If you are old enough to have debt, you are old enough to file bankruptcy. Bankruptcy is designed to give debtors overwhelmed by significant amounts of debt a fresh start. Today, more than ever, young people are amassing huge amounts of debt. Though we are in a recession, the availability of credit to young people, especially young people on college campuses, has not dwindled. Young people suffer from instant gratification syndrome. “Buy now, pay later” is more of a suggestion than it is a motto.
Unfortunately, many young people have accumulated tens of thousands of dollars of debt – often before the age of 22. The combination of large sums of debt and the dearth of jobs in today’s economy are leading more young people to file bankruptcy. Fortunately, the young person that is ready to be more financially responsible will use bankruptcy for its intended purpose – a fresh start. If planned correctly, one could file bankruptcy, rebuild her credit and still become a homeowner all before the age of 30.
Upon receiving a discharge, the debtor will be flooded with credit card offers, the reason being: creditors know that one way, or another, they will get their funds because you will be unable to file chapter 7 again for 8 years. If you pick and chose wisely amongst these offers and make your payments on time, EVERYTIME, with absolutely no slip ups, you will often see an improvement in your score within 18 months. Most creditors do not look back more than three years when evaluating your credit worthiness. What this means is that you will still be able to buy a nice car and home when you are ready and you most likely will not have an unreasonable interest rate.
The bottom line is, though filing bankruptcy is a serious step, if done for the right reasons, and with a solid plan for rebuilding your credit rating, bankruptcy can be the first step to a fresh start in life.
If you are considering filing bankruptcy, be sure to discuss your options with a competent legal professional in your state.
Thursday, August 06, 2009
Friday, July 31, 2009
Should I Go On a Shopping Spree Before Filing Bankruptcy?
Prior to the 2005 changes to the bankruptcy code, it was common practice for individuals contemplating bankruptcy to go on a shopping spree with the intention of having the debt discharged in bankruptcy. Boy have times changed!
When prospective clients come to me with the intention of filing bankruptcy, they often want to know if it would be ok to go on a shopping spree before we file. I tell them all the same thing: "the short answer is a resounding NO!" Any increase in normal spending habits just prior to filing bankruptcy could be considered fraudulent activity.
Going on a shopping spree just prior to filing for bankruptcy could be considered fraudulent if the objecting creditor or trustee suspect, and then prove, that you made these purchases and lacked the intent to pay for them. At the very least this new debt would become non-dischargeable. What this means for a potential debtor is when those purchases are no longer in fashion, or have become obsolete, he or she will still be paying for them. Further, if you give any of these purchases to family or friends as “gifts” you will be guilty of a fraudulent conveyance. If you are found guilty of such a transfer, the bankruptcy trustee could exercise his right to object to the discharge and/or prosecute you for abuse of the bankruptcy system - bankruptcy fraud.
Bankruptcy fraud, a felony, carries a fine of up to $250,000 and/or five years in prison. So the bottom line is, while the temptation to go on a spending spree may be great - JUST DON’T DO IT!
When prospective clients come to me with the intention of filing bankruptcy, they often want to know if it would be ok to go on a shopping spree before we file. I tell them all the same thing: "the short answer is a resounding NO!" Any increase in normal spending habits just prior to filing bankruptcy could be considered fraudulent activity.
Going on a shopping spree just prior to filing for bankruptcy could be considered fraudulent if the objecting creditor or trustee suspect, and then prove, that you made these purchases and lacked the intent to pay for them. At the very least this new debt would become non-dischargeable. What this means for a potential debtor is when those purchases are no longer in fashion, or have become obsolete, he or she will still be paying for them. Further, if you give any of these purchases to family or friends as “gifts” you will be guilty of a fraudulent conveyance. If you are found guilty of such a transfer, the bankruptcy trustee could exercise his right to object to the discharge and/or prosecute you for abuse of the bankruptcy system - bankruptcy fraud.
Bankruptcy fraud, a felony, carries a fine of up to $250,000 and/or five years in prison. So the bottom line is, while the temptation to go on a spending spree may be great - JUST DON’T DO IT!
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