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Bankruptcy Terminology: What is Reaffirmation?
Filing for bankruptcy is a difficult decision. However, bankruptcy is an important tool that gives people a second chance despite the curve balls that life may throw. Indeed, the reason behind the United States Bankruptcy Code is an acknowledgment of the reality that life sometimes just happens.
It is unfortunate that bankruptcy has such a negative stigma. Bankruptcy is an invaluable tool, and if used properly, it allows persons to shed off undesired liabilities while retaining useful assets; just ask Donald Trump.
With proper planning, bankruptcy can even allow a person to continue inhabiting the same home or drive the same car while getting rid of undesired debt. This is all thanks to the concept of reaffirmation. Reaffirmation allows bankruptcy filers to choose to remain liable for the debt that encumbers certain assets, thus keeping those assets.
For example, assume that a person who decides to file for bankruptcy wants to keep a car that they have financed; this may be the vehicle used to make a living or to drive children to school. Under bankruptcy rules, if a person does not reaffirm the debt associated with the car, the bank that financed the purchase would repossess the vehicle and dispose of it as they see fit.
State of Economy in Texas Remains Political Issue
With the gubernatorial race upon us, and local elections being decided throughout the country, the public will surely continue to be inundated with political ad campaigns and candidates’ appearances throughout the region. One of the most discussed issues involves Texas’ economy, and the correlated issues of unemployment rates and the public debt.
According to My San Antonio, Attorney General Greg Abbott, who is running for the 2014 GOP gubernatorial nomination, stated during a recent campaign appearance that Texas’ debt ranks as the second highest among large states in the U.S., while San Antonio holds the highest debt of any city within the state. While this state of affairs is concerning, especially considering the recent actions of cities in financial crisis in other parts of the country, perhaps the public can find some reassurance in the fact that the elections will call attention to these issues and potentially produce proposed resolutions.
Avoid Bankruptcy by Keeping Your Debt under Control
If you don't have money to “treat yourself,” then don’t, and while you’re at it, turn off your lights to save on electricity. It sounds simple, but sometimes unexpected expenses pop out and as much as you cut back, there never seems to be enough money to cover everything that you need. Sometimes bankruptcy is your only option. On average, an American household with at least one credit card has a credit card debt of almost $16,000.
CNN Money offers the following tips and tricks about debt and spending to help you avoid bankruptcy:
- Some debt is good: Taking out loans for big investments like houses and college is okay, but it is still important to only take out as much as you can pay back. Also be sure to compare interest rates before choosing a loaner.
- Some debts are bad: If you consume items quickly, do not use your credit card to pay for them; these items include food and vacations. If you cannot pay off expenses that continue to build up each month, you are likely to dig yourself into a hole too deep to easily crawl out of. Try setting money aside for these items prior to the expense, so when the time comes, you have the funds ready to pay your bill.
A New Baby Could be a Good Time for Financial Fresh-Start
There are usually all kinds of planning and important decisions to be made when a couple has a new baby on the way. And many of those plans are expensive ones. According to the U.S. Department of Agriculture (USDA), it costs a middle-income family almost a quarter of a million dollars to raise that child from infancy to age 18 – and that’s excluding college tuition.
The UDSA’s new report breaks down as follows:
- Families earning between $60,640 and $105,000 (pretax) will spend $241,080.
- Families earning less than $60,640 will spend $173,490.
- Families earning more than $105,000 will spend $399,780.
The report cites the two largest expenses as housing (33 percent) and child care/education (23 percent). The third-highest expense is food (18 percent). Although parents may be tempted to overspend in other areas, none of these three categories are arbitrary ones.
What Does an IRS Tax Levy Mean in Texas?
Since the economy has taken a turn for the worse, the IRS has be relatively aggressive in coming after income tax debt. If you are being contacted by the IRS about existing tax debt and you are feeling overwhelmed with your finances, you need the advice of a San Antonio bankruptcy attorney.
The IRS can use levies to pay your taxes if you do not make payments or arrangements for payments to cover a tax debt. The IRS can take and sell any type of personal property that you own or have interest in. This includes the cash loan value of your life insurance policy, commissions, your wages, bank accounts, licenses, rental income, dividends, and retirement accounts. The IRS may also seize and sell property such as houses, boats or cars.
