What Everybody Ought to Know About Bankruptcy

(This is a guest article by Dorothy Anderson*)

Recession has affected a lot of us in disastrous ways. Businesses big and small have gone bankrupt all around the world. Being in debt itself creates a lot of pressure on human minds. To top it, if you are in knee deep debt, you may feel perplexed about the various options available for the repayment of your debt. Many people do not give this problem much of a thought. Instead, they file for bankruptcy, thinking it to be the easiest and safest way out of debt. However, bankruptcy is not a viable option. It should rather be the last resort that you choose.

Bankruptcy is lawful declaration of incapability of an individual to pay his creditors at a given time interval. In case of a personal bankruptcy, you need to surrender your non-exempt property to a court appointed trustee, who liquidates the property and distributes the money to your creditors.

Basically, there are six types of bankruptcy in total; however, the two key ones are as follows:

1. Straight bankruptcy or chapter 7 bankruptcy- In this type of bankruptcy, you can have all your debt cleared, after your assets are liquefied and used to repay your debts. Just remember, that you should not conceal any records related to your present financial condition. You will not be granted any discharge, in case you do so. Relief, in such cases of bankruptcy is available only once in every eight year period.


2. In case you wish to enroll yourself to a wage earner’s plan, also known as reorganization bankruptcy or chapter 13 bankruptcy, this can clear you most of your debt. Once you file for the petition of the plan, you are protected from lawsuits and all other legal actions that creditors could have taken against you. The plan allows you to pay off your debt from your future earnings, while you are under the protection of the court. Your debt is paid according to a debt management plan set up in cooperation with your lawyer. You pay a fixed amount of money each day to a court appointed trustee. The trustee then distributes it to your creditors. The repayment plan is usually of three to five years. The creditors may object to the payment amounts, however, the judge has the final say.

In case, you have a secured debt, like a car loan, that you want to continue paying, then, reorganization bankruptcy is a better option as, chapter 7 bankruptcy requires you to liquefy assets.

According to the US Bankruptcy code, if you have more than $922975 in secured debt and $307675 in unsecured debt, you are not eligible to file reorganization bankruptcy.

In both the above cases of bankruptcy, you need to receive credit counseling from an approved firm, before filing the petition. Personal bankruptcy laws are complex to deal with. Therefore, make sure that you seek advice from an attorney before filing the petition.

So, what are the ways that you can choose to avoid bankruptcy altogether?
Check out the below-mentioned alternatives that you can choose from:

1. Debt consolidation program - This kind of programs help you to make your monthly bill payments at reduced interest rates. Here, you can consolidate all your debt into one easy monthly payment. Moreover, late fees and all other charges are eliminated. This also has a positive effect on your credit ratings. However, there are various effects of consolidating debt.


2. Debt settlement - When you cannot manage even minimum payments on your debt, debt settlement can be an option for you. In this kind of program, the creditors reduce your debt amounts by 40-60%. All you need to do is, negotiate with the creditors. You can obtain help from professional debt settlement firms.


3. Debt management - If you choose to opt for debt management, you need to visit a credit counseling agency. They will offer you a plan to repay your loans. They would help you to get reduced rates of interest on your debt. Furthermore, any interest charges incurred due to late payments would also be waived off.

Also, before filing for bankruptcy, check out the cons of filing for a bankruptcy petition:

1. Filing for bankruptcy will ruin your credit listing - A declaration of bankruptcy will remain on your credit score from six to ten years. This will make it difficult for you to get new loan approvals. Hence, it is always better to pay off your debt rather than go for bankruptcy filing.


2. You may be rendered homeless - Unless, you qualify for state or federal exemptions, and you may lose your car / home. This is because, if you are filing for a chapter 7 bankruptcy, your assets are sold off to repay your dues.


3. You cannot get rid of all your debt - Filing for bankruptcy will not get you exempted from all your debt. There are taxes, student loans etc which you have to pay.


4. Bankruptcy may influence your security clearance status, thereby affecting your financial situation.


5. Not all retirement plans are protected - According to the bankruptcy laws, 401k retirement plans are protected. However, any amount above $1 million is used to pay off your debt.

So, before considering bankruptcy, see whether, it is right for you. Think about the below mentioned points:

1. Try negotiating with your creditors - Creditors are human too. They would rather settle a debt instead of having it discharged in bankruptcy.


2. Get yourself credit counselor - Credit counselors can help you bargain at lower interest rates and monthly payments. Explore the option as an alternative to bankruptcy, since under the bankruptcy law, you will have to get credit counseling advice, before filing for bankruptcy.


3. According to the American Banking Institute, if your creditors have garnished your wages, filing for bankruptcy will stop it.


4. Your medical bills too, can be discharged completely, if you file for bankruptcy.


5. Everyone deserves legal help. Contact a consumer law attorney to discuss about your bankruptcy options. Only, he will be able to review the facts and give you the correct advice.

Ultimately, you can work your way out of bankruptcy, only by changing your spending habits.

*About the author: This is a guest post by Dorothy Anderson. She offers advice to consolidate debts. Dealing with debts is all about choosing the right option.


