What Is Bankruptcy?


Regaining control, regardless of your situation, is your right and responsibility.

Many of the people who contact us are in a period of transition — separating from a spouse, changing a custody agreement, foreclosures, leaving an abusive relationship or facing some sort of financial hardships accompanied by overwhelming debt.

How Can Bankruptcy Help You?

As we’ve been in business for quite some time, we have the experience necessary to assist you with a wide variety of financial needs.

Bankruptcy is one action we commonly advise to file when fit for our clients.

Learn a little about how we define bankruptcy, and see how we can help you at our offices located in Danvers, Wakefield, and Chelmsford, MA.

Defining Bankruptcy In Our Terms

Bankruptcy is not a bad word. It is the Federal Governments remedy to assist honest people, overwhelmed by debt regain their financial control.

When people feel as if that have no option to relieve the burden of their debt, that’s where we come in. We’re always so happy to chat with clients about their options, and getting them to a better place financially.

Moving In A Positive Direction

I like to refer to the bankruptcy court and the tax court as similar governmental approaches to helping American society function and move in a positive direction.

Both courts have federal judges, both have codebooks for the rules and regulations, both have forms that one fills’ out, and both have end results that are designed to keep society functioning with an approach that assists individuals and families.

Contact Us at The Consumer Bankruptcy Law Center to learn more about how we can assist you. We’re here to help!

Five Steps to Overcome Financial Trauma

by Tamara E. Holmes: CreditCards.com

Hitting bottom financially is bad enough. In addition to money problems, the fear, guilt, or shame associated with financial distress can make pulling yourself up by your bootstraps seem impossible.

But there’s hope for emotional recovery, too, experts say, one that can walk hand-in-hand with a financial comeback.

A financial crisis is emotionally traumatic because it threatens our survival and our sense of belonging, says Brian H. Farr, a licensed professional counselor in Portland, Ore., who specializes in financial therapy.  Financial therapists help clients understand the emotional issues connected to money management problems. “We can get knocked out of our peer group if we don’t have the cash flow,” says Farr.

The recent recession was particularly traumatic for Americans, with more than half experiencing some type of work-related hardship and 32% saying they lacked confidence in their ability to retire, according to the Pew Research Center. Others are simply jaded, having watched family and friends grapple with credit card struggles, according to Patricia Sahm, managing director at Auriemma Consulting Group.

But the good news is you can regain control over your emotions — and your money — by taking the following steps offered up by experts.

Confront the Shame

Guilt and shame are common feelings when people make major financial flubs such as accumulating massive credit card debt, says Katie Ross, education and development manager for American Consumer Credit Counseling (ACCC). “People feel that they’ve been a failure,” says Ross, who co-wrote the book, “Financial Peace of Mind,” to help people pick up the pieces.

While many go to great lengths to keep others from learning about their precarious financial situation, the process of telling someone can be very liberating, says Rick Kahler, president and founder of the Rapid City, South Dakota-based Kahler Financial Group, a financial planning company. “Just admitting a financial failure to someone is usually enough to begin letting go of the shame,” Kahler says. Talking to a financial therapist, a financial planner trained in dealing with financial therapy or a good friend could prove helpful.

Focus on Behavior

Some who have endured difficult financial situations vilify financial tools and swear off using them ever again. For example, a person who ran up credit card debt might decide he will never use a credit card again. But the credit card is not the bad guy; rather it’s the use of the card that got you into trouble, says Farr. In fact, used wisely, a credit card can save you money through rewards, purchase protection, and other bonuses. The better solution is to modify your behavior so financial products are no longer a curse, but a blessing.

Take Responsibility

It’s important to look closely at the factors that caused the trouble, says Marie McNabb, a financial therapist based in Seattle. “Bad luck or other people’s actions may have played a role, but in most cases, there were moments when one could have changed the course of events,” she says. “Maybe we trusted when we knew better or gave in to social pressure or the desire for things we couldn’t afford, or took unreasonable risks or shortcuts.”

Once you own up to any role you may have played in creating your money blunders, you empower yourself to create a better future. After all, if your choices had the power to wreck your finances, they also have the power to improve them.

Create New Habits

It’s not enough to simply say you’re going to change your money behaviors. “Humans are creatures of habit so new habits must be formed, which will pay off financially and emotionally,” says Kathleen Gurney, CEO of Financial Psychology Corp. and author of “Your Money Personality: What it is and How You Can Profit From It.” Implementing rules such as saving 10% of your income or paying credit card bills in full each month takes emotion out of the equation and creates a safety net that will make you feel less anxious if financial difficulties arise again, she says.

Take Small Steps

Just as a person who has recently been in a traumatic traffic accident may be overly cautious at intersections, a person who has undergone financial trauma can become overly cautious with his or her money, says Farr. For example, a loss of money in your 401(k) might tempt you to hoard cash when you may have plenty of time to recoup those earnings in the stock market. While you’re not likely to get over new money fears overnight, you can take small steps to restore your confidence. First, you might invest a small amount. Then, you might slowly raise the percentage. Over time, you’ll regain trust in your ability to create a sound financial future.

Applying past lessons is key to rebounding from a financially traumatic event, says ACCC’s Ross. “Once you accept your mistakes, there are tools to help you make better decisions moving forward.”

