Myths and Realities of Bankruptcy

Bankruptcy filers are often told a host of myths and misconceptions about how horrible their lives will be in the wake of a bankruptcy proceeding. While life after bankruptcy certainly won’t be easy, unfortunately, much of the popular beliefs about bankruptcy are far from accurate, according to credit experts as well as people who’ve successfully and quickly bounced back from a bankruptcy filing.

Myth 1) I can’t get any credit cards for seven years!

Reality: There are many credit cards that you can apply for and
be approved post-bankruptcy. Obviously, these cards will have higher rates, but over time if you maketimely payments you can graduate to more prestigious cards with better terms and interest rates. In fact, getting a credit card can be one of the best things you can do post-bankruptcy as it will give you a chance to start re-building your credit.

Myth 2) I can’t buy a house for at least 10 years.

Reality: Bankruptcy will NOT automatically disqualify you from getting a mortgage. You can actually be in the middle of a Chapter 13 bankruptcy proceeding and still get an FHA home loan. There are many lenders who will work with you post-bankruptcy. You may find working with a mortgage broker can also be a resource in aiding you to find lenders who may be able to assist you with financing.

Myth 3) I can not get financed for an auto loan. The only cars I can get will be used cars or from “bad credit car lots”.

Reality: Obtaining a car loan post-bankruptcy isn’t as difficult as you think. Many lenders will work with you on financing a new vehicle. The key to getting approved for an auto loan is a process called pre-qualification. This involves you researching lenders for those who will work with someone with a bankruptcy. When you find a lender that says they are willing to work with you knowing about your bankruptcy, you are pre-qualified. This means you can go select a car that you can reasonably afford and they will finance you.

Myth 4) Bankruptcy is the WORST thing you can do to your credit. Bad credit or no credit is better than a bankruptcy.

Reality: This is a very common misconception. Obviously, bankruptcy does not help your credit rating. However, by filing bankruptcy you have given yourself a second chance to start fresh. Once you realize that you are not going to be able to pay your bills in a reasonable fashion and your financial position is rapidly deteriorating, filing bankruptcy may be the best choice you could have made. Allowing serious delinquencies to remain on your credit report will ensure that your credit rating will NEVER improve. While bankruptcy may damage your credit rating, remember it is ONLY temporary. You must take proactive steps to ensure a smooth recovery. By following these steps, you can dramatically improve your credit score in only a few months

Myth 5) My current or future employers will find out about my bankruptcy!

Reality: Current and prospective employers are prohibited by law from running a credit check without your permission. Even if granting an employer permission to view your credit records is a prerequisite to employment, it still won’t necessarily bar you from employment. If an employer requiring you to sign a waiver so they may obtain a credit check this will give you an opportunity to offer an explanation for your bankruptcy. Furthermore,bankruptcy protection can help to prevent embarrassing issues such as wage garnishments or credit collectors calling your workplace.

Myth 6) My friends, family and colleagues will find out about my bankruptcy!

Reality: While it is true that bankruptcies are considered public records, unless someone is specifically looking for your name it is unlikely that anyone will find out. Millions of people every year file bankruptcy and your records are just one of many.

As you can see, much of what people believe about bankruptcy simply isn’t true. While bankruptcy does have a negative impact on your credit, it is also a new beginning. Bankruptcy is the start of your journey down the road to financial recovery!

Remuneration for Bankruptcy Attorneys

Bankruptcy attorney have a big task of researching on bankruptcy matters. This makes it difficult for them to spend most of their time in the court rooms. Since they are professionals who spend most of their time practicing bankruptcy laws, they are expected to be updated on new arising matters. They are very valuable professionals who assist the consumers and business persons on bankruptcy matters, bankruptcy court procedures and bankruptcy filing procedures.

They must prepare the legal documents and have transactional skills as well as litigation capability. Since they spend most of their time convincing the magistrates, it is expected that they must posses’ very good communication skills which they use to communicate and interpret laws related to bankruptcy. The salary the attorneys earn depends on where they are practicing, the skill level and the type of employers they have.

The average salary they earn per year is $61,000; the wages may vary depending on the location of the place they practice. The experience they possess plays a very vital role as well as the type of the employer in question. The geographical location plays a crucial role in determining the salary earned by the Bankruptcy attorneys. In the US, the attorney earns &87,600, In New York the attorneys earn $86, 000 whereas in Washington DC the attorneys earn 80,000. In California the attorneys earn approximately $71,000 per year.

