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					Going Broke

Independent Living
What are some issues that lead individuals
and families to go “broke”?
   1. Medical Expenses
   2. Unemployment/job loss
   3. Poor/excess use of credit
   4. Divorce/Separation
   5. Unexpected Expenses/Events-Uninsured
   Impulse buying
   Gambling
   Pay cut
   Alcohol problem
   Bank failures
   Debt
   Society
   Kids
   Legal trouble
Ways you can get out of debt…

   Start selling things you own (electronics, lawn mower,
    cars, etc)
   Call creditors and see if they will work with you
What is bankruptcy?

   Bankruptcy is a federal court process where a debtor
    gets the chance to eliminate or reorganize his debts
    through sale of assets or by following a repayment plan.
   Consumers typically file either Chapter 7 or Chapter 13
    personal bankruptcy depending upon their financial
    situation.
   Young Americans now have the second highest rate of
    bankruptcy, just after those aged 35 to 44. The rate among
    25- to 34-year-olds increased between 1991 and 2001,
    indicating that this generation is more likely to file
    bankruptcy as young adults than were young boomers at
    the same age.
7 Reasons to avoid bankruptcy

   Your credit is badly hit: Chapter 7 and Chapter 13
    bankruptcy have a negative effect on your credit. It brings
    down your credit score by around 200-250 points.
    Moreover, the negative entry stays on your credit report
    for 7-10 years depending on the type of bankruptcy you
    file, thereby making it difficult for you to qualify for new
    loans and credit for the next 3-4 years.
   You may lose your property: There are certain assets
    that will be sold to repay your debts under a Chapter 7
    bankruptcy plan. Depending on your situation and your
    state's laws you may end up losing your home and your
    car.
   Not all debts can be eliminated: It's a myth that
    bankruptcy can get rid of all of your debts. Back taxes,
    student loans, child support, alimony/spousal support, and
    a few other debts cannot be gotten rid of through
    bankruptcy. Therefore if you are looking to get rid of
    these kinds of debts, you should avoid bankruptcy. What
    you should do is, negotiate a debt settlement or an
    alternative payment plan with your creditors.
   Creditors/lenders may repossess property: 30 Days
    after your bankruptcy case ends, any creditors whose
    debts have not been discharged can sue you for the debt
    if you are behind on your payments. If you have reaffirmed
    your home and car loans and kept the property, you are
    not relieved of the personal responsibility to pay on the
    mortgage or the loan and their liens remain on the
    property.
   Adverse effect on your finances: Bankruptcy has an
    adverse effect on your financial situation. For instance,
    you won't be able to buy or even rent a home or car.
    Filing bankruptcy can also influence the status of your
    security clearance if you don't inform your employer
    about your bankruptcy and why you've filed for
    bankruptcy.
   You may not qualify for new credit: Getting approval
    for new loans/credit is tough after you've filed bankruptcy.
    It'll take at least 2-4 years for you to qualify for a secured
    loan (such as mortgage or car loan) unless you apply for a
    secured credit card with a high interest rate. Even
    unsecured loans are hard to qualify for if you cannot
    avoid bankruptcy.
   Not all retirement plans are protected: Depending
    on your state's exemption laws, your 401ks, IRAs,
    government pension, social security, or other retirement
    plan may be tapped to repay your debts during Chapter 7.
     Minimum Payment, Maximum Cost
   Consider having a balance of $5,000, at 14% APR, and
    minimum payment as 2% of your credit card balance
    ($100/month). Making minimum payments only, it would
    take you 22 years and $5,887 in interest payments
    to pay off this debt.
   Increasing your payments to $125 a month would allow
    you to pay off the same debt in less than 6 years and
    spend only $1,775 in interest.
   Not only does increasing your payments allow you to pay
    off the balance sooner, you also save money in interest.

				
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posted:9/26/2012
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