Credit Card Lowdown

Bankruptcy In The Skies: Soaring

--By Priya Jestin, Staff Writer

Would you like to take on someone else’s debts and help them work their way out of bankruptcy? I doubt any sane person would want to do it – excepting of course near and dear relatives and friends. That’s why initially, I was quite confused when I heard about USAirways wish to merge with the now bankrupt Delta Air Lines. What does USAirways CEO Doug Parker stand to gain by buying bankrupt Delta?

Quite a bit it would seem. Parker, who is well versed in this game of merging with bankrupt airlines, knows the benefits he can garner from such a deal. USAirways was a bankrupt airline until Parker came along with America West Airlines and merged the two. Now USAirways is one of the most profitable in the airline industry.

With Delta under his belt, Parker will be able to create one of the world's biggest carriers, with 350 destinations. Still wondering what bankruptcy’s got to do with all this? Well, I’m coming to it. Bankruptcy is quite advantageous to companies and helps them enter into deals they may not have been able to negotiate if they were solvent. For instance, you can work your way through the company’s assets and discard things that may seem useless and a drain on the resources. In the case of Delta, this may mean cutting back on or stopping unprofitable routes. This would also help to make the fleet more efficient. Another benefit of bankruptcy is that you can return unnecessary assets like gas-guzzling planes or jets that are too huge to the lessors.

Back office operations also become easier because information systems, airport and maintenance facilities and vendor networks can be consolidated. With all this benefit, will it be any surprise if shareholders and creditors too prefer merger over going it alone?

Fattening Credit Card Cos On Money Meant For Donation

-- By Priya Jestin, Staff Writer

It is painful enough to be in bankruptcy (Chapter 13) and unable to afford to live life the way you want to, are accustomed to. But to rule that a debtor cannot tithe or donate money to charity when in bankruptcy is downright ugly. This whole ugly row took place because a New York couple wanted to give $100 to their local church. They were asked to use the money to pay their creditors and not the church.

Painful isn’t it? Blame the new bankruptcy law. As per the new rules, you cannot file for a Chapter 7 unless your annual income is at or below a certain amount based on your state’s median income. If you are not so lucky, you have to perforce file under Chapter 13. This means you must repay your debts over a three or five-year period. One important requirement in a Chapter 13 filing is that you are allowed only certain ‘reasonable’ expenses. And donation to charity is definitely not reasonable according to the law.

How do you explain this phenomenon? On one side we are taught to be kind, giving and caring. And on the other, the country’s laws say you don’t have a right to give to the less privileged because your financial health isn’t too good. So what do you do? Fatten up already bloated creditors like MasterCard, Visa, American Express…. I cannot even begin to fathom or explain the depth of my disgust here.

Can we become such a consumerist society that we forget our downtrodden? And what is the law asking us to do – become even more selfish and self-centered? Gives you something to think about this festival season, doesn’t it?

In Bankruptcy, Ignorance May Take You The Wrong Way

--By Priya Jestin, Staff Writer

In dire financial straits and cannot see a way out of it? Most of us in such a situation would opt to file for bankruptcy. Why would anyone want to lose much needed money and peace of mind when a bankruptcy can save you both. However, how many of us actually understand the bankruptcy law and how it affects us in case we do file? Just a miniscule portion of people can truly claim to understand what they do when they file.

Now as the new bankruptcy law completes a year, it has become even more imperative to ensure that the right information percolates down to us. There are quite a few procedures that we may not understand and may accept blindly because it saves us the effort of trying to understand. That’s just like taking any medicines your physician gives you without querying about your ailment. For instance, did you know that if you file a chapter 7, you might not even see your bankruptcy judge? Uscourts.gov reports:

A debtor's involvement with the bankruptcy judge is usually very limited. A typical chapter 7 debtor will not appear in court and will not see the bankruptcy judge unless an objection is raised in the case. A chapter 13 debtors may only have to appear before the bankruptcy judge at a plan confirmation hearing. Usually, the only formal proceeding at which a debtor must appear is the meeting of creditors, which is usually held at the offices of the U.S. trustee.

