Bankrupt Is Normal

Update on My Life After Bankruptcy

2008-04-12T23:00:00.002-04:00

I'm ashamed to say I haven't posted on this site in three months. I fully intended to keep posting helpful information to people who are going through bankruptcy. The problem is I've been working 50+ hours per week on my new job so I have not had very much time to do anything but work, spend time with my family, and sleep.

That's also very good news for my family. The timing has been perfect. Not only did I get rid of all my credit card debt in the bankruptcy but now that we're making a lot more money and we've been able to pay off other debt and have fixed up our house and we're even taking our family to Disney World next month. We're the perfect example of how bankruptcy can change your life for the better.

Plus my brother now needs to file bankruptcy (he's got himself in a huge mess). He doesn't even have the money to hire an attorney so I'm thinking about helping him to file for himself. If that happens I'll have plenty more information to post on this website. I'm also going to be working less hours starting next week. The money has been nice but I have to have a life too.

Thanks to everyone who reads my blog and I'm really sorry that I haven't posted in so long. My goal is to post at least twice per week. I want my posts to contain useful information that will benefit you in your struggles through bankruptcy and your fresh start in life after bankruptcy.

God Bless,

Kari

My Chapter 7 Bankrupcty has been Discharged!

2008-01-11T22:03:00.000-05:00

This is an awesome day for me. I checked PACER today and as of yesterday my bankruptcy is discharged. Woohoo! I knew it had to be any day now but I'm just thrilled.

If this is your first time reading my blog please check out my other entries. I filed bankruptcy on October 12th and have documented all of my personal bankruptcy experiences here. My bankruptcy was audited and I also started a new job in between filing and my 341 meeting of creditors. I was worried that any of those things could cause a delay in my bankruptcy or even cause me to have to file a Chapter 13 instead.

I'm so happy that my bankruptcy is discharged. I'm ready get my fresh start and do things right this time around. I'll keep making entries into my blog because I'm very interested in researching more about about bankruptcy law and other people's experiences. I also want to be able to help other people that might have to go through a bankruptcy. You'll hear over and over again that bankruptcy can be the most hardest thing you'll ever have to go through. It was NOT for me. The last few months I've felt like a huge burden has been lifted from me. I have three children and I wondered how I would ever send them to college (let alone put dinner on the table for them). Now I'm looking toward a bright future for my family.

No objections?!

2008-01-08T12:39:00.000-05:00

I checked out my case today on PACER and the status is still "awaiting discharge". I'm thinking any day now my case should be discharged because I filed on October 12, 2007 and my first 341 meeting was on November 8th and my second 341 meeting was on November 29th. However, the last day for my creditors to object was January 7, 2008 and I don't see any objections on PACER and my attorney hasn't contacted me with anything.

So now I'm just waiting. My audit went through fine. They didn't find anything that concerned them. The only thing I'm probably waiting on is my van to be reaffirmed. My attorney mentioned I might have an issue with reaffirming my van but I'm not sure if that will hold up my case from being discharged.

So far my life doesn't seem at all worse from filing. It's much better. I don't get creditors calling my house and I have over $800 per month less bills. I know I can't get credit but I'm going to try to live without credit anyway because of the mess I got myself in from using too much credit before. I keep everyone posted when my bankruptcy is discharged. I can't wait!

My bankruptcy audit is over.

2007-12-27T19:35:00.000-05:00

I checked PACER last night and it looks like they are done with my random audit. My bankruptcy case was one of the “lucky” ones chosen for a random audit. The audit company called my attorney’s office a couple days ago with a few additional questions and now PACER shows:

"Report of Audit with No Material Misstatement Identified. (Entered: 12/26/2007)"

It sounds to me that they have completed my audit and everything checked out. I’m so relieved. I was hoping that the audit didn’t hold up my discharge. So now as long as I don’t receive any last minute objections from creditors I should be discharged within the next couple weeks. Yay! This bankruptcy is almost over and behind me now.

The Bankruptcy Forum – All your bankruptcy questions answered!

2007-12-15T01:37:00.000-05:00

I’ll never have enough good things to say about the bkforum. I stumbled upon this website when I first decided to file for bankruptcy and this website has been a God send for me. Bankruptcy is such a hard decision to make and you can feel trapped and alone. But if you decide to visit the bkforum you’ll realize that you are not alone. The thing that’s so cool about this site is that not only is there people there in the same situation as you but the moderators at the forum are very knowledgeable about bankruptcy laws and proceedings. If you have any questions at all about filing bankruptcy ask at the bkforum and you’ll have many replies in a matter of minutes.

I have to say that I personally visit the bkforum at least once a day. I try to check out the latest posts and now that my bankruptcy is filed and I’ve attending my 341 I especially like to hang out in the general section. I’ve never read a forum where the people are so nice and accepting.

No – they are NOT paying me for this post let me assure you, but if your looking for the right step to take and you’re not sure about bankruptcy then just check out the bkforum because you’ll get a lot of good information there.

Good luck with everything and come back soon.

Should I file for bankruptcy?

2007-12-12T22:12:00.000-05:00

If that’s the question you’re asking yourself then you’re probably in serious debt and don’t see a way out anytime soon. You really need to weigh your options and see if there’s any other way for you to get out of debt. Filing for bankruptcy should be a last resort but there are many times when it is the best decision you can make. Answer the following questions:

1. Are you able to make at least the minimum payments on your credit cards and if so, how long will it take you to pay them off?
If you’ll be paying off your credit cards for more than 10 years then it might be worth filing bankruptcy.

2. Is your house in foreclosure or are you no longer able to make your house payment?
If you file a Chapter 13 bankruptcy then you may be able to save your house and prevent foreclosure.

3. Are you disabled, living on social security, or have no income from a steady job?
Sometimes, people are deemed judgment proof meaning they don’t have any income that can be garnished from a creditor suing you in court. Unless you have a reason to file bankruptcy (you’re losing your house, etc) sometimes it better to wait it out. You may have to put up with annoying phone calls from creditors but it might be better than going through an unneeded bankruptcy.