The tax levy can be completed after the IRS assessed the tax and provided you with a Notice and Demand for Payment, you refused to pay the tax or ignored the notice, and you received a "Final Notice of Intent to Levy and Notice of Your Right to a Hearing." Generally, you will receive this last piece of information about 30 days before the levy. Taxes are extremely complicated and contacting the IRS may not clear up your questions. This is a sign to reach out to a bankruptcy lawyer.
Proposed Changes to Credit Score Reporting
A person’s credit score represents the riskiness of lending that person money. Banks, credit card companies and car dealerships all use this information when approving or denying a credit application. The score is weighted on a scale up to 850 based on payment history, length of credit history, accounts owed, types of credit used and whether new accounts have been opened.
Consumers who handle their credit accounts well and make payments on time have a higher score. Those who miss payments, open too many accounts, or who don’t use credit or loans will have a lower credit score. Filing for bankruptcy will also lower your credit score because you do not have to pay back your debts.
San Antonio Bankruptcy Options
When bills start piling up and you don't have the income to cover them, life gets complicated. Most minds turn right to bankruptcy as a last resort, but there are other options.
Simple ways to avoid going into debt from Money Management include:
1. Have sufficient insurances. Many studies show that bankruptcies are often caused by medical reasons. When something out of the ordinary comes along, such as an unexpected surgery that is not covered by medical insurance.
2. Adjusting spending according to income. There are many items that people buy that could be exchanged for less expensive items and other items may not be in a new budget that is created to pay off debts.
3. Try to settle debts. Sometimes debts can be settled for less than the full value, which could be an important step in diminishing debts.
Insured Patients and Bankruptcy
Many people assume most bankruptcy filings are due to out-of-control spending habits or poor money management. However, according to a study published in The American Journal of Medicine, one of the biggest reasons people file for bankruptcy is unpaid medical bills.
More surprising is that many who file for bankruptcy due to medical bills have health insurance. So even with the expansion of health care coverage through the Affordable Care Act, there will still be people struggling under the weight of medical bills. Understanding the expenses related to health insurance can help you be financially prepared.
Monthly Premiums
Unless you have an employer covering your full monthly premium, most people will have to pay at least part of this to have health insurance. The amount you’ll pay for your monthly premium has many variables, including the amounts set for your deductible, co-payments and co-insurance.
Which First, Divorce or Bankruptcy?
Money is a major source of tension for any marriage. It may not be the cause of a divorce but financial arguments can add to the stress on any couple. Especially if that pressure is compounded by bills that are not being paid and calls from creditors. As much as financial troubles can be the cause of divorce, divorce can also be the cause of bankruptcy.
Given this close relationship to two of the most stressful events that might occur in life, it is important to plan ahead. The first consideration is which you should do first, file for divorce or for bankruptcy.
The fees for filing for bankruptcy are the same regardless if you apply separately or together. That means you can potentially save money if you file with your soon to be ex-spouse. It should be mentioned to your bankruptcy attorney that you will divorce soon, that way there is no conflict of interest.
A 341 Meeting in Texas: Bankruptcy Basics
Deciding whether or not to file for bankruptcy can be one of the most important decisions a family makes. Some families put off the process as long as possible hoping to avoid the stigma that comes with filing for bankruptcy, but in many cases it’s the easiest, simplest, and most effective way to recover from financial insolvency. Following the financial crisis of 2008, from which many Texans are still recovering, bankruptcy became a more important option than ever.
But it’s a complicated process, one that has many different steps and processes depending on which type of bankruptcy the debtor is filing. Though local rules govern each bankruptcy court, the overall procedure of filing bankruptcy is overseen by Federal Rules under the Bankruptcy Procedure, set forth by the U.S. Court system and laid out in the U.S. Bankruptcy Code. There are two main types of personal bankruptcy: Chapter 7, in which the debtor liquidates his assets and his debts; and Chapter 13, in which the debtor goes through a debt reorganization process. In a Chapter 7 filing, the debtor never appears in court, and only sees the judge if an objection is raised in the case. In a Chapter 13 filing, the debtor will likely appear before a bankruptcy judge only at a plan confirmation hearing.
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