By Richard K. Gustafson

I ran across a very good article that discusses “bad habits” that lead to debt problems. Below is a link to the full article at www.bankrate.com, but I thought I’d briefly share the highlights with you.

The ten bad habits are:

1) Misusing Balance Transfers - All of us have found offers for new credit cards that provide a “teaser” rate. “Transfer balances and pay no interest for a year” is a common sales pitch. While it can be a good idea to manage debt by taking advantage of these types of offers, you still have to be disciplined and concentrate on paying down the debt. The common mistake is that the person continues to use the card and creates new debt.

2) Not Checking Credit Reports - Some people believe that there is no value in checking credit reports because they don’t think they can do anything to change what the reports say. This is not true. Insuring that your credit report is accurate and challenging inaccurate information can help improve your credit score. An improved credit score opens opportunities for credit at lower interest rates. Lower interest rates can save you a lot of money! For more information, visit www.creditrepair.com.

3) Failing to Alert Creditors About Financial Hardships - Some creditors have in-house programs you can qualify for if you alert your creditor to an anticipated problem. If you wait until you are behind on payments, you may not be eligible for some of the programs the creditor could have offered you if you were current on payments.

4) Failing to Budget - Budget your money and stick to your budget. Don’t forget about those yearly or quarterly expenses. Make sure you take them into account.

5) Using Retail Store Accounts - I’m sure you have experienced shopping at a department store and being offered the store’s credit card. They are tempting as you are offered 10% off your purchases, or sometimes even more! The downside is if you don’t pay it off at the end of the month, retail credit cards have much higher interest rates than Visa, Mastercard, or American Express.

6) Procrastinating on Creating an Emergency Fund - Make sure you begin saving a little money each month into a savings account. You never know when a trip to the hospital could lead to a loss of income. You should be prepared for these events. Most experts tell you to have at least 3-6 months of your budgeted expenses saved in a savings account. This money can help get you through a medical situation or a job loss.

7) Paying Bills in No Particular Order - If you can pay all of your bills at the end of each month, obviously it doesn’t matter what check you are writing first. But, if you are going to fall short one month, you need to prioritize which expenses are more important so you can pay the important ones. Rent/Mortgage, transportation, utilities, and other “basic living expenses” should always be the priority over credit cards, retail store cards, etc…

8) Charging Purchases Instead of Using Debit Card or Paying Cash - If you have the money in your pocket to pay cash, why charge on the credit card? I know, it’s only $20 here or there, right? But what about when you do this three or four times a month. Suddenly, you have balances on your credit cards that could get out of control if you don’t pay them each month.

9) Making Credit Payments Late - You might be tempted to simply “eat the late fee” on credit cards if you’re struggling to make payments. Try to avoid this temptation as paying late could cause your interest rates to triple. In fact, missing payments to one credit card could could cause ALL of your interest rates to triple on ALL of your credit cards.

10) Making the Minimum Payment Only - Paying minimum balances is better than not paying, but if all you are doing is paying the minimum you won’t make much progress paying your debt. Try to pay at least a little bit extra each month. Obviously the best option is to pay off the entire balance each month. Try working a part-time job or overtime and using the extra earnings to pay down debt.

Here’s the link to the full article: www.bankrate.com/brm/news/debt/debtmanageguide/mess4.asp?caret=8

Effective representation requires open and honest communication from everyone. A client should feel comfortable telling the attorney about his/her financial problems. An attorney should not be afraid to educate a client about how the particular course of action the attorney is recommending benefits the clients and what the potential risks might be. Sometimes this means that the attorney must deliver unwelcome news to a client.

You might be surprised how many times I’ve witnessed someone else’s client sitting in court waiting for a meeting of creditors and the client couldn’t even tell me why they chose a chapter 7 over a chapter 13, or vice versa. I think that demonstrates that the attorney hasn’t spent sufficient time explaining the recommendations. It’s not uncommon for lawyers to tell their clients “don’t worry about it, I’ll take care of it.” While this phrase is a legitimate response to someone, I always try to at least explain why I think my client need not worry. Perhaps for some clients, the simple assurance is all they seek, but when a client is deciding on a course of action, I think the client should have more information than that.

