Do I want to buy a house?

Do I need to buy a car?

Do I have kids that need help for college?

• What is the annual fee? Annual fees can range from $35 to $120 and more.  You don’t need to settle for and pay a high annual fee.
• Are there other fees? These can be called setup fees, processing fees, program fees or one-time fees, and are not indicative of a good card.
• What is the interest rate? Rates can vary greatly, and you want the best possible rate.  Make sure the rate you are quoted is not just a promotional rate.   READ THE FINE PRINT.
• Is it reported to the credit bureau? You want your chosen credit card to work for you.  You want a good payment history reported to all three credit bureaus.  One note — if the card is secured, you do not want this fact reported, as it will do little or nothing to help your credit.  It is possible to find secured cards that are not reported as secured.  Some banks do, some don’t, you need to ask.

Here is an example of a how good a deal can be found with a credit union.  Check out this one: GTE Federal Credit Union.

This credit union was originally open for GTE employees, but now offers membership through your employer, or a family member, or a low-cost program called CU Savers.  It offers a secured card with:

• No annual fee
• Low fixed rate of 14.9%
• Minimum $500 pledge amount
• No finance charge if you pay your balance in full within the 25-day grace period (excluding cash advances and convenience checks)

Another example of a good card is an Orchard Bank secured credit card.  The fee structure is a little different, but the annual fee is waived the first year.

• Reports to all three major credit bureaus
• Earns interest on your deposit
• Your choice of due dates
• $35 annual fee waived the first year
• 7.9% to 15.99% interest rate
• $200 minimum deposit

I recently had the opportunity to speak with a customer who just completed a Chapter 7 bankruptcy. My client agreed to help with my research regarding automobile financing since he himself was in the process of shopping for an auto loan. The value here is that he is just out of bankruptcy, which allows me to present to you an actual scenario rather than a hypothetical situation. It is also relevant in light of all the new financing guidelines that are prevalent due to the current recession and its affect on financing. Over the next two issues my goal is to help you understand what you need to know and do to finance a car right after bankruptcy.

Following is an outline of what we will cover over the next two issues:

• Financing: Who is actually doing the loan?
• What is the finance company looking for?
• How to be prepared before visiting the dealership.
• What local dealerships in the DFW area will help you.

The very first step once your bankruptcy has been discharged, is to obtain a credit report from all three major credit bureaus. I will provide information in our next issue how to get your credit report and what to do with it. Your credit report contains a score which is an indicator to your creditors on just how safe of a credit risk you are. Fortunately, bankruptcy doesn‘t necessarily mean you are a bad credit risk. Frank Uhl of Bonham Chrysler says it could actually help you because the finance company knows you cannot declare bankruptcy but once every eight years if you discharged your debts under a Chapter 7 plan. It is also likely that your debt ratio has been significantly reduced, which makes it easier for you to pay.

The key factor in regards to your credit report will be your credit history prior to bankruptcy. This can be a good thing or a bad thing for you. Regardless, it is recommended that you see your report, know how to read it and understand what the finance company is looking for. We will show you that in our next issue towards financing a vehicle fresh out of bankruptcy.

Because of the complexity of bankruptcy laws and the nuances involved, it is essential that you hire a skilled attorney to assist you in the process.

We have found that our clients have common concerns and questions during the time period of considering bankruptcy to before the filing is official.  Below are some examples:

How do I manage a bank account and loan from the same credit union?

If you have a bank account at a credit union and you have an unsecured loan or credit card with that credit union, draw down the balance of that checking account to $50.00 before filing.  Because most credit unions cross-collateralize their loans to your checking account, they can take money out of your checking account to satisfy the unsecured debt you have with them.  Open up a checking account at another bank that you don’t have a loan with before you file and have all of your direct deposits go to this account.  Make sure that this has been accomplished before you file.

Can I transfer my non-exempt assets to a family member before I file?

Unfortunately, the answer is no.  When you file for a bankruptcy, you have to disclose all transfers made within 4 years previous to filing the bankruptcy.  If you have transferred assets to a family member within this time, the trustee can get this asset back.  It also could raise the issue of bad faith.  If it is determined by the Court that your case was filed in bad faith, your discharge can be denied, and you will prohibited from ever getting a discharge on the debts that you had before you filed for bankruptcy.  So, it is just not worth the risk.

