Published Wednesday, July 28, 2010 @ 9:16 pm

A recent insurance company survey highlights the fact that a large percentage of Americans are not financially prepared for a sudden loss of employment. Saving an “emergency fund”, as the financial advice columnists and radio show hosts like to call it, is far easier talked about during afternoon drive time than done. Heck, it’s the emergencies that pop up while trying to save for an emergency that prevent us from being able to squirrel away enough cash to prepare for the worst. Have a few hundred bucks to put away? Oops, there go the brakes on the minivan.

MetLife’s report shows that close to half of all Americans would be unable to pay their bills if they lose their job. In total, 65 percent said they could maybe cover a month or two, but not three, which is the coveted benchmark. In today’s tough job market, even a 6 month emergency savings account is probably an inadequate safety net.

Now, this is a wake-up call readers. Stop and look around at your situation. It’s time to start saving.
Take this opportunity to find every instance of money heading out and shut down the leaks. And if a significant portion of your income is going to pay unsecured debt, call a bankruptcy attorney today. Discussing your options with a bankruptcy attorney will give you one more perspective on your situation. Maybe bankruptcy isn’t your best option, but you don’t know until you’ve taken a hard look at your financial situation and talked to an attorney.

Look, we know you’ve probably heard this all before. But if you’re still reading about it, what have you done about it? Digging out of a financial hole is no easy job. Rest assured, it will take time. And by all means, let us know if we can help.

From the Law Offices of John T. Orcutt, with offices in Raleigh, Durham, Fayetteville, Wilson, and Lumberton North Carolina. Call us today for sound financial advice.

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Published Tuesday, July 13, 2010 @ 6:28 am

One thing you may already know about most court proceedings, is that parties usually have the option to represent themselves without the aid of an attorney. This is called appearing ‘Pro Se’, which, in Latin means “for oneself”. In a bankruptcy proceeding, when money is tight, the thought of saving money by cutting out attorneys and their fees can be pretty tempting. But there are many reasons this is a bad idea.

Bankruptcy can be complicated and bankruptcy judges are a picky bunch. They expect that the preparation of the voluntary petition, schedules, or other documents will be done accurately and on time. A bankruptcy attorney can usually prepare the documents in much less time than it would take for you to figure it out on your own. He or she knows what items of personal property should or should not be included on the petition to avoid a dismissal of your case, and how to apply the Means Test to your situation.

Some courts may give pro se applicants some minor concessions or leeway so that the case can be moved along, but they are careful to avoid crossing the threshold of what may arise to the level of the Court doing the job that a litigant – or his or her counsel – should be doing. Also, many different communications are exchanged between a party and the court, the trustees reviewing the petition, as well as the creditors. Your actions, or lack thereof, during this time, can seriously affect the outcome of your petition, and may even lead to the worst outcome- a dismissal of your case.

Normally, when you retain an attorney to handle a bankruptcy, the attorney will contact creditors on your behalf and attempt to stop any embarrassing, annoying, or even harassing debt-collecting activities. Usually this stops the behavior, even though legally, the creditor still has the right to contact you. He or she can also give you advice on seemingly innocuous activities that could negatively impact your case, such as drawing on retirement funds to pay bills.

Then there is the significant issue of knowing the law. Since there are several sets of rules governing bankruptcy proceedings, trying to navigate all the rules at once can get very confusing. All parties to any bankruptcy proceeding must comply with the Local Bankruptcy Rules, the U.S. Bankruptcy Code and the Federal Rules of Bankruptcy Procedure. Failure to do so will result in dismissal of the case, or other sanctions. Other important aspects of law can come into play at any time during this process as well, such as statutes of limitations, transfer of assets, or tax issues that can have a big impact on your proceedings as well.

Finally, many bankruptcy proceedings are entangled with other legal issues, such as divorce, civil court action, or foreclosure, which could affect the outcome of your bankruptcy proceeding, and vice versa.

Before deciding to gamble with your future, talk to an experienced bankruptcy attorney about it. You will find the cost well worth it.

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Published Thursday, April 8, 2010 @ 9:18 am

This blog talks at length about savings strategies and offers a great deal of consumer spending advice. Our goal is to create an all-encompassing approach to helping readers, clients and potential clients be financially successful after bankruptcy.

Having a healthy savings account should be the goal of anyone rebuilding after bankruptcy. But after the great bank fallout of the last two years, it’s becoming hard for a lot Americans to trust some of our nation’s largest financial institutions. Not only are the rate of return on these accounts very low, it seems every day banks are surprising account holders with a sudden fee or reduction in service.

If you remain skeptic and trust your tech-savvy, Web-based banks offer a number of attractive reasons to earn your savings account business.

Online banks can limit fees and offer higher interest rates because they do not have expensive overhead to cover, like hundreds of brick-and-mortar branches, thousands of employees and millions in advertising budgets. It also costs them less to service the customer because the means by which they do it—typically e-mail and instant messaging—costs much less than a person standing behind a counter.

Many online banks do offer phone service, so you can speak to someone when necessary. Another way they can limit fees—and this is a good thing—is by limiting access to your cash. No, not in a negative, “you can’t have it” kind of way but more so by not having ATM machines or again, physical branches.

Since everything is set up electronically, you can establish a line of connection between your online savings account and a local branch where you maintain a checking account. So yes, you may still have to deal with the big guys to some extent. In that respect, look around for a regional bank with only a few branches. Many of these institutions still do business like they used to, with neighbors working behind the desk and managers who remember your name.

Many online banks also limit the number of transfers you can arrange in a given month. Again, a good thing. Savings accounts are not meant to be accessed like a checking account. Unless you need it, it’s best to let the money sit. It should be noted though, that the transfer limit is set by federal law, not the banks.

Lastly, these banks are experts in user studies, creating Web sites that are very easy to use, navigate and set up. Thus, you don’t need to be a Web genius to online and start saving. If interested, do some comparisons. A site with current comparisons can be found at: http://moneyning.com/online-savings-accounts/.

Brought to you by the Law Offices of John T. Orcutt. With offices in Raleigh, Durham, Fayetteville, and Wilson, we’re always close to you. Call today for your free debt consultation. 1-800-899-1414.

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Published Thursday, April 1, 2010 @ 10:48 am

Are you feeling too broke to break out of debt? For those ready to end the cycle of debt, it is important to understand that bankruptcy is not a one-size-fits-all solution, and bankruptcy filings are complex cases catering to your individual economic needs.

Bankruptcy, like so many areas of the law, is in a constant state of evolution, having been refined and redefined over the decades and through several important pieces of legislation. The first major bankruptcy legislation since the Chandler Act of 1938— Bankruptcy Reform Act of 1978—brought some of the most significant changes to the U.S. Bankruptcy Code. Within this Act, there were a host of important changes that the Act brought to the U.S. Bankruptcy Code—changes that can help you in these tough financial times:

(1) The Bankruptcy Reform Act of 1978 introduced Chapter 13 bankruptcy protection. Referred to as a wage-earner reorganization bankruptcy, this new type of bankruptcy can now stop foreclosure on your home or restructure your consumer debt into a more manageable payment plan— allowing debtors to pay back what they owe over time, often at a percentage of the cost.

(2) For the first time, this act also allowed married couples to file a joint bankruptcy. Because husband and wife file a single bankruptcy case pursuant to these rules, only one filing fee is paid to the Clerk. These days, considering the fact that the filing fee for Chapter 7 and Chapter 13 bankruptcy can be hundreds of dollars, and attorney fees ranging even higher, this results in major savings. Married couples should consider filing jointly filing when most debts are jointly held between as is often the case of credit card debts, mortgage loans and automobile loans.

(3) The legislation also introduced additional exemptions for filers, allowing individuals, for the first time, to keep most, if not all, of their property. Assets you can keep in bankruptcy can include certain retirement plans, education funds, and even real property under homestead exemptions.

(4) The act reorganized various chapters of the Bankruptcy Code. Specifically, Chapters 5, 6, & 7 were changed to Chapter 11 bankruptcy. For the first time, businesses filing for bankruptcy after the act began using Chapter 11 bankruptcy. Today, Chapter 11 bankruptcy is a form of bankruptcy reorganization available to individuals, corporations and partnerships. It has no limits on the amount of debt and is the usual choice for large businesses seeking to restructure their debts.

With the legislation Bankruptcy Reform Act of 1978 bankruptcy reforms were highly substantive and substantial, shaping the law to the needs of a public eager to get a fresh financial start. These specific efforts and exemptions are the primary reason that it is important to have a good bankruptcy attorney on your side; someone who is familiar with the process and knows precisely how the latest laws can assist you.

Well, it’s finally time to halt the hesitation, dismiss the deterrents, and suffer no more; because, in fact, the opposite can be true in the world of bankruptcy law. Days, weeks, and months wasted without speaking to a qualified bankruptcy expert can actually add up to higher bills, increased interest and greater stress—creating a costly cycle of creditor-debtor “cat-and-mouse”—that you continue to pay for—with the constant risk of losing even more.

Specifically, the bankruptcy attorneys at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Sunday, March 7, 2010 @ 8:10 am

Before you begin the bankruptcy process, it’s important to understand a few helpful hints to make it a more painless process:

(1) Remember: You are not Alone.
Maybe you think of bankruptcy as something for “other people.” But the days of bankruptcy as a means of financial respite for the perpetually poor are no more: everyone from the solidly middle class to formerly wealthy Americans are being forced into bankruptcy more than ever before. Because of steady declines in real estate values, and rises in health care costs, credit card interest and unemployment in all sectors, more than 8% of bankruptcy filings in 2009 came from people who made over $60,000. So, begin by dispensing with any preconceived ideas of bankruptcy in lieu of a successful strategy for setting off on a sound path to personal financial freedom.

(2) Personal Bankruptcy Puts You in Control
While people who drown in debt remain at the mercy of their creditors, bankruptcy can actually be a better way to take control of your financial future. If you file for Chapter 13 bankruptcy, you play an integral role in determining how you’ll pay off your debt, including a trusty payment plan that works for you. Even Chapter 7 bankruptcy can buy precious time to halt creditor harassment, save money and plan your next best fiscal moves.

(3) Bankruptcy Can Be a Key to Better Credit
As counter-intuitive as it may seem, bankruptcy could potentially improve your credit scores in the long run. Obviously, the immediate effect of bankruptcy is a lowering of your credit scores. However, filing can be the better option for your long-term credit than enduring late payments on credit cards for years in an attempt to stave off what is more than likely inevitable: default. Because some 35% of your credit score is based on your payment past, it is vital to your financial future to avoid missed payments and establish new credit as soon, and as much, as possible. Even though bankruptcy stays on your credit report for 7 to 10 years, it does not necessarily follow that your credit score will be low for that entire time. If you take steps to rebuild after your bankruptcy, your FICO score can quickly be restored to where it was prior to your filing.

(4) With Bankruptcy, Timing is, in Fact, Everything
When you’re facing insolvency, timing can be especially important. And that’s also the reason it’s the best time to talk to a qualified bankruptcy lawyer. But just because you’ve consulted a lawyer does not necessary mean that bankruptcy is the next step. While it’s hard to believe, it is sometimes your best move to hold off on your filing until the worst of your financial situation is over. For example, if you are facing impending medical costs, you may want to wait to file until you’ve recovered fully before filing for bankruptcy, simply to avoid accruing more medical expenses during the process. In the alternative, some situations demand that you file sooner than later, such as if your car’s been repossessed and you need it back immediately. As a result, consulting a bankruptcy expert is your best bet to making your bankruptcy work for you.

(5) With Bankruptcy, You Never Have to Go it on Your Own
Bankruptcy isn’t a cakewalk, but you never have to go it alone. In fact, knowing a qualified bankruptcy attorney can also help you conquer your creditors and face your financial fears, yielding the right kinds of support, information and insights—at a low cost— for a viable and secure future. The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Thursday, February 25, 2010 @ 3:09 pm

While many economists argue that the economy is steadily rebounding, whether you’re in a recession or recovery seems to largely depend on where you live, if you have a job, if you can pay your bills, or if you still have your home.

The Huffington Post reported this week that facing an economic meltdown in their personal lives, many formerly middle-class families have had to find “creative ways to cope with the sudden loss of their jobs and homes.” In her article, “Rattlesnake for Breakfast, Wedding rings on Craigslist: Families Cope With Falling Out of the Middle Class,” Laura Bassett describes how the American dream, for many, has turned into a surreal nightmare.

