I have previously posted tips on how to avoid a Christmas debt hangover.  Maybe you didn’t get the memo, but that’s okay.  Pull up a chair and we’ll roll up our sleeves to see what we can do.

The first thing to do is not to panic.  December is traditionally a slow time for bankruptcy attorneys and I hear from many people who want to “have a good Christmas” and not focus on their debt issues.  In January, reality sets in when the credit card bills start to arrive.  If this is you, you are not alone.

The next thing to do is call me.  There are many possibilities to deal with your Christmas debt.  Maybe you payback some of your debts in a partial repayment plan under Chapter 13 bankruptcy.  Maybe you will file for Chapter 7 bankruptcy and get rid of all debt except the recent purchases.  Perhaps you will wait a few months to file for bankruptcy and possibly discharge even the Christmas purchases.  The point here is that you have options available to you.  Arm yourself with information.

Finally, you should act.  Your debt problems will not go away by ignoring them.  Call us at (619) 448-2129 or fill out our online questionnaire for a free case evaluation.  Even if you decide not to file for bankruptcy, you will feel better about taking a step toward making things better.

Image credit: Brad_Chaffee

Clients often ask me if filing for bankruptcy could prevent them from getting a job.  There is a new law in California that address that issue for many of my clients.  Subject to several exceptions listed below, most California employers cannot review your credit report beginning January 1, 2012

Jobs that allow a credit check include:

• A position in the state Department of Justice
• A managerial position
• A position as a sworn peace officer or other law enforcement job
• A position for which the information is required by law
• A position that involves access to specified personal information such as social security numbers
• A position in which the person is a named signatory on the employer’s bank or credit card account
• A position that involves access to confidential or proprietary information such as trade secrets
• A position that involves regular access to $10,000 or more of cash like a bank teller or financial adviser

Any employer who orders the credit report of an employee or job applicant must give you notice that a credit report will be ordered along with an explanation of what exemption allows this access.

Section 525 of the Bankruptcy Code prohibits an employer from firing an employee “solely” because they filed for bankruptcy, but the Code is silent with respect to pre-employment discrimination due to bankruptcy.  California joins Maryland, Oregon, Hawaii, Illinois, Washington and Connecticut in limiting the use of pre-employment credit reports, thus providing some protection to job applicants that files for bankruptcy and do not wish to reveal that fact to a prospective employer.

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I recently posted a request on my Facebook page and my Twitter page soliciting blog ideas and I posed the following question:  “So if you could ask a bankruptcy attorney any question, what would it be?”  The title for this blog entry is an actual question I received from a Facebook friend.

While the question I received was largely tongue-in-cheek, there are some in society who wonder a how couple can get rid of $150,000 in credit card debt, receive a 2.5% interest rate on a home loan, keep their home and both cars.  My response:  things are not that simple.

Most of my clients can trace their debt problems to a life changing event such as a divorce or a job loss.  For others,  their debt problem “snuck up” on them for one reason or another such as not cutting spending after a salary reduction or not communicating with a spouse over budget issues.  A significant percentage of my clients had never even considered filing for bankruptcy before they actually called me.  They are not like “other people” who don’t pay their debts…until they run out of money.

In reality, most Americans are only 2 or 3 missing paychecks away from financial struggles.   The decision to file for bankruptcy protection is not one to be taken lightly and it is not without sacrifice.

While my clients benefit greatly from bankruptcy, it does come at a price.  The bankruptcy will be on their credit report for up to 10 years.  They will pay higher interest on car loans, often approaching 25%.  They will not be able to buy a home for 2-3 years and the bankruptcy make come up any time they try to get credit, apply for a job or try to rent a place to live.

The Supreme Court once stated that the purpose of the Bankruptcy Code was to “relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start a fresh free from the obligations and responsibilities consequent upon business misfortunes.”  Though it may seem like some debtors come away unscathed from their bankruptcy, the vast majority are good people that just need a helping hand.

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If you are approaching retirement age, bankruptcy can help you get rid of your debts and keep most or all of your retirement funds.  This protection extends to any qualified pension plan under the Employee Retirement Income Security Act (ERISA) such as:

• 401(k)s
• 403(b)s
• IRAs (Roth, SEP, and SIMPLE)
• Keoghs
• profit-sharing plans
• money purchase plans, and
• defined-benefit plans

Debtors can protect as much as $1,095,000 per spouse if the funds are in an ERISA qualified plan.  Instead of pulling money out of your retirement account to pay off debtors, why not enter retirement free of debt and your retirement funds protected form your creditors?

Long before Lisa joined me as a paralegal, we were looking for a career that would allow her to work from home to spend more time with our daughter.  An estate planning attorney suggested the possibility of become a professional fiduciary, basically to help people with large estates manage their assets.  It was something she could do from home.