4. What kind of debts do you have?
If your debts are mostly credit cards and medical bills then these kinds of debts can be discharged in bankruptcy. In a Chapter 7 bankruptcy you pay none of it back. If you file a Chapter 13 bankruptcy you will be put on a payment plan and at the end of 3-5 years whatever is left owing will be forgiven. However, if you owe for student loans and child support, these debts can not be included in your bankruptcy in most cases.

5. Have you recently lost your job or had a decrease in income?
You may need to file bankruptcy if you can no longer afford your previous debt load.

6. Do you possess many assets with high cash values or have a lot of equity in your home?
If you do, you’ll definitely want to talk to an attorney before seriously considering bankruptcy. Depending on what state you live in you can protect up to a certain dollar amount in assets but at some point the bankruptcy trustee will be looking at ways to get money to pay off your creditors.

Filing for bankruptcy is never an easy decision but sometimes it is necessary. You have to think about this logically and try to stop your emotions from getting in the way. You’re not a loser if you decide to file for bankruptcy. Sometimes it’s the very best decision you can make. I personally recently filed for bankruptcy and I feel really good about my decision. My family actually has money at the end of the month to spend on clothes or haircuts. We struggled for some time with a huge amount of credit card debt that just continued to grow because we never had enough money to live on. Now we pay cash for everything and that’s a really great feeling.

If you do decide to file for bankruptcy then make sure you make a vow to never get yourself in this mess again. You need to build an emergency fund to may sure you never have a reason to borrow money. Don’t use credit cards. Most people can’t handle paying off the balance each month and before you know it you’ll be back in debt again. Live within your means. Don’t finance a car that’s going to take 20% of your income each month. If something happens and your income decreases you’ll find yourself right back in the same situation.

Bottom line – file bankruptcy if you need to. First, contact an attorney, or two, or three. Most give a free consultation and can give you great advice. Then after your bankruptcy is over get your “fresh start” and make sure you never have to file for bankruptcy again.

Good luck!

PACER Brings Me Good News Today!

2007-11-30T21:58:00.000-05:00

Yesterday was my 341 for my Chapter 7 bankruptcy I filed on October 12th. Actually it was a continuance of My November 9th 341 but that’s another article. So just now I decided to check PACER to see if the status had been changed on my case. In case you don’t know PACER is the acronym for Public Access to Court Electronic Records. Anyone can set up an account on the web but there are some costs depending on how many pages you view. So here’s the current status of my bankruptcy petition:

Meeting of Creditors Held and Concluded on 11/29/2007Trustee's Report of No Distribution Trustee of this estate reports and certifies that the trustee has performed the duties required of a trustee under 11 U.S.C. 704 and has concluded that there are no assets to administer for the benefit of creditors of this estate. I have received no funds or property of the estate, and paid no monies on account of the estate. Wherefore, the trustee prays that this report be approved and the trustee be discharged from office.(Entered: 11/30/2007)

This is great new for me because this means the trustee has determined that I have no assets to collect for the benefit of my creditors and he’s recommending my case be discharged. Yay! Now I am waiting to hear how my audit turns out. I was one of the cases selected for a random audit which means I had to turn in extra paperwork to a third party who performs an audit to make sure I’m not committing bankruptcy fraud. But since I’m NOT committing bankruptcy fraud I don’t foresee any issues (hopefully).

If you’ve recently filed for bankruptcy check out PACER. Don’t let the costs scare you away. It’s been a huge comfort to know that I can find out the status of my bankruptcy even before my attorney’s office notifies me. The cost is only 8 cents a page. I just checked my balance and so far I’ve been charged $1.04. You can rack up the charges if you start searching under other peoples names, which sometimes people do get curious. However, I just check the current status of my bankruptcy and that’s it. It’s also funny to mention PACER to your attorney’s office because they always act shocked that you actually have access to it.

I went to My 2nd 341 Today

2007-11-29T13:53:00.000-05:00

Today I went to my second 341 Meeting of Creditors. The trustee wanted to talk to me about my mortgage. When I got there I talked to my attorney and he said since I'd recently refinanced my house (within 90 days of filing) the trustee had the right to strip the mortgage company of the mortgage and I would have to refinance or lose the house. I was very upset and the attorney said he hadn't realized that I'd recently refinanced. Of course I had told the attorney I just think he must have overlooked it. He said they trustee will only try to get money so he might just try to negotiate with the current lendor and try to get them to give him some money. I thought the whole thing seemed very strange.

When I went in front of the trustee it was very quick and painless. All the trustee wanted to know was had I received more money from the loan then what was required to pay off my previous morgage. I told him no and that was it - 341 adjourned. What a relief.

So here's another piece of advice for you. If you've recently refinanced your home then wait 90 days before filing. I hadn't heard this before filing or I would have waited another 30 days just to make things less complicated. So now I'm just waiting for my discharge, hoping no creditors object, and praying that my audit is over quickly.

My second 341 Meeting is tomorrow

2007-11-28T15:16:00.000-05:00

My attorney thought the continuation for my 341 meeting would be canceled once I provided the courts with a copy of the registered deed to my house. My great luck strikes again! He was wrong. The court called the attorney’s office today to let them know I do need to show up to yet another 341 meeting tomorrow because the trustee has some questions about my mortgage.

I am so bummed. I filed for Chapter 7 bankruptcy on October 12th and my first 341 meeting was on November 8th. Now not only am I one of the “lucky” people who gets randomly audited but I also get to attend two 341 meetings. I feel sick right now.

I don’t know what the trustee would want to know about my mortgage. I recently refinanced because my old mortgage was going to adjust from 7% to 10.5% so if I wouldn’t have refinanced there’s no way I would have been able to keep my house and continue making payments. Hopefully that’s all the trustee will need to hear.