Take Arkansas’s Jeff Falk, 51, for example. After losing his family business selling auto parts, and finding himself no longer able to afford the house he had built for his family, his wife Jill, and their two boys, ages 3 and 8, packed their 40-foot camper and headed to Arizona for the winter.

“Jill found a part-time job waiting tables, and Jeff found occasional work repairing old boats, but they struggled to feed and home-school their young boys. Occasionally, Falk says, he feeds his children rattlesnake that he caught near his camper. While Falk, his wife and his children have managed to stay positive throughout their financial hardships, he says the hardest part of falling out of the middle class is losing the respect of those around him. ‘There are two kinds of people,’ he said. ‘Those that turn and look the other way and don’t even wanna look at you, and those that reach out and help you, and it seems like there’s no in-between.’”

The Falk family isn’t alone. Bassett also found Illinois’s Stephen Mooney.  Laid off in 2008 from a job he had held for 10 years, his severance pay ran out a few, short months later, leaving he and his wife Marianne unable to pay their bills.

“’Our gas was shut off,’” Mooney told HuffPost. ‘We were taking showers with water that we would heat up in the rice cooker and microwave. It was very depressing. Going to a job interview, you may be wearing a shirt and suit, but you don’t feel clean. I looked unkempt all the time, and corporate America’s not an easy place. There were some places where I knew I didn’t have a job as soon as they saw me sitting in the lobby.’ To make matters worse, the Mooneys’ house was recently foreclosed, and they have been asked to leave by March 1. ‘I don’t know how we put all the pieces back together,’ Mooney said. ‘Where do we live? Where does all our stuff go? It’s going to be very strange.’”

As Bassett reports, many families are making similarly difficult decisions just to stay afloat.

Kimberly Rios of Maryland sold her wedding ring on Craigslist last weekend just to cover utility bills.  “‘This is no joke, please be a serious buyer,’ Rios wrote in her ad. ‘It is too cold for us to be without electric and heat so if you have been looking consider my deal.’ She told HuffPost that she sold the ring on Valentine’s Day. She is trying to decide whether to use the money to pay for a few weeks of electricity or to buy a cheap car so that she and her family of six will have a place to go when the foreclosure happens.”

In spite of it all, Rios remains positive about her family’s future: “At least we have each other.”

Unfortunately, in this new era of financial insecurityy, stories like these are common in articles, reports and blogs all across the World Wide Web. Fortunately, no matter how dire your financial situation and how extreme your sacrifice, you can find strength in the numbers of families—all across the country—facing the same tough choices.

Yet, even if major sacrifices just aren’t enough to keep you afloat, knowing a qualified bankruptcy attorney can also help you face your financial fears, yielding the right kinds of support, information and insights—at a low cost— for a viable and secure future.  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Tuesday, February 9, 2010 @ 6:39 pm

If you couldn’t tell by the utter onslaught of tax preparation service ads and the sudden presence of temporary cubicles in that once abandoned retail space at the corner of your favorite strip mall, let us be the first to remind you that it’s tax season.

We take interest in this time of year because tax returns can mean one of two things to our readers: more debt or more money. Since we are all about helping you figure out what to do with your debt, we hope this post will educate you regarding what tax season can mean for your financial well-being.

There are number of tax deductions out there that get ignored by a lot of families. Worse yet, they are not even addressed by many of the “come-and-go” tax return preparation services out there. On that note, we encourage you to take caution when deciding who to work with if you are not someone who handles returns on your own. We should also point out that there is good reason to hire someone to help with your tax returns, primarily to alleviate stress and ensure they get done correctly.

That being said, make sure that the person you hire is an actual financial professional, not someone who was just trained to punch data into a computer program. Ask friends or co-workers if they can recommend a reliable Certified Public Accountant that has a tax service. Yes, it will cost you more money, but not that much more.

If you have no choice but to use a temporary tax shop, ask for the most senior member of the team. Many of these operations do have supervisors on staff with actual accounting and tax experience. Remind them that there are countless shops just like theirs that would prefer your business to encourage the top person to give you appropriate attention.

To further ensure you are getting the service you deserve, remind your tax preparer about the most often missed tax deductions. An article on MSNBC.com highlighted seven of them, which do require you to itemize:

• Home ownership deductions can include mortgage interest, property taxes, fees involving the sale of your home and agent commissions.
• In North Carolina, the personal property tax you pay on your car each year can also be a deduction.
• Always hang on to your receipts for charitable donations, even the bags of clothes you gave to Goodwill. When any charity asks you if you want a receipt, say yes.
• Did you know you can deduct mileage expenses if you use your own car in a charitable effort? You can. Go back and write down when you did and even keep receipts for bus trips to the location of your volunteering. Parking fees and other tolls count, too.
• If you had to travel for work, keep track of any dry cleaning and laundering receipts for clothes you needed on behalf of the company. This only counts if you are required to look the part and don’t try it with the torn jeans you wear on the flight.
• Also related to business travel are the costs of shipping materials or paying for your baggage, which many airlines now require. So hang on to those receipts as well.
• Other miscellaneous deductions related to work include costs for faxes, Internet access or hotel phone calls.  You may also be able to deduct moving expenses. Make sure you provide good proof that the costs you incurred are directly related to the available deduction category.

We would hate to see your tax bills become the reason you have to file bankruptcy.   However, if you have been stuck with a large tax bill from the past, or if you anticipate owing taxes that you can’t pay all at once, you should consider bankruptcy as an option to either discharge taxes eligible for discharge or pay certain taxes that can’t be discharged over a period of several years through a Chapter 13 plan.   If you have any questions about how tax bills are handled in Chapter 7 or Chapter 13 bankruptcy, give us a call, we’ll be glad to help.  Call 1-800-899-1414 to schedule a FREE consultation with an experienced bankruptcy attorney at the Law Offices of John T. Orcutt.

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Published Sunday, January 31, 2010 @ 7:38 am

There is so much we do not know about the things that put us into debt. From credit card fine print to car lease agreements and as the last few years have demonstrated, even the most basic facts about our home loans.

To anyone with the ability to fog a glass, it is more than evident that our collective ignorance on these matters is precisely what causes our country to carry so much personal debt. And despite the government’s best effort, whether in credit card reform or mortgage assistance programs, the only way to solve our financial problems is for the American consumer to educate itself as to the practices, jargon and bureaucracy that obfuscate the critical, debt-inducing rules of credit and loan products.

However, education, specifically student loans, is one of the things helping to add weight to America’s debt anchor. They have caused countless bankruptcies and yet remain a non-dischargeable debt under Chapters 7 and 13 unless you can prove that paying them will cause a substantial hardship on your family. As if the bankruptcy itself was not enough hardship.

Those in the student loan profit circle are hesitant to ever address the debt issue in public, despite it’s prevalence on so many household balance sheets.

In a Wall Street Journal column, an expert on the student loan debt problem cited a 2003 report by the Department of Education with some staggering statistics. It stated that default rates for loans that cover 4-year, 2-year and for profit colleges are 25 percent, 35 percent and 45 percent. In simpler terms, around one in three students default on the loans they accepted to pay for education.

Not sinking in yet? Try this: the student loan default rate is higher than credit cards, sub-prime mortgages and even over the counter payday loans. Yet, the issue is never introduced or addressed in Washington circles, even in the midst of today’s middle class stabilization efforts.

Even though the Department of Education (DOE) created and published the report demonstrating the nation’s difficulty in repaying student loans, it later boasted complete confidence in a full return on every loan it issues plus a 20 percent boost in interest and fees on forbearance, adjustments and default penalties.

Now, mix in organizations like Sallie Mae, who buy, issue and oversee billions in student loans and also own collection companies to track down those who can’t pay, and it’s easy to understand just how much money is being made on the back-end of our college diplomas.

The higher-ups in Washington are in on it too, as a number of very common consumer protections that apply to most loan vehicles, such as the bankruptcy code and truth in lending requirements simply can’t be found in the fine print of your student loan. Thus, the DOE is the lone source of control when it comes to student loans, wielding powers over your wallet and financial stability like no other wing of our democracy.

And it’s only going to get worse.

Reuters is reporting that the rate of student loan growth in the last two years is close to setting records, jumping 29 percent. In total, there are now close to 69 million student loan accounts open in the United States. This is primarily because the recession has put so many people back into the classroom to refresh job skills, obtain additional degrees or change careers. Additionally, with so many parents out of work, more children have to apply for loans to cover their schooling.

In total, the country now owes close to $527 billion in student loans. And just about every penny of it will be repaid. Plus interest.

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Published Sunday, December 20, 2009 @ 8:22 am

Creditors around the country probably still secretly wish that Debtor’s Prison still existed so that they could send all the people that do not pay their bills there. Thankfully, the founding fathers had the foresight to do away with such an antiquated notion back when the country was formed and even provide the foundation for the bankruptcy laws that we now have today.

Little do most people know but the founding fathers were not the best at managing their own finances as they were in managing a war for independence. After all, these people did dump thousands upon thousands of dollars in tea into Boston Harbor! Most people are not aware, but the third president of the United States, Thomas Jefferson, was on the verge of bankruptcy for many years.

Luckily our founding fathers had the understanding that financial turmoil could strike any American, usually honest people that made a few too many mistakes or fell on hard times that would have trouble making ends meet and fulfilling their financial obligations. The first law allowing for people to wipe their debts clean was passed in 1800, but the power of business was evident even then and the law was repealed three short years after it was enacted. States tried to follow suit by enacting their own bankruptcy laws, but the Supreme Court quickly put a stop to this exercise.

The first federal law to pass that helped debtors came about in 1833. However, it was not until 1841 that bankruptcy laws became more of a remedy for debtors than creditors. Much like the law in 1800 though, this one was abolished three short years later as well. Another effort lasted a few years longer following the end of the Civil War with the passage of the Bankruptcy Act of 1867; eleven years later business interests once again prevailed as the law was done away with.

The underlying rationale for the repeal of each bankruptcy law was that it should be up to the creditor and/or the court if someone should be able to declare bankruptcy and wipe out their financial obligations. It was not until the late 1890s that the idea that honest people should be allowed a way out from the financial hole of too much debt without the creditors/ courts giving the okay. This unconditional discharge finally became law with the passage of the Bankruptcy Act of 1898.

Creditors undoubtedly still try to get this law overturned. It worked at other times in history so why not? However, in a country founded on the concept of new beginnings the concept of being allowed to escape persecution of a financial nature appears to have become an inherent right.

So when you are pondering the decision to file for bankruptcy keep this in mind: it took nearly a hundred years for that right to be secured; it is yours- use it. Also, if it was good enough for Thomas Jefferson than it is good enough for you too!

If you are in North Carolina, talk to the experienced bankruptcy attorneys at the Law Offices of John T. Orcutt today to discuss how bankruptcy can help you save your family home from foreclosure, decrease your auto payments, and get rid of your burdensome credit card debt once and for all. Call 1-800-899-1414 today to set up your free initial consultation. Convenient offices in Raleigh, Durham, Fayetteville and Wilson.

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Published Sunday, October 11, 2009 @ 10:09 pm

We can’t stress enough the value of bankruptcy for those who truly need it. Hey, it’s no secret that our business is to help people correctly file and emerge from bankruptcy with a more positive approach to their finances. The truth is that without dependable legal assistance, many Americans would face a very difficult and extremely creditor-centric bankruptcy process.

Need evidence? Just look at 2005′s Bankruptcy Abuse Prevention and Consumer Protection Act, which was conceptualized and heavily backed by the lending industry to ensure they re-gained an upper hand in bankruptcy court. Despite the prevalence of consumer debt problems, compounded by a faltering economy, many Americans operate under several misconceptions about bankruptcy that can often prevent or at least delay the decision to file. So let’s clear up a few things.

First off, bankruptcy is by no means a haven for unmotivated, blameless folks who simply don’t want to pay their bills anymore. Please.

No one hopes to lose their job. No one plans on having their multi-billion global employer (which provides a healthy, well-deserved salary) make shoddy investments and lay-off thousands of employees within weeks. Today’s bankruptcy cases span all levels of income and “social status” and often stem from factors beyond the control of those who need to exercise its benefits.

More over, medical debt has driven a large portion of today’s bankruptcies. How is being suddenly injured or stricken with a hard-to-fight disease an attempt to escape financial responsibilities? Many people who file for protection today are older than 65 and do so as a result of inescapable hospital bills.

