In a post published this past July, we discussed a program in Tennessee known as the $mart Tennessee Financial Literacy program, which teaches students financial literacy. Continuing in that same vein, in today’s I would like to discuss the importance of teaching young adults to manage credit.
Along with cell phones and personal computers, the age of people using credit cards is getting younger and younger. What used to be considered to be only used by adults, credit cards are now regularly used by many young adults/teenagers.
Studies show that 32% of high school seniors use a credit card. And college freshman are offered an average of 8 credit cards during their first week of school. However, with 60% of students maxing out their credit cards within their first year of college, young adults are obviously not being taught how to responsibly use a credit card or the importance of their credit score. This can have devastating effects, as even some young people end up having to file for bankruptcy in some occasions. Fortunately, as of February 2010, Congress passed the Credit Cardholder’s Bill of Rights, which has limited the amount that credit card companies can advertise to young people.
Numerous college students are forced to drop out of school due to credit card related financial issues that could have been prevented with proper credit-education. The CARE Program, which stands for Credit Abuse Resistance Education, provides financial education presentations to students. With the constant messages of excessive consumption and material pleasures, it can be difficult for young adults to fight the temptations of overspending and abusing credit. CARE interjects to teach the consequences of irresponsible spending, such as bankruptcy, dropping out of school, higher interest rates, and other serious financial problems that can occur down the line as a result of misuse of credit.
CARE has put together a video that you can watch here: (http://www.careprogram.us/video-taking-control-of-your/ )
The video is aimed to teach students about the dangers of credit cards and covers the basics of credit, debt, savings, and the importance of making a budget. The video also provides important information for adults as well, and I recommend people of all ages to watch it, especially if you are experiencing personal financial troubles or are considering bankruptcy. It is never to early or late to learn about responsible spending and how to use credit cards wisely. As you know, credit counseling is a requirement of bankruptcy, so perhaps familiarizing yourself with how to make wise financial choices is your first step in getting back on your feet financially.
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In the most recent post, we discussed medical bills, a type of unsecured debt which can be discharged if you file bankruptcy. In this post, we will discuss secured debts, as people often have questions about the differences between secured and unsecured debt.
Translating legal jargon can be daunting, especially when dealing with the stresses of bankruptcy. Many terms are frequently used but not fully understood by filers. To determine if a debtor is eligible to file for Chapter 13 bankruptcy, they need to know the total amount of the secured debt. Here, I will cover what “secured debt” is, and how to tell if a debt is secured.
Examples of secured debts are home mortgages, home equity lines of credit, and car loans. These secured debts are liens, which means the creditor is secured, and were legally created by an agreement between the debtor and the creditor. Liens determine the rights a creditor may have in the debtor’s property. Here are some less known forms of liens:
Security Interests: A seller is secured when they finance a purchase you make. Credit plans by retailers such as Sears and Good Guys give the seller a security interest in the products purchased, and they have the right to reclaim the goods if you discharge the debt through bankruptcy. In contrast, if you purchase the products using a credit provided by a lender instead of the seller (a credit card) then the products are yours with no security interest in favor of the lender. However, creditors rarely take legal action to repossess the products.
Judgment Liens: A creditor must take an extra step of filing or recording the judgment to create a lien on the judgment debtor’s property. Secured debts are totaled separately from unsecured debts when determining the debtor’s eligibility to file Chapter 13 bankruptcy, so you need to know if judgment liens have been perfected. Laws vary between states so it’s important to check how judgment liens are perfected in your state. For example, in California if a creditor records the judgment then they have a lien on all of the debtor’s property in the county.
Tax Liens: If a tax lien is recorded, then a lien is perfected on all of the taxpayer’s property.
Blanket Security Interests: If you give the lender a security interest in all of your personal property, then the lien “blankets” all of your assets, potentially even including assets acquired after the security interest agreement is signed.
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According to a Harvard study recently reported in the LA Times, medical bills played a role in 62% of all bankruptcies filed in 2007, which is up 7% from 2001. Interestingly, a large majority (78%) of these filers even had health insurance.