The attorneys work in different fields and the wages they earn depends on the work they perform. Those who are in the private sector focus more on the civil and criminal law. The lawyers are quite vital to clients especially when it comes to navigating around the court systems and also interpreting the laws that affect them. The US Bureau of Labor Statistics put the salaries between $56,000 per year to $113,240 per year.

The single source of employment to Bankruptcy attorneys is the governmental organization, nonprofit organization as well as corporations. By 2018, it is projected that the employment of bankruptcy attorney will grow by 13 percent. This is attributed to ever rising demand for legal services occasioned by the prevailing hard economics time worldwide. Most countries are experiencing recession which is directly affecting the household and businesses.

For the bankruptcy lawyer to be able to discharge their duties effectively, they must be allowed unlimited access to the clients’ financial information to help them create and file an effective case. Sometimes the attorneys are called upon to make emotional decisions and advice the clients on the way out. The fact that they are working for people who are in financial difficulties makes matters complicated for them. They are expected to charge a reasonable price while at the same time offer the best services to save the client. The attorneys are mandated to create an effective case, file it and also be able to negotiate the outcome. The bankruptcy laws keep on being changed every now and then, these calls for the bankruptcy attorneys to be on their alert and update themselves on the latest development in this area.

Money Laundering and Major Risks

The concept of money laundering is very important to be understood for those working in the financial sector. It is a process by which dirty money is converted into clean money. The sources of the money in actual are criminal and the money is invested in a way that makes it look like clean money and hide the identity of the criminal part of the money earned.

While executing the financial transactions and establishing relationship with the new customers or maintaining existing customers the duty of adopting adequate measures lie on every one who is a part of the organization. The identification of such element in the beginning is easy to deal with instead realizing and encountering such situations later on in the transaction stage. The central bank in any country provides complete guides to AML and CFT to combat such activities. These polices when adopted and exercised by banks religiously provide enough security to the banks to deter such situations.

However if a bank encounters any such situation it encounters the following types of consequences:

Reputational risk

The major risk a bank faces when it finds itself caught in any sort of money laundering is reputational risk. The reputation of the bank goes negative and in turn it might face huge withdrawals. There might me loss of profitable business and many other liquidity issues. The quantum of this risk might cause a bank to confront various investigations costs and penalties. The biggest hurdle a bank has to undergo is the situation of mistrust by the customers which is devastating.

Operational risk

It is another one of the major consequences of money laundering which a financial institution faces. It is a kind of risk which lies in the internal procedures, people and system after they breakdown. It is a risk which is included in the operations of the business. Thus it creates disturbance in the smooth functioning of the organization.

Legal risk

Legal risks are also posed to the organizations due to the uncertainties in the legal actions which might come up for the organization to deal with them. These might include certain charges on the bank, the dealing between the money launderer and the bank etc.

Concentration Risk

This type of risks is majorly pertains to the banking industry and defines the probability to which any bank has lent money to a particular group. The increased lending without proper identification or the realization after encountering money laundering act may cause a bank to suffer loan losses which in turns deteriorate banks standing in the industry.

Opportunity Cost

One of the major consequences a bank faces is the increase in opportunity cost. It is increased in a way that the management finds itself spending its time in managing the damage control which the act of money laundering has caused instead of utilizing that time for other better perspective.

Thus money laundering brings many adverse consequences to the organization due to the risks it presents. It increases the probability of major risks and the opportunity cost of the bank and ultimately causes the bank to face losses.

Things Not to Do When Filing for Bankruptcy

When most people think of filing for bankruptcy, they think of what they need to do and have to do. Rarely do they worry about what they shouldn’t do. This is one good reason to consult a bankruptcy attorney when first considering the idea of filing for bankruptcy. The bankruptcy attorney will be able to fill the individual in on some tips they might like to consider before filing.

Prior to filing, most people don’t realize how the bankruptcy estate is created and what is included in it. Because of this many people will take money out of their retirement to cover their living expenses prior to the bankruptcy filing. This is a huge mistake because money that would be protected by bankruptcy exemptions is now part of the state and fair game for the trustee to take it. If it was just left in that 401(k) account it couldn’t be touched.