In February 2005 a report was released in Health Affairs, a medical policy journal, that stated bankruptcies related to medical bills increased by 2,200 percent between 1981 and 2001. The majority of the cases in the study involved those who had insurance. Scary.

Truthfully, the idea that a person who files bankruptcy is irresponsible has been perpetuated by many of the same entities responsible for pushing anti-consumer legislature. There are simply too many unknown factors behind bankruptcy to ever assume a person is filing simply to get a free ride.

One would think, especially after the push and passage of the 2005 act, that the lending industry would be quite wary about to whom it extended credit. In other words, if they were so concerned with the number of those not paying them back, why did so many industry players provide avenues of credit, such as subprime mortgages, credit cards or lines of credit, to individuals who clearly demonstrated no ability to pay them back?

There is no hiding the fact that the lending world, as it is doing currently, saw an opportunity to quickly increase profits by providing money to those who did not have any. With steep late charges, interest rate spikes and hidden fees backed by exceptionally aggressive, tobacco industry-like marketing, financial industry leaders knew full well that money brought in from these tactics would far surpass that which would be lost in America’s bankruptcy courts. As evidence, note that since 1997, bankruptcy filings have increased by 17 percent at the same time credit card companies have experienced a more than 160 percent rise in profit.

You tell us who’s winning the credit wars.

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Published Friday, October 9, 2009 @ 5:23 pm

Even though we are in the business of helping people through bankruptcy, legally and sometimes even emotionally, we understand that filing is not always the best option for you. However, our greatest fear is for those who should file but decide not to for the wrong reasons, whether it be because of the stigma of bankruptcy, an inability to face financial reality, or opting for a “less than legitimate” credit counselor.

To help in your decision, consider some of the consequences of not filing bankruptcy:

Losing your car
More than likely, you have a car loan. Should that payment be one of the debts that goes unpaid, your car can be repossessed by the lender and sold to pay the loan. But here’s the real pain in losing your car: it rarely covers the amount you owe. So, you could end up losing your car and getting sued for the difference. Bankruptcy stops the repo man, and in many instances, will allow you to repay the loan with much better terms.

Foreclosure
This can be the biggest pain of them all. While the bank can’t simply take your home like a car, they can foreclose on it. The process typically takes a few months. However, this does not mean you should wait until the foreclosure hearing to seek help. If you are behind on your mortgage, a Chapter 13 bankruptcy will allow you to catch up the missed payments over a repayment period of 3 to 5 years. Contact your bankruptcy attorney today, even if you’re only behind a couple of payments.

Student loan collection
In-state tuition for the University of North Carolina system schools is going up every year. Some of the private schools in our state are well over $50,000 per year just for the privilege of attending. Without question, college is getting expensive. And so is the cost of not filing bankruptcy if you have student loans. While many loans start out as federal in nature, a large majority of them are bought by third-party lenders who do not look kindly on your inability to pay them. However, these groups are more than happy to grant you a deferral or forbearance in order to drag out the payment periods to 25 years or more. If you don’t pay your loan, they can garnish your wages and even sue you. While bankruptcy can not get rid of student loans, it will get rid of your other unsecured debt, putting you in a better position to get back on track with your student loan repayment.

You could get sued
You might think that if you simply don’t pay your creditors, they will eventually go away. Not true. Debt buyers, the lowest of all life forms, will eventually purchase the debt for pennies on the dollar. These aggressive hounds will not stop until they have pressured you to cough up a reduced settlement amount. If you still refuse to pay, they can sue you and obtain a judgment lien on your property. Depending on the laws of your state, the debt buyer can then attempt to sell your home, car or other belongings in a sheriff’s auction. Bankruptcy will stop a lawsuit immediately, and stop the creditor from forcing a sale of your property.

If you are falling behind on your monthly payments, talk to an experienced bankruptcy attorney to discuss how bankruptcy can protect you and your family. In North Carolina, call the Law Offices of John T. Orcutt to set up your free initial consultation. 1-800-899-1414.

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Published Monday, August 17, 2009 @ 1:52 pm

It’s generally not good practice to pay unsecured creditors just before filing bankruptcy. This is especially true if you plan on paying back a friend or relative. This means that if you’re considering a bankruptcy, you shouldn’t repay your Cousin Ted that $1,000 you owe him from vacation last year. A repayment constitutes preferential treatment of an unsecured creditor, and if you then file for bankruptcy, the Trustee will sue Cousin Ted to recover the $1,000.00

If this happened to you, don’t beat yourself up about it, it’s one of the more common pre-filing mistakes. It’s completely understandable that a good portion of your financial guilt stems from not being able to get square with friends and relatives. However, you need to make sure you don’t do it again, because it can make things quite a bit worse, especially for your favored insider.

Wait, what’s an “insider?” That sounds underhanded…

Basically, an insider is a person who is close enough to you for the court to be swayed into believing they have a strong enough influence over you to impact payment decisions. Insiders are not automatic and are determined on a case-by-case basis. If a person is found to be an insider, the trustee can retrieve preferential transfers from them as far back as a year before bankruptcy.

Ex-spouses can sometimes be considered insiders, provided you two are still on speaking terms. But if things are bad enough between you, he or she may be begging to be labeled an insider. As you can see, this is one component of preferential transfers than can get pretty sticky.

Here is a quick breakdown of the type of payments that are not preferential:

• Small payments: Payments less than $600 to a single creditor within the defining time period, typically 90 days or up to a year if involving an insider.
• Payments on secured debts: Car and house payments are not preferential, because you are obligated to pay them as secured debts.
• Current expenses: You are not going to get in trouble for paying your current bills and other monthly obligations. Be somewhat careful here, though, as back rent could be considered preferential. Talk to your attorney about this and all payments you have made prior to filing.
• Overdue alimony or child support: These payments also need to be made and can’t be recollected by a trustee.

Every post here is to help educate and inform you about the world of bankruptcy. If you are considering bankruptcy, but feel a moral obligation to repay a friend or relative first, speak with a bankruptcy attorney before you make a costly mistake. In North Carolina, call the Law Offices of John T. Orcutt at 1-800-899-1414 for a free debt consultation.

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Published Friday, August 14, 2009 @ 2:55 pm

The news sure sounds exciting, especially for those rebuilding after a bankruptcy or perhaps teetering on its edge. Economic statisticians, those in colorful bold boxes on morning stock report shows and even the country’s newspapers, long considered a haven for everything depressing, are reporting that the worst of the recession is over. Many are going so far as to say that we’re on our way up again.

Honestly, the numbers don’t lie. But they don’t tell the whole truth, either.

The last couple of months have seen the fewest number of jobs shed, according to those in Washington. National savings rates are holding steady and business productivity has climbed to its highest level in six years. Impressive.

Still, the impact of those numbers, where the results really count, has yet to be felt in the cul-de-sacs, unemployment offices and youth soccer field sidelines across the country. People are still struggling and bankruptcy filings are still on their way up. If you were to probe a bit deeper into the primetime diatribes or stumble upon the e-mail trains chugging back and forth between Wall Street and Washington, you would find a good deal of evidence that most of America remains quite scared about their financial future and that the recovery will take another year or so to materialize at home.

The last thing we want to do is give people a reason to be pessimistic. Our job, day-to-day, involves helping people put things into perspective by showing them a route out of economic uncertainty. However, in order to do that, we need to be honest with clients and others we advise. No one benefits from a skewed truth. We still see people cashing in retirement savings to pay bills. College funds are being depleted and houses being sold at deep discounts because of foreclosure fears. All of these things continue to go on in the midst of statistics that indicate we don’t have to do those things anymore. The sun is rising, they say. The new dawn is coming.

We just want to advise you to remain cautious and to continue to do what is responsible. If you have made the decision to file bankruptcy but now harbor indecision because of things you heard on the news, stay honest with yourself. Trust in your decision and compare what you read and hear with reality. Is your situation really changing?

The July jobs report showed the unemployment rate dropped slightly. The numbers don’t show, however, the fact that 400,000 people have dropped out of the labor force and were not counted as unemployed. Compounding that skewed stat is the fact that the number of people out of work 27 weeks or longer–a key benchmark in determining the rate at which people find new jobs–reached 5 million, a record.

The last 18 months, hopefully, have taught people how to save better and conserve more. Still, more saving means less spending, which translates to weaker retail, slower shipping channels and minimal economic growth. That’s a tough concept for the country to balance. Unfortunately, tilting things in the favor of saving is rising unemployment and bankruptcy figures. With those numbers on the rise, the longer consumer spending will take to rebound–dates and numbers that the statisticians don’t put in blogs and press releases.

If you’re staring a pile of bills with the hopes that the economy is going to turn around tomorrow, you may be in for a rude awakening. Creditors across the nation are stepping up their collection efforts and turning up the heat on delinquent consumers. Consider bankruptcy as a real option to survive these tough times. Make the call today. In North Carolina, contact the Law Offices of John T. Orcutt at 1-800-899-1414.

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Published Wednesday, August 12, 2009 @ 9:25 am

Everything is so political today. From health care reform and recession bailouts to the multitude of Web sites, cable news stations and talking heads that cover the debates, there seems to be no escape from the issues that are shaping our country. However, in the thick morass of over-done analysis and futile attempts to put every issue, no matter how minute, into historical context, we have like no other time in history, lost sight of how we ended up where we are today. Not just financially, but socially, mentally and as a country.

Those thoughts made us realize that maybe it’s healthy for us to look back on things from time to time to get a better understanding of why someone may think the way they do or why an organization reacted the way it did to an important social issue. So, why not look back at bankruptcy? What are its roots? How did it come into being?

Read on …

Prior to America’s independence and the formal creation of the United States, colonies handled personal debt differently. There was very little consistency on day-to-day measures but when caught, most colonies would rely on the traditional British rule relative to handling debtors: prison. Yes, debtors prison was a very real thing.

Our country’s founders envisioned new ways of handling those in severe debt. Basically, changing bankruptcy laws was another method of departure from British rule. Understanding that personal debt was a real threat to the American way of life but still under pressure to address its punishment, a bankruptcy clause was added to the Constitution after the Constitutional Convention in 1787. This action prevented some states from creating “debtors’ havens” that would offer widespread protection for those who owed. The importance of this action was that it established bankruptcy into the constitutional vernacular. It made those in power understand the impact debt can have on a country trying to grow.

Eleven years after the ratification of the Constitution in 1800, Congress passed the first national bankruptcy law, the first iteration of what we have today. Still, creditors remained powerful and the law was repealed. States tried creating their own laws to deal with bankruptcy but Supreme Court rulings continued to deny their enactment. On a good note, 1833 saw the official end to debtors’ prisons but honest debtors still faced tough consequences as creditors remained the beneficiaries of bankruptcy laws.

Less than a decade after the first bankruptcy law was passed, Daniel Webster campaigned diligently on behalf of debtors and won over Congress in the passing of the Bankruptcy Act of 1841, which finally enabled debtors to benefit from bankruptcy. Almost, anyway.

Webster’s efforts were shot down three years later under intense political pressure applied by creditors and those in Congress they could influence. (Not a real departure from what happens today, right?) The law in favor of creditors came and went again before and after the Civil War. Finally, as the country was inching toward the turn of the Century, the Bankruptcy Law of 1898 was passed and in it lied the concept of unconditional discharge, which illustrated the collective notion that honest debtors needed a method of relief out from under the approval of others. Thus, modern bankruptcy code was born.

Granted, the law has fluctuated several times through the decades and in 2005, creditors won a seeming victory in the passing of the Bankruptcy Abuse Prevention and Consumer Protection Act (or BAPCPA). The Act made drastic changes to the existing bankruptcy code, with the hope that the new bureaucratic red-tape would decrease bankruptcy filings. However, as bankruptcy courts have sorted through the poorly drafted BAPCPA, they have generally construed the provisions in favor of debtors. For instance, pre-BAPCPA, it was more likely that unsecured creditors would receive a payout in a Chapter 13 bankruptcy. Post-BAPCPA, the majority of Chapter 13 cases pay nothing to unsecured creditors. The new Means Test, a gate-keeping provision to restrict high income earners from filing for Chapter 7, has no effect on the majority of filers. According to numerous studies, only about 20% of bankruptcy filers earn enough income to be subject to the Means Test. Less than 10% “fail” the means test, but these filers are usually still eligible for full discharge in a Chapter 13 bankruptcy.

It’s important to talk with an experienced bankruptcy attorney who thoroughly understands the new law and how to properly apply it to your case. In North Carolina, the attorneys at the Law Offices of John T. Orcutt are BAPCPA experts. Call today to set up a free initial consultation and find out how bankruptcy can work for you. 1-800-899-1414.