I was also called about the audit today. The company performing the audit wanted all my bank statements through the month of October even though I filed on October 12th. Well I gave them all the paperwork on November 1st so of course I didn’t have all my bank statements from October at that time. The ones I was able to give them I printed off the internet. So just now I also faxed over another October bank statement for an old checking account that has $10 in it.

I just feel like I’ve done something horribly wrong and that they’re going to find out about it even though in actuality I have nothing to hide. I filed bankruptcy because I didn’t have enough money to pay for my bills – that’s the bottom line. I am entitled to file bankruptcy by the U.S. government. It doesn’t make me an evil person but at the same time the courts are giving me such a hard time about it, it makes the system seem so twisted.

I realize that there are people who will try to scam the system so they need to have some of these checks in place but it doesn’t seem like it would take much to figure out I’m not one of these people. I’ve never had a lot of money. I don’t own anything of value. I just don’t seem to fit into a category of a bankruptcy scam artist.

I realize this post was mostly a rant and I apologize. As I’ve said before, this website is for the benefit of you and me. This article was mostly for me, sorry.

Credit Scores After Bankruptcy

2007-11-24T01:41:00.000-05:00

In case you're wondering what will happen to your credit scores after you file bankruptcy I've decided to track mine so you can get an idea of what will happen to yours if you decide to file. I had really good credit scores prior to filing. They were in the 720's with each credit bureau. Right after filing they averaged 560. A huge nose dive, I know. But a month after filing they are back to an average of 649. I know 649 isn't a great score but it's not too bad either. Also, I think I get just as many offers for credit now as I did before I filed bankruptcy. I know the interest rates wouldn't be as good and I don't even want new credit but I'm not really missing out on anything either.

This post is just to let you know bankruptcy is not the end of the world. You'll get through it if this is what you need to do. Good luck to you!

I have $1000 in savings

2007-11-17T20:21:00.000-05:00

I'm off to my fresh start. Although I've just recently filed for bankruptcy and am barely finished with my 341 meeting I have stashed away $1000 into my emergency savings account. An emergency savings account is very important when you're learning to live without credit cards. One of the reasons I found myself so far in debt was because whenever an emergency came up I always had to pull out the plastic.

I don't plan to spend this $1000 for anything unless it's absolutley an emergency. It will be safe from Christmas presents and anything else we feel we "need". My next stop is to start paying off all of my other debts. Now that we have filed for bankruptcy we don't have anymore credit card debt but we still have student loans and car payments. We also have one credit card that is in my husband's name. He didn't file for bankruptcy because the card only has $1200 owed.

We plan to pay off his credit card first, then the car payments, and finally our student loans. I'm really ready to live a debt free life.

This Bankruptcy Waiting Period is Killing Me

2007-11-14T17:50:00.000-05:00

I really have nothing new on my bankruptcy to report and it’s quite annoying. I just checked PACER and there are no new notes on my account. I filed Chapter 7 bankruptcy on October 12, 2007 and attended the 341 meeting last week on November 8th. The Meeting was continued to November 29th because I didn’t have all my paperwork but the trustee said once he received it he would probably cancel the continuation.

I am also being audited by the U.S. Trustee as one of the “lucky” 1 out of 250 that get a random audit. I’ve turned in all my paperwork to the attorney’s office and haven’t heard back about that either. Waiting is tough. I wish I could look into the future and know that everything is going to be ok. I really want to put this bankruptcy behind me and continue on with my life.

If you are currently going through a bankruptcy like me or even if you are just thinking about what decision is best for you I hope you will my website helpful. Bankruptcy isn’t easy but it does make it more comforting to know you’re not the only one in this situation. Bankruptcy shouldn’t be “normal” like the name of my website suggests but unfortunately today many, many people are being forced in bankruptcy because of tough economical times and the mistake of too much debt.

Using the Envelope System is a Great Way to Stick to Your Budget

2007-11-09T20:45:00.000-05:00

If you’ve recently filed for bankruptcy or are trying to avoid bankruptcy you can stick to your budget much easier by using the envelope system. I’ve been using this system since I decided to file for bankruptcy and stopped using credit cards. The problem with using debit and credit cards is you lose sense of how much money you’re spending and you’ll go over budget without realizing it until it’s too late.

When you use the envelope system you’re going to be spending only cash. On payday I figure out how much money I’ll need for food, our “free” money, household expenses, children allowances, and school lunch money. The rest of the money in my account is to cover bills (and savings one of these days). The only thing I use my debit card for is to pay for gas and that’s because I have two babies that I like to leave in the car instead of taking into the gas station. You’ll have to figure out what works best for you.

You actually put the cash for each of these categories into an envelope, except for the “free” money which my husband and I keep in our wallets. Our “free” money can be used for the soda machine, fast food, or whatever but it’s not a very large amount. The envelope money stays at home unless I plan on spending it. If I’m going to the grocery store I take the grocery money. When the grocery money’s gone then it’s gone – no more overspending. If I save a lot on groceries one week then sometimes we might have enough money left over to go out to eat. I usually use the “household” envelope for other things that come up during the month, such as one of my kids need some new shoes. Again, when this cash is gone there’s no more spending in this category.

I’ve really found this system useful because I tend to overspend on groceries and it really keeps me on track. It’s also a different feeling to spend cash. If you only have $10 in your pocket to last you for the next week you’ll think twice about stopping through McDonalds for a meal that costs $6 when you could eat at home instead. But if you were using your debit card you probably wouldn’t think twice.

One of the disadvantages is you have to find time to stop at the ATM machine on payday and you have to split up the cash. On the other hand, I save a lot of time balancing my account because I hardly have to enter any debit card transactions. Hopefully you’ll try this system and see if it works for you. It will help you to stay out of debt and to avoid bankruptcy.

