these things and that there are very good reasons to file and great benefits to filing.  I also try to show them that it is a legal, moral, and ethical thing to do that is as old as the bible and that corporations do it whenever they can.

You get a fresh start, you get peace, freedom, anonymity, your credit score will improve, you can keep most of your assets.  I also try to explain that times are tough, you need your money, and that bankruptcy is their bailout and things will probably get worse for them if they don’t file because collectors will not stop trying to collect from them.

I try to get my clients to see all of these things about the benefits to filing.  Often the biggest hurdle is the psychological block that they have to bankruptcy itself.  So please read my article and see if you should also possibly file bankruptcy if you have debts you cannot pay.

 1)  You get a fresh start.  Filing for bankruptcy is powerful and useful tool which allows you to discharge most of your debts and usually keep most of your assets.  You get a “fresh start” with your life and you can begin again financially without the burden of debts you cannot pay.

You can also avoid the permanent debt trap from which it is very hard to escape.  Remember that bankruptcy is nothing new.  It is as old as the Old Testament of the Bible.  It has been around in some form for thousands of years.

The tradition in Old Testament times was to forgive debt regularly every 7 years.  This practice had a tremendously beneficial effect on society and its people as it can on you.  Even back in ancient times people knew that everyone in society is better off if individuals don’t carry around debt long-term.  They knew then that debtors were happier, healthier, and better and more productive citizens when their debt was forgiven.

How badly is the burden of all this debt affecting your everyday life now?  Do you feel the fear, the worry, the anguish we all feel when we are over our head in debt and we don’t know how to get out or what to do.  Bankruptcy is a legal, definitive action you can take that can make the debt all go away and put your life back together to give you a fresh start.

 2) Usually your credit score will improve over and above what your credit score would be if you didn’t discharge these debts.  By the time most people file bankruptcy they are so far behind in their credit card payments that bankruptcy will actually help improve their credit score.  Each month that you don’t pay those monthly credit card bills your credit score remains low.  Since most people are unlikely to pay their debts off this results in a permanently low credit score.

If you are in the same position then bankruptcy will certainly help you.  Your credit score will decrease immediately upon the filing of the case but when your bankruptcy is finished your debts will appear as “discharged in bankruptcy”.  Those debts discharged in bankruptcy will then no longer negatively impact your credit score.

You can now begin to rebuild your credit score with new credit.   You need to have credit in your name and use that credit wisely to increase your score.   If you charge things on your new cards and then pay your payments on time and pay the full balance every month you will slowly and steadily build up your score.  Every month that you pay those payments you should get points added to your score.  These points will add up over time.   You will get credit card solicitations after the bankruptcy discharge so use them wisely to increase your credit score.

Any other payments you make on time for financed items will help drive up your credit score.  Some of my clients reaffirm their cars in bankruptcy so they will get the benefit to their score when they make payments.  Others will finance a new car after bankruptcy for the same purpose.

 3) You get freedom– Shakespeare said “never a borrower or lender be” because as a borrower you become a slave to the lender.  If you owe credit card debt then you are a slave to those big banks to whom you owe money.  You pay huge amounts of interests to these big banks every month to service your debt.  These interest payments only serve to enrich very large corporations at your expense.

Filing bankruptcy can serve to free you permanently from both the worry and the financial strain of continual and unrelenting debt and the stress of the collection actions.  Your discharge is your key that unlocks the debt prison doors.

 4) You can keep most of your assets.  Most people can retain most of their assets in a bankruptcy.  That includes your house and your cars.  Many people think they will lose everything.  We have very generous exemptions in California that allow most people to keep everything they own.  If your house and cars don’t have any equity then you can certainly keep them.  If they do have equity then usually we can find a way to exempt them.

Your house is probably secured.  If there is equity in the home then there is a homestead exemption we can use to allow you to keep it.  Your car may be secured and if there is equity in that we can use the car exemption and the “wildcard exemption” together to keep your car (if we don’t have to use the homestead exemption on your house”).

Cars usually have no equity if financed and these days with housing prices low, many houses also have no equity.  Your personal furniture and clothes you can keep under a separate exemption and jewelry and “tools of the trade” also have their own exemptions.  Even your retirement fund, if it’s an IRA or 401k, is protected by federal bankruptcy law up to $1,000,000.

 5) You will get peace back in your life.  When you file bankruptcy your creditors must stop calling you on the phone.  Most of my clients have not answered their phone for some time before they actually consider bankruptcy.  Filing a bankruptcy case will stop all of these collection efforts with the miracle of the “stay” that is created once you file bankruptcy. This stay stops all creditors from contacting you in any way once they get notice from the Bankruptcy Court of the filing.

So remember that as far as you debts go, peace and tranquility are waiting to return to you if you file bankruptcy.

