Automatic Stay – this is the second best thing about filing bankruptcy. The moment you file bankruptcy your creditors are stopped in their tracks. The harassing phone calls cease immediately as with all other collection activity: garnishment, lawsuits, repossession and foreclosures. There are three absolutes: death, taxes and the automatic stay provision of the bankruptcy code. With cars and mortgages if you don’t immediately make arrangements to continue to pay these bills or act to get a Chapter 13 plan confirmed the automatic stay only has a limited benefit, but for harassing credit card companies and collections agencies you probably never hear from them again. What’s the second best thing (see discharge debts).
Bankrupt – the legal definition states that your liabilities exceed your assets. For the average person this means that you can’t afford to pay your monthly bills with this month’s paycheck or earnings, and that you do not have enough liquid assets (non-exempt) to satisfy those debts.
Bankruptcy – a set of Federal Laws designed to protect debtors and creditors when a debtor can no longer afford to pay his bills. The law was designed for the orderly disposition of assets either through liquidation, exemption or repayment.
Chapter 7 – this type of bankruptcy is also known as a “simple bankruptcy” or “liquidation bankruptcy” – the most common form of bankruptcy for individuals and business. For those who qualify, debts are discharged, a certain portion of a person’s assets are protected, and the rest is liquidated and dispersed to your creditors. Retirement plans, clothing, household items, certain amounts of home equity and/or equity in personal property is protected.
Chapter 11 – this a form of bankruptcy for large companies of very wealthy people (who don’t qualify for Chapter 7 or Chapter 13)
Chapter 13 – this is a type of bankruptcy also known as the “wage earner plan” or a “repayment plan.” In this type of bankruptcy a person unsecured debts (a portion or all) are repaid over a 3 or 5 year plan. A debtor receives his discharge after they complete this court approved plan.
Chex Systems – a company used by banks and credit unions that report an account holders negative activity: bounced check, unpaid fees and excessive overdrafts that result in the bank closing the customer’s accounts. These negative reports are referred to as “for cause” incidents. Such reports will often prohibit you from opening a new account. They stay on your file for 5 years. Such a report is the kiss of death for those starting over with no bank account. (more about this company and post-bankruptcy banking alternatives in future posts).
Credit Repair – this is the act of paying your bills (credit cards, mortgages and car loans) on time, every time. If performed consistently over a period of two or more years after filing bankruptcy a new “history” of credit responsibility is created. I’m not talking about some wacky strategy of fabrication of a new credit file just advocating the time tested method of paying your bills on time. After filing bankruptcy review your credit file for mistakes and for debts that should have been discharged. Review each year for accuracy and improvement.
Credit Card Negotiation Companies – These are for profit companies that are allegedly run by human beings. They claim to want to help you reduce your credit card debt by up to 60%. They heavily advertise on radio and the internet touting their special debt reduction “programs that the credit card companies don’t want you to know about.” There are no such “secret” programs. Here is their pitch: First you pay them a bunch of money up front (or they take a monthly fee); next you pay them a certain amount every month, they will than put that money into a saving account, and when you have enough saved they will call one of credit card companies (you give them power of attorney) and than they negotiate a less than full payment. Ok, sometimes it can be up to a 60% reduction, but the rest of your credit card bills go unpaid for months, interest and penalties increase and finally the lawsuit start getting filed. You can do the same thing yourself. Stop making your credit card payments, put that money in a savings account and when you saved enough call one of them up and negotiate the same deal. All for free. Plus, you still get sued. What a bargain. This author’s definition: These companies are scams. They can not and do not promise to get you out of debt. But they will expertly separate you from your money. (See Loan Modification Company)
Debt Free – the new status symbol is the paid in full mortgage with no car payment or credit card debt.
Discharged Debt – one of your debts, such as a credit card bill, that has been legally wiped-out by bankruptcy. You never have to pay this back.
Fresh Start – the decision to move forward with your life following bankruptcy by taking positive steps to improve your financial life by living below your means, debt free living, saving and investing for the future and re-establishing credit for purchasing a home.
Financial Distress – the day to day financial situation of someone’s who is living beyond their means; whose income is exceeded by their monthly repayment ability. This is the exists because of high monthly debt obligations or insufficient monthly income. Unless treated this situation leads to family, marital, job and spiritual stress.
Financial Denial – also known as “lie and deny” – the state of mind of a person or husband and wife that they are living a financial lie. Yes, the lights are still on and there’s food on the table but for how long? This is classic example of avoidance.
Financial Lie – this is the state of mind and financial existence where you live on a finite amount of income, credit and savings. Yes, your credit score may still be above 740 or you are current on your mortgage or SUV payment, but your probably borrowing money through cash advances or raiding your retirement plan. By continuing to conduct your financial affairs in this fashion you perpetuate that lie. Here is the truth: You can’t afford the lifestyle your living. Financial lies usually end up disclosing themselves because unlike the government we can’t print or borrow money indefinitely.
Income Problem – this is the situation where you monthly expenses exceed your monthly income. There are two solutions to this problem: (1) cut expenses; or (2) increase income. Filing bankruptcy can never solve this problem. At FRESH START System we address this situation before ever considering bankruptcy otherwise your doomed to continual state of financial distress.
Loan Modification Company – a group of individuals who attempt to convince you that they have special powers of negotiation with your mortgage or loan company. They advertise on TV, radio and the internet. They tout their supernatural powers to lower interest rates, stop foreclosures, that they can magically reduce the principal on your mortgage thus lowering your payments or wiping out huge amounts of debt. They are experts at separating you from your money before they produce any results. This author’s definition: They are a SCAM. It is also been reported that these companies are owned and run by human beings, but that has not been verified by this author.
Pay Yourself First – a fundamental principal of saving and creating wealth. For every dollar that you earn you set aside (save) a portion, usually 10% or more, before any other portion of that dollar is spent. Paying Yourself First is a fundamental principal to any financial plan, including the FRESH START System — Life After Bankruptcy.
Pre-Paid VISA Debit Card — a relatively new financial instrument issued by certain banks that allows a card holder to recharge or “re-load” a VISA or MASTER CARD debit card through an employers direct deposit or cash deposits. The debit card acts identically to “regular” bank issued debit cards. Virtually available to anyone – these cards provide an alternative to the traditional checking accounts that may not be available to someone because of bad credit or the Chex System “kiss of death.” (See Chex System above). Note: These are new type products: This author makes no warranties and has no direct experience with these types of products – they are mentioned solely as a service, but do your research first.
Secured Credit Card – a credit card issued by a bank based upon a deposit of money into a secured or block savings account. They issuing bank extends credit based upon the amount on deposit. Usually, the bank will ignore bad credit history and will rely solely upon the “security.” These cards are excellent ways to rebuild your credit history so long as the issuing bank reports to the major credit bureaus and the card holder pays on time and does not max out the credit limit on the card.
Stop Digging – the phrase means stop spending more than you can afford. Stop going into further debt; or following bankruptcy don’t start incurring new debt. This is a fundamental principal to the FRESH START System: live debt free, spending less than you make, save for a rainy day and retirement.
Triggers, Traps and Tragedy – the major causes of bankruptcy: loss of job, death, divorce, poor financial education and choices, living beyond your means, change in circumstances, fraud and identity theft.
Disclaimer
Fresno-Bankruptcy-Lawfirm.com is owned by the Law Offices of Jeffery D. Rowe. We are a debt relief agency. We help people file for bankruptcy relief under the Federal Bankruptcy Code (Title 11 of the United States Code). If you would like to discuss your situation in further detail, please call our offices at: (559) 228-1500 to schedule a consultation.