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Published Thursday, August 6, 2009 @ 6:56 am

In a recent post, we talked a little about the “Meeting of Creditors.” That got us to thinking, are there other terms and steps along the way that we could help you better understand if you are still considering filing bankruptcy? And, does the blog mention or gloss over some terms that leave you with questions? So, we decided to put together a brief glossary of bankruptcy terms and jargon that might help get a better idea of how this whole thing works.

• Automatic stay: A court action that holds your creditors at bay upon filing bankruptcy.
• Collateral:An asset that backs up a specific debt.For example, in the most fundamental sense, your house backs up a mortgage loan. Think of it as something that you agree to wager as value in exchange for a loan.
• Confirmation:When the bankruptcy court makes your Chapter 13 plan binding, meaning that the plan has been accepted by everyone involved and it’s legally authorized.
• Discharge: What happens to your debt at the end of your case when the judge wipes clean your debt slate.
• Exempt property: Property that is not subject to the grasp of the creditors. They are “exempt” from the bankruptcy.
• Foreclosure: The legal process by which the bank takes back your home when the mortgage can longer be paid. On a more technical note, foreclosure is basically the method by which a creditor, namely a bank, turns an asset into cash. Everything needs to be disclosed to the public through announcements and an auction. Bankruptcy can stop a foreclosure and keep your family in your home.
• Joint bankruptcy: When you and your spouse file bankruptcy together, as a couple.
• Lien: Very similar to collateral. A lien is an obligation that must be met before you gain full ownership of an asset. You have to satisfy, or pay, the lien on your home before it’s actually yours. The same with a car loan. The loan itself is considered a lien.
• Means Test: A list of qualifications that a person must “meet” in order to file for bankruptcy under the legal reform of 2005 that determines whether you are entitled to an outright discharge of your debts under Chapter 7 or whether you must file a Chapter 13 bankruptcy. A good bankruptcy attorney knows the ins and outs of the means test and can help you maneuver the many hurdles.
• No asset case: Pretty straight-forward really. This is when a person filing Chapter 7 does not have any assets valued above state exemption limits. This means you don’t have enough value to your property that would make it worthwhile for a Trustee to sell the assets for the benefit of unsecured creditors. The majority of Chapter 7 cases are no asset cases.
• Personal property: While this seems like an easy concept, it’s actually a legal term. It means anything you own, outright, that is not attached to land. Car. Retirement funds. Furniture. That sort of thing. Most personal property is subject to specific rules within a bankruptcy.
• Petition date: The date on which you filed your bankruptcy petition.
• Property of the estate: An overarching term to include everything you own and that may be at risk on your petition date.
• Reaffirmation: A promise to pay back certain debts even in the face of being able to discharge them.
• Redemption: The ability to only pay the value of personal property despite still owing more on it. So, let’s say your flat screen is worth $750 but you owe $1,100. This allows you to just pay the $750 and be done with it.
• Repossession: The taking of your collateral. (See above.)
• 341 meeting: The U.S. Bankruptcy code provision for the meeting of the creditors, a chance for your creditors to appear and object to your bankruptcy. Although creditors have the right to appear at the meeting, in the majority of cases, none do.

Okay, now that you have a good breakdown of bankruptcy terms, bookmark this post and refer to it if something gets by you as your bankruptcy gets underway. And of course, talk to your bankruptcy attorney if you have any questions.

From the Law Offices of John T. Orcutt. Call today to set up a free consultation. 1-800-899-1414.

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Published Wednesday, August 5, 2009 @ 7:14 am

One aspect of bankruptcy you don’t hear much about is what happens after you file. One of the steps that tends to be a little disconcerting for those who have just filed Chapter 7 or Chapter 13 is the “Meeting of Creditors.” It just sounds so intimidating, doesn’t it?

Truthfully, it isn’t.

Meetings of creditors take place a few weeks after your attorney has filed your case and you have provided him or her with your most recent income information and list of debts. The meeting is essentially an opportunity for every one with an interest to hear your case and accept or challenge its terms.

The meeting of the creditors rarely even justifies its namesake because it is highly unusual that a creditor actually attends. What does happen usually takes only a few minutes and sometimes less. At the meeting, you will be sworn in by the trustee and have your identity verified. You will then be asked, under oath, whether the petition you have filed is a true and correct statement of your financial affairs.

The questions you might face are pretty easy to handle and should not cause you to be nervous. For example, “Why are you filing bankruptcy?” is pretty common. Your reason for filing will probably need to be flushed out in some detail but obviously, that’s not anything you need to study for because anyone who has gone through the financial stress and frustration prior to bankruptcy knows full well the reasons why. You will also probably hear some questions about employment and real estate, too. But again, nothing overly complicated.

There are rare occasions when a creditor might appear at a Meeting of Creditors. This often happens when there is a domestic support obligation involved, or some other obligation between you and another individual party. If a creditor does appear, they will be given a limited time to ask questions. If it appears that the creditor will need more time to ask questions, the Trustee may ask the creditor to make a formal request for a separate hearing to continue the inquiry. Don’t let this scare you. These extra hearings are extremely rare, and, as long as you have been honest throughout the process, you shouldn’t have any problems answering the questions.

You may also see a creditor if you ran your own business. This is because there is typically a great deal more money involved with a business than an individual. And, business creditors are more bankruptcy-savvy and thus feel comfortable being involved with every step of the process. Again, your honesty with schedules and asset listings will determine how easy a time you have at the meeting.

This post should give you a decent overview of the Meeting of Creditors but be sure to discuss it with one of our attorneys as you begin the bankruptcy process. Again, the more you know about the process, the more comfortable you will be throughout your journey into & out of bankruptcy.

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Published Sunday, August 2, 2009 @ 10:02 am

You know it and we know it: There’s a lot of stigma behind the word bankruptcy. We’re here to tell you: If you’re considering bankruptcy, there is nothing to be ashamed of and don’t let anyone tell you differently. Bankruptcy has helped millions of families and businesses emerge stronger, especially in tough economic times.

The federal bankruptcy code has long been a carefully negotiated, well-thought out safety net to catch the financial pratfalls so many Americans take on occasion. It’s an outstanding testament to the state of cooperation, foresight and spirit of assistance that characterizes our country. Despite the pervasive stigmas, there is very little collective impact to the nation’s economic well-being as a result of individual bankruptcy filings outside of a number of Americans becoming once again financially stable and viable contributors to society. The collective impact of bankruptcy is a positive.

There is no doubt that America has poor communities. There are people struggling today–and there always will be. But the bankruptcy code helps to significantly prevent more Americans from ending up on the street. And no, that comment is not a stretch. With careful planning, you can emerge from bankruptcy in relatively good shape emotionally and financially.

Think about it for a moment: bankruptcy allows you to keep the things you really need: your home, retirement accounts, life insurance assets, college funds, and even your car. If you have those items intact after a bankruptcy, you remain in far better financial condition than the large population of indebted Americans who never file for bankruptcy. Why keep taking the hits on your credit when bankruptcy can immediately stop the hemorrhaging?

A quick search of the blog will produce a number of posts about life after bankruptcy. There is a reason for that: studies show that, without careful guidance, those who file for bankruptcy can end up in the same situation again in the future. Our goal is to help you before, during and after your bankruptcy so that you emerge from your bankruptcy with a solid financial footing.

It is interesting that people still feel a certain amount of discomfort about the idea of bankruptcy. One should wonder if that sort of stigma wasn’t fostered, or at least perpetuated, by the credit industry. Given the practices of collection agencies and credit card phone reps, it’s easy to understand how miserable they can make a person feel about missing a payment. Despite all of the misinformation you’ve heard from the credit industry about bankruptcy, it is still the best financial safety net for you and your family. If you’re struggling to pay the monthly minimums or getting behind on your mortgage payments, don’t wait another day. Call an experienced bankruptcy attorney and learn about your options. In North Carolina, call the Law Offices of John T. Orcutt at 1-800-899-1414 to set up your free initial debt consultation. Offices conveniently located in Raleigh, Durham, Fayetteville & Wilson.

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Published Saturday, July 25, 2009 @ 5:35 pm

It shouldn’t take more than a few visits to our blog for you to find a slew of posts about how to prepare for your bankruptcy and manage all the relationships along the way, like those with your attorney and bankruptcy trustee.

Like any relationship, the ones that are forged during a bankruptcy should be built on trust. That is, you need to be upfront with everyone and every entity involved, even your creditors, to ensure that in the end you wind up where you need to be. A large part of building that trust has to do with how you handle the disclosure of your assets. The following point almost deserves to be in all caps, but no one likes to be yelled at, so: never try to hide or transfer assets with the intention of shielding them from creditors.

Okay, now that the lecture is over, it should be noted that sometimes people transfer assets with good intentions. A constructively fraudulent transfer is not an deliberate attempt to hide an asset but is looked down upon by creditors because quite often, the gift or item in question is transferred at a value less than its actual worth. For a simple example, imagine you sold a $25,000 SUV for $15,000 out of simple desperation to raise cash for the bankruptcy. Sure, you now have cash, which is still an asset, but the creditor would have preferred the $25,000 SUV. And you can rest assured, they’ll make a case out of it.

Consider these additional examples of constructively fraudulent transfers:

• Ty Webb gives Lacy Underall $10,000 to help her move from dreary old Manhattan to a high-end suburban country club. His creditors will end up pretty unhappy with Ty’s attempt to secure his girlfriend a spot at the club pool because that money could have been used to pay his debt. Worse yet, he received no real asset in return. As a result, the bankruptcy trustee handling Ty’s case will most likely try to sue Ms. Underall for the money. Since Ty’s asset transfer wasn’t an attempt to hide anything, his bankruptcy will probably go through as planned. But now his girlfriend is involved, and that doesn’t bode well for Ty’s post-bankruptcy dinner plans.
• Al Gore, on the cusp of bankruptcy and in a last-ditch effort to remain relevant, decides to switch political parties and attend an expensive fundraising dinner for the Green Party candidate in the 2012 election. He pays $50,000 to attend. Once he officially files for bankruptcy, the court immediately rules that the party candidate’s election committee needs to relinquish Mr. Gore’s donation to the trustee because it was ruled that the dinner was not equal to $50,000 cash that could be used to pay creditors.

As you can see by the example above, even donations are subject to becoming constructively fraudulent transfers in the eyes of the court. Large donations to churches, schools and other non-profits can all be retrieved by the trustee if they result in the reduction of an asset’s value or are considered an attempt to quickly move money and thus, diminish the trustee’s ability to obtain proper restitution for your debts. There has been some action against this practice, however. In 1998, a contingent of religious organizations successfully lobbied for the Religious Liberty and Charitable Donation Protection Act, which was formulated to protect good-faith monetary gifts of up to 15 percent of a person’s gross income based on the year before filing bankruptcy.

If you’re considering filing for bankruptcy, it’s important to talk to a bankruptcy attorney early to avoid an innocent mistake like the ones described in this post. In North Carolina, call the Law Offices of John T. Orcutt for a free initial consultation. 1-800-899-1414.

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Published Thursday, July 23, 2009 @ 8:44 am

The link between the recession and credit cards is undeniable. While credit card use by itself is a number of links down the chain from the one that broke Wall Street’s hold on the economy, the underlying theme of easy credit and its impact on the American consumer remains a prevalent factor in our ongoing financial struggle.

In the majority of the posts about credit cards here on “Bankruptcy & Your Passage Into & Out of Debt,” you will read about how substantial a role credit cards play in bankruptcy. There is simply no denying it. Thankfully, the era of easy credit now seems to be fading into the sunset, evidenced by the approach global banks are starting to adapt relative to issuing credit cards.

In light of a rapid increase in account charge-offs and missed payments, banks will start factoring credit decisions based on your level of current business with them. In other words, if you already have a savings or checking account and how much you keep in each.

This approach to issuing credit was at one time the primary factor for many banks, especially local community banks. After all, it simply made sense. If you are a good customer and demonstrated a track record of fiscal responsibility, your banker, not a computer, could make the determination on whether or not to issue you a loan or line of credit. Often, a handshake and a word of promise was more important than a credit score and a business-school derived mathematical model.

Unfortunately, the small-town banker, whom you may know from your church pew or the little league baseball sideline, has been pushed aside by call center operators and glossy direct mail pieces with attractive credit card offers boasting “hurry-up and join” headlines just sure to offer all the rewards and prestige your credit rating says you deserve. Until you miss a payment. Then you get kicked out of the club.