I went to the Meeting of Creditors (341) for my Bankruptcy Today

2007-11-08T19:32:00.000-05:00

Today was the day for my 341. I had to be at the federal court house by 10am. I decided to dress in my “luck interview outfit” which consists of a brown suit coat, skirt, and heels. I wanted to get there early and it’s a good thing I did because I had to park in a parking ramp about a block away and when I got to the court building they wouldn’t allow any cell phones so I had to walk all the way back and leave the phone in my van.

The bankruptcy court was in the basement of the federal building and I entered a small room with three rows of tables. There were a few other people inside the room and some were consulting with their attorneys. I peeked through the door of the next room and it was a court room with people speaking to the trustee. I had arrived about fifteen minutes early and my attorney wasn’t there so I sat down at one of the tables. The wall in front of me had a huge red sign that warned bankruptcy fraud was a federal crime and could be punishable by a huge fine plus time in jail. I looked around the room and noticed the exact same sign on the other wall, as well.

My attorney arrived a few minutes later and he nodded for me to leave with him and we headed to a break room where it was more private. He quickly went over some things with me telling me to only answer the trustee’s questions and to never volunteer any extra information. Then we headed back to the court room and he told me to go in and to sit in the front row. Right after I sat down the trustee announced that he was finished with the 9 o’clock hearings and would begin the 10 o’clock hearings.

The trustee gave us instructions on how he would swear us in, needed picture id and social security card, and then would ask a series of identifying questions. After those questions were complete he would ask about the bankruptcy petition. The trustee called three people ahead of me and I paid very close attention to what questions he was asking the other people. I was so nervous that I kept saying my name and address to myself just because I thought for sure I’d forget my own name when he asked me.

When I was called I stepped up to his table and pulled myself together. He asked me the usual identifying questions and then he asked me if all of the information on my petition was accurate. I said yes of course and then he asked me the question I had been dreading – “Has anything changed since you filed?” I knew he would ask this question because he had asked everyone else the same thing. So I told him that I had just changed jobs the previous week. He asked me where and I told him. He asked me if there was a change in income. I told him it was a little higher but my expenses would be higher too. He asked me how much higher my net income would be per month after my increase in expenses. I told him I wasn’t sure because I hadn’t figured it out yet but it could be a few hundred dollars. Then he moved on. He didn’t seem concerned about it so I hope that will be ok.

One issue I did have was the trustee did not have a copy of the recorded mortgage for my home. My attorney said he told me to get it from the Register of Deeds and to turn it in to his office. I really don’t remember him saying anything about it but the trustee said he must have it. So he ordered a continuation of my 341 for later this month but said that if I sent a copy of the recorded mortgage to his office and he didn’t have any questions about it he would cancel the continuation.

The rest of my 341 meeting was over quickly and I was actually only at the courthouse for a total of 45 minutes. Right after leaving I went to the Register of Deeds and picked up a copy of the recorded mortgage and dropped it off at the attorney’s office. The paralegal told me that the trustee always cancels the continuation after he receives the copy.

So my 341 is over and I’m feeling relieved but a little apprehensive at the same time. I’ll be checking PACER at least every other day to see if there’s anything new posted about my case. I realize that every county has different trustees who handle things in a different manner but hopefully you’ll be able to learn something from my experiences. The big ones today are:
1. Leave you cell phone in the car because they are not allowed in the building
2. If you own your home make sure you have a copy of the recorded mortgage
3. Have titles to all your vehicles
4. Have your drivers license and social security card
5. Have change for parking
6. Don’t sweat it to much because like everyone said it really wasn’t that bad

How will Bankruptcy Affect my Credit? Will I ever get Credit Again?

2007-11-06T16:46:00.001-05:00

Filing bankruptcy is a scary thing and some of you are wondering if you’re ruined for life and if you’ll ever be able to buy a house, car, or whatever on credit again. The fact is that although you filing bankruptcy stays on your credit report for 10 years it becomes less significant as time passes. The truth is you’re probably a better credit risk after you file bankruptcy than you were before.

Right away after discharge you might be able to obtain a “secured” credit card. A secured credit card is where the borrower places a deposit down and the lender extends a line of credit equal to the initial deposit. This is why it's called secured. In the event of a default, the funds are covered by your deposit. Make sure they are reporting to the credit bureaus and this can help rebuild your credit.

Two years after a bankruptcy discharge debtors are eligible for mortgage loans on terms as good as someone who has not filed bankruptcy. The size of your down payment and the stability of your income will be much more important than the fact you filed bankruptcy in the past.

As you can see filing bankruptcy is not the end of the world and in time you should be able to rebuild your credit. But whatever you do don’t fall into the same credit trap that led you into bankruptcy in the first place. Sometimes debt is necessary if you’d like to own your own home or in cases of emergency but try to live within your means and live as debt free as possible. That’s what I plan to do once my bankruptcy is over.

Good luck!

Met with Attorney Friday, November 2 to Go Over Audit and Vehicle Reaffirmation

2007-11-03T14:54:00.000-04:00

Today I had to meet with my attorney at 2pm to go over some paperwork. First, there’s the issue that I’m being audited by the U.S. Trustee as part of a random audit under the new bankruptcy laws. One in 250 bankruptcy cases are subject to a random audit. I’m one of the “lucky” people to get audited. Also, the attorney had some paperwork he needed me to sign to reaffirm my 2004 Dodge Caravan.

I looked over the audit letter. An independent company is performing the audit. They need my last six months of bank statements and investment accounts, and my tax returns for the last 2 years, including all schedules, W2’s, 1099’s, etc. My attorney already has most of this paperwork but I need to bring him my entire tax return folders from the previous 2 years and also the bank statements I’ve received since filing. I also have to review the last 6 months of statements and type up a document that gives explanations for all deposits into my accounts over $500. Good thing I keep all of my paperwork. This shouldn’t be much of an issue and hopefully the audit doesn’t become a problem. I did have to write a check to my attorney for another $350 to assist me with the audit. Aren’t these new bankruptcy laws great? This bankruptcy is costing me a lot of money which is pretty ironic since the reason I’m filing bankruptcy is because of my lack of money.