Another part of communication involves availability. An attorney should be available to address a client’s concerns and questions. Unfortunately, I do take many calls from people who have hired other lawyers to do their bankruptcy cases and they now can’t get in touch with their lawyer and their lawyer doesn’t call them back. While I believe this situation doesn’t represent the way the vast majority of attorneys conduct themselves, it does illustrate how important it is that a client can get questions answered and concerns addressed in a timely fashion. In the same way, a client should keep his/her lawyer fully informed of address changes, phone number changes, etc… Communication is a two-way street.

When considering a lawyer to represent you, I think you should ask yourself whether or not the attorney you are considering has given you good explanations for the recommendation he/she is making. You should ask about how phone calls are handled in the firm to try to determine whether you will be dealing with a phone tag situation, or whether you can get an attorney on the phone immediately when you call, if the need arises.

By Lori Leigh

If you are suffering from a temporary or a permanent layoff, don’t wait to seek the relief you deserve. With so many companies downsizing, cutting overtime or simply closing up shop, it is no wonder that so many workers are struggling month to month just to pay their bills.

I cannot tell you how many times I have heard from my clients that since their job cut back hours, they have been struggling to pay their mortgage or car note while at the same time, trying to stay current on utilities and pay all the other miscellaneous debt. Their paychecks simply cannot pay all their bills. They have to do something and for many of them, bankruptcy is the answer.

Do not let yourself get so far behind that your car gets repossessed or your home goes into foreclosure. I can tell you first-hand that I have had clients that have had their home go into foreclosure because they have been trying to pay all their credit card debt and medical bills. Please do not let this happen to you. Each time I meet a client that has been laid off or have had their hours cut and have been struggling each month to pay their bills, I hear that they all wished they had come to see me a lot sooner.

Do not pick and chose which bill needs to be paid, when your income no longer affords you this choice. You need to seek the professional help you deserve. The bankruptcy laws were designed to help individuals just like you. Let a professional show you how they can help your financial situation and be the means to a better future.

By Richard K. Gustafson

Unfortunately, relief from financial hardship is occasionally short-lived. It is not uncommon for some people to find themselves in more financial problems at some point after they filed a bankruptcy. It is possible to file bankruptcy more than once. However, there are time limits.

One part of the bankruptcy reform legislation that happened in October, 2005, was that time limits between bankruptcy filings were increased in some instances. The new time limits are as follows:

Chapter 7
- If you filed and received a discharge in a prior chapter 7 case, you have to wait 8 years after the filing of the prior chapter 7 before you can file another chapter 7 case.
- If you filed and received a discharge in a prior chapter 13 case, then the time limit depends on what percentage of your unsecured debt you repaid in your prior chapter 13. If you paid back more than 70% of your unsecured creditors (and that was your best efforts) in the chapter 13, you can immediately file a chapter 7 case without any waiting period. If your chapter 13 case paid less than 70% to the unsecured creditors, you have to wait 6 years after the filing of the prior chapter 13 before you can file a chapter 7.

Chapter 13
- If you filed and received a discharge in a prior chapter 7 case, you are eligible to file a chapter 13 case. There is no waiting period. However, if you file the chapter 13 case within 4 years of the date you filed the prior chapter 7, you will not receive a discharge in the chapter 13. Thus, you could use the chapter 13 to catch up on mortgage arrears and save your house, but the chapter 13 won’t ultimately discharge any debt obligation, including credit cards.
- If you filed and received a discharge in a prior chapter 13 case, there is a 2 year waiting period from the filing of the prior chapter 13 case. This provision would probably not come into play much because most chapter 13 repayment plans take longer than 2 years to complete. Thus, since the time period looks at the filing date, it would be rare that someone would complete a chapter 13 case within 2 years and then immediately need another one. It’s possible, but it would be rare.