When someone is burdened with medical problems, multiple other issues arise that contribute to why they would need to file for bankruptcy. Along with extremely high medical bills, lost wages from having to take days of work off all are also major factors.
The study also revealed a fact that challenges the negative stigma often associated with filing bankruptcy. Approximately 70% of the people that filed bankruptcy for medical reasons owned homes, and the majority had gone to college. It is finally becoming realized that there is no shame in filing bankruptcy, as so many filers these days are middle class and financially stable before medical reasons push them into bankruptcy.
Medical problems can occur suddenly and can hit hard. And they can happen to anyone. Health insurance is not a guarantee that injuries or illness won’t burden you with out-of-control debt, and it’s almost impossible to plan for the unexpected.
If you are filing medical-related bankruptcy, medical bills are considered unsecured debt and will be discharged entirely if you are filing Chapter 7 bankruptcy. If you are filing a Chapter 13 bankruptcy, your medical bills can be ordered and combined with other debts, and potentially reduced, in a bankruptcy trust. In either case, bankruptcy may be just what you need to eliminate your debt arising from medical bills and help you get back on your feet again.
Filed under Common reasons to file, Types of unsecured debt by
In the last post, we discussed how student loans are not wiped out by bankruptcy and how those with student loans can deal with this type of debt. In this post, we discuss bankruptcy and the elderly and how seniors’ retirement funds may be protected by bankruptcy.
In the last eight years, Americans aged 55 and older have become the group most likely to file for personal bankruptcy, according to the AARP. Over half of people aged 50 and older that have debt spend the majority of their monthly income paying it off. Mortgages, home-equity loans, large credit-card balances, and loss of income are all reasons seniors are experiencing financial distress.
If the economic situation was not so dire, retirees may have been able to downsize their homes to pay off their debts, or get reverse mortgages. However, with the current declines in housing markets, many do not have enough equity in their homes to do so. Seniors that refinanced their mortgages during the real estate boom may have enormous mortgage payments. In many cases seniors owe more on their homes than they’re worth.
According to the National Foundation for Credit Counseling, seniors carrying high credit card debt into retirement, and the high interest payday loans against Social Security checks, produce the biggest burdens for senior debtors. With no income coming in, the debtor has fewer options for paying off the credit cards…and interest can grow quickly. Since last year’s market’s crash, many seniors don’t have as much money locked away as they planned.
Another possible contributing factor to senior’s financial troubles can be their own children. Many parents try to help their children financially even if they can’t afford to do so. Some financial advisers won’t even allow their clients to loan money to their children when they are in or near retirement to prevent their financial situation from going further south.
Many times bankruptcy is the best option for seniors with large debts. People with large medical debts can declare bankruptcy and keep their savings because assets in IRAs and other retirement accounts are protected from bankruptcy judgments up to $1 million. Depending on state laws, some debtors can keep their home as well.
Fortunately, there are agencies that are available to provide credit counseling or debt management services to those that need help. Talk to an experienced bankruptcy attorney to find the best route to take. Be careful as there are many scam artists that try and take advantage of senior citizens during their financial distress.
Filed under Bankruptcy and retirement savings by
Student loan debt is a significant, ceaseless weight on many Americans. While filing for bankruptcy will discharge many debts – such as credit card debt – it’s virtually impossible to get out of student loan debt. According to FinAid.org, there is an estimated $730 billion in outstanding federal and private student-loan debt, and only 40% of that debt is actively being repaid.
In these tough economic times – where salaries are reduced, layoffs are increasing, and job openings are difficult to find – many graduates are feeling the weight of their student loan debt and finding it difficult to repay. Here are some ideas on how to handle your student loans outside of bankruptcy:
Study your loan to make sure you understand the exact terms and what is expected of you. Then examine your budget and figure out what you can realistically afford to pay each month. Once you know what your budget will allow, familiarize yourself with your options for repayment.