*Image Credit: Photograph by blehk [via Flickr Creative Commons]

5 Ways To Avoid Getting Stuck In The Credit Card Debt Trap

(This is a guest article by Kris Bickell*)

If you've ever used a credit card, you know how easy it is for the balance to grow REALLY big, REALLY fast. And like a ball rolling down a hill, once it starts rolling ... well, once it starts rolling it's a lot easier to wait until it stops rather than chasing it down the hill.

So, think of credit cards like the ball.

And hold onto them tightly. Because once you start building debt, it's a lot like the rolling ball.

I know, that's much easier said than done. For most people, by the time you figure out you've got a debt problem, you've got a HUGE debt problem!

Trust me, huge debt problems don't go away quickly. Or easily. So do yourself a really big favor. And don't get stuck in the "debt trap" in the first place. One of my friends used to say "Money doesn't come with instructions". Which is so true. And even more true with credit cards. You get all the fine print about terms, rights, penalties, privacy policies. But nothing that tells you "don't charge more than you can pay off when the bill comes!"

I got my first credit card when I was in college. Imagine that!

I had no income. No credit. And no idea how to use it.

Yet American Express thought it was a good idea to give me a card anyway. Why? So they could make money off me, of course. Fortunately, American Express cards must be paid off each month. But the cycle of debt was started when I was only 20.

I remember my friends went on a day trip to Atlantic City and called me to tell me how much they missed me, because there were machines that took credit cards and gave you cash (of course, they didn't really miss me - they just wanted my fancy new AMEX card to use to get cash!)

The moral of the story is that the whole business of credit cards is nothing more than a money machine - for the banks!

So here are those instructions mom and dad never gave you. And American Express never gave you (or CitiBank or Chase or Capitol One, etc.) Here are 5 ways to avoid getting stuck in the credit card debt trap:

1) Don't fall for the lure of rewards cards (unless you can pay off the debt every month):

Rewards cards sound great. And if you can pay off the balances, they are. But if not, you'll probably end up paying a LOT more in interest than you gain in store discounts, frequent flyer miles, or other rewards.

2) Don't keep transferring balance & getting more cards:

Sure, credit card "surfing" is very common - constantly shifting your debt to low interest promotional offers. But in the long run, it's easy just to dig yourself a deeper hole, as you keep getting more and more credit. Want to use this as a temporary "quick fix"? OK. But as a long term strategy, this is like throwing the ball down the hill.

3) If you have more than one card, hide it:

It is tempting to use a retail card to save an extra 5% or 10% on purchases. Or use the new fancy looking card you just got in the mail. Or use the one with the lowest interest rate. And if you can pay it off when the bill comes, OK - then feel free to use them. But if you do fall victim to the temptation often enough, before you know it your credit card ball will start rolling down the hill!

4) Take yourself off the offers list:

The best way to keep yourself from getting caught up in the credit card trap is to keep yourself from getting all the tempting offers in the first place. So go to www.optoutprescreen.com and www.dmachoice.org to get your name off the most common mailing lists!

5) Don't use your credit cards as a spending account:

Make sure to set up a savings account to use for emergencies. Then, when you need some immediate cash, you can use this money instead of a credit card.

So there you have it. Sounds so simple, doesn't it? Sure, it takes some discipline. And many of your friends and family won't understand why you don't rely on credit cards to pay for everything. But if you follow them, these five steps will keep you out of the credit card debt trap!


*About the author: This is a guest article by Kris Bickell. If you would like to learn more about avoiding the credit card debt trap, visit www.Debt-Tips.com. You'll learn how the author, Kris Bickell, paid off all of his credit card debt and the various debt relief options you can use to improve your financial problems.


*Image Credit: Photograph by Leonid V. Kruzhkov [via Flickr Creative Commons]

5 Tips You Can Use to Start Saving Money Today

(This is a guest article by Raine Parker*)

By now, no one needs to be told that the national economy has seen better days. Although there are signs that the recession might be bottoming out, it's too soon to tell. But the slowdown in the market has been a reminder that saving a few bucks here and there is a good idea, and there are great ways to save money even when the economy starts to pick back up. With that in mind, here are five simple ways to pinch pennies and make sure you're prepared for a rainy day:

1. Take your lunch to work.
This is a quick way to see savings. It can cost between $150 and $200 a month to eat out every day, and that's way too much to spend on daily meals. Instead of going broke by eating out, try taking a lunch to work instead. The cost of groceries for a week of meals is far below that of eating out, and as a bonus, you'll be able to pack yourself healthy lunches that are better for you than fast food. You'll start to feel the financial difference immediately.


2. Make a monthly budget.
A great way to save money is to first see how and where it's being spent. Plan out everything: Make a list of all your revenue sources, and then make a list of your expenditures. Be as accurate as possible, and don't leave anything out. Account for major bills like rent and utilities, car and phone payments, and an approximate grocery cost. If your expenditures are higher than your income, that's a big problem, and even if the two figures are close, it's not good. Your list of expenditures will be able to tell you where you can start cutting. Do you really need that DVD or trip to the mall? It's better to think twice and plan your purchases. You'll be less likely to make impulse buys.


