Bankruptcy Blog

Nearly every person I speak to regarding the need to file bankruptcy tells me how ashamed they feel by the prospect of going bankrupt. They explain to me how they have always paid their bills and that no matter how hard they try, they cannot pay down their debts and are falling further and further behind. They feel they are alone, hopeless and are filled with despair. They feel they are bad people because of their financial situation and somehow deserve to suffer harsh consequences.

The purpose of this post is dispel the perceived stigma of bankruptcy. The stigma affects a person’s decision to exercise their Constitutional Rights and release themselves from overwhelming debt by getting a fresh start.

To begin with, it is creditors who promote the moral stigma of bankruptcy and make consumers feel terrible because they can no longer afford to pay their bills. And why not? Creditors have everything to gain by shaming, cajoling, browbeating and intimidating consumers into not filing bankruptcy. Creditors don’t tell consumers their legal options under the law because those options are not pro table to the creditor. Don’t expect creditors to tell you the truth about your legal rights in relation to your debt. Expect them to manipulate you into giving them all your money.

Most people don’t realize bankruptcy relief has a long history dating as far back as the Bible. In Deut. 15 1-2 the Bible itself provides for the periodic release from debts: ” At the end of every seven years thou shalt make a release. And this is the manner of release: every creditor shall release that which he has lent unto his neighbor and his brother; because the Lord’s release hath been proclaimed.”

Bankruptcy is every citizen’s right under under the law, provided for in the Constitution, intended to provide a fresh start for those financial distress and that many famous people and businesses have  led for bankruptcy protection in the past and continue to do so today.

Many of America’s political, business and entertainment leaders have gotten a fresh start by  ling bankruptcy. For example, did you know Thomas Jefferson (our 3rd President) and Abraham Lincoln (our 16th President) both filed bankruptcy several times? (And, they are not the only US Presidents who have done so.) In addition, Walt Disney, Henry Ford and P.T. Barnum also exercised their legal rights and filed for bankruptcy when their financial situations called for it.

Why should bankruptcy laws only apply to the famous, smart or wealthy citizens of these United States? The answer is they don’t: the legal right to file bankruptcy is protected in the U.S. Constitution and US laws. They apply to everyone equally. This includes you!

Call the Upper Peninsula Bankruptcy Lawyers: Church and Korhonen, PC today to see if you qualify for filing bankruptcy just like Abraham Lincoln, Thomas Jefferson, Walt Disney and so many other famous people have done countless time in the past.

What’s good for the famous can be good for you too.

People are often wary about filing for bankruptcy, often based on stories they have heard about the process. In most cases, those stories are nothing more than myths and once the air is cleared, they find that bankruptcy is not only not scary, it was the best thing they ever did. Here are ten bankruptcy myths that are just not true.

Bankruptcy brings shame – this is perhaps the worst myth of all. Bankruptcy is there for a reason – to help people when they need it most. Do you recognize any of these names – they have all filed for bankruptcy? President Abraham Lincoln, Mark Twain, Henry Ford, Francis Ford Coppola, Larry King, Mickey Rooney, Burt Reynolds, Kim Basinger, Jerry Lee Lewis, Wayne Newton, M.C. Hammer, Continental Airlines, General Motors and US Airways (twice).

You’ll lose your job – the court will not notify your employer of your bankruptcy petition. In fact, you may have several work colleagues who have filed for bankruptcy – you just never know, and they won’t know about yours either.

You’ll lose everything – the majority of bankruptcy cases now involve debtors with few if any eligible assets. Most people are discharged from bankruptcy having lost nothing but their credit score, and that was on the way down anyway through overdue debts.

You have to be flat broke to file – income has little effect on your ability to file for bankruptcy. If your income is not large enough to cover your debts, then you may need to file. Your income will determine which Chapter you are eligible to file under.

You need a lot of debt to file – the amount of debt you carry is not important. As mentioned, it’s whether or not you have sufficient income to service your debts, that’s what’s important.

Bankruptcy destroys your credit – bankruptcy will affect your credit. In the eyes of some lenders, you’re a better risk after bankruptcy than before. Your credit score will return to normal if you are wise with your future spending and credit activities.

Your spouse must file as well – another myth is the opposite, you and your spouse have to file separately. The truth is, if you are legally married, then it’s your decision whether to file jointly, or for only one of you to file.

You’ll lose your house in bankruptcy – you can only lose your home through bankruptcy if you have a lot of debt and a lot of equity in your home. In most states, there are large homestead deductions in place that protect homes. Bankruptcy will stall foreclosure, however, bankruptcy will not clear your

mortgage debt. Few people lose their homes because of bankruptcy.

Bankruptcy will take my pension plan – the vast majority of pension plans are protected in bankruptcy. You may have difficulties if you have drawn large amounts out of your plan, or made very large payments into your plan just prior to bankruptcy, otherwise, your pension plan is perfectly safe.