The attorney also had a reaffirmation letter for me to sign because I still owe 27 more months on a 2004 Dodge Caravan. I want to keep this vehicle because I only owe 12k on it and I would pay at least that amount to get something equivalent. We bought it brand new in 2004 and have taken good care of the van and have never missed a payment. I signed to reaffirm the van but now the courts have to decide if they’re going to let me. My attorney said he had to check the box and sign that this van payment will cause a hardship because my schedule is -900 to the negative and my van payment is $460 per month. My attorney said their may be a hearing to decide if I can keep it and I can attend that hearing alone to save money by not having my attorney with me. When I signed the affirmation I also wrote “I need to keep this vehicle because I need it for work and to take my 3 children to school/daycare. I will make adjustments to my budget, as necessary”. My attorney said they should let me keep it if I stress that I need the van and I can cut other costs such as food, gas, etc.

My 341 meeting is next week so the attorney also went over some questions the trustee may ask. One he said trips up a lot of his clients is “When did you first realize you we’re having financial problems?” He said the best way to answer this question is “I don’t remember exactly but probably a couple months ago.” He said some of his clients will say a year or more and the problem is the trustee will question why they continued to borrow money when they were insolvent and knew they wouldn’t be able to pay back the debts. You must stress to the attorney that you had every intention on paying back the debts you owe.

I’m going to be working on the audit paperwork this weekend and will be turning it back into the attorney on Monday. I’m getting nervous about my 341 meeting, especially because I started a new job this week and I don’t know what the trustee will ask me about that and if it will delay my bankruptcy. I’ll be posting on Thursday to give an update on how my 341 meeting went.

My Bankruptcy is getting audited!

2007-10-30T17:45:00.001-04:00

When the bankruptcy laws changed in 2005 the U.S. Trustee’s Office started a new program to randomly audit at least one of every 250 Chapter 7 and 13 cases. The audit is supposed to identify cases of fraud and abuse.

I can’t believe my bad luck. My attorney’s office called me today because I’m one of the “lucky” people to get a random audit. Now I have to go to the attorney’s office on Friday and fill out a bunch of paperwork and provide them with more documentation. This is what I have to bring:

Complete tax returns from the last 2 years (all W2s, etc)

All Bank statements from the last 6 months including the entire month the bankruptcy was filed in. Then I have to have an explanation for every deposit or withdrawal over $500 with documentation.

All of my pay stubs, including the entire month for which the bankruptcy was filed.

I hope it doesn’t affect my case too much. I guess I have nothing to hide but it’s more of an inconvenience. I’m not sure if my attorney is going to be charging additional fees but I hope not.

What rotten luck. I’ll write an update when I find out more…

The Dangers of Credit Card Debt – My Personal Story

2007-10-26T15:30:00.000-04:00

I received my first credit card in the mail during my first year in college. I went away to college and was only there a month when the card was mail to me. I hadn’t applied for the card and I had no job. I thought it was so neat that a company thought enough of me to simply send me a credit card with no strings attached. Since I didn’t have a job and I wanted to have money to go out with my friends I put this new credit card to use right away. I didn’t charge too much. I would take cash advances out of the ATM machine of $20 a week, maybe less or more. Somehow I always managed to pay the minimum payments and my payments were never late.

As my life continued I used credit cards whenever I needed to make a “big” purchase. I never even thought of saving up the money to buy these things. I thought if I could afford to make the minimum payments everything was great. I could have the things I wanted now and worry about paying for them over a very long period of time. I didn’t see a problem with my financial life. My husband and I charged our honeymoon (about $5k). We rationalized this because this was a once in a lifetime opportunity for us to go to Jamaica for our honeymoon. We also charged items such as a new washer and dryer, furniture, computer, and a big screen TV. These things were not all purchased at one time. I’m talking about a period of about 10 years. We always paid at least minimum payments and I felt good.

I had good credit and lots of nice things. I drove a new van and to other people we looked like we were doing very well. We went through a custody battle to get custody of my husband’s daughter. Her mother had custody and was using drugs and there was a lot of violence in her home. We didn’t have the cash to pay an attorney so we charged the fees. The attorney fees were about $7K over a period of a year and a half. We also charged small things here and there such as Christmas presents, school clothes, and short vacations. I never viewed this as a problem and sometimes I even felt grateful for the credit cards because I felt like they allowed me to live a better life then was possible with out them.

Wow. I can’t believe how my point of view has changed. My husband did get full custody of his daughter (thank God) and in the same week my first baby boy was born. We both worked but always separate shifts so we never had to worry about daycare. It happened very slowly that more and more of our income was going toward credit card minimum payments. I always kept a budget so we never missed payments but we started to struggle to buy anything, even groceries and gas for our cars.

Then in March of 2007 I had another baby boy and my husband was offered a great job opportunity working first shift (the same shift I work). So when I came back to work in May, off maternity leave, we had to put two children in daycare. Daycare costs are over $1200 per month for us – ouch! No matter how I adjusted our budget the bottom line is we could no longer afford it. We got rid of cable TV, started cutting coupons, and cut our expenses in everyway possible. Our budget was clearly in the red by about $1000 per month after making all cuts possible. The only option I was left with was either to let our house foreclose (selling in this market is not an option) and move the whole family in with my parents or file for bankruptcy.

I was in denial for a while. We didn’t want to use our credit cards anymore but if I made the credit card payments we had no money for food or gas for our cars so we had no choice. I decided I would call the credit card companies and explain we were having a hard time and see if there was anyway they could offer help to us. After all, I had always been a great customer and I figured they would be able to offer me some kind of break.