There are several options you can look into depending on your circumstances. You can work with your lender to modify your repayment plan. If the terms of your student loan need to be revised, contact your lender once you know the specific modifications to ask for. Some lenders will let you pay less at first, and then pay more each month which is helpful if you’re expecting to have more money in the future. If your loans are through the Federal Government, you can see your choices at the Federal Direct Loan web site found here: http://www2.ed.gov/offices/OSFAP/DirectLoan/index.html.
Some lenders allow you to defer your student loan payments for various reasons. For example, if you go back to school, work in certain fields, or are unemployed, you may qualify for deferment. But be aware that interest will likely accumulate while your payments are deferred.
If you are can prove financial hardship, you can apply for forbearance, which means you may be able to make reduced payments or suspend payments completely. Just like with deferment however, interest is likely to accumulate.
Another option is consolidation, which allows you to make a single payment each month and can potentially lower interest rates. It is important to know the exact terms and penalties of consolidation.
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When you file for bankruptcy, what happens to your car differs depending on what chapter bankruptcy you file for (Chapter 7 or Chapter 13).
Chapter 7 Bankruptcy and Your Car
If you file for Chapter 7 bankruptcy, filers are offered a complete discharge of many unsecured debts. Your car loan is considered a secured debt because it’s attached to property. If you file for Chapter 7 bankruptcy, you have these three options for your car loan:
You can redeem your car where you would make one lump sum payment to your creditor for the car’s current fair market value. If you can afford to make this payment, it’s a good option because you’ll have eliminated car payments and it may make life easier in the future.
However, most people who file for bankruptcy are low on cash, so it is not possible to make one lump sum payment. Another option is to reaffirm your car loan, which allows you to continue to make payments as you did before you filed for Chapter 7 bankruptcy. When you reaffirm your debt, you are agreeing to make payments according to a schedule agreed upon by you and your creditor.
If your financial situation does not allow you to continue making payments or redeem your car, or if you owe more on your car than it’s currently worth, then surrendering your vehicle is the next option. You can also choose to surrender your car to your creditor and have the remainder of your debt discharged.
Chapter 13 Bankruptcy and Your Car
If you file for Chapter 13 bankruptcy, what happens to your car depends on when you purchased it.
Your car is considered a newer car if you purchased your car within 910 days of your bankruptcy filing. If your car is newer, then you are required to pay the full value of the car loan, though it’s possible your interest rate may be reduced.
Your car is considered an older car if you purchased it more than 910 days before your bankruptcy filing. If your car is older, then you are only required to repay the car’s current fair market value.
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Mandatory Credit Counseling and Debtor Education Courses for Bankruptcy Filers
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 stipulates that when a person files for personal bankruptcy, they must go through two counseling sessions: a credit counseling course and a debtor education course. Within 180 days before a person files for bankruptcy, they must receive credit counseling from an organization approved by the Department of Justice’s U.S. Trustee Program. Then, once they have filed bankruptcy, they must complete a debtor education course in order to have their debts discharged. The U.S. Trustee Program operates in all states except Alabama and North Carolina.
Pre-Filing Credit Counseling
You must go through a credit counseling session with an approved credit counseling organization before you file for bankruptcy. In this course you will receive an evaluation of your personal financial situation, a discussion of alternatives to bankruptcy, and a personal budget plan. Approximately half the people that complete the credit counseling session immediately hire a lawyer and file a case, while the other half usually try cutting more expenses to suspend filing.
The credit counseling course should last about 60 to 90 minutes, and can take place in person, on the phone, or even online. Generally, this session costs about $50 but can be waived for consumers who cannot afford to pay the fee. To waive the fee, you need to request a fee waiver from the counseling organization before the course begins.
Once the course is completed, you must receive a certificate as proof of your participation. It is important to check the U.S. Trustee’s website to make sure that you get the certificate from a counseling organization that is approved in the judicial district where you are filing bankruptcy. To protect against fraud, the certificates are produced through a central automated system and are numbered.