It has been estimated than as many as 80 million Americans were born between 1946 and 1964.  As they become older, the need for professional fiduciary becomes greater.  Many factors contribute to the need for these individuals to have a professional fiduciaries such as the effects of aging, mental disabilities, illness and retirement travel plans.  But investment losses in recent years might be delay retirement for some or prevent retirement at all.  Would you rather retire debt free or be worried about having enough money to live on a fixed income?

If you are in Southern California are facing difficult debt issues as you approach retirement, place call me today at (619) 4489-2129 for a free consultation.

The American Bar Association (“ABA”) has chosen Toronto as the location its annual convention for 2011.  I mean no disrespect to neither the people of Canada nor the City of Toronto.  Canada is a trusted friend of the United States and I am told that Toronto is a wonderful city, but why is the ABA holding its convention in a foreigner country?

To me, the ABA has always been a “left-of-center” organization that offers very little to solo practitioners like me  By choosing a foreign country for its annual convention, the ABA is further alienating attorneys by selecting a destination that is expensive to reach while ignoring cities in the United States that could desperately use the business.

There are many cities in the United States that are hurting economically that could have used the ABA’s convention business.  San Diego, New Orleans, Chicago and Las Vegas are just a few of the cities that could have handled the ABA’s annual meeting and have suffered through hard economic times.

Perhaps next year, the ABA will be a bit more carefully in choosing the city where it holds its annual meeting.

As a bankruptcy paralegal, I speak with many people who are lost, overwhelmed and confused because of their crushing debt.  They often know that bankruptcy is what they need, but they also need a helping hand and a roadmap to get started on the right path.  I am often the first voice that our potential clients hear and I help them start to read their bankruptcy roadmap.  Let me share a story from my own life to illustrate what I mean.

I got a call from my mom that she was taking my dad to the hospital with severe abdominal pain.  My dad does not get sick so this was very unusual.  I got to the visitor center and they gave me a map.  I listened well for being stressed and out of my element but I don’t have the best track record with maps and it showed about 3 turns into the directions.

A nurse getting off her shift, lunch bag and purse in hand, asked me if I needed help with directions.  I said that I really did and started to give my map for her to point me in the right direction, but she didn’t do that.  She took my map and pen and she said “follow me.  I’ll show you how this works.”  I can’t tell you how my stress changed.  It was still there, but I had somene to guide me and help me along.

As we walked she drew landmarks on the map – a huge tree, a red picnic bench…things that I could remember easily.  She walked me to where my dad was, asked if I needed anything else, and told me she hoped everything worked out well.  I think I said something like “thank you so much” but only can hope that the tone in my voice let her know what her kindness meant to me.

That nurse’s example has always reminded me of what a difference I can make when I talk with people who are trying to understand bankruptcy for the first time and are stressed.  I enjoy being a friendly voice when people have been dealing with nothing but harsh creditor calls non-stop.  I enjoy finding a way to explain how bankruptcy works in a way that clicks with people (think hospital map with a picture of a tree and picnic bench).  I enjoy it when people relax enough with me to email a question at 9pm that has been bothering them and I can answer it and give them a better night’s sleep.

If you’re thinking about what bankruptcy could do for you, let me show you the difference between someone who gives you a map and points and someone who comes along side you and says, “I’ll show you how this works.”

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As a bankruptcy paralegal, I often find myself looking for ways to save money.  I’ve recently started using less of some o f my household products and you know…it works!  If someone gave you a coupon for ½ off laundry detergent would you accept it?  If you could buy your favorite brand of paper towels in a roll twice the usual size but at the same price, would you buy it?

This is The Principle of Half.

In the same way that we spend more money when we have more money, we also use more household products when we have more of them.  If you only have one roll of paper towels and it has to last you for 3 weeks instead of the usual 2 weeks, you’d use less because you knew it had to last.  So…why not do that now.  Try using half the amount of a product than the amount that you would usually use and see if it works.  This won’t work for all items – it’s no good to use so little laundry detergent that you have to wash a load twice, but try cutting 25% and see how it works for you.  If it works, try using 50% less and then add back more if needed.

Some items that can usually do the job with½ of the amount the manufacturer suggests:

• Dryer sheets:  Yep, I tear them in half and I can’t tell the difference.
• Laundry detergent:  I stretch mine an extra 25% by using only 75% of the amount recommended.  After all, who benefits if you run out of the product faster?  Oh, the manufacturer!
• Juice:  It can actually be more refreshing to add water and cut down the sugars.
• Paper towels:  Tear a sheet in half, use one half and put the other half by the roll to use later.  If one sheet didn’t do it, the half is right there to use.  If a ½ sheet did the trick, congratulations because you’ve saved 50%.
• Salad dressing:  Use half the amount as usual and toss, toss, toss.  You’ll find that each bite has just enough dressing and you won’t be cleaning dishes that have a puddle of dressing at the bottom.