Another foolish thing individuals do is pay debts preferentially. They might choose credit cards that they want to continue using up until the bankruptcy filing so they choose to pay them while no longer paying any of their other debts. Preferential payment is not okay with the bankruptcy court and that money might be collected by the bankruptcy trustee. Even worse than that, people will pay friends and relatives back so they can leave them out of the bankruptcy filing. What they don’t know is the bankruptcy trustee will look through the bank account of the individual filing and see if there were any payments made in the six months prior to filing. Any money given to the relative or friend can be seized by the bankruptcy court making a very embarrassing situation for the individual.

The bottom line is, if someone is to be successful when filing for bankruptcy is important that they are completely truthful with the bankruptcy court. Now that we are living in a technology driven and age, it has become very easy for the bankruptcy trustee to gather a wealth of information about a person that is filing bankruptcy. Many people make the mistake of bragging on their social media website about plans they are making post bankruptcy. It won’t look good for an individual to post something about an extravagant cruise or an expensive trip to Hawaii after they get their bankruptcy discharge. This will lead to a lot of questions from the bankruptcy trustee. Along those lines, always remember that a former friend or disgruntled employee might also try and enlighten the court on any property that the individual might be trying to hide. That’s why it’s important to let the bankruptcy attorney earn their keep by using the exemption laws provided.

Reasons To Decide To File Bankruptcy Now V Waiting

Nobody wants to file bankruptcy, but sometimes it’s a necessity and a good option to get a fresh start.

Here are the top three reasons given by most people as to why they don’t want to file bankruptcy right now:

1. I will try to resolve the debt on my own or through debt consolidation or debt settlement.

Sure – creditors are willing to accept less than what’s owed, but the only way it works is if you have cash to pay them quickly! (Creditors are typically willing to accept 35% to 60% of what’s owed to them, but you must pay them off now.) It does not work otherwise. Beware of debt consolidation or debt settlement companies as they charge a large fee for setting up a savings account for you to then try to use to settle. They will not stop the ongoing harassment or lawsuits.

2. I don’t have the money to pay an attorney to file bankruptcy.

Keep in mind you’re paying fees to get rid of substantial amounts of debt that far exceed the amount most attorneys will charge.

Paying an attorney to file bankruptcy gives you a much greater return on your money. Most offer convenient payment plans so you can pay your fees and costs to file the bankruptcy easier than you think. (If you’re going to file bankruptcy my recommendation is to stop paying the rest of your unsecured debt as in most cases that debt will be discharged.)

Also beware of using a document preparer/paralegal to file your bankruptcy. While this type of service can ultimately save money, it can sometimes cost you more money in the long run. Because they are not actual attorneys, they cannot offer any legal advice to those filing for bankruptcy; without proper advice, you could potentially lose assets and/or have other major problems with your case. I’ve had many people come to me after their filing to try to correct problems – by that time, it is oftentimes too late.

3. I’m going to ignore the creditors (and hope they go away).

Unfortunately creditors will not go away. They may sell the debt to collectors, who can be even more aggressive than the original creditor. If you ignore the collection efforts, lawsuits will occur, and if judgments are obtained, garnishment of wages and bank accounts can occur, liens can be placed on real property, etc. Ignoring the creditors is not a good option.

Also if you wait to file, and your circumstances change (i.e. you receive an inheritance, you receive a lump sum disability award, you win the lottery, etc.), you may not be able to file bankruptcy then. Unforeseen circumstances can severely limit your options.

For those people that don’t make the decision to file bankruptcy, I guarantee I will see you back in my office, whether it be 4 months from now or a year or two down the road. If you wait, you’re that much more delayed when you could already be on the road to recovery.

THE LONGER YOU WAIT, THE MORE LIMITED YOUR OPTIONS BECOME. PLEASE DON’T WAIT TO DECIDE.

Kathy Johnson has a reputation for being honest and respectful of your particular situation. She is compassionate, nonjudgmental and extremely knowledgeable. She offers genuine and real help for people who are in a difficult situation. Kathy is respectful of her clients’ desires and is very careful not to pressure individuals into filing for bankruptcy. In fact, she offers as many options as possible for clients, letting them know that bankruptcy is just one of a number of tools that may be used to resolve pressing financial conditions.