Bankruptcy affects citizenship status – bankruptcy has no bearing on your current or future citizenship statues provided there is no fraudulent acts discovered through bankruptcy.

Bankruptcy is fairly easy process if your engage the services of an attorney first. Rather than listening to what others have to say about bankruptcy, get the real facts from a real attorney – remember, every person’s situation is different.

Before you sign your bankruptcy petition, you must review everything for accuracy. One of the schedules, called “Schedule J – Current Expenditures of Individual Debtor(s)” is where your monthly expenses are listed. Unfortunately, many people are unaware of what their monthly expenses are, and what is allowed. A commonly asked question is, “What monthly expenses are allowed while in bankruptcy?”

Here are some personal monthly expenses that are allowed in bankruptcy: work expenses, ongoing legal fees, bank charges (monthly checking account fees, ATM fees), hair care and personal grooming products, annual tax return preparation fees, accounting fees, summer camp and summer activities, school lunches, sports fees, school uniforms, Christmas and birthday gifts, pet grooming and care, pet food, veterinary visits, oil changes for your car, cigarettes, car washes, and parking expenses.

Other allowable monthly expenses while in bankruptcy include: college expenses, home landscaping & lawn care, home alarm system and maintenance, annual registration cost for motor vehicles, postage, EZ Pass costs, OnStar system payments, vision care, doctor visits, dental visits, charitable donations, eyeglasses (care and replacement, including contact lenses and saline solution), home office supplies (including computer toner, ink, paper, and software), non-prescription medications, and shoe shines. Additional allowable monthly expenses include: monthly website subscriptions, monthly magazine and newspaper subscriptions, antacids, gym/YMCA fees, toothpaste, tooth whiteners, brush and floss, pain killers, cold/sinus/allergy remedies, vitamins, weight loss programs and aids, books, and music lessons.

Some expenses are easy to determine and record – fixed expenses such as mortgage or rent payments, car payments, health insurance, child support, and cable. Variable expenses are harder to determine since the payment amounts fluctuate. These expenses include food, electric costs, gasoline, day care, and phone. To determine your variable expenses, review the past year’s expenses and divide by 12 to calculate the average monthly cost. Don’t forget to include periodic expenses, such as clothing, medical expenses, and insurance.

Where there are people who have any kind of debt, there are scammers lurking and waiting to trick them into buying into a plot devised to steal even more money from them. You may have heard the telemarketing calls that start out telling you you’re pre-qualified for a lower interest rate on your credit card, they want to give you a grant or scholarship, or that you can lower the payments on your “whatever” by doing x, y, and z. It almost always involves you sending them some type of illegal payment, and always results in the unlucky victims feeling fooled and frustrated.

Anyone who wants real, free advice about student loans should contact the U.S. Department of Education, or their private loan servicer. There is no information about your loans and financial status that you cannot find out for yourself by contacting the appropriate resources. Remembering certain things can keep your from making common and potentially costly mistakes, such as:

• Never Pay Anything Upfront – Many “companies” will try to convince you that they can help you drastically reduce your debt, so long as you pay a pretty hefty fee upfront. This is illegal. No reputable company will ever ask you for any fee’s in advance for information to help you reduce any student loan debt.
• No Such Thing as Fast Forgive and Forget – Loan forgiveness is a real thing, but it comes with a lot of red tape and requirements. Anyone who comes claiming they can completely forgive your student loan debt without any previous information about you is waving big red flags. Loan forgiveness takes time, and is not a once over the phone conversation.
• Fake Seals and “Official Documents” – It can be easy to be duped by fancy forms with official looking information on it claiming to be from the U.S. Department of Education or other known institutions, but often times these scammers spend quite a bit of money to make their operations look legit. If you receive any suspicious looking documents that you’re unsure of their authenticity, you can always call the U.S. Department of Education’s help or customer line to ask them to verify the document. In nearly all cases they will be able to determine the documents authenticity and save you the hassle of getting scammed
• Don’t Share Your Personal Information – Your FSA ID is the key to your student loan kingdom. By giving your FSA ID out without verifying who it is you’re giving it to, you are potentially opening up your life to identity theft, fraud, and more. Once scammers control your personably identifiable information (PII), they can do anything they want in your name including worsen your debt. Always keep your PII to yourself unless you’re 100% sure the person you are sharing it with is a trusted professional.

Student loans can be a burden, and a quick fix can give you hope that you know better than to grasp at. Don’t let the fear of your student loan debt push you to make risky decisions. There are countless professionals available by phone or online who can help you with your student loan debt.

If you have been sued for delinquency or are in need of legal advice regarding your student loans, call Church and Korhonen, PC, toll-free at 1.800.758.5611 or simply fill out the form in the sidebar to begin taking steps to a more sound financial future, greater peace of mind and a fresh start.