When searching for a credit counseling provider, make sure you receive services only from approved providers for your judicial district. Check the list at www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm or at the bankruptcy clerk’s office for the district where you will file.
Post-Filing Debtor Education
As mentioned above, you must complete a debtor education course after you file for bankruptcy in order for your debts to be discharged. As a rule, there is no way that you can take the debtor education course at the same time as the credit counseling course. In the debtor education course, you will receive information on developing a budget, managing money, using credit wisely, and other resources. This course may last about two hours, and like credit counseling can be provided in person, on the phone, or online.
The fee for the debtor education session is generally between $50 to $100. As with credit counseling, if you are unable to pay the session fee, you should seek a fee waiver from the debtor education provider.
Once the course is completed, you should obtain a certificate as proof of completion, separate from the certificate you received after completing your pre-filing credit counseling.
Check the list of approved debtor education providers at www.usdoj.gov/ust/eo/bapcpa/ccde/de_approved.htm or at the bankruptcy clerk’s office in your district.
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Knowing what to expect can make filing for bankruptcy a smoother, less painful process. Here are some helpful tips and secrets about filing for bankruptcy:
Personal bankruptcy is not just for the poor anymore; formerly affluent people are being pushed into bankruptcy more than ever before. Due to the decline in real estate values and the increase in job losses in professional positions, 8.1% of bankruptcy filers last year made over $60,000. This fact lessens the stigma that personal bankruptcy is for the poor and those irresponsible with their money.
You can choose the best way for your debt to be handled when filing for personal bankruptcy. If you file for Chapter 13, you play an integral role in determining how you will pay off your debt. You will help design a payment plan that works for you, and thus you have a lot of choice about the way your bankruptcy plays out. Even with Chapter 7, you and your attorney can negotiate with creditors to find a way to fit your needs. Chapter 7 and Chapter 13 bankruptcies can be complicated, however, so it is highly recommended that you consult a bankruptcy attorney before filing either type.
A common misconception about bankruptcy is that it will leave you with nothing and homeless. Even in Chapter 7 cases, in which most a debtor’s assets are liquidated in order to pay off creditors, debtors often get to keep their homes. This could be because the debtor has taken out a second mortgage or the value of the home has fallen. There is also something called the homestead exemption which most of the time allows the debtor to keep their main residence if their equity in it is below a certain threshold. The laws vary between states, so it is recommended that you consult with an attorney before moving forward.
Bankruptcy could potentially improve your credit scores in the long run. While it is true that the immediate effect of bankruptcy is a drastic lowering of your credit scores, bankruptcy can be less damaging down the road than juggling late payments on credit cards for years in an attempt to delay the inevitable. Because 35% of a person’s credit score is based on payment history, it is important to keep from missing any payments and establish new credit as soon as possible. Bankruptcy stays on your credit report for 10 years, but you can work to repair it immediately.
Many debt settlement firms can actually do more harm than good. Most are unregulated, for-profit, and require regular payments before even helping the debtor. Because they are getting fees every month, they have little incentive to settle with creditors quickly. I recommend being very wary of debt settlement firms.
While it’s a natural desire to pay back friends and family before filing for bankruptcy, it can cause many problems. The trustee has the power to sue over any money repaid to friends and family within a year of bankruptcy if it is not voluntarily returned. Bankruptcy filers must disclose everything they’ve sold, transferred or given away in the past two years, and attempting to hide assets from the court can lead to bankruptcy discharge or even jail time for perjury.
Even if you stop receiving bills, it is still important to pay them. When you file for bankruptcy, you stop receiving collection calls and most bills aren’t sent to you, but that does not mean that you are released from obligations for paying them. If you file for Chapter 7 bankruptcy you must remember to continue to pay for what you want to keep, known as “secured possessions” such as a car or house, even if you don’t receive a bill.