3. Pay yourself first.
Take 10 percent of your paycheck and put it in savings right away. It's the best way to start building a savings fund that can be used for emergencies or large planned purchases or investments, but you'll be less willing to do it if you start spending your check right away. If you take 10 percent off the top, you won't even feel it, and before you know it you'll have a comfortable cushion you can use if something unexpected happens.


4. Don't use credit cards.
At all! Plastic money is a wicked gimmick, and though there are benefits to very controlled spending, like improving your credit rating, it's almost never a good idea to just put things on the card. You're less likely to keep track of how much you spend, and before you know it, your interest rate has skyrocketed and your monthly minimum payment is crippling you. If you don't have the money, don't buy on credit.


5. Set small rewards.
This isn't counterintuitive to saving. In fact, small rewards can help motivate you to keep saving and spend wisely. It's that little light at the end of the tunnel that can keep you on the track to smartly dealing with your money. Go out to eat with your partner or spouse; pick up the new album from your favorite band; enjoy a night at the movies. You'll feel the happiness of being rewarded and the satisfaction of knowing you earned it by making the right choices.

These are just a few ways to save money, but they'll get you started on the path to short-term and long-term savings.

*About the author: This guest post is contributed by Raine Parker, who writes on the topics of online accounting degree. She welcomes your comments at her email Id: raine . parker6 @ gmail . com

*Image Credit: Photograph by happyhaggis [via Flickr Creative Commons]

The Secret to Finding a Part-time Job in Tough Economic Times

(This is a guest article by Caroline Fraissinet*)

Part-time jobs are sometimes necessary for students to earn enough money to pay for their education. In these economic times, it can be difficult to find part-time jobs. However, that does not mean that all hope is lost. There are some great resources and places to start which students (or anyone, for that matter) can use to search and apply for jobs. Here is a list of a few general tips and sources for finding a part-time job:

1. Take A Walk Around Town – stores or local businesses sometimes have “Help Wanted” signs on their windows. Many times, people may overlook them, so keep an eye out for them. Take a walk around your neighborhood and see if there’s any in a nearby location. This is more of a hit-or-miss option, as “Help Wanted” signs in the window are more characteristic of a smaller town or community. However, it’s a good starting point because most of the time, you can just walk right in and get a feel for what you might be doing as well as whom you might be working with right away. So take a little stroll around the block – who knows what kind of opportunities you might find?



2. On-Campus Job/Work-Study – college campuses have many services for students. Naturally, that means that a lot of assistance is needed for many of the great places open for the student body. Get in touch with specific locations on campus and see if they have any job openings. Some of the best places to look are the library and any food service locations. Colleges will also frequently post job openings in specific places to students on the university website. If you like meeting new people and being an on-campus leader, residence assisting might be a good option for you. RAs usually get room and board free for supervising specific floors in dorms, and sometimes get a stipend in addition to that for activities. Also, colleges may offer the opportunity for work-study if you qualify. These are more or less the same jobs, but the money that you make goes directly towards your tuition. Sometimes to get enough money to pay for your education, you need look no further than your college or university.



3. Surf The Web – there are countless websites that employers post job openings regularly. Craigslist.org is one of the best places to look for local job opportunities. They have many different subcategories of jobs to search, and also feature a separate section just for part-time jobs. Also be sure to check the “Gigs” section if you’re in a field that would apply (writing, film, ect.) or for miscellaneous jobs that can earn you a few quick bucks. Craigslist also posts many paid research studies, which could be a good way to make some quick cash if you qualify as well. Other places to look include Monster.com, SimplyHired.com and CareerBuilder.com. Keep in mind that internships may or may not be paid, but could also be a good opportunity for students to gain experience and make contacts for later on. Search the web for jobs; it’s one of the easiest ways to discover new job openings.



4. Talk To Friends – sometimes getting a job isn’t about what you know, but who you know. Try asking friends and family about places that they work or worked in the past. They may have some connections or contacts that you can get in touch with for some work. Another possibility is that if you have a friend currently working at a place, they might know about upcoming openings and be able to put in a good word for you. You can also get an insider’s perspective on different places and find out if the employer is someone that you actually want to work for. When job searching, never forget about your friends and family – someone you’re close to could make a huge difference to your finances as well as your social life!

Rough economic times don’t have to signal unequivocal doom to job searchers. There are many different ways to look for part-time jobs for students. By using any or all of these resources, you might be able to find a job that not only pays the bills, but that you might actually enjoy, too. Don’t get discouraged looking for jobs; if you utilize these strategies and are consistent about looking for employment, you should be able to find a great job that can help you to finance your studies.




*About the author: This is a guest post by Caroline Fraissinet, a student at Drexel University in Philadelphia, PA, majoring in Film/Video with a minor in TV Production. More articles by Caroline can be found here.

*Image Credit: Photograph by boogah [via Flickr Creative Commons]

This article was included in the Carnival of Personal Finance #243. Thanks, JD!