6) No one needs to know.  Many people are afraid of bankruptcy because they think that their landlord or their employer will find out about their bankruptcy and they believe they can be evicted or lose their job.  This is not true and you will still have anonymity if you file.  You don’t have to tell anyone that you filed bankruptcy and probably no one will know unless they do a public record search.  It is unlikely that this will happen though so your secret should remain safe.

Your landlord will probably not be notified especially if you are on a month to month lease.  Your employer need not know unless you already have a wage garnishment that needs to be stopped.  You cannot be fired from your job or thrown out of your apartment or home because you filed bankruptcy if your employer or lenders or landlord do find out.  Discrimination of this sort based upon a bankruptcy filing is illegal.

7)  You have other things to do with your money–   If you are like most people then you need the money you earn from working to pay for your own personal bills and pay for your family and their needs.  You don’t need to give this money to these large banks.  You don’t need to spend this money to enrich large banks for money you borrowed from them a long time ago.

If you earn less than is allowed in the means test then you can probably file bankruptcy and discharge your debts.  You can then use your money for other purposes than paying off old dischargeable debt.

 8) You have already paid the credit card companies back–  If you are like most of my clients then the debts that you owe are probably very old.  You have probably been making payments on these debts for years.  If that is true then you have already reimbursed the creditors for them.  By the time most people file a bankruptcy they have already paid back all of the money they borrowed plus some interest. This is because of the very high interest rates that credit card companies charge.

Remember that the banks borrow money at a very low-interest and then lend it to you at very high interest.  They keep the rest.  It is a most profitable business and the make lots of money doing it.  The banks want to keep you paying them this exorbitant interest indefinitely.  Some of you are paying as much as 30% interest on the money you borrowed.

Don’t make the mistake of feeling that you need to keep paying these companies.  You have already paid them enough so file a bankruptcy, discharge the debts and move on.

 9) Times are very tough and many people need to file more now than ever.  There is a recession on now and you need relief from your debt maybe more now than ever before.  Many people are unemployed and those who are employed don’t know if they may lose their job in the near future.  Even if your job is secure and you expect no pay cut, you still probably need your funds for your ongoing bills.  Why pay for old debts incurred long ago when the money you borrowed back then often went to pay for other bills?

Times are very tough in this recession so explore the possibilities that bankruptcy opens up today.

 10) Personal bankruptcy is your bailout – Corporations file bankruptcies all the time including the credit card companies that you owe money to.  They bail out with bankruptcy so why not you?  In addition many banks have received government bailout money to keep them going.  They then turn around and bug you for money.  That is your money they are receiving from the government but they are not giving you any breaks.

So if big companies can file bankruptcy and get your money sent to them so they can collect more money from you then why don’t you get your bailout?  File bankruptcy.

 11) The creditors absolutely will not stop trying to collect from you until you pay or you are dead or you file bankruptcy.  They only know one thing and that is to collect your debt with all of the interest and penalties that they can add.  They will continue to sell the debt to other collectors and these collection agents have a nationwide network.  They buy, sell, and trade these debts but they keep trying to collect.  They are like the Terminator in that movie.  They are like a machine which won’t stop until you are dead.

If you file bankruptcy then they must stop trying to collect the debt. They will then discard your debt because if they try to collect it after the bankruptcy discharge then they would be in violation of federal bankruptcy laws.

 12) Your situation will probably continue to get worse and worse if you don’t file bankruptcy or pay these creditors.  The collection efforts will increase in intensity and eventually the creditors will file suit.  Many people try to put their heads in the sand and hope the debts will disappear.  This is not the case though as the situation will only get worse.  The debts will grow in size as interest and fees grow.  Eventually some creditors will file suit and serve these on you.

If you do not file at this point then you could get a default judgment against you and they will use this judgment to collect money from you.  They can now lien your house and file a lien against you personally.  Some liens cannot be removed in a chapter 7.

In addition creditors with court judgments can garnish your wages so your income could decline.  They can also get access to your bank accounts and remove money from them legally to satisfy your debt.  You may need that money to pay a bill but it could be gone one day.  They can even call you into court for a debtor’s exam to get you to answer questions about your job, your bank account, and your general financial situation and they can get you in there every 6 months.

Not all of these things will happen to all people but these are the tactics creditors can use against you when they have a court judgment.  As you see here your financial situation will continue to get worse over time when you have debts.  It will not get better on its own and the debts won’t go away.  Therefore don’t delay and preserve your rights by exploring your options with bankruptcy.

(See here for my blog about what the bible has to say about bankruptcy.)

Thank you for reading my “12 Reasons to file bankruptcy article” and if I can be of any further help please call for a free consultation.  I am a San Diego bankruptcy attorney.  Please visit my websites at www.freshstartsandiego.com or www.farquharlaw.com.

Douglas G. Farquhar, Esq.

1901 First Ave. Suite 217H

San Diego, CA. 92101

(619) 702-5015  Call now for free credit report and analysis!

E-mail: farquharesq@yahoo.com

Websites: www.farquharlaw.com or www.freshstartsandiego.com.

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.