Since the Bankruptcy Code was amended on October 17, 2005, you cannot file for a Chapter 7 Bankruptcy unless your income is less than the National average for your household size or after deducting all expenses as governed by the IRS guidelines, you have less than $100.00 per month to pay towards your unsecured debt.

So with this test in mind, it is essential to determine if you qualify now, or if will you qualify in the near future.  This is where an experienced Bankruptcy Attorney’s services are so vital.  If your case is filed and the presumption arises, then you can be asked by the US Trustee to either convert your case to a Chapter 13 and pay a percentage to your unsecured creditors, or you run the risk that your case will be dismissed, without obtaining a discharge!

Can I exempt any assets?

Another valuable service that an experienced bankruptcy attorney can perform for you is a determination of whether all of your assets are exempt.  When you file for bankruptcy in the State of Texas, you get to keep all of your exempt assets.  Your non-exempt assets are turned over to the Chapter 7 Trustee, and he or she turns these assets to cash and distributes these funds to your unsecured creditors pro-rata.

Case Study:

A few years ago I was attending a meeting of creditors for my client.  We arrived early, and we sat in on another meeting of creditors.  The Chapter 7 trustee was asking this debtor about their assets, and then the trustee asked about the debtor’s trust.  The trustee asked the debtor if he could control the distributions of the trust.  The debtor said, yes.  At this point the Trustee correctly determined that since this was not a spendthrift trust, it was a non-exempt asset.

Everyone in the room could see the look of astonishment and dread on the Debtor’s Attorney’s face.  It was clear that this Attorney did not know that this Trust was a non-exempt asset.  The trustee informed the debtor that he would have to turn over this trust to him and that he would distribute these proceeds to the debtor’s unsecured creditors.

The debtor then told the trustee that the trust was his only source of income.  After the meeting, in the next room, you could hear a very heated argument between the debtor and his lawyer. I am sure at this point the debtor asked his lawyer if he could just dismiss his case.  The answer is no.  You cannot voluntarily dismiss a Chapter 7 case without permission from the Court.  And, here is the bad news for this debtor: the Judge is not likely to allow a dismissal of a Chapter 7 Bankruptcy case unless the Trustee agrees.  And, the Trustee cannot agree to dismissal if there are non-exempt assets to distribute and fulfill their duty as a Trustee.

There are young, inexperienced attorneys out there who offer you a cheap price on filing your bankruptcy.  But aren’t peace of mind and the knowledge that your case is being handled by an experienced, qualified Bankruptcy Attorney worth a little bit extra?

One of the main concerns of my clients is their credit score.  Many of them have witnessed its decline and felt the effects of a loan rejection or higher interest rate on credit.   Often, the first thing they ask me is, “What will happen to my credit score if I file bankruptcy?”

In most cases, after you file a Chapter 7 Bankruptcy and receive a discharge (which normally takes about 4 months from the date of filing) the credit scores actually climb up. This is true after a Chapter 13 discharge, as well.  However, typically, in a chapter 13, you don’t receive a discharge until you finish the plan.  The plan ranges from 3 to 5 years.

After I tell my clients this, the next question is, how can that be?

Your credit report has probably already been damaged by late payments, no payments, charge off’s, collections, repossessions and foreclosures or any combination of these.  Once you receive a discharge, these items show that they have been discharged in a bankruptcy.  The negative “hits” stop,  and this is what causes your credit scores to climb.

Next issue we will address how to begin building your credit.

I recently had a woman visit my office who was in her 50’s.  Her husband had just lost his job, and he was having difficulty finding another job.  They were in financial distress.  She was really struggling, wondering if she should get a second job to pay her bills or if there was another solution.

Bankruptcy was mentioned as a possible option for her, but she had difficulty pursuing it, primarily because of the moral or social dilemma it posed.  She and her husband had always paid their bills on time before he lost his job. They were a responsible, well-intentioned couple who just fell into a tough spot.

She came to me with many fears and concerns about bankruptcy.  Would her bankruptcy go on a public record that could easily be accessed?  Could a future employer find out and not hire her because of it?  How much of a social stigma would be present?