First, I contacted Bank of America (MBNA) because I owed them the most money. They told me that I was already at their very best interest rate and the only thing they could do was transfer me to their “Debt Consolidation” partner. A nice lady got on the line and took down all my expenses and our income. She wanted to know the interest rates I was getting on all of my credit cards. I was getting fantastic rates, anywhere from 0% - 12%, so she couldn’t help me. She suggested I contact a bankruptcy attorney. A few days letter I got a letter from MBNA stating they were closing my account because of the conversation.

I did contact a bankruptcy attorney and he was very understanding and helped me to see that I’ll probably never get these credit card bills paid off at the rate I’m going. He suggested that if I planned on filing for bankruptcy I should stop paying my credit card bills because they would be discharged in bankruptcy.

At first I just couldn’t do it. It felt so wrong not to pay them. I’d never missed a payment in my 11 years as an adult. So I ended up having to take out another cash advance because my checking account went $1300 in the hole that month. I knew it was ridiculous so the next month (July 2007) I stopped making payments to the credit card companies. It was such a great relief. I adjusted my budget and took the credit card payments out and for the first time in the past year my budget balanced (barely but it did). We’ve been living on this budget for the last few months and it’s working wonderfully.

The credit card companies starting calling me right away but as soon as I retained my attorney and notified the companies that I had done so, they stopped calling. I filed Chapter 7 bankruptcy on October 12, 2007. Hopefully in a few months my bankruptcy will be discharged and my credit card debt will be gone once and for all.

If I could go back and change things I would have ripped up that very first credit card I received back in college. I feel bad for buying all of these things and now I can’t afford to pay them back. I don’t really feel sorry for the credit card companies because I think it’s wrong what they’re doing. But I don’t blame the credit card companies for my situation because I got myself into this mess and I should have been wise enough to understand the consequences of too much borrowing. I will blame myself and I’ll deal with the fact that I now have a bankruptcy on my credit record for the next 10 years.

I can tell you this. I will not use credit cards anymore. I will not use one to rebuild my credit. I will not use one to receive a 10% discount at a store. I will not use one to receive airline miles or any other rewards. Credit cards are bad, bad, bad in my book. There are many people that are disciplined enough to use them and then pay back the balances with no negative consequences. However, I don’t think that’s the case with most people in this country. My advice is to stay clear of credit cards because you should save your money if there’s something you need to buy. If you can’t afford it now then you might not be able to afford it later either. Plus you never know when your circumstances will change. You might be able to pay minimum payments now but if you lose your job, have medical issues, or unexpected expenses these credit card payments will send you into bankruptcy real fast.

Hopefully someone will learn from the mistakes I’ve made regarding credit card debt and bankruptcy. You might think using credit cards is the way to go but it’s not.

Claim Bankruptcy for a Better Future - You're not a Loser

2007-10-25T14:08:00.000-04:00

If you’re getting ready to file for bankruptcy or if you’ve recently filed then this article is for you. You might feel like you’re a failure or that you’re letting your family down. Please, please do not feel that way. The only reason you’ve decided to file for bankruptcy is because you’ve decided to swallow your pride and do the BEST thing for you and your family. Yes, you heard me right. Bankruptcy is not to be taken lightly and if you’re contemplating bankruptcy it’s because you’ve gotten yourself way over your head in debt and don’t feel like you have a way out.

You need to think about your future. Make a plan for your future now. If you file for bankruptcy how is it going to change your life? You won’t be able to apply for credit (at a decent rate) so you need to be able to live on cash. You must come up with a budget and make sure you are spending less then you make. Where do you see yourself five and ten years from now?

Bankruptcy can help you on your way to a “fresh start” but you also need to help yourself. You can’t change the past but you can set yourself up for a successful future. So you can keep feeling sorry for yourself and drown in your debt and sorrows or you can file for bankruptcy and make the necessary changes in your life to make sure this never happens to you again.

I’m trying to be as positive as I can about my own personal bankruptcy. I screwed up. I borrowed way too much money and when my circumstances changed I could no longer afford to pay it back. Filing bankruptcy gives me hope for the future. I might not have good credit for 10 years but I know I’ll be able to save money for my children’s college and for retirement. If I don’t file for bankruptcy I’ll still be paying off my creditor’s 25 years from now. However, I will make sure that I don’t get myself into this situation again. I will not borrow money anymore. I’ll drive used cars and save up for the new furniture this time around!

Dos and Don’ts Before Filing Bankruptcy

2007-10-23T14:07:00.000-04:00

You may be to the point where you realize you’ll need to file bankruptcy soon. Whether you’ve already retained an attorney or you’re just starting to contemplate bankruptcy you should check out the list below about serious Dos and Don’ts in the time period before you file for bankruptcy.

DO continue making payments on your home and vehicles that you plan to keep. If you are filing Chapter 7 bankruptcy you’ll need to be current if you plan to keep your home and your automobiles. If you’re filing Chapter 13 you may be allowed to catch up on your payments. You may also be able to get your car back if it’s been repossessed (but not yet sold) and stop your home from being foreclosed on.

DO be completely honest on your bankruptcy petition. It’s against the law to lie in bankruptcy proceedings. If you lie or try to conceal assets you can get in very serious trouble and your bankruptcy could be dismissed.

DO reduce the amount of your future tax refunds. Do this by reducing your withholding. Some trustee will be interested in taking your tax refunds in both a Chapter 7 and Chapter 13 bankruptcy. However, be careful that you don’t reduce the withholding so much that you have a big tax bill to pay.

DO tell your attorney everything about your financial situation and anything else that could affect your bankruptcy. Your attorney is on your side and you’re paying him to help you through the bankruptcy. It’s a very bad idea to keep information from your attorney. Make sure you give him all relevant financial files.

DON’T borrow money from your 401k or retirement plan to pay bills. ERISA qualified savings and 401K funds are exempt from creditors in bankruptcy. If you withdraw these funds you’ll also face tax consequences which may not be discharged in bankruptcy. If you don’t use these funds you’ll still have them after your bankruptcy is discharged.

