The passing of a year is always an optimistic time for most of us. It’s a little arbitrary, probably, to stand on the threshold of a new year and expect that much will change when, usually, January 1st is never all that much different from the day before it, but we all have that expectation regardless. We formulate New Year resolutions or decide steadfastly that we don’t require them, and we step forward into another year with the notion of change set firmly in mind. “This year,” we tell ourselves, “it’s all going to come together for me.”
That’s as true for me as it is for anyone else. I have great hopes and expectations for 2009 that may or may not be borne out as events unfold. Like everyone else, I have no guarantees that anything will work out particularly well for me, but, like absolutely everyone else, I move forward with my fingers crossed, doing what needs to be done. It’s simply human nature to retain at least enough optimism to keep going forward regardless of whatever it is that may be weighing us down. The New Year holiday represents that optimistic side of our nature as human beings, and it is that side of our nature that does bring us our greatest successes, even when the odds are against us.
It does happen that the odds are against many of us at this particular time in our history. Particularly here in Detroit and the greater southeast Michigan area, many are having a tough time right now. Regardless, just as our political leaders must adapt to new circumstances and develop new strategies for our state and our nation’s economic well-being, we must, individually, do the same. Nobody needs to be told to tighten their belt when the going gets rough, but the details of how to do it are sometimes easier said than done. And, when it comes to dealing with overwhelming amounts of debt in the face of job-loss, medical issues, or other serious matters, there’s nothing easy about it.
In particular, if your belt has been tightened and tightened again and you are considering filing for bankruptcy in the coming year, there are a few basic precautions you can take to improve the odds for yourself—and for your coming year.
Stop Using Credit-Cards
This is one of those “easier said than done” things, especially if your situation has become so strained that you are, to some extent, living off of your credit-card right now. But credit-card debt is expensive in the long-term. It isn’t always to focus on the long-term when the short-term has become difficult, but interest-rate changes, the inflated rates on cash-advances on a credit card, and the ability of the card issuers to alter the terms of your agreement with them at virtually any time throughout the length of your relationship means that, unless you’re careful, you could make a short-term difficulty into a very long-term one.
Further, if you are considering bankruptcy anytime in the coming year, you don’t want to give your creditors any justifiable reason to claim that your bankruptcy petition is fraudulent and should be dismissed. Use of a credit-card when you know you will be filing for bankruptcy is fraud.
Stay Current on Your Car and Mortgage Payments
Again, if you’re in trouble, this may be a very difficult thing to accomplish. It may, in fact, be the primary reason you consider filing for bankruptcy. In general, especially here in Metro Detroit, where the public transportation options are slim to none, it is important to have a reliable vehicle before, during, and after a financial crisis. Losing a car or, especially, a home will obviously worsen the odds that you will emerge from the crisis. But, if you are planning to file bankruptcy and hope to save a home or vehicle, it is also important to continue demonstrating your ability to make payments on the property so that your Chapter 13 plan will appear effective to the Bankruptcy Trustee who will oversee your case.
Close Unnecessary Bank-Accounts
If you have accounts that you don’t use or rarely use, transfer the funds to other accounts and close them out. It just makes things easier.
Keep Good Records
Complete and accurate records of your financial history will enable a bankruptcy attorney to do the best job for you that he or she can.
These are just a few of several steps you can take to make not only the short-term possibility of a Happy New Year alive but also the long-term possibility. If it is not possible for you to take at least the first two steps I’ve discussed above, it is possible that a bankruptcy may be the best financial course of action for you in the New Year. Even that, however, is still cause for optimism. A bankruptcy is, after all, not an ending but a new beginning, like the New Year holiday itself, and, if your situation requires that drastic step, it should be viewed as an optimistic move forward.
If you are considering filing for bankruptcy or would like to discuss your financial options, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation.
Meanwhile, a very Happy New Year to all of you!
I have addressed the high bar to the discharge of student loan debt in bankruptcy on this blog in earlier posts. It remains true that student loans are very largely not dischargeable in bankruptcy. However, it is not true that bankruptcy cannot assist in managing or even paying down student loan debt.
There are many variables which determine how much a monthly payment under Chapter 13 will be. Filing for bankruptcy under Chapter 13, which is a reorganization of your finances rather than a liquidation as under Chapter 7, is a complicated process. In a Chapter 13 filing, you work with your attorney to develop a payment plan which will allow you to catch-up the amount you are in arrears on one or more debts—generally secured debts, such as home or car loans. The amount that you pay each month to the Chapter 13 Plan is primarily driven by your ability to pay—that is, the amount of money you have each month after certain basic expenses are deducted from your monthly income.