…and the list goes on.

So, try The Principle of Half and see how it works for you.  Like mom always used to say, you can always go back if you want more!

Image credit: Images of Money

Never leave home with your coupons!  I recently started watching the show Extreme Couponing on The Learning Channel.  The show follows people who obsessively clip coupons that save as much as 95% or more on their grocery bills.  Some of these extreme couponers are very obsessive about collecting and using coupons.  While I don’t think “Extreme Couponing” is realistic and it’s not something I want to do, I do have to admit that the show prompted me to get back into coupons and inspired me to write this blog entry.

Why? Because those quick stops to pick up something are budget busters.  While I plan a good weekly grocery list and stick to it, there’s always that item I need to pick up on the way home – someone signed up to bring drinks to a school event, someone didn’t tell me that we were almost out of a box of cereal…you know the drill.

If you don’t have your coupons with you, you’ll lose out on savings and that quick unplanned trip cost you $30. Instead feeling slightly taken at the store from your quick trip, keep an organizer with your coupons in it in the car. This way, you’ll never be without savings.  Need drinks for a sports event?  Great, check in the beverage section of your coupon organizer.

Need a box of cereal? Great, pull out the coupon for buy 3 get 1 free. (Now you won’t run out for quite a while.)  You won’t always have a coupon for everything, but you’ll feel good that you did everything you could to save and that’s always a good feeling!  On a recent shopping trip, I was able to save over $60 on a grocery bill of $160.  You can save a lot more than you may think.

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The Bankruptcy Court will schedule a Meeting of Creditors that must be held within 20 to 40 days after the case is filed. At the Meeting of Creditors, the Chapter 7 trustee will ask you questions under oath and conduct an investigation into your financial affairs. In about 97% of the Chapter 7 bankruptcy cases that I file, the trustee determines that the debtor’s assets are exempt and cannot be used to pay the creditors. The trustee will usually file a “no asset report” or a “report of no distribution” and the file will be closed shortly after the court enters the discharge order.

Creditors have 60 days from the Meeting of Creditors to object to the debtor receiving a discharge. In a “no asset case”, the Bankruptcy Court in San Diego where I practice will usually enter the discharge and close the case within a week of the expiration for creditor objections. Courts in other parts of the country may take a little longer, but nearly all of my Chapter 7 bankruptcy cases are over in 90 to 120 days.

Once the trustee concludes the Meeting of Creditors and you have completed the other steps outlined above, you are on cruise control and just waiting for discharge.

THINGS THAT COULD MAKE THE CASE LAST LONGER

If you are reaffirming a car loan or filing a motion for redemption of a vehicle, those must be filed and approved before the court will grant your discharge. You should also take the required post-bankruptcy course in financial management and get the certificate to your attorney as soon as possible. Failure to do so could result in the court closing your case without a discharge.

If the trustee locates assets that will be sold for the benefit of your creditors, the case may remain open for several more months until the creditors have been paid.  However, you will still receive your discharge of your debts. The discharge releases you from most of your debts, allowing you to focus on moving forward with life with the emotional debris of excessive debt removed from your path.

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Debtors who have decided to file for bankruptcy should plan ahead to be ready for the short term consequences that might result. For some debtors, pre-bankruptcy planning may include closing bank accounts and moving their money to a different financial institution.

Reasons to switch to a different bank or credit union include:

Avoiding having your bank account temporarily frozen. Some banks like Wells Fargo have a policy to place an administrative freeze on any account of a newly-filed Chapter 7 debtor with a balance exceeding $5,000. Other institutions like Union Bank are even more strict on this issue. One colleague told me about a case where Union Bank had frozen a debtor’s bank account that contained only $16. In theory, the banks are protecting assets of the bankruptcy estate. In reality, this type of bank policy creates a huge inconvenience to customers and does little to preserve bankruptcy estate assets.

Ending automatic withdrawals. Many debtors set up automatic withdrawals taken from their bank account to pay credit card bills. Even with the filing of a bankruptcy, there is not guarantee that automatic withdrawals will stop. It is easier to close a bank account than to get money back that a creditor improperly withdrew from your account.

Avoiding set offs. Sometimes debtors bank with an institution that has also issued credit cards to them or provided other forms of credit. It is not uncommon for a bank to claim money from a debtor’s bank account as a set off against other money owed by the debtor. Closing your account or keeping a low balance will minimize the risk of a claim of set off.

Debtors considering bankruptcy should avoid banking with Wells Fargo, Wachovia Union Bank and any financial institution to which the debtor owes money. If a creditor does improperly remove money from your account after your bankruptcy is filed, contact your attorney immediately.

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