Last week I had the pleasure of speaking to a former client about his experience before and after filing bankruptcy.  I’ll refer to him as Andy in this discussion.  Andy and his wife filed chapter 7 in 2011.  Here’s part of our conversation.

Michael: I know I represented you back in 2011 but tell me again about what occurred before you considered bankruptcy.

Andy: At that time my wife and I had been married for 12 years and we had three kids.  We both worked in the mortgage industry.  Our problems started when I lost my job.  At first we tried not to worry.  We assumed I would get another job but as the months passed and our savings dwindled we got really scared.

Michael: What happened next?

Andy: We had never had serious money troubles.  We took money out of retirement just to pay our monthly bills.  Luckily our kids were young enough that they did not understand any of what was going on.  I searched feverishly for a job, any job, but the economy was horrible and I wasn’t even getting interviews.  Finally I found a job but the pay was straight commission and that didn’t work out.

Michael: Did you own a house?

Andy: We did.  Our goal was to keep the house, no matter what.  Unfortunately, my wife’s income was not enough to pay our living expenses and the mortgage got behind.  We got foreclosure notices and we realized that unless I found a good job we would lose the house.

Michael: This must have been stressful.

Andy: Looking for a job is the toughest job.  I spent so much time and nothing seemed to work.

Michael: Did this affect your marriage?

Andy:  I have to say it was very harmful but I don’t want to go into detail about that.

Michael: You mentioned drawing money from retirement, did anything else happen with your finances?

Andy: Uh…yeah.  We had all kinds of debts we were not able to pay.  We had to focus on food and shelter.  We had creditors calling, we owed IRS, that whole situation was super stressful.

Michael: Tell me about bankruptcy.

Andy: We realized we would need to file bankruptcy but we held off.  For one thing, we didn’t have the money to file plus we didn’t want to file.  We kept putting it off.  We knew we needed to file because we just owed too much money but we were scared of the consequences.

Michael: Eventually you  filed chapter 7 in 2011, right?

Andy: That’s right.  We made payments on the attorney fee and eventually got it paid off so we could file.  Filing was a turning point for us.  The collectors stopped calling and we were able to get some of our old taxes wiped out.

Michael: Can you tell me what has happened since the bankruptcy?

Andy: The main thing is I found a good job.    We did lose the house but we were able to find a house to rent nearby so our kids did not need to change schools.  I wasn’t sure a landlord would rent to us but he did.

Michael: That was five years ago now.

Andy: Right, and we have been able to get back on our feet.  You told me I could have good credit two years after filing chapter 7 but I didn’t really believe it.  Turns out you were right.  Today all that seems like so long ago but it also seems like yesterday.  Definitely made me appreciate my family and the things I have.

Michael: Looking back, how do you feel about the decision to file bankruptcy?

Andy:  Like I said, we really didn’t have a choice.  That said, it was a life-saver.

Michael: Thanks for talking to me today.  Stories like yours are what makes my job worthwhile.

 

Many people in Walnut Creek, Concord, and Antioch may wonder, what is a payday loan?  Payday lenders offer small, short term loans with little or no credit check or income verification.  They are usually small shops in strip malls.  Typically the loans are for about $300 and are due in 14 days.  Generally, the borrower writes a post-dated check for $300 but gets only $250, and in just two weeks the full $300 is due.  The borrower can pay about $50 to extend the loan for another two weeks or pay the full $300.  If the borrower fails to pay either the $50 or the full $300, then the payday lender deposits the post-dated check.  These loans are easy and convenient but carry interest rates ranging from 100% to 500% on an annualized basis.  How can that be legal?  Payday lenders exploit loopholes in the usury laws so that even a 500% interest rate is legal.  With interest rates like that, it’s no wonder payday lenders are popping up like weeds in the spring!

Most people who borrow from a payday lender have been turned down for traditional loans and only out of desperation take a payday loan.  Too often, the person takes a second payday loan to pay the first and begins a downward cycle.  Like quicksand, the payday loan cycle is nearly impossible to get out of.  Soon the person – in dire financial straits before the first payday loan – has several loans with payments due every two weeks.  Often the payments are taken directly out of the borrower’s bank account on payday, hence the name.

As the cycle continues, the borrower goes deeper and deeper in debt.  Many borrowers will have up to 5 payday loans, usually from different lenders   Soon some of the post-dated checks begin to bounce, marking the beginning of the end.  As the checks bounce, the borrower incurs bounced check charges, further compounding the problem.  Often on the verge of eviction due to unpaid rent, the borrower asks “How can this craziness end?”  The answer might be bankruptcy.  A bankruptcy is a federal court order that gives people a “fresh start” by forgiving debts including payday loans.

This is a general discussion of the law and should not be relied upon.  Any person considering bankruptcy should consult a lawyer for a detailed discussion of his or her rights and options.

At the Law Office of Michael Primus, we have helped hundreds of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy.  If you live in Contra Costa County and have debt problems, contact us for a free in-office consultation.  We have offices in Walnut Creek, Antioch and Hercules.

 

I need to do it, you need to do it.  Most of us realized long ago that saving money is easier said than done.  In this strong economy, it seems like saving would be easier, yet between daily temptations and a myriad of unexpected expenses it just never seems to happen.  In fact, saving for the future is a combination of economics and psychology.  A recent study by Bankrate.com confirmed that 32% of people age 30 to 49 have more credit card debt than savings.  Other age groups are only slightly better off.    So, if you’re one of those people with more credit card debt than savings, what can you do?

