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3. How Did I Get Myself Into This Financial Mess?

FAQ'S

1. How does a typical person get into massive credit card debt?

There are many different roads in life that can cause a person to file for bankruptcy. For some people it is the loss of a job, the death of a spouse, the illness of a spouse or a child, or a divorce. Meanwhile, for other people it is poor money management and spending money like a drunken sailor. I just cringe when I prepare bankruptcies for clients and I see Burger King meals and other frivolous fast food places charged. Unfortunately, you wind up paying twice as much for the lousy burger if you use a credit card.

Most people initially incur credit card debt with the good faith intention of repaying for it. However, when life throws curve balls at you then paying your credit card bills can often seem like climbing Mount Everest. When people find themselves trapped in the never ending New Jersey rat race, they often begin using their credit cards to pay for their groceries, utility bills, or to pay for their other credit card bills. After most New Jersey’ites pay off their quarterly property taxes they have little if any disposable money to live on. I often see that many people take out a second mortgage or a home equity line of credit just to pay off their credit cards and for other unsecured debt. Converting unsecured debt into mortgage debt is often a disaster because if you don’t pay off your credit bills you can still keep your home.  A credit card company can’t take your home away from you. However, if you convert credit card debt into mortgage debt, then you can lose your home if you default. Does this type of madness sound familiar to you? Unfortunately, for most people these are only short-term solutions. In my experience many people use their home equity line of credit to pay off credit card debt. Sadly once the credit card debts are paid off, many misinformed debtors start to charge up those same credit cards only within a few months time. In closing all these debtors have accomplished is to rack up additional debt for themselves. Unfortunately, this is more debt that most people can simply afford to pay.

2. Who is responsible for the financial mess that many consumers now find themselves in?

The credit card companies and mortgage companies are largely responsible for the financial crisis that many consumers now find themselves in. Most credit card companies charge outrageous interest rates, late fees, and over-the-limit fees. The different types of fees that credit card companies charge is never ending. The credit card companies are now even charging fees if you don’t use your credit card. Moreover, many credit card companies punish their customers by raising interest rates if a debtor makes a few late payments. Some credit card companies will even raise the interest rates if the customer makes a late payment on a credit card from another bank. The cold hard reality is that many people simply can’t get out of credit card debt, and they are trapped in this mess forever.

Many other people are in financial trouble because of the predatory loans that they have obtained over the past five to ten years or so. I can’t tell you how many clients I have represented who have maxed out their home equity with second mortgages. It is really easy to spend the money that you borrow from a home equity line of credit. The banks give the consumer a check book to use their equity line of credit. Consequently, many people do not even realize that they were spending money when they used these checks. Nonetheless, paying back this second mortgage is harder than ever in these hard economic times. Most people can barely make their payments on their first mortgage.

In summary, most people want to pay their bills, but due to unforeseen circumstances, such as the loss of a job, the death of a spouse, or unexpected medical expenses,  this becomes an impossible task. Bankruptcy is one of the major stresses that can happen in your life along with filing for divorce, suffering from a major illness, the death of a loved one, and/or loss of a job. I have never represented a client who enjoyed filing for bankruptcy. It can be demoralizing and embarrassing! However, the decision to file for bankruptcy is really a simple choice of survival in this day and age.

3. What are the major indicators that I should consider when deciding whether to file for bankruptcy?

There is no set formula or computer program to determine if you should file for bankruptcy. Each decision is a personal decision and should only be made with the consultation of an experienced bankruptcy lawyer. However, there are some clear cut indicators that may convince you to file:

a. Do you live paycheck to paycheck?

b. Do you routinely pay your bills late?

c. Are you constantly juggling bills to keep creditors off your back?

d. Do you routinely overdraw your checking account?

e. Do you have more than three credit cards?

f. Are all of your credit cards maxed out?

g. Are you paying late fees and/or over-the-limit fees on all or most of your credit cards?

h. Do all of your credit cards have double-digit interest rates?

i. Are you at least one month behind on your mortgage payment?

j. Are you at least one month behind on your car payment?

k. Do you now or have you within the past three months obtained a title loan or a payday loan?

l. Are you using your credit cards to pay for necessities like groceries, prescriptions, and gasoline?

m. Are you dipping into your savings or retirement accounts to pay bills?

n. In the past three months, have you borrowed money from family or friends to pay your bills?

o. Do you know exactly how much you owe on all your bills?

p. Do you make only the minimum payment on your credit cards each month?

q. Are you receiving telephone calls or letters from collection agencies?

r. If you own a home, are you in pre-foreclosure?

s. Have you recently had a vehicle repossessed?

t. Is your auto finance company threatening to repossess your car?

u. Are you upside down in your auto loan?

v. Have you been denied credit, insurance, employment, or a security clearance because of poor credit?

If you have answered yes to any of these questions, then it is time that you take control of your life and to file. Filing for bankruptcy can help you stop worrying about paying for all of your debts. Moreover, you can finally be able to afford to put food on your table, buy your much needed medication, pump gas into your car, heat your home this winter and not freeze to death, and buy Christmas gifts this year. Bankruptcy can help you get your life back! Bankruptcy can get those nasty bill collectors to stop calling you. It is time for you to get the fresh start that you deserve! I have handled approximately two thousand bankruptcy cases in my career. I have never had one client call me to complain that he or she regretted filing.

4. How can bankruptcy help me regain control of my life?

One of the major benefits of filing bankruptcy is psychological. Many of my clients inform me that filing for bankruptcy is very similar to the feeling/rush of getting out of jail. Many of my clients come into my office shaking like a nervous wreck. Filing for bankruptcy allows you to regain control of your life once again. If you are behind on your bills and if you have creditors are calling you 24/7 then you have no control over your life. How can you possibly perform adequately at your job if the credit card companies and the bill collectors are leaving nasty messages for you all day at work. It doesn’t stop here, once you get home from work the creditors will often leave about ten more messages for you. Consequently, you then start fighting with your husband and wife. Is this the American dream? I don’t think so, instead it is the American nightmare! The bottom line is that life in the United States is not as great as it used to be. Everything is so expensive, companies will fire you in a second, and you have to worry if your 401K plan will disappear if there is another Wall Street Meltdown. I may be nostalgic but I long for the 70’s and 80’s when times were simpler. Back in these days, when there was less credit cards around, and Americans simply spent less and lived more modestly.

The stress of constantly being trapped in massive debt is also one of the major causes of divorce. Filing for bankruptcy will let you sleep again at night without waking up and turning around and around. Filing for bankruptcy will also enable you to have a clear mind and permit you to focus better on your job and on your family.

5. Can bankruptcy stop the annoying calls from creditors and bill collectors?

Yes, one of the major benefits of filing for bankruptcy is that it will stop collection calls cold. How embarrassing is it to receive receive collection calls at work or at dinner with your kids each night. It is certainly demoralizing to watch your kids check the caller ID before answering the phone because they know mom does not want to talk to creditors? Thankfully, bankruptcy stops the endless harassment from your creditors. When you file for bankruptcy the automatic stay immediately goes into effect. The automatic stay prevents creditors from taking any collection efforts against you and this includes telephone calls, letters, lawsuits, garnishments, foreclosure, and repossession. Filing for bankruptcy is like a nuclear weapon against your creditors and it will immediately stop all of their harassing ways.