DON’T assume bankruptcy will get rid of all your debts. In most circumstances, taxes accrued in the three years prior to filing are non-dischargeable. Student loans are now non-dischargeable except in cases of extreme hardship. Child support is also non-dischargeable.

DON’T borrow money on your home to pay bills. If you take out a second mortgage on your home you may be converting debt that could have been discharged in your bankruptcy to debt which you’ll still be required to pay if you want to keep your home.

DON’T keep a creditor off your petition for any reason. If you owe them money, you must list them even if you intend to pay them back.

DON’T pay $600 or more back to relatives or business associates who have lent you money. Payments to “insiders” of $600 or more within one year before filing is considered a preference. The trustee may recover the amount of money paid from that person to divide between all of your creditors. Payment of $600 or more to any other unsecured, non-priority creditor within 90 days before filing may also be a preference.

DON’T run up a lot of bills before you file. If you start maxing out your credit cards or take out loans right before you file the court could find your petition to be fraudulent and could dismiss your case. Or they may not let you include those bills in your discharge and you’ll still owe them when your bankruptcy is over.

DON’T transfer property into someone else’s name to avoid having it taken by the trustee. That kind of transfer is considered fraud and can result in the trustee denying your discharge. The trustee may also take back the property from the person you transferred it to.

DON’T keep paying unsecured creditors you plan to include in your bankruptcy. This is really a personal decision but if you’re going to be filing soon there is probably not a good reason to throw money away on credit card payments when you know they’ll be discharged in your bankruptcy. You should save the money to hire an attorney or use it for living expenses.

My Credit Score after Filing Bankruptcy

2007-10-22T14:01:00.000-04:00

I just filed Chapter 7 Bankruptcy on October 12, 2007. As of July, 2007 all of my accounts were current and I had never been late on a bill. My credit score was usually around 720-730. I never used an online service to check my score but I did recently refinance my house and this is what I was told by the lender. Today, out of curiosity, I checked my credit report and credit score to see if the bankruptcy had already been listed and to find out what my credit score is currently.

First, I needed to find an internet service to sign up for that would display my credit report, along with the credit score. These services seem to be a dime a dozen and most have a 30 day free trial period. I signed up at www.creditkeeper.com. I wasn’t too surprised to find out that my bankruptcy had already been listed as a public record at all three credit bureaus. Many, but not all of my credit card accounts, were listed as included/discharged in bankruptcy. My credit scores have taken a huge nose dive, of course. They’re now as follows:

Experian: 577

Equifax: 541

TransUnion: 566

CreditKeeper rates these as “Poor” scores when given categories of Very Poor, Poor, Fair, Good, and Excellent. Hey, at least I’m not in the “Very Poor” range.

I’m curious to see how long it will take for my scores to even reach the “Fair” range. I’m not interested in applying for credit anytime soon but I’d like my scores to recover at some point in my life. I do have a mortgage, student loans, and an auto loan that are all current. I’ll keep this site updated if there’s any significant change to my scores.

Bankruptcy Can’t Solve All Your Financial Problems

2007-10-19T09:59:00.000-04:00

If you're feeling overwhelmed by debt and bill collectors are calling bankruptcy may seem like the only way out. I completely understand how you feel because I have recently filed for Chapter 7 bankruptcy and feel that it is the best choice for me and my family. I want to make sure in the future we’re financially stable and half of my paycheck isn’t owed to credit card companies. However, I have come to the understanding that bankruptcy alone is not the solution to my financial mess.

I realize that some people declare bankruptcy due to circumstances that are beyond their control but many of us could have avoided our money troubles if only we had better handled our finances starting many years ago. Since we can’t go back and change the past the most important thing is to learn a lesson from the bankruptcy and make the necessary changes in our lives today. Below are some very important steps to avoiding another bankruptcy in the future:

1. Always live within your means. This sounds so obvious but in our world today it is so difficult. People have so much “stuff” and if you don’t have the latest “stuff” you feel so deprived and left out. Creating a budget is a must. If you aren’t tracking how much money you have coming in versus how much you’re spending then you don’t even know if you are living within your means. If you don’t have the cash for it don’t buy it which leads me to my next point…

2. No more debt. Every time you turn on your TV, drive down the road, or log on to your computer some company is willing to lend you money. Don’t ever forget how horrible it feels to be a slave to your debts. Instead of purchasing that new car on credit it will feel much better to drive a clunker and have the extra money each month to do whatever you’d like with (i.e. saving to pay cash for a new car). Just because you can afford the payments does not mean you should finance the new furniture, school clothes, etc. Remember, you never know when your circumstances could change. If you lose your job, have unexpected medical bills, etc then your situation will be much less drastic if you don’t owe anyone money.

3. Save for Emergencies. There is no getting around this. Since you’ll no longer be using credit cards you need to be prepared when the unexpected happens. Start by saving at least $1000 as fast as possible and put it in a savings account that you don’t have easy access to. If you have to, go without a few things for a couple months to build up this account. For instance, you could spend less on groceries, dining out, or renting movies. Ideally you should build your emergency savings to three-six months living expenses. Once you have saved for emergencies it will feel good to know you no longer need to depend on credit cards.

These steps are just the foundation of living a debt free life and being in control of your financial future. Since I've started living with a budget (that actually balances) and I'm paying cash for everything a huge burden has been lifted from me. I can't wait to get started on my emergency fund. I'll keep you updated on how much I'm able to save. Remember - the most important thing to remember after bankruptcy is NO MORE DEBT - ever! Don't let this happen to you again.

Preparing for your Meeting of Creditors (341 Meeting)

2007-10-18T12:39:00.000-04:00

My own 341 meeting will take place on November 8, 2007 at 10am so my attorney sent me a letter to help me prepare for the meeting and be ready to answer the types of questions the trustee may ask me. I thought I would pass the information along to you. First, make sure to have your driver’s license and social security card with you at the meeting along with your most recent bank statements. If you don’t bring these items the trustee may adjourn the meeting to another date. This will cost you additional attorney fees plus delay your bankruptcy discharge. Here are some of the questions that the trustee will typically ask. Remember to testify truthfully.