But the club rules are changing for the better. In a USA Today article, an executive with an investment bank that advises the credit card industry said, “In today’s environment, not all the risk models are working…” In support, the leader of a small community institution in Upstate New York, Cattaraugus County Bank, said his bank has never used a “cookie-cutter” method of determining credit worthiness.

For those looking to rebuild after bankruptcy, your very physical presence can make a big difference in the eyes of your local banker. Literally, many small banks want to know where you live and how they can reach you if there is a problem with an account. If you have a job, a similar zip code and a working phone, it can help you become a better customer to a local bank. Keep in mind, your credit history will play a role. However, you are not going to feel like another person on hold or the source of another potential commission.

To a local bank, your deposits are looked upon as a sign of trust in their ability to protect and build your money. In return, they are willing to hear your explanations for why you need credit and how you plan to use it. Additionally, you’ll find answers to your questions quickly, without the need for a vexing automated option tree that routes calls about account balances to India and problems with billing statements to Argentina. Instead, local banks offer comfort, understanding and a solid business model.

For rebuilding credit after bankruptcy, start with a bank in your own neighborhood.

Drowning in credit card debt? Call the Law Offices of John T. Orcutt to set up a free initial debt consultation. 1-800-899-1414.

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Published Sunday, July 19, 2009 @ 5:13 pm

There are many reasons for filing bankruptcy. From sudden medical expenses to layoffs, We already know medical bills are a substantial reason people file and that even smart consumers have faced serious challenges as a result of uncertain mortgages.

Regardless of your reasons, life after bankruptcy offers you the chance to start in a new direction. So here are some important tips to help you become an economically-conscience consumer.

• Like buying shoes, don’t purchase cable channels unless they are on sale or part of a long-term promotion. Remember that cable companies rely on customers forgetting about the incentive’s termination to lock you into paying the increased rates. Mark your calendar on the day it ends and cancel. More than likely, they’ll continue to offer it to you. Don’t forget about the pay-per-view channels, which allow you to buy only one show or movie at a time.
• Like going to movies? So does most of America, which explains the $100 million opening weekends for just about any half-way decent film. Before even sitting down in your seat, provided a contingent of un-supervised pre-teens haven’t “saved” them for the rest of their sordid lot, it’s easy to spend $25.00 on the ticket and a trough of popcorn. You can see the same thing everyone else does for $5.50 by going on a weekend afternoon and not buying any of what’s lurking behind the counter. Not only will you avoid the calories, matinees are also the best way to avoid the swarms of irksome youth that pay more attention to the next incoming text message than what’s happening on the screen.
• Try to avoid any sort of club that charges a monthly a fee unless you can reasonably justify that your use of its service will cover the fee. Fitness clubs, for example, literally bank on the fact that members will not use the facility. Most gym members cease attendance after six weeks. Instead, check with your employer about wellness discounts or reimbursements, as many companies today offer these incentives to promote employee health (and to avoid paying medical claims). If fitness is important to you, then find a gym that does not require long-term contracts. A good deal of Web sites charge monthly fees as well. Truthfully, there is very little content on the Internet that will not become public in very little time. Premium memberships and site subscriptions are rarely worth it. This goes for magazines, too. Use their respective Web sites for the articles.
• People find a surprising amount of money to be saved by curbing random food purchases. Snacks while getting gas, vending machine walk-bys and quick pit stops can really add up. Prepackaged food is extremely expensive by volume and rarely healthy. Avoid it whenever possible. Try to remind yourself that you paid for the food that’s at home. Just because it’s in your kitchen doesn’t mean it was free. Don’t waste your money or jeopardize your health.

This brief list is only a random selection of ways to save money. Remember though, every little bit helps, especially when you are trying to rebuild your financial wherewithal. There are countless ways to cut back and still live exactly the type of lifestyle that suits you and your family. Give it a shot.

From the Law Offices of John T. Orcutt. Convenient offices in Raleigh, Durham, Fayetteville and Wilson. Call 1-800-899-1414 today to set up your free initial consultation.

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Published Friday, July 17, 2009 @ 4:58 pm

Most of us go on vacation to get away from the things that are causing us stress. Well, that might not be so easy anymore. Travelers across the country are reporting an increase in collection agency contact for even nominal amounts of money because of a dispute they raised with airlines, hotels and rental car companies–even after the company has acknowledged its own mistake. A few examples:

A gentleman traveling through Pennsylvania was pulled over for an expired registration on his Hertz rental car. Despite repeated attempts to reconcile the issue with Hertz, he was notified by the company that collections activity was underway because of the unpaid ticket. After several automated phone trees and countless customer service agent assurances the matter would be handled, he feared his credit report was in jeopardy. It took months to clear up the issue.

A woman in California was not notified when her flight changed, resulting in her missing a plane to Los Angeles. After buying a new ticket, she disputed the charge with her credit card company, which agreed to alleviate the cost. Delta Airlines was not so accommodating. They are starting collections activity.

A woman using Travelocity faced technical problems on the site and called the company to finalize the travel plans and place deposits. However, the original booking was processed and a month after she returned, she found out she had been charged twice. Once again, despite customer service assurance all would be handled correctly, she was notified of collections activity. She ended up paying an agreed upon settlement with the collections agency under protest and was eventually able to be refunded thanks to her repeated efforts to convince Travelocity and the cruise line of the mistake.

If you have recently emerged from bankruptcy or are in any stage of trying to improve your credit, be aware that traveling now poses a risk to your financial credibility. Adding complication to the matter is the fact that traveling involves spending money in far away places, which can translate into having to deal with money problems and disputes over the phone or e-mail, adding substantial frustration to an already tedious process.

Just because an expenditure happened in another state or country doesn’t mean your rights change. Under the Fair Debt Collection Practices Act, a collections representative must follow-up in writing within five business days of phone contact in regard to a debt. After that notice, you can dispute it within 30 days. It’s best to do so in writing by certified letter, not by e-mail, to ensure its delivery.

Also, be able to determine a collections threat from the real thing. Many collections industry experts agree that most first contact is just a hard-nosed tactic to influence someone they believe owes money. Most often, it works; especially when someone has just returned from a trip and feels that the nature of the spending alters the playing field. If you owe less than a $1,000, the first contact is typically just a threat. Use that time to understand your rights and if needed, engage the services of an attorney.

One of the most surprising aspects of these examples is the speed at which the collection efforts get underway. If you are planning a trip this summer, be aware that if a financial complication occurs along the way, it is best to try to solve the matter as soon as possible. Also, don’t wait or rest on assurances from the companies you are dealing with. Speak to managers and get things in writing. A vacation is supposed to be relaxing, not a financial nightmare.

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Published Wednesday, July 15, 2009 @ 12:18 pm

The Associated Press is reporting that banks will soon start employing variable interest rate strategies on most credit cards. This means that the days of the fixed rate card are numbered.

It should come as no surprise to you, our loyal readers, that is in response to the federal government’s crackdown on sudden interest rate hikes, vague terminology relative to fees and an industry-wide, consumer-unfriendly marketing approach. The new laws, which will take affect next year, are part of a sweeping legislative effort to help stabilize Americans’ increasing debt load.

The two largest issuers of credit cards in the country, Chase and Bank of America, are on the record stating that most fixed-rate cards will be switching to variable in August. Discover Card has already enacted some of the changes. It will not take long for the rest of the industry to follow in lockstep.

While industry representatives see the step as a helpful one for cardholders, most consumer-advocates are leery. A variable rate may at times offer a lower interest incentive to card users but there is little doubt that an increase will catch many cardholders off guard.

By all means, it is critical for an individual to self-govern in terms of card usage. However, the industry has come under fire for employing complex tactics that require consumers to monitor countless agreement terms every month. A variable rate, which will be based on the fluctuations of the prime rate, simply means there is one more plate in need of spinning. And with more than 230 million card holders between Chase and Bank of America, a lot of porcelain is bound to be broken.

The banks are stating that the variable rate strategy will help them off-set the growing cost of issuing credit. Traditionally, fixed rate cards were reserved for the best customers. However, they rarely remain fixed, as banks adjust them suddenly if they feel a user becomes a higher risk. As it turns out, this happened to hundreds of thousands of customers as the recession stole jobs and cut income. Therefore, the credit card companies bumped rates endlessly, driving people into debt and contributing to the nation’s number of bankruptcy filings.

Now, fixed rate cards are going to be quite rare and banks will have to actually use good judgment when issuing such a credit card to a customer. One bank official in Charlotte, on behalf of Bank of America, said that the new legislation will “… limit our ability to re-price based on risk.”

Isn’t that the point?

The current low prime rate is also contributing to the banks’ decision because they believe a variable rate attracts more users of credit. There are certainly plenty of arguments about the critical nature of new credit in business lending but the consumer banking world should exercise extreme caution if trying to use credit as a means to stimulate spending. We’re simply no where near even the edge of the recession woods yet.

Of course, that’s never stopped the credit card industry before.

If you’re struggling with credit card debt, it’s time to think about bankruptcy. In North Carolina, contact the Law Offices of John T. Orcutt for your free initial debt consultation. 1-800-899-1414.

Raleigh bankruptcy. Durham bankruptcy. Fayetteville bankruptcy. Wilson bankruptcy.

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Published Thursday, July 9, 2009 @ 2:48 pm

Coming out of bankruptcy is a great milestone. It renews confidence, offers comfort and provides you with a sense of accomplishment from meeting a tough challenge head on and surmounting it.

Like most people who have experienced these emotions, you have comprehensive understanding of how to better control your spending and look out for your financial well-being. One component of that is learning to identify common credit report problems that arise after bankruptcy.

Look for a record of credit agency activity that is listed separately from the debt they tried to collect. This makes it appear as if you had two outstanding debts. The original debt should have been discharged as a result of your bankruptcy and thus, the agency should not appear on the report. This is a very frustrating component of a post-bankruptcy credit report because a bankruptcy eliminates debts with organizations to which you owe money but does not eradicate the record of the debts. In other words, it’s a two-step process: removing the debts and reporting that they were removed. Parts of the second step often fall through the cracks.

Another common reporting error involves accounts that were reported closed by the creditor instead of it being closed by you. This would indicate that a creditor shut down the account instead of it being done as a result of a bankruptcy, intimating that it was done outside of your control because of your inability to pay. If a closed account appears open and the payment history demonstrates a clean record, leave that one alone because it will help.

We’ve said on the blog many times but it bears repeating: make sure your credit report looks good at all reporting agencies. It’s very possible that one bureau reports a solid history and the other still shows bad debts. It is also crucial to ensure any existing debt is correctly reported by all agencies.

One technique for proving credit report accuracy after a bankruptcy is to compare your report with your bankruptcy paperwork. Look at discharged debts and then what is listed on your credit report. This is bare-bones way to rest comfortably that your information is being handled the right way and won’t derail any future loan plans, such as a mortgage or student loan.

One last bit of advice: Do not turn to a credit repair business to repair mistakes in your credit report. These are businesses that charge a hefty up front fee, promising to improve your credit score quickly. As someone who took the initiative to contact an attorney, gather your wits and decide that bankruptcy was the best option, you can repair your credit on your own. With some time and a little bit of effort, you can rebuild your credit.

From: The Law Offices of John T. Orcutt. Helping thousands of families with the power of bankruptcy. Call 1-800-899-1414 to set up a free initial debt consultation.

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Published Thursday, July 9, 2009 @ 9:22 am

Bankruptcy and personal money management are tightly intertwined. As you read through the blog you will probably notice that a lot of our posts will offer advice and tips on saving, how to avoid scams and general philosophies about preserving financial stability.

Here is another post about how to hang on to more of your money, which is especially useful for anyone coming out of bankruptcy or performing some initial research. These tips involve banks, which many people believe want to help you with saving money. However, that is not always the case. In fact, it’s becoming quite the opposite.