I patiently answered all of her questions and provided the information she needed to make more of an informed decision.  I told her that most employers do not even seek out that information ever from their employee prospects.  I calmed her fears about the social stigma that she perceived by reminding her of many public figures, including Thomas Jefferson, Harry Truman, Henry Ford, Walt Disney, Larry King, Burt Reynolds, and Donald Trump who have all filed for bankruptcy.

She decided to go home and think about things more fully.

After three days, she called back.  She had talked it over with her husband, and they decided to file.  They now had the right mindset – free from fear or worry – to move forward with bankruptcy.

I have several people contact me regularly who struggle similarly with the issue of whether or not to file bankruptcy.  Their concerns are common.  Many feel that it is not morally “right.”  They had been adverse to debt beforehand and do not like to carry the guilt of not repaying their debtors.  They have been told by friends and neighbors, and even the media that because the laws have changed, a Chapter 7 bankruptcy is no longer available to them.  Some come to me and wonder whether credit counseling is better than bankruptcy.  Basically, because bankruptcy can be a very emotional decision, they have a hard time holding onto the fundamental information that would bring clarity to their situation.

With each client, I have found that once I am able to sit down and talk to them, addressing each issue and offering more information, they are able to move forward with a new, educated perspective.

I tell them that bankruptcy has been set up as a tool for people who are stuck between a rock and a hard place.  It offers protection from further financial demise and an opportunity for a fresh start and new slate, in a sense.  We live in a unique country that encourages risk, and so have these measures like bankruptcy to cushion losses when they get to a point that are uncontrollable.  I share that yes, laws have changed.  Now there is a “means test,” and if they pass, they can still qualify for a Chapter 7.  And laws might continue to change, due to a new presidency, and offer a climate that is even more acceptable towards bankruptcy.

I also let them know that it is more damaging to their credit to pursue credit counseling.  Filing for bankruptcy discharges their debts and allows individuals to start over within four months.  Every month that they do not make payments, it reflects negatively on their credit score.  I also share that many credit counseling agencies have been indicted, serving time in prison because they did not distribute collected money to creditors.

Basically, from my experience, if a person falls within the right requirements, once they become educated about bankruptcy, it becomes a clear and even hopeful option for people who are feeling overwhelmed by debt.  The “right mindset” about bankruptcy is essentially one that is fully informed, free from social stigmas, and prepared for a fresh start.

After your bankruptcy, one of the last things you probably want to see is another credit card. Or you may be worried that no company will ever offer you another one, and you want to take the first offer that comes along. Whatever your feelings about credit, you will most likely need to rebuild your credit history if you ever plan on purchasing a home or car again.   Used correctly and responsibly, credit cards can be a great tool to help with rebuilding your credit.

There are some things to be careful of when looking for a new credit card or if you have received an offer in the mail.  One rule of thumb:  if it sounds too good to be true, it probably is. Another:  ALWAYS read the fine print.

Many companies market to newly bankrupt people.  They know you want to rebuild your credit and may pay large fees to get a credit card, thinking your fee is a deposit on their secured card.  They offer you a “guaranteed” line of credit, or promise that “you cannot be turned down”, but what you end up with for your $100 or more is a LIST of companies that MAY give you a secured credit card.  You can get that for free yourself at www.bankrate.com.  Don’t give them your hard earned money.

There are also companies that offer a credit card, but it is a merchandising ploy and can only be used to purchase their overpriced merchandise.  One example is a card offered by USA Platinum through CMG, also known as All American Gold.   The fine print even tells you it is NOT a Visa or Mastercard.  There is typically an enrollment fee to become a “member” with these type of scams.

Beware of companies offering to automatically deduct your payments each month to “help you rebuild your credit with timely payments”.  That puts them in charge, which is never a good idea.  Other companies invent a name which closely resembles a legitimate and familiar bank name.  They are trying to confuse you.

Some companies require an up-front membership fee before you even find out what the interest rate will be.  Get the rate in writing first.  And check out the bank affiliation — genuine cards will always have an affiliation from an issuing bank.

The bottom line is, do your homework, call the Better Business Bureau, and ALWAYS read the fine print.  There are many scams and people just waiting to take your money.