TEN COMMANDMENTS Of PREVENTING
1. Set Financial Goals.
Set (and follow through) a long, short, and mid-range savings goals and time range for paying bills. Keep in mind to be realistic when setting your goals.
2. Keep a Budget.
Save at least five to ten percent of your net income each month on a continuous basis. Maintain at least three to six months' salary worth of cash flow in case of an emergency.
3. Keep Track of Spending Habits .
Keep a ledger of your daily spending. Determine which ones are necessary and which ones are not. Compare with your budget and financial goals and eliminate any unnecessary spending habits on a gradual pace.
4. Only Make Necessary Purchases.
Purchase only when it is necessary. Try-to maintain the mindset of buying only the necessary items. Avoid going to sales events when it is not necessary, because more than likely when you go to a sales, you will purchase items that you don't need.
5. Economize when Possible.
Cut back on home energy consumption. Bring lunch to work more often. Take advantage of free or low cost activities in your community. Simple ideas like these may not sound luxurious, but it saves.
6. Be Credit Cautious.
Don't allow credit payments to exceed 20 percent of your net income and don't borrow from one creditor to pay another. Don't charge more than what you are paying each month. In case if you can not make your monthly payments, try to work out a payment plan with your creditor immediately.
7. Get Medical Insurance.
Obtain a medical insurance even if it is a stopgap policy with a large deductible. It is impossible to avoid medical emergencies, and living without medical insurance is an invitation to financial ruin.
8. Do Not Make High Risk Investments.
Do not gamble (literally and figuratively). In every gamble, you don't necessary win, but you most definitely pay. Whether it is in a casino, or in the stock market, gambling seldom leads the gamblers to financial prominence, but instead, often leads them to their financial ruin. Opt for certificates of deposit, money market funds and government bonds over speculative real estate, penny stocks and junk bonds.
9. Avoid Co-Sign or Guaranteeing a Loan or Involve in a Joint Obligation with Someone . .
For whatever reasons that you happened to decide to Co-Sign, Guaranteeing, or become Jointly Obligated for a loan or other financial obligations with someone else, you are in fact volunteering yourself to be totally responsible for these' obligations if the other person defaults.
10. Seek Professional Help.
When you find yourself engulfed in debts and financial problems, do not simply ignore them. Seek professional help as soon as possible. An experienced attorney or financial consultant specializing in dealing with financial problems can help you turn your life around.
Bankruptcy and Debt Clearance
Many people believe that in the United States, if you become engulfed in debts, all you need to do is to file for bankruptcy and you will be cleared of any and all debts. This is NOT SO!!
First of all, no matter which chapter of bankruptcy you filed under, a secured debt such as house or car loan may not be excused. Either you choose to pay off the remaining balance, or the secured creditor may take the secured item and sell it. In the event if the money they received from selling of the item does not fully compensate them for the loan amount your borrowed, you are still liable for the amount of deficiency.
In addition, the following categories of debts may not be discharged (both in Chapter 7 and in Chapter 13) unless you show the bankruptcy court that the debt comes within an exception of the rule:
1. Debts you don’t list in your bankruptcy papers.
2. Student loans – unless repayment would cause you undue hardship.
3. Most federal, state and local taxes and any money borrowed or charged on a credit card to pay those taxes.
4. Child support and alimony and debts in the nature of support.
5. Fines or restitution (to the court or victim) imposed in a criminal-type proceeding.
6. Fees imposed by a court for the filing of a case, motion, complaint or appeal or for other costs and expenses assessed with such filing.
7. Debts resulting from intoxicated driving.
8. Debts you couldn’t discharge in a previous bankruptcy that was dismissed due to fraud or misfeasance.
In order to show the bankruptcy court that the debt comes within an exception of the rule you have the choice of either hiring an attorney while your case is still open to argue and persuade the bankruptcy court that your debt is not covered by the general rule. Or simply don’t take any action during bankruptcy, and if the creditor attempts to collect after your case is closed, argue that the debt was discharged.