Banks (and credit card companies) are in attack mode. Surprise fees and quick interest jumps are now an everyday occurrence and customer service operators are busy as ever routing the complaints. Here are a number of examples:

• Checking accounts: This is basically a fee to use your own money. Many banks will give it to you for free if you have other accounts or a loan. Once that loan is paid off (isn’t that the idea?) they will add a fee for your checking. Most likely without notice. Some will charge you now if you don’t carry a specific balance or use enough checks each month. Don’t assume your checking account is free.
• ATM fees are very unreasonable, across the board, if you don’t use your own bank’s ATM. Some surcharges are reaching toward $4.00/transaction. The only way to make this affordable is to take out more money, thus lowering your cost of getting the money. Still, you probably only need $20, not $400. Use your own bank but if there is still a fee, go inside to a teller.
• But wait … many banks now charge to use tellers! Complaints are piling up about the reinstatement of teller fees. As hard as it is to believe, it was once quite common but drew significant flack from national consumer advocates. Looks like we’ll need their help again.
• Overdraft charges are also becoming steep. While many banks began to offer accounts with no overdraft fee as an incentive, watch for it to kick-in unexpectedly. Also, it does not help that a bank allows you to take more than you have from an ATM and then has the nerve to hit you with an overdraft penalty.
• If you deposit a check that bounces, you get slapped with the penalty. Ouch. How were you supposed to know?
• You get charged for the ATM, charged for speaking with someone, so how about the phone? Nope. Fees are popping up for calling the bank, too.
• Visiting a brother in Canada? Well, you should now expect to pay to get currency converted. Expect to get lopped off at the knees on the front end, when exchanging the money and at the end when converting back to dollars whatever foreign currency you have left over.

As most of us try to avoid using credit cards and the fees they are implementing before new laws kick-in to prevent that very thing, it seems that even working in cash will cost us. Basically, it’s become a tough world in which to try to stay debt-free. For those teetering on the brink of a major financial setback, don’t let a surprise fee push you into the abyss.

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Published Wednesday, July 8, 2009 @ 2:14 pm

Even though it completely runs in opposition to the intended goal, many states allow creditors to seize your wages should you not be able to pay a debt. The contradiction is easy to see: how can you pay your debts if your income is diminished?

Evidence is now on the table that bankruptcies are filed at a much higher rate in every state that empowers creditors to reach into your paycheck directly to get their money. The impact stems from the fact that if a creditor seizes funds directly under such a state law, they limit a person’s ability to pay other creditors as well. So while one company may get paid back, all the others to which money is owed have substantially less chance of being paid. Simply put, garnishing wages only serves to severely weaken an individual’s economic wherewithal.

The news of the connection between wage garnishment and bankruptcy stems from a three-year study by the Associated Press, which tracked millions of bankruptcy records across all states by using an “Economic Stress Map.”

Thankfully, North Carolina prohibits the practice (except in extreme cases of child support neglect and tax delinquency) and as result, the Tar Heel state has only a third of the bankruptcy filings as Tennessee. South Carolina, Pennsylvania, Florida and Texas are other states that do not allow or limit a creditor’s rights to take money directly from your paycheck. However, in North Carolina, your wages may be garnished for such debts as student loans, child support, or back taxes. If your wages are being garnished for any reason, it’s important to realize that bankruptcy can put an immediate stop to the garnishment, and put you back on the track to financial freedom.

Although most courts limit the amount of money that can be seized, for just about everyone facing financial problems of that magnitude, the slightest reduction in monthly income can create serious turmoil. More over, it can quickly lead to increased stress in an individual relative to their money woes, leaving them to feel powerless and invaded.

Making matters worse are reports that the level of aggression relative to wage garnishment is on the rise in the states that allow it. Basically, creditors are seeing more competition for money that’s owed and as a result, want to be first in line. The approval to garnish wages is often the winning strategy.

A woman in Alabama had been in a relatively sound financial position until debts incurred from assisting a former roommate came back to haunt her. Able to afford her mortgage and recently paying off thousands in credit card debt, she was suddenly over-burdened as a result of her roommates inability to pay. Once the wage garnishments started, she couldn’t adequately handle any of her debt and filed bankruptcy to protect herself.

Thankfully, North Carolina is one of the five states where judges rarely allow wage garnishment. However, this won’t stop a creditor from suing you and attempting to collect in other ways, such as attempting to levy a bank account, or worse, attempting to sell your house through a sheriff’s execution sale. If you are facing overly aggressive bill collectors, contact a bankruptcy attorney today. Bankruptcy will stop the bill collector calls, stop a lawsuit, and put you back on your feet in these tough economic times. Call a bankruptcy attorney today.

The Law Offices of John T. Orcutt, with offices in Raleigh, Durham, Fayetteville, Wilson. Call today to set up your free initial debt consultation. 1-800-899-1414.

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Published Tuesday, July 7, 2009 @ 11:22 am

If you have made your way through bankruptcy and the old clunker is starting to make noises that you more associate with an exhausted yak than an internal combustion engine, maybe it’s time for you to consider buying a new car. Or, should you lease? It’s a tough call.

Before you think about either option though, remember to consider the ancillary costs of car ownership, like insurance. If you have a few vehicle types in mind, contact your insurance agent to determine what it will take to cover them. You may be surprised at the little things that can add up to a steep insurance policy.

Cost of repair should be in the picture too. Thankfully, many of the promotions out there today include comprehensive service plans for sometimes up to 100,000 miles. It pays to know what a tune-up will cost you or if that sporty convertible you have your eye on requires expensive performance tires that need to be replaced after 30,000 miles.

Once you understand some of the ancillary costs, it’s time to get down to the lease versus buy debate. And it’s an extensive one.

Leasing attracts car buyers because the monthly payments are typically lower. This is because in total, you are not paying back the entire cost of the car. In essence, you are only buying a portion of it. Lease payments are figured according to the loss in value of the vehicle during the lease term. Most leases also incorporate all the added fess and taxes.

Many people consider re-sale value when choosing a new vehicle. With leases, that concern is eliminated because at the end of the term, you simply turn-in the vehicle. In that respect, leases are great for people who get bored with a particular vehicle after a couple of years. Or, should something in the car become an annoyance, it’s only something you have to live with for a limited amount of time. Leasing also eliminates the hassle of having to sell your vehicle privately or back to a dealer when it’s time for another one.

Perhaps the most attractive component of a lease is that it simply costs less to get into a nicer vehicle. For people watching their wallets, that can be an easy sell. And in this recession, leases are being marketed heavily.

On the contrary, vehicle leases do present some drawbacks. For most people, especially in light of how far America commutes today, the mileage limits on leases are rarely realistic. If you go over the allotted limit, upon turn-in you should be prepared to pay some additional fees for the excess.

While the monthly payments on a lease may be less than a car loan, you are actually paying more for the car over time. Should you decide to purchase the car at the end of the lease term, you’ll find you owe substantially more on it than you would have if you originally purchased it. Of course, a lot of that has to do with the price the dealer will charge you. Finance charges are also higher with a lease, which means more money going to interest.

Lastly, be wary of the commitment factor. Leases are extremely difficult to get out from under without paying substantial penalties. If you were to die, your estate is still on the hook for the lease payment. There are a couple of Web sites out there to help you get out of a lease based on vehicle swaps but make sure your agreement allows you to do that. Yes, they have even invented penalties for that.

The Law Offices of John T. Orcutt have provided solid bankruptcy advice to thousands of North Carolina families. If you need to file for bankruptcy, you deserve the experience of John T. Orcutt. Call today to set up you free initial consultation. 1-800-899-1414.

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Published Friday, June 26, 2009 @ 12:32 pm

If you have spent some time on this blog then you’re probably giving some consideration to filing for bankruptcy. It’s not an easy decision, which is why this blog exists. We understand that it helps to understand what others are dealing with and similar stories about accumulating debt can better help you grasp where it is you stand financially. Well, maybe the story of Mary Uhazi will help.

Originally written about in an MSNBC article, Ms. Uhazi built up $60,000 in credit card debt and just recently suffered a salary reduction. If it sounds familiar already, read on.

Like so many of Americans struggling under the strengthening pressure of consumer debt, Ms. Uhazi admits than in the end, after spending all that money, she had “…nothing to show for it.”

Extreme credit card debt starts, and often ends, with the best of intentions, especially when you have a good job. Ms. Uhazi started with a gas card to avoid stopping for cash every time she needed to fill her tank. In commuter heavy Sacramento, where she lives, that is a great reason to have a card. However, the collection of cards continued to build and what was once an easy amount to pay in full each month became a regular balance. And when that balance is spread among a number of cards, it doesn’t take much for things to spiral out of control.

Ms. Uhazi’s debt load was built over time and didn’t include what most would consider large, impulse purchases. It was simply some presents for Christmas here, a dinner with friends there and a few weekend trips. Also, a major car repair popped up, which is probably one of the best reasons to use a credit card.

Thus, the story of Ms. Uhazi’s debt accumulation is very common. Today, almost every major consumer product retailer–department stores, home improvement chains, book stores–have a branded credit card with their own litany of benefits. For those with good credit, the lure of an immediate 20 percent discount is often too enticing to resist. Rewards, cash back and free merchandise are constantly used as bait for access to your good credit rating. The more you spend, the more offers for cards you receive.

Everything was fine for Ms. Uhazi until she let a single payment deadline slip. Then things began to crumble.

Enter California’s historic budget crisis. Ms. Uhazi was notified that she would be required to take unpaid days off from work so the state could alleviate its own debt problems. With less money to pay the minimum balances, lenders pulled back credit limits and as if on cue, raised her interest rates. The perfect storm began to rage and when she sat down to get an idea of her debt the credit card balances totaled more than $62,000. Just two of her minimum balance payments were close to $2,000.

Ms. Uhazi took control of her situation by contacting many of the retailers and card issuers to negotiate lower balances but even the small reconciliations made in that effort carried a cost. For example, her creditors would lower rates on store purchases but increase them on cash advances. Despite the progress and new approach to spending that she now employs, Ms. Uhazi remains uncertain about where her economic future is headed. She is considering bankruptcy.

If you see any of yourself in Ms. Uhazi’s story, know that there are many more just like you. You are not alone in this economy and you certainly not the only person who has experienced bad things as a result of good intentions. Keep in mind that just by consulting with a bankruptcy attorney, you may realize that filing is often the most reasonable solution.

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Published Saturday, June 20, 2009 @ 7:07 am

Chapter 7 bankruptcy, or a liquidation bankruptcy, involves the sale of any non-exempt assets, and is generally the fastest route to a discharge of debt.. Chapter 13 offers the option of a payment plan, or wage earner’s plan, that allows a person to create a structure to catch up on missed mortgage or auto payments. Another form of bankruptcy that is not as often filed but relevant to many, especially in states like North Carolina, is Chapter 12, or Family Farmer and Family Fisherman bankruptcy.

Chapter 12 bankruptcy was established in 1986 to support family farmers and fisherman who are struggling economically. Similar to Chapter 13, it allows for a repayment plan of three to five years but in most cases, all debts need to be settled within three years. Specifically, Chapter 12 is designed around those who carry debt that is no less than 80% occupational costs. And, a person filing Chapter 12 needs to owe less than $1,500,000.

While Chapter 13 is meant for the more common wage earner, or someone who has regular, balanced income, farmers and fisherman face unique circumstances in their efforts to make money. Natural disasters, difficult growing conditions and Acts of God, for example, play a much more important role in a farmer of fisherman’s ability to pay off debt. Moreover, intrinsic to being either type of professional is the cost of equipment. Boats, tractors, and machinery are considered capital expenditures and therefore are often financed. Thus, farmers and fisherman are almost operating on substantial debt. Chapter 12 allows for the forgiveness of liens on property that is considered critical to the work being performed.

Additionally, leases for land and boat slips eat into their income and on top of that, farmers and fisherman are also affected by prices set on Wall Street, making their professions even substantially more subject to hardship than most 9 to 5 employment situations.

Chapter 12 is more streamlined than Chapter 13 because it is designed around the unique working conditions of its constituents and the typical size of the debt owed, which is usually much larger than debt subject to other forms of personal bankruptcy. And, it takes into consideration the seasonal nature of a farmer’s income.

Like other forms, Chapter 12 bankruptcy begins with the filing of a petition in the bankruptcy court that serves the region where the person filing lives or has an established business presence. It costs $200 and the paperwork that is required includes:

• schedules of assets and liabilities
• a schedule of current income and expenditures
• a schedule of executory contracts and unexpired leases
• statement of financial affairs

Federal law allows those filing Chapter 12 to do so as an individual or as a corporation or partnership, and each classification has it’s own unique set of qualifications. Once the petition for Chapter 12 is filed, collection efforts, for the most part, are halted. Creditors are not allowed to begin new or continue collection efforts, lawsuits or other forms of financial restitution. There are some exceptions to the automatic stay provision, which your bankruptcy attorney can explain in full detail.