Timing is very important, and when you owe more than you own, it’s time to talk to a lawyer. It does not mean that bankruptcy is the next step. As counter-intuitive as it may seem, it is sometimes best to wait until you think the worst is over. Otherwise you may file prematurely and acquire more debt that will not be included in the bankruptcy discharge. For example, if you are facing hospitalization you may want to wait to file until that’s behind you. However, there are other situations where it is better to file sooner rather than later. Legal advice can help you find the correct timing.
There is nothing easy about bankruptcy, but it certainly does not have to be the end of the world. An important part of coping is for debtors to acknowledge the normal feelings of depression, fear, and anger that come with filing for bankruptcy, and to make sure to reach out to support networks. The stigma that comes with bankruptcy has been lessened as it becomes more widespread and accepted. Often times filers come out stronger than they expected.
Filed under Personal Bankruptcy Tips by
Finding a job in this economy can be very difficult to say the least; however, some employers use background and credit checks that can make it seem impossible. Approximately forty-three percent of companies use credit checks as a prerequisite to employment. The credit checks are used for various reasons, including attempting to determine if a person has a propensity to steal because of debt, etc. Despite this reasoning, however, many studies conducted by various unbiased groups have found that a person’s credit history does not predict job performance.
In an effort to stymie the use of credit checks, especially in this difficult economy and while unemployment rates are high, Tennessee
Tennessee Representative Steve Cohen
Representative Steve Cohen has introduced HR 3149, The Equal Employment for All Act, which would help individuals, especially students, recent college graduates, low-income families, and senior citizens, to build or rebuild their credit by obtaining a job. According to Representative Cohen, one-third of individuals making less than $45,000 a year have poor credit scores due to bankruptcy, foreclosure, loan delinquency, divorce, medical debt, or unemployment. Their credit score can continue to be adversely affected the longer they remain out of a job, and companies using a credit investigation to determine whether to hire them adds to their problems.
The Equal Employment for All Act would prohibit employers from using an individual’s credit check as part of the hiring or firing process, unless the job involves national security, FDIC clearance, or significant financial responsibility – positions such as loan officers, bank managers, or financial officers. Representative Cohen has noted that approximately forty-six other House Representative colleagues have endorsed the Equal Employment Bill. He has stated that the purpose of the Bill is to prevent the loss of job opportunities for people who need them the most and to stop a hiring trend that will only hurt those who need the employment the most. In these difficult economic times, people are continuing to struggle with debt and many are attempting to work their way out of it. This Equal Employment Bill represents a tangible, simple, and immediate action that can be taken to provide unemployed individuals an opportunity to work their way out of debt without some of the roadblocks along the way.
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Tennessee’s job market and solar initiative will be stimulated with the opening of a manufacturing, warehousing, and distribution facility in Clinton, Tennessee. Confluence Solar, based in Missouri, will be investing $200 million for the new facility in Clinton, which is expected to create 200 to 400 new jobs.
Confluence Solar produces mono-crystal silicon ingots that increase the 
efficiency of solar photovoltaic, which helps to reduce the cost of solar power generation. Tennessee, which has noticed a quick surge in solar capital investments and growth in solar research and development throughout the state, is eager to house the new facility. Wacker Chemie and Hemlock Semiconductor will be investing over $2 billion for the construction of polysilicon manufacturing facilities near Cleveland, Tennessee.
Some of the other initiatives in the state include the establishment of the Tennessee Solar Institute and an investment of $62.5 million in research and energy production. Tennessee Valley Energy Enterprise was introduced by the Department of Energy in March of 2009 for reusing federal sites for the purpose of energy related research.
The Governor of Tennessee, Phil Bredesen, said that these new developments in addition to the advances in energy storage from the Oak Ridge National Laboratory have helped to build a solar footprint throughout the state. Confluence Solar will be building its facility in the Clinton I-75 Industrial Park on a 25-acre site.
Tennessee Valley Authority, the Tennessee Department of Economic and Community Development, elected officials, local economic developers and the Clinton Utilities Board worked together to seal the deal.
Filed under Bankruptcy and unemployment, Tennessee job market by