Make a Plan – According to a survey done by AmericaSaves.org, people with a plan are far more successful savers then those without.  You don’t need to hire an accountant but you do need to take an honest assessment of how you spend your money.  Studies show that only 55% of people are saving enough for retirement, so any long term plan needs to provide for retirement.

Reduce Expenses – Invariably you have been told to “cut back” by many well-intentioned people.  There are many little things that can help.  Perhaps you can spend an afternoon at a public park or library instead of a movie theater.  Maybe try camping as an inexpensive vacation idea.  Make coffee at home instead of going to Starbucks.  Simple ideas can be a part of the solution.

Get a Better Job – Of course this would be wonderful.  Unfortunately many people have limited options.  Do you have children in school and need a job close to home with some flexibility?  Are you a senior citizen who fears age discrimination in the job market?  The fact is, finding a better job may not be realistic.

Move Out of the Bay Area – Study after study show the Bay Area is one of the most expensive places to live.  In fact, some studies conclude the cost of living in the Bay Area is the highest in the country.  If you’re retired or planning to retire soon, moving can make sense – a fixed income will go much farther somewhere else.  However, if you’re not ready to retire you may find the lower wages  keep the monthly budget tight.

Likely you’ve spent sleepless nights considering your options but still each month live paycheck to paycheck.  Maybe it’s time to take a hard look at things.  Did you know you have a right to bankruptcy?  The word scares most people.  The truth is, the never-ending cycle of living paycheck to paycheck is more daunting than bankruptcy.  Imagine what it would be like if your credit card debt vanished.  Picture yourself making a plan, being successful at saving.  How would it feel to finally be able to save the way you need to?  None of us are getting any younger so now is the time.

At the Law Office of Michael Primus we have helped thousands of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy.  If you live in Contra Costa, Alameda or Solano counties and have debt problems, contact us for a free in-office consultation.  We have offices in Walnut Creek, Antioch, and Hercules.

For many senior citizens in Contra Costa County, living on a fixed income can become unmanageable.  Unexpected medical bills, prescription drugs, and the never-ending increases in the cost of living can stretch a budget to the brink.  Hard choices slowly become the norm.  It’s a modern tragedy to hear that some seniors elect not to purchase prescription medicine in order to pay other debts.  Amidst the turmoil are questions with real answers and meaningful help.

What happens if I just stop paying my credit cards? 

Generally, credit card companies will wait about 30 days from when a payment was due before they send a follow up letter informing you that you’re delinquent.  As the bill gets further and further behind you will receive harsher, more demanding letters as well as phone calls.  Usually after several months the debt is sold to a collection agency and the calls and letters continue.  Eventually, the credit card company or collection agency can file a lawsuit.  The goal of a lawsuit is to give the credit card company the ability to put a lien against your house or garnish your wages or both.   Note: a judgment does not allow a credit card company to force the sale of your home.

If a bill collector calls what do I say?

Many honest people try to explain their situation when they receive a collection call.  If you try that, you’ll soon see that most debt collectors are not interested in your situation.  Typically, debt collectors are paid a percentage of what they collect from people, and for that reason they will limit the discussion to what you will pay and when.  After a few calls you’ll realize there is no point in talking to them, but the calls will keep coming.  The Fair Debt Collection Practices Act (FDCPA) and the California Civil Code create limits on what debt collectors can do.  Debt collectors are prohibited from calling before 8:00 am or after 9:00 pm.  The law also prohibits “harassment.”  Unfortunately the FDCPA and the Civil Code are routinely ignored by bill collectors.  The law gives you the right to sue a bill collector if your rights are being violated.  The debt collection industry relies on people being unable or unwilling to actually file suit against a bill collector.  The Federal Trade Commission has jurisdiction to enforce FDCPA but only deals with a small fraction of the known abuses.

If I die will my kids inherit my debts?

This is a very common misconception, and one that an unscrupulous debt collector may offer as fact.  Generally, a person’s assets are used to satisfy their debts before there is any inheritance.   In most cases, creditors are only allowed to seek payment from the deceased person’s assets.  In some circumstances a surviving spouse can take personal responsibility for all assets and debts of the deceased.

Can they take my Social Security?

Finally some good news.  Federal law protects Social Security from the reach of most non-governmental creditors.  That means credit cards, medical bills and collection agencies will not be able to take your Social Security even if they have filed a lawsuit and obtained a judgment.  Even better, the protection is automatic so you do not need to complete any forms or go to court.

Is Bankruptcy the solution?

Usually.  The bankruptcy laws are the laws society provides to allow a person to have most debts forgiven.  Bankruptcy can wipe out credit cards, medical bills, and collection agency bills.  After bankruptcy the calls, letters, and lawsuits all stop.  Bankruptcy does not forgive student loans, alimony, child support or crime.  Bankruptcy is a viable, long term solution for many people struggling with debts.

At the Law Office of Michael Primus we have helped thousands of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy.  If you live in Contra Costa County and have debt problems, contact us for a free in-office consultation.  We have offices in Walnut Creek, Antioch and Hercules.