Read more: Bankruptcy Basics

Gay Latino Group Bankruptcy Stuns Govt

Bankruptcy of a group aiding gay Latinos has wide reverberations The recent financial collapse of te National Latina/o Lesbian, Gay, Bisexual and Transgender Organization, a prominent organization that aids gay Latinos has left federal officials stunned. They are now scrambling to reclaim hundreds of thousands of dollars in allegedly misspent government money. Mercurynews.com reports:

LLEGO once touted itself as the only national organization of its kind. But five months after it got the 2004 federal grant, LLEGO shut down. When auditors began probing, they found that the organization had incurred $703,181 in "unallowable costs" instead of the promised HIV/AIDS education efforts.

Read more: Bankruptcy of a group aiding gay Latinos has wide reverberations

Bankruptcy Filings On The Rise: Report

Nearly a year since the enactment of the new bankruptcy law, Chapter 7 bankruptcy filings are slowly on the rise. However, according to recent reports, at 71 percent, filings remain significantly lower than 2004 filings for the same time period. Accounting.smartpros.com reports:

Chapter 7 and 13 bankruptcy filings are slowly rising since enactment of the law, however, at a much lower pace than in previous years likely due to cost to file; complications with paperwork; the surge in filings prior to the law; and a misperception that Chapter 7 is no longer available. Attorneys are trying to issue appropriate messaging that helps set the record straight.

Read more: Chapter 7 Filings on the Rise

Breaking Up With Your Partner? You Could Go Bankrupt

And you thought that it was only people who had no control over their money that went bankrupt. Well, those types do exist but there is one more category of people that has begun to declare bankruptcy – those who’ve broken up with their partners. According to recent research, in Scotland, the average age of people going bankrupt has risen to 40 because of couples splitting up. While until recently the average age of people splitting up was around 30, now there seems to be a shift in debt trends.

While much of the debt among people in their early 40s can be attributed to credit card abuse, some of it is associated with the financial pressures imposed by failed relationships. Experts believe that the division of assets among separating couples may have contributed to the debt crisis. Now, it would be interesting to see if this phenomenon repeats itself in America or not. Oh, and by the way if you don’t know where Scotland is, you probably should be looking up a map.

How To Avoid Common Bankruptcy Pitfalls

If your financial situation is in such a bad shape that nothing short of filing for bankruptcy will help solve your problems, then you better not take too much time deciding to do it. One of the biggest mistakes people make is to defer the decision to file for bankruptcy. According to bankruptcy experts, people tend to wait until it is almost always too late to do anything at all and sometimes, people filing for bankruptcy don’t even have enough money to pay for the mandatory counseling sessions.

Then, there are the mistakes that people make prior to filing, which drastically affect their ability to get a "fresh start". The most common such mistake is to use your credit cards. Why so? Well, you were probably unaware of these facts:

• If you incur debts for the purchase of luxury goods and services from a single creditor in excess of $500.00 within 90 days of filing, this debt is nondischargeable and you may have to shell out the money.
• Cash advances of more than $750.00 within 70 days of filing are presumed to be nondischargeable and may be found to be due and owing.

Another very common mistake people make is to repay the debts owed to family members. Remember: when it comes to repaying your debts, family members to whom you owe money are like any other creditors. A bankruptcy trustee can even reclaim any amount repaid to a family member within one year of filing bankruptcy.

Think you can reduce your debt burden and probably not have to file for bankruptcy. Good, so how do you plan to do it? Liquidate your retirement account? Don’t EVER make that mistake. Retirement accounts are generally protected. You can eliminate your debt and keep whatever you have in an ERISA qualified account, free and clear.

There are many more mistakes but the biggest one would be to not tell your attorney the truth. In a worst case scenario, failure to notify your attorney about your assets may even lead to the loss of those assets, denial of your bankruptcy case, fines, or even imprisonment.

Tough bankruptcy law throws up new questions

The new bankruptcy law, which took effect in October last, was designed to make it more difficult for people to write off their debts under Chapter 7 bankruptcy. And for the first time, the new law mandated that anyone filing for bankruptcy would have to compulsorily go through credit counseling to consider alternatives before filing -- but the moot question is; does this solution work? Orlandosentinel.com reports:

Steve Bartlett, president of an industry association called the Financial Services Roundtable, supports the law but says it's flawed. "Early on, most of the pre-bankruptcy counseling is not especially useful because it's only occurring for people right before they go into bankruptcy," Bartlett said. "The flaw is that the bankruptcy counseling is only occurring at the end of the process when you have little option."