1. Are most debts listed in your schedules more than six months old?
2. Do you have more than $100.00 per month left over after paying living expenses?
3. Do you expect your employment to continue?
4. Does anyone owe you money or do you have any pending lawsuits which you have a potential recovery?
5. How did you calculate you house’s fair market value?
6. How did you value your auto?
7. Are you getting divorced or so you have a recent divorce property settlement?

You have to be careful how you answer the next set of questions. Although you should answer truthfully, answer in the following way if you can to avoid opening up a can of worms.

1. Why did you file for bankruptcy? “I couldn’t afford to pay all my bills”
2. When did this first start happening? “I don’t remember exactly – not long before I filed.”
3. Why did you take out this credit union loan? “To pay bills.”
4. What bills did you pay? “I don’t remember specifically.”
5. When did you first talk to your attorney? “I don’t remember – maybe a month or two before filing.”

This meeting should be nothing to be afraid of because you should have nothing to hide. In most cases, you are answering very basic information for about 10 minutes and the meeting is really more of a formality of verifying your Bankruptcy petition. I hope your 341 meeting goes smoothly. I’ll be posting an update of my own 341 meeting the evening of November 8th. Good Luck!

Important Dates for my Bankruptcy

2007-10-16T08:58:00.000-04:00

I’m pretty excited right now because I have two very important dates pertaining to my bankruptcy. The first date is the 341 meeting (First Meeting of Creditors). I have to go to court for this meeting on November 8, 2007 at 10am. That was fast! I filed on October 12th and my attorney said it would be around 45 days but he couldn’t give me an exact time frame. I didn’t expect it to be less than a month. The second important date is January 7, 2008. This is the last day one of my creditors can object. As long as none of my creditors object my bankruptcy will be discharged and I’ll be off to my “fresh start”.

My attorney did not call me with this information. I actually logged on to PACER (Public Access to Court Electronic Records). Someday, I hope to give a tutorial on exactly how to use PACER to get the information you need pertaining to your bankruptcy. At this point, I was very lost to get the information myself. First, you have to create an account on PACER and I had to give my debit card information. For each page you view you’re charged .08 cents. Even if you run a query that comes up with zero results they still charge you. So I’m a little leery about searching randomly for information pertaining to my case. Once I’m seasoned at using the system (which hopefully doesn’t cost me a fortune) I’ll be posting the easiest way to get exactly the information you need from PACER.

For now, I’ll be looking forward to attending my 341 meeting with the trustee. Of course I’ll be nervous but I can’t wait to get this over with. Look for a post the evening of November 8th to find out all the details of my 341 meeting.

Let’s Talk About Exemptions

2007-10-15T11:13:00.000-04:00

One myth of filing for bankruptcy is that you’ll lose everything you own. Not only is that not true, but in many cases you’ll be able to keep your home, cars, and everything else. Most Chapter 7 cases are no-asset cases meaning you’ll have to give up nothing to the trustee. Exemptions are a good thing to know about when you’re going through a Chapter 7 bankruptcy because exemptions are the assets you’ll get to keep even though you’re bankrupt.

- Pension Plans. You might be surprised to know that your pension plan can’t be touched during a bankruptcy. Your contributions to ERISA qualified retirement plans, deferred compensation plans, tax deferred annuities, and health insurance plans are exempt. This is why it’s unwise to take money out of your 401k to pay for credit card debt. During you’re bankruptcy credit card debt is an unsecured non-priority debt and will be discharged (forgiven) at the end of your bankruptcy. Keep your money in your retirement plan and it will be protected during your bankruptcy.

- Education Funds. If you’ve been contributing funds to an educational account or qualified State union program for the benefit of your children or grandchildren that money may also be exempt. However, those funds must have had been placed at least 365 days before your filing date and there is a $5000 limit on funds contributed between one and two years before filing.

- House. If you have no equity in your home, meaning that today’s value is less than the payoff balance you owe to the mortgage company, the trustee in a Chapter 7 bankruptcy will let you keep it. You must still pay the mortgage or the lender has the right to foreclose if you don’t pay. If you do have equity in your home you’ll want to check the “homestead exemption” that is available in many states and is also as a federal exemption. If the equity is exempt you can keep the house but it is possible you could lose your home if you have more equity in your home than the exemptions can cover. If that’s the case, you may want to consider filing a Chapter 13 bankruptcy which can more adequately protect your home.

- Car. If you have no equity in your car then the trustee will be not be interested in taking it. If you have equity in your car but it can be covered by an exemption (varying by state) then the bankruptcy attorney will not take your car. If there’s equity in the car above the amount of the exemption available then in many cases the trustee will allow you to pay the difference in order to keep the car. If you still owe money on the car you’ll need to keep payments current but if you feel you can no longer afford to make the payments you are allowed to surrender the car and be free of any obligation to pay for it.

- Household Goods. In most cases the items in your home will have very little resale value and won’t be of much interest to the trustee. Under normal circumstances the trustee will not be taking a tour of your home to snatch the items he’d like to sell. Unless you have many items of significant value you shouldn’t have need to worry. You should be able to keep all of your clothes, toys, furniture, etc.

Since each state has different rules for exemptions you’ll want to check the specific exemptions for your state. http://www.bankruptcyaction.com has an easy to use drop down and instructions for figuring out which state’s exemptions to use for your situation.

Bottom line: Exemptions are extremely important in planning for your bankruptcy. If you have a home and other property that you feel may be threatened make sure you consult an experienced bankruptcy attorney to handle your case. A good attorney can mean the difference between what you get to keep and what you could lose. Remember the reason why you’re filing bankruptcy is because you need a “fresh start”. Part of making your “fresh start” possible is by having some of your things to start out with. Since exemptions are one of the most important aspects of protecting your property make sure you do some research in this area.