In a normal Chapter 7 bankruptcy proceeding, there are four categories of nondischargeable debts. These are:
1. Debts incurred on the basis of fraudulent acts.
2. Debts from willful and malicious injury to another or another’s property.
3. Debts from embezzlement, larceny or breach of trust (fiduciary duty).
4. Debts arising from a marital settlement agreement or divorce decree.
However, they may be discharged if you list them on your bankruptcy petition, and the creditor does not formally object within the time allowed. In the event the creditor fails to file the objection in time, it will be barred from future attempts to collect. If however, the creditor does present its objection, you need to respond if you want the debts to be discharged. If the amount owed is large enough to justify the fees, you should hire an attorney to handle it. If the judge rules in your favor after a creditor has accused you of fraud, the court should make the creditor pay your attorneys’ fees. In a Chapter 13 proceeding, these debts will be discharged even if in the unlikely event that a creditor objects.
Increasingly, most creditors that are credit card issuers begin to challenge the discharge of a debt by means of claiming credit card fraud. Although there are no clear rules defining what constitute a credit card fraud in bankruptcy, many courts are however, using the following factors to determine fraud:
1. Short time between incurring the charges and filing for bankruptcy;
2. Consulting an attorney before incurring more debt;
3. Recent charges over $1,075;
4. Many charges under $50 when you’ve reached your credit limit;
5. Charges after the card issuer has ordered you to return the card or sent several “past due” notices;
6. Changes in your pattern of use of the card;
7. Charges for luxuries;
8. Multiple charges on the same day; and
9. Charges after you’re obviously insolvent (no job, income or savings).
The banks claim that insolvency is evidenced by and through factors such as 1. A notation in the customer’s file that the customer has met with an attorney, 2. A rapid increase in spending, quickly followed by 60-90 days of quiet, and 3. The date noted on any attorney’s fee statement, if the customer consults a lawyer for help with a bankruptcy. However, you could probably defeat a claim of fraud because of no job if you diligently sought employment.
Most often, the objection begins with a letter asking you to sign an agreement, called a reaffirmation agreement, which generally means that you concur that the debt will survive your bankruptcy case and that you will be liable to pay it after your bankruptcy case is over.
It is never a good idea to sign a reaffirmation agreement in such a situation. Why saddle yourself with debts you know you can’t pay? The purpose of you filing for a bankruptcy is to get a fresh start, not to still owe money. Don’t be lured by the promise of restored credit. Creditors do not restore credit until after the outstanding debt is paid in full. Besides, you can apply for a new credit card after your bankruptcy case is over.
Most credit card issuers lose these objection cases when they go before a judge. Judges are finding that credit card issuers usually send pre-approved cards without doing an adequate credit check. Judges also discover that cards are issued to all applicants, no matter what number is entered into the household income blank on the credit application. Finally, judges are finding that debtors are using the cards for the precise reasons the creditors encouraged them to use the cards such as “when you’re short on cash,” “to take that much deserved vacation,” “to consolidate other debts,” or “to buy expensive gifts.” Ultimately, judges rule that credit card issuers must assume responsibility for their own neglectful behavior and cannot claim fraud when someone on the financial edge uses a card for precisely the reason anticipated by the issuer.
To fight this kind of cases, it is wise to hire an attorney. However, if for some reason you decide to handle the case by yourself, and when the time comes for you to engage in formal discoveries, you may find the following questions valuable to utilize in the interrogatories:
1. You have alleged that the debtor obtained funds from you by false pretenses and false representations. Please state with particularity the nature of the false pretenses and false representations.
2. State all steps taken by you to determine the credit worthiness of the debtor.
3. Identify all means you used to verify the debtor’s income, expenses, assets or liabilities. Identify any documents obtained in the verification process.
4. Identify your general policies concerning the decision to grant credit and how those policies were applied to the debtor.
5. You have alleged that at the time the debtor obtained credit from you he/she did not intend to repay it. State all facts in your possession to support this allegation.
6. Identify all credit policies you allege were violated by the debtor. State how such policies were communicated to the debtor and identify all documents, which contained those policies.
7. Identify the dates on which you claim any of the following events occurred:
A. The debtor consulted a bankruptcy attorney.
B. The debtor had a reduction in income.
C. The debtor formed the intent not to repay this debt.
D. The debtor violated the terms of the credit agreement.
8. State whether you believe that every user of a credit card who does not later repay the debt has committed fraud on you.
9. If the answer to the preceding questions is no, state all facts that give rise to fraud in this debtor’s use of the card.
Upon receiving a list of questions such as the above, the credit card issuer is likely to see that you are serious about defending yourself. There is a good chance that it will withdraw its complaint.
Copyright 2003, Law Office of Sam X. J. Wu