Read more: Bankruptcy law put to the test

Credit card use in bankruptcy

If you are in debt and see no way of repaying it then filing for bankruptcy may be a good option for you. It will not only help you get a fresh start, you can also save the skin on your backs if you are careful. Here is a list of the common mistakes that people make when filing and how you can avoid them.

Once you’ve decided to file for bankruptcy, one of the first things you need to do is stay away from your credit cards. If within 90 days of filing, you incur a debt for luxury goods and services and owe in excess of $500 to a single creditor, then this amount is presumed to be nondischargeable. This means you will have to pay up. If you have a retirement account, don’t make the mistake of draining it to pay down your credit card. A retirement account is generally protected, which means that you can eliminate your debt and keep whatever you have in an ERISA qualified account, free and clear.

Bankruptcy staring you in the face? Try these tips

While some run up their credit cards on consumer products, others are hit with a medical emergency -- whatever the cause, the end result is the same -- a severe debt that could lead to bankruptcy. There are several options for reducing and eliminating debt, however you will not eliminate your debt overnight. Bestsyndication.com reports:

On a recent Oprah Winfrey series of shows called The Debt Diet, experts agreed the best approach is to make more and spend less. Don’t get me wrong, I am not saying this is an easy thing to do. Part time jobs or a sideline business were the most common methods given for making extra money. Cutting expenses is just as hard.

Read more: How to Get out of Debt - Debt Consolidation and Ideas - Avoid Bankruptcy and Reduce Payments Using Credit Counseling Agencies

New bankruptcy law seems to work

A recent survey by the National Foundation for Credit Counseling (NFCC) found that the biggest reason consumers face bankruptcy is poor money management. And the new bankruptcy law which insists on credit counseling sessions before filing for bankruptcy, has seen filings drop phenomenally since it was introduced. Lsj.com reports:

Nationally, debtors who received prefiling counseling had average debts of $40,673 and an average income of just $31,255, according to a survey by the National Foundation for Credit Counseling, the umbrella organization for Consumer Credit Counseling Services.

Read more: Is bankruptcy reform working? Here's the difference between the two options

Beware of bankruptcy trap

Debt seems to have become a national bugbear with record numbers of consumers filing for bankruptcy every year. And some unscrupulous companies seem to be making a killing on this trend. The Federal Trade Commission has often warned consumers to be wary of advertisements that offer seemingly quick fixes to debt problems.

Problem is not everyone who is in debt needs to file for bankruptcy. While bankruptcy is definitely one of the options to deal with financial problems, it should be tried only if you have exhausted all your other avenues. Not only does a bankruptcy stay on your credit report for 10 long years, it also can make it difficult for you to get credit, a job, or even a house. This is something these shady companies will not tell you. They promise you the sky and then involve you in bankruptcy proceedings. What you can do is try other means like talking to your creditors or contacting a credit counseling service

This is the American nightmare!

Just about everyone will agree that today we are earning much more than what our parents did. We are told that we can expect to live a much better life than they did. Wanna know the real truth? Of course since you are grappling you’re your bills and don’t know where the money’s all gone, you do have an idea. But here are some figures you can crunch. Today, the costs of necessities are rising at an incredible rate and the average household income has actually dropped by nearly $2,000!

Sounds incredible? Well so, where does that leave the hard working American who is working himself to death just to realize a simple dream? With more and more bills! The hope, that someday you could hang up your shoes and watch the sun set gratified in the knowledge that you have enough money in the bank to tide you through, is all but vanishing.

Today, even before you can begin your career, you are saddled with college debts. Then there are the mortgage loans and auto loans. If you want to get married and have children, remember that in a little over a decade, you may be taking another big loan to pay for your child’s education. Sounds awful, but there seems to be no way out of this morass.

And here is the saddest part. Unable to meet even basic requirements, growing numbers of people in the middle class segment have taken to using their credit cards as ‘safety nets’ for all the necessities that they cannot afford to buy due to lack of money. And this takes them into a debt trap from which the only escape could be to file for bankruptcy. A real dismal scene this.