For more information on your options under Chapter 12 bankruptcy, and on all other forms of bankruptcy, contact the folks on the other side of this blog.

Brought to you by The Law Offices of John T. Orcutt, with convenient office locations in Raleigh, Durham, Fayetteville, and Wilson. Call (toll free) 1-800-899-1414, to set up a free, confidential debt consultation. Visit www.billsbills.com for more information.

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Published Friday, June 19, 2009 @ 11:06 pm

It’s important to remember that credit card issuers are businesses. While they may not necessarily sell a tangible product (other than a sleek piece of plastic) they are very much in the business of making money. Interest, clearly, is the primary profit generator. In the last several years, however, more marketing incentives and added services have come online to generate fee-based revenue for those how don’t spend much and therefore, don’t provide a great deal of interest income to the company. One of those services is the credit protection plan. And like most add-ons to a credit card, they aren’t worth it.

For a monthly fee, companies offering these plans claim that should something happen to prevent payment of your balance, they’ll handle it for you. Job loss, injury and even death may be reasons stated to buy by a plan. However, the pages of fine print that accompany such plans is full of loopholes and ultimately offers more protection for the card issuer than the card holder.

For example, the unemployment insurance does not engage if you were let go for performance reasons, as opposed to being laid off in the traditional sense. Employers often cite “performance” as a reason for dismissal to avoid the public stigma that accompanies having to reduce staff by layoffs. By most peoples’ standards, being “let go” qualifies as losing your job. Not so, say most credit protection agreements.

In fact, many credit protection plans only work in your favor if you are unable to do any work at all, perhaps because of a medical hardship. If a writer becomes stricken with carpal tunnel syndrome for example, he or she may not be able to type for their career but the credit card company would argue that a writer could use voice-activated software and thus avoid providing coverage.

And since these programs are run by the same people who can develop individual marketing pitches based on where you shop for undergarments, rest assured that they will contact your employer should you file a hardship.

Credit protection plans are also pretty expensive, often running up to $.99 per $100 dollars of debt, meaning that a $5,000 balance could cost you an extra $49.50 per month. Worse yet, the plan costs are tacked on to the balance, thus increasing interest, financed charges and other balance-based fees. Without question, you are better off using that money to attack the balance.

If you carry life insurance, there is even less need for a credit protection plan. Most of them do not kick-in until after private insurance policies and do not provide nearly as much additional coverage as a standard term or whole life policy. A credit protection plan may offer $10,000 worth of coverage for $300 per year while a typical insurance policy would run around $250 per year for $250,000 worth of coverage.

Lastly, most protection plans only pay the minimum amount on your balance. And you know what happens when that is all that gets paid. So while interest continues to accumulate and your balance only gets bigger, you end up only deeper in debt because you paid extra for a plan that doesn’t really help you when you need it.

Brought to you by The Law Offices of John T. Orcutt, with convenient office locations in Raleigh, Durham, Fayetteville, and Wilson. Call (toll free) 1-800-899-1414, to set up a free, confidential debt consultation. Visit www.billsbills.com for more information.

Raleigh bankruptcy. Durham bankruptcy. Wilson bankruptcy. Fayetteville bankruptcy.

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Published Thursday, June 18, 2009 @ 11:44 am

If you have spent some time on this blog, then you should understand the value of working with a bankruptcy attorney. Not only can a dedicated legal representative be your best asset in a courtroom, they offer the emotional confidence that everything will be all right in the end. It can be trying and frustrating at times, and that is exactly why you should hire an attorney.

That being said, there are some things you can do on your own to prepare for meeting with a bankruptcy lawyer that will not only help you get a better idea of where you stand but it will help your attorney do an even better job for you.

For example, prepare as best as possible a breakdown of any income taxes that you owe, regardless of when they were due. Your mortgage is also a crucial component of your preparation, so it will help for you to find out what your home is worth, which can be ball-parked by looking at online county tax records. Know that tax value (the number on which your property taxes are based) and market value (the number at which an agent can sell it) are much different. In Wake County, for example, you can see a record of recent sales around your address. This is a solid enough breakdown for your purposes.

Find the value of your automobiles and determine what is owed and how far behind you may be. Then, create a total for all monthly bills. This can include utilities, credit card payments, home phone and cell phone, Internet, gym memberships, movie rental clubs or subscriptions of any kind. Be as thorough as possible; if you send a check somewhere each month, document it.

You should also consider gathering copies of the following documents:

• * pay stubs for the last 60 days
• * all mortgage documentation
• * most recent income tax returns
• * any court papers relative to current lawsuit or legal action in which you are involved
• * divorce decrees, martial settlement agreements, etc.
• * paperwork of any kind accumulated from a credit counselor or financial assistance program

In order to help you, an attorney will need to be as comprehensive as possible when learning about your individual economic situation. The answers to their questions are critical to your bankruptcy success, so it will only help if you know as many of the answers as possible ahead of time. Don’t worry, it’s not a test, just a way to make sure you get as much assistance as you deserve. You may be asked:

• * What is your marital status? Or, is a wedding or divorce pending?
• * How long have you lived in the state?
• * Are you considering foreclosure?
• * What is your general living situation? Renting? Homeowner?
• * Is there any indication that you will be seeing a spike in medical expenses in the near future?
• * Have you spent more than $500 in the last 90 days with a single creditor?

You get the idea. These questions are rather general in nature but the answers to them will help ensure that initial meetings with your bankruptcy attorney are as beneficial as possible. Remember that once you have made the decision to move forward, you need to keep moving forward. Don’t delay your future.

Brought to you by The Law Offices of John T. Orcutt, with convenient office locations in Raleigh, Durham, Fayetteville, and Wilson. Call (toll free) 1-800-899-1414, to set up a free, confidential debt consultation. Visit www.billsbills.com for more information.

Raleigh bankruptcy. Durham bankruptcy. Wilson bankruptcy. Fayetteville bankruptcy.

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Published Tuesday, June 16, 2009 @ 5:04 pm

Chapter 11 bankruptcy has received a lot of discussion of late. From General Motors to Chrysler to even Six Flags amusement parks, corporate reorganization has been the talk of Wall Street. Most of the conversation has been about the impact on jobs, cars, stock markets and CEO pay.

Unfortunately, a lot of this news fails to educate the general consumer about the benefits and nuances of bankruptcy. So let’s use all these corporate restructurings as examples to discuss how Chapter 11 bankruptcy has changed and what it means to come out of it successfully.

At one time, a Chapter 11 plan was successful if the company eliminated superfluous debt, lessened overhead (salaries, employee count) and had specific steps in place to strengthen its revenue. The new definition deals more with liquidating assets, such as subsidiaries and disparate business plans that may not be in step with the company’s original core competencies and product lines. This is mainly a result of corporate growth trends in the last couple of decades. More and more companies became global, acquiring several companies to help them diversify and in turn, taking on more debt, more employees and a longer balance sheet.

A lot of this new approach to Chapter 11 has to do with lenders wanting quicker return on what is owed. Instead of a lengthy, strategic process about what is best to streamline and where layoffs should be focused, debt holders apply pressure to sell assets and raise capital. Chrysler for example, didn’t aim to be a smaller, more nimble version of “Chrysler” again. They just simply sold the majority of the business assets to another car maker. In this case, Italy’s Fiat.

Chrysler was in and out in 42 days, which is an exceptionally short amount of time, considering a typical Chapter 11 takes about 18 months. Still, experts believe that number is a little misleading because Fiat purchased only the strongest assets and that a portion of Chrysler is still in bankruptcy. The “old” part of the company will continue to operate and find ways to satisfy creditors.

The term “successful” in relation to corporate restructurings under Chapter 11 is relative. Jobs are always lost, shareholders get stung and operations collapse. This new approach to handling it makes it a priority to salvage the best components so somewhere along the line, there is a silver lining for a segment of the people and organizations involved.

Another factor that can determine Chapter 11 success is the company’s market position upon emergence. How well are they positioned into whatever economy they’ll be facing? Today’s conditions are not overly conducive to becoming profitable right away. The fear is that a company, while operating under very tenuous conditions, would have to file again. Industry jargon calls that a “Chapter 22.”

Like personal bankruptcy, Chapter 11 is designed to help corporations realign their interests, trim excess operational fat and come back out swinging. In the age of global conglomerates and disparate product channels, it’s becoming a entirely new process. If you are giving some thought to leveraging the benefits of bankruptcy for yourself or a small business, it helps to track what’s going on elsewhere and of course, to read through this blog. There is a lot to learn and in this blink-fast economy, things change in a hurry.

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Published Saturday, June 13, 2009 @ 10:32 am

We have put a lot on the blog about how your home can be affected by bankruptcy. Hopefully, you’ve read through some of those posts. If not, simply do a search to find as much as you can about the topic because knowing how bankruptcy affects where you lay your head down at night can be very helpful to you and your family.

To continue on the topic, let’s talk about the Homestead Exemption. It can be a little confusing and this post will touch on the general aspects of it and the specifics can (and should) be left for your face-to-face meeting with one of our attorneys.

Homestead exemption laws are in place to shield your house from creditors who do not have a lien on it. In other words, your credit card company can’t come after it. The amount of value placed on your home is based on its equity. If the market says your home is worth $200,000 and you owe $180,000 on the mortgage, your equity is $20,000. Pretty simple math.

Different states have different numbers for the amount of the exemption. So, if you are in a state where the exemption is $20,000 or more, your only concern is the mortgage holder. Thus, one of the best questions you can put on your list when you meet with your bankruptcy attorney for the first time is: “What is the state’s homestead exemption?” In North Carolina, it’s $18,500 per owner. (But that is not all you need to know about it; so still ask the question!)

In most states, the amount of the exemption is limited. Some states in the South and Midwest, however, have unlimited homestead exemptions, including Texas, Florida, Iowa and South Dakota. However, even in those states, if you acquired your home within 1,215 days of bankruptcy, you are limited to protections of only $125,000.

Here’s another confusing aspect of the homestead exemption laws: some states allow you to choose either their state’s exemptions or the federal government’s exemptions under the Bankruptcy Code. North Carolina does not, however. You are subject to the state’s rules. Also, you need to have been a resident of your state for at least two years to claim the exemption in your current state. However, if you have not lived in your state for two years, you are subject to the exemption rules of the state in which you lived 180 days prior to filing.

As some people have done, never try to leverage the homestead exemption by quickly buying down your mortgage in order to create more equity. The amount of the exemption can actually be reduced by whatever amount of equity a person tries to create intentionally as a way to hamper creditors ability to collect from you. So, let’s say things were starting to get bad for you and the creditors have found your phone number. You decide that a bunch of cash you have from a recent windfall will be better spent buying into your mortgage instead of paying off the delinquent boat loan. If you then file for bankruptcy within a few weeks, your homestead exemption will be reduced by that amount.

The homestead exemption is one of the more challenging bankruptcy concepts to grasp at first, which again, is why you should make sure to ask your bankruptcy attorney about how it will affect you. In the end, it’s all about protecting your home. While you may have made some spending errors along the way, they are certainly not worth losing your home.

Live in North Carolina and need to find out what your rights are. Contact the bankruptcty attorneys at the Law Offices of John T. Orcutt, experienced attorneys offering a totally free and confidential consultation and serving 28 counties in N.C. (See list at www.billsbills.com/offices.php. To make an appointment for a free consultation, during normal business hours, call toll free 1-800–899-1414, or make an “online” appointment by visiting our website at www.billsbills.com.

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Published Friday, June 12, 2009 @ 7:09 am

According to an article in The Wall Street Journal, a man from Texas registered with a debt relief firm to seek help in climbing out from under $15,000 in credit card debt. After paying hundreds in upfront fees and a steady stream of monthly payments close to $250, he eventually found himself $20,000 in debt. Clearly something wasn’t working.

After more threats from creditors and the potential for wage garnishments, he filed bankruptcy, telling the paper, “I wish I had done that to begin with … I’d have been much better off.”

Unfortunately, his story is not uncommon.

Debt relief “companies” are becoming as common as corner coffee shops as the country’s personal debt continues to wear away at our collective economic foundation. Problems arise when people, so distraught over not knowing where to turn, respond to the first pitch that sounds sincere. Problem is, they all sound sincere.

The WSJ article cited a financial resources Web site that tracks complaints about debt-settlement companies as reporting that the rate at which consumers are filing complaints against debt-settlement companies has already doubled since 2007. The problems are becoming so commonplace that the Federal Trade Commission is now involved, having recently held an industry workshop to examine how these companies are doing business.