Avoid These 7 Credit Card Sins

5/25/2012 3:20 PM ET

|By Karen Haywood Queen, CardRatings.com

Using plastic can be convenient and even rewarding. But if you handle credit poorly, you’ll pay dearly in time, money and frustration.

Likely you’ve lost your credit card bill under a pile of papers at least once. By the time the bill surfaces, it’s past due. Congratulations, you’ve just committed one of the seven deadly sins of credit card use — and the costs will add up.

Yes, the best credit cards make paying convenient. Compare the time you save when you swipe your credit card at the gas pump with the hassle of stepping inside a cramped, noisy convenience store to hand over cash. When you pay with plastic, you can also rack up credit card rewards. But committing any of the following credit card no-no’s can ding your credit score, cost you money and even eat up some of that time you thought you’d saved.

Paying Late

“The No. 1 deadly mistake is paying your bill late,” says Manisha Thakor, the author of “Get Financially Naked.” “People say, ‘It’s just a day late — it’s not a big deal.’ But a lot of people don’t realize that being an hour or a day late is as bad as being five days late.”

And you can end up paying in multiple ways. First, a late credit card payment can cost you up to $25 in late fees, plus interest. Second, your low-interest card can quickly become a high-interest-rate card, says Jessica Cecere, a former regional president for CredAbility of South Florida, a nonprofit for credit counseling and education. “You can be late one time and you’re done,” she says. “You might have a 12% interest rate and it could go to 24%.”

Finally, your credit score also can be affected. “The timeliness of your credit card payment is 35% of your credit score,” Thakor says. “One small thing — being late — mucks up a third of your credit score.”


Paying Only the Minimum

“A lot of people are still paying off Christmas 2010,” says credit counselor Patrick Owens, of ClearPoint Credit Counseling Solutions in Richmond, Va. Bad idea. You’ve probably noticed that your credit card bill now has a required box showing how much you’ll pay over time if you cover only the monthly minimum payment. “You may be paying for 20 years on a couple thousand dollar balance,” he says.

You could end up paying nearly double for that cute outfit or fancy meal, Thakor says. “A rough rule of thumb is, if you have an interest rate in the high teens or above and just make the minimum payment, you have essentially almost doubled the price,” Thakor says. “So that $100 pair of jeans cost you nearly $200.”

Co-Signing for a Credit Card

Many parents co-sign for a young adult child’s credit card with good intentions, hoping to help the child establish credit, Owens says.

“But it’s a gamble for parents when you add children on,” he continues. “Some kids have not used credit cards before and they run up a big balance. That causes problems for both the kids and the parents.”

If you’re co-signing for a credit card, first make sure your child understands how credit cards work, Owens says. Also, consider a secured credit card or prepaid debit card set up with money to cover the balance, he advises. When the money’s in such an account is gone, the card can’t be used anymore.

It’s not just parents getting burned on co-signing for a child’s credit card. Sometimes it’s the other way around, Thakor says. “I’ve seen cases of kids helping adult parents,” she says.

Co-signing for anyone can be a bad idea, Thakor says. “It’s like unprotected sex once you co-sign,” she says. “The other person’s reputation is reflecting back on you. And if they don’t pay, creditors are going to be coming to you next for that money.”

Letting Someone Else Use Your Credit Card

Letting someone borrow your credit card can cause problems that go beyond exposing you to financial risk. “One of my friends lent her credit card to an individual to use at a store,” Owens says. “His name wasn’t on the card. They asked for ID at the store and when the name didn’t match, they confiscated the card and she had to go to the store to pick it up.”

Robbing Peter to Pay Paul

While a balance transfer to a low-rate card can save you money on interest, if you’re transferring the balance because you can’t afford to pay it, that’s a bad sign, Cecere says. “You’re not actually getting yourself anywhere when you do that,” she says. “You’re robbing Peter to pay Paul. That’s not only one of the seven deadly sins, but also a warning sign you’re in financial trouble if you’re using one card to pay another.”

Too Many Credit Cards

Rewards programs and store discounts can entice you to apply for, and end up with, too many credit cards, Cecere says. “If you apply for too many cards at once, your credit score will go down,” she says.

Canceling All of Your Credit Cards

Perhaps you’ve decided to just get rid of all your credit cards — the business credit card, the gas credit card, the rewards credit card. All the plastic, gone. Then you can’t possibly mess up your credit. Right?

Wrong. “You don’t want to cancel all your credit cards at once,” Cecere says. Then you have no available credit, she says. Further, you’re essentially closing the book on your credit history, which will lower your credit scores. Instead, pay them all off but don’t close them, she advises.

A Piece From Us at Eramo Law

I am proud to have helped thousands of individuals and families in the course of my practice. My office has provided guidance to our clients to work their way from unmanageable debt to regaining financial control. My office is not a “bankruptcy factory,” where clients are processed without regard to their individual needs. Rather, I build relationships and represent people not only in their bankruptcies, but with their other legal needs.

In fact, knowing my clients and their families is the only way I can understand their individual goals and aspirations. I understand that nobody wants to talk about bankruptcy with a lawyer. I have learned over the years that clients filing for bankruptcy are not trying to avoid their responsibilities, but are looking to alleviate a difficult situation. You owe it to yourself to consider all of your options. I look forward to meeting you, answering your questions and helping you and your family.

12 Myths About Bankruptcy Everyone Should Read

11/17/2011 3:44 PM ET
|By Bankrate.com

Will you lose