Credit card companies (not exactly the first place people turn for help with money, either) are reaching their wits end with debt-settlement firms. Some, like American Express, say they will not cooperate with representatives from debt-settlement firms.

Even non-profit firms, that typically appear to more focused on help people, have also become subject to scrutiny. The IRS is finding that an increasing number of non-profit debt relief organizations have direct ties to for-profit entities.

One of the primary areas of concern about the operating practices of so many debt-settlement firms is that any money you could pay ceases to go to your creditors. Instead, you deposit it directly into a special account they arrange. Thus, you are trusting the firm to pay your bills. In the end, you are really just putting someone else in control of your money. And, you rarely learn what creditors are being paid what percentages of the total owed so there is no way to measure if there is any structure to the debt repayment. How can you measure its effectiveness?

State laws are not really helping, according to the WSJ piece. While the rules vary per border, more states are allowing for-profit credit counseling firms to conduct business. An industry trade group, the Association of Settlement Companies, has seen its membership double in a year.

If you are facing some debt trouble, the odds are one of these companies has you in their sights. But if you are reading this, then you are already starting to consider your best option: bankruptcy. There are certainly some very helpful and legitimate debt-settlement companies out there but it’s too hard today to determine which one among the hundreds can do you the most good.

With the assistance of a bankruptcy attorney, you can find your way out of debt the right way. No mystery accounts in which to put monthly payments and no questionable business practices, just an honest approach to using the law to properly face financial setbacks. Don’t be the guy in Florida, make the right choice from the beginning. Call a bankruptcy attorney today.

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Published Wednesday, June 3, 2009 @ 12:15 pm

Our blog sure does cover a lot of ground about bankruptcy. Which is a good thing. We want to be sure that you understand all the processes, terms, principles and philosophies that factor into such an important decision. We even throw in some recent news about bankruptcy to help provide additional “real world” perspective on how bankruptcy laws are interpreted and applied.

All that being said, it’s always good to get back to the basics. So let’s talk about some common mistakes people make when considering or starting the bankruptcy process:

• Borrowing money from family to pay creditors: This will only make things worse. Even if your venture capitalist brother is more than willing to lend a dollar, don’t do it. Every dollar that comes from a family member will gain more emotional interest in the coming years than the debt relief was worth. There is no sense in spreading financial stress and discomfort when its not necessary. The problem is compounded if you repay the relative prior to filing bankruptcy. A bankruptcy trustee can sue friends or relatives who have received more than $600 in repayment during the year prior to your bankruptcy. Regardless of your family’s outlook on your financial situation, see your own way through it.
• Hiding assets: This sounds like a simple enough rule to follow, doesn’t it? You may be surprised at how many people try to transfer ownership on prized items that they know will look pretty attractive to the trustee overseeing your case. This is about not making things worse. Oh, and its about looking good in court. The last thing you want is a bankruptcy judge under the impression you tried to pull one over on him or her. Always be upfront and honest about what you own.
• “Selectively” listing your creditors: Be very thorough when providing contact information and names of creditors to whom you owe money. Take the time to get it right from the beginning. Your bankruptcy attorney can certainly help but some folks have decided that maybe one or two groups called a few too many times or may have been a bit harsh in their collection efforts that just maybe, you can sneak one past them. You can’t. Again, don’t hide anything; get it all out as soon as possible.
• Cashing in retirement accounts: This is never a good idea, whether you are filing bankruptcy or not. No expense is worth putting off the rest of your life. Remember, your bankruptcy dealings will pass well before it’s time for most people to retire. More likely than not, any retirement funds are fully protected because of acts passed in 1974 and 2005, as discussed in a previous post. Plus, the tax penalties will prevent you from being able to use all of the money.
• Use your home equity line: Once more for the people in the back row: You can’t borrow your way out of debt. Do not put your home in trouble when its not necessary. If you have managed to keep that equity line in check while building other kinds of debt, let it be. That money is better used for home-related expenses and tax benefits when you are on solid financial ground.

To recap, keep browsing the blog for all things bankruptcy and keep the above points in mind so if you do decide to file bankruptcy, you can get off on the right foot.

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Published Wednesday, May 27, 2009 @ 2:28 pm

Future home ownership is a major concern of so many people who have made the decision to file bankruptcy. A previous post on this blog discussed the ins and outs of your ability to buy a house after emerging from bankruptcy. The good news is that it is completely possible and that you can indeed be a very viable mortgage candidate.

However, there are some drawbacks to home ownership in general, many of which are related to costs. For starters, buying a home is not going to be the same rapid-return investment it was five years ago. As you know, the recent real estate boom sent home prices flying because financing was so readily available. That bubble has burst. Folks who have been watching real estate prices understand that in many parts of the country, home values have dropped significantly and in fact, hundreds of thousands of people owe more on their home than it is worth. Thus, don’t consider home ownership just for the investment potential. Unfortunately, in the last several years, a lot of people did just that.

There is a healthy number of hard costs associated with buying a home, especially now that the 100% financing days have faded into the sunset. As a result, you’re going to need a down payment. And that means thousands of dollars. Mortgage rates are very attractive right now but they demand at least a 20 percent down payment. For a $150,000 home, that equals $30,000. Knowing what you now know about preparing for financial emergencies and the power of having cash on hand, that amount of money could also buy a great deal of emotional comfort should medical bills or other surprise expenses occur.

Many lenders have significantly increased their costs relative to approving and processing a home loan. Fannie and Freddie Mac, for example, have pushed fees that in many cases will equal three percent of the mortgage. Again, for a $150,000 home, you’re looking at $4,500 simply for the ability to obtain the mortgage. Still, it should be noted that those fees are the lowest in North Carolina. They are the highest in New York.

Don’t forget about the costs of your inspections prior to closing. While many inspectors have become quite competitive in the face of the down market, many of them have also gone out of business. Thus, don’t just assume that inspections have become cheaper. When you add together a general home inspection, radon testing and pest reports, you could be looking at another $1,000.

In the last several years, apartment homes have become exceptional alternatives to home ownership. Real estate developers have created an almost new sector to the apartment market in the concept of “apartment homes.” Many apartment communities today come with outstanding amenities, furnishings and add-ons that are equivalent to many higher-end homes. Granite counter tops, multiple full bathrooms, three-bedroom options, club houses with elaborate pools and fitness centers and even movie theaters are just some of the features available to renters today. Renting also provides flexibility in lease options, very low maintenance costs and commuting convenience, since so many communities are built around mass transit stops, employment centers and highway access.

Even though home ownership is a viable possibility after bankruptcy, and a worthy goal to shoot for, it may not always be your best option. As with all major financial decisions, weigh the costs and benefits carefully and do what’s best for your family and your finances. And of course, keep reading our Blog!

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Published Friday, May 22, 2009 @ 11:13 am

Medical debt is the second most common reason for filing bankruptcy in America today. One might think that, given the extensive health care debate in our country, the connection between spiraling health costs and bankruptcy filings would be made an issue. Instead, the debate just rambles on about complex forms, confusing co-pays and generic prescription drug replacements.

There is no definitive cure for the ills of America’s medical plan drama. In fact, despite all the campaign promises, the new administration’s universal health care plan has not even begun to find its legs. To the administration’s credit, there are a number of legislative efforts underway that will come to the aid of a lot of debt-addled Americans. The Senate is currently discussing three options and according to the associated press, they go something like this:

• Create a plan that resembles Medicare, administered by the Health and Human Services department.
• Adopt a Medicare-like plan, but pick an outside party to run it. That way government officials would not directly control the day-to-day operations.
• Leave it up to individual states to set up a public insurance plan for their residents.

The problems with health care run deep. Global Health Maintenance Organizations (HMO) and the closely related Preferred Provider Organizations try to solve the problem by encouraging preventative care and taking a more hands on approach in treatment, so patients better understand how to keep themselves healthy and in the end, keep medical costs under control. But even their definition of “affordable” varies quite a bit from how the most of us define “monthly income.”

For the uninsured, the dollars spent on medical issues can be staggering. It is not uncommon to see many working class people get saddled with a bill for a single medical visit that can be more than an entire month’s paycheck. For many of us, it’s easy to complain about public hand-outs and out of control welfare benefits that offer medical care at the expense of the taxpayer. Sure, many of our fellow Americans do need assistance in that regard and yes, it can be abused. However, you can’t get a kidney transplant at a walk-in clinic. Or stop in for a dose of chemo.

For every one person that may be getting some flu meds or an arm cast on the tax-payer’s dime, there are twice as many going untreated for serious ailments because they can’t afford it. Their problems only become more serious when they resort to a credit card or home equity line or whatever small amount of retirement savings they have to pay for that treatment. A few months later when the bills arrive and all the deferments and payment plan options have been exhausted, there is usually only one alternative: bankruptcy. And while that bankruptcy might very well nurse them back to financial health, it won’t necessarily keep them physically healthy. So the cycle continues.

A person can change their spending habits and learn to be more financially responsible. A person can also change their diet and exercise to stay healthy. But medical emergencies happen and try as we might, we can’t always learn how to be more frugal when it comes to getting cancer or less impulsive about paralysis. Medical expenses, like the ailments that create them, can be terribly crippling to our health, and our credit. Serving North Carolina residents, John T. Orcutt has helped thousands of families get out from under medical debt. Call our offices today for your free initial consultation at convenient locations in Raleigh, Durham, Fayetteville and Wilson.

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Published Thursday, May 14, 2009 @ 12:55 pm

The shrinking job market is squeezing college graduates in record numbers as the number of student loan defaults has not been this high since 1998. Suddenly, today’s college graduates don’t have much of a reason to toss that mortar board in the air.

Adding a few more demerits to the situation is the fact that employers have also cut back drastically on benefits packages that historically included reimbursement for continuing education. What makes the jump in student loan defaults so troubling from the national perspective is that they are difficult to get included in bankruptcy plans.

Understandably, the situation can create a lot of pressure for the youngest, and hopefully most energetic, component of our workforce. In times like these, when fresh minds, new skills and workplace creativity can benefit the business world, it is more important than ever to engage young talent. However, if they are saddled with debt and unable to confidently move forward in a career, or even find a job, the financial dominoes begin to tumble quickly. If student loan defaults keep growing, the odds are good that their credit cards, car loans and ability to secure mortgages will also be severely affected.

While there are a number of legislative efforts underway to help struggling borrowers of other forms of money, government action on student loans can cause sweeping changes in the graduate education world. According to industry professionals, if student loans are granted leniency in bankruptcy plans, then they become a greater risk to lenders. In turn, that will create jumps in the cost of education, as it will simply be more difficult to secure the money needed to attend law school, study to be doctor or get an MBA.

However, an expert with the Institute for College Access and Success said that even with the federal protections in place, student loans have not become any cheaper.

FinAid.org, a Web site dedicated to information on student financial aid, reports that two-thirds of undergraduates turn their tassels every year under the oversight of a creditor. Given that a typical private undergraduate education costs more than $25,000 per year and graduate programs range from $27,000 to $114,000 and that student loans have more than doubled in the last decade, it appears the growing academic debt issue is not going anywhere soon.

It may be surprising some to learn that gambling losses can be discharged in a bankruptcy but to seek protection from federal student loan debt, a person needs to attempt to convince the court of an “undue hardship,” a rule that was put in place by Congress more than ten years ago. Then in 2005, the same provision was made legal for private student loans as well. Meeting the hardship discharge standard is extremely difficult and relief is unlikely to be granted except in the rarest cases.

The bright side is, while you are in a bankruptcy, your student loan payments are deferred. Once you emerge from the bankruptcy with your unsecured debt completely wiped away, you will have a better chance of making a dent in your student loans. In North Carolina, call the Law Offices of John T. Orcutt to set up your free initial bankruptcy consultation.

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Published Monday, April 6, 2009 @ 12:02 am

You’ve probably come to this site seeking information about how bankruptcy can help you.

The attorneys at the Law Offices of John T. Orcutt are here to help you understand the powerful ways that bankruptcy laws can stop the bill collectors, stop foreclosures, and help your family survive these tough economic times.

This blog is the latest addition to our extensive website www.billsbills.com. The blog will answer your questions, and discuss common issues which arise in many bankruptcy cases. You will also find the very latest bankruptcy related news, all updated on a daily basis.

Our goal is to help you and your family get free from debt now. Keep reading our blog for current information on how bankruptcy can help you get your financial life back on track. Then call our office for your free and confidential initial face-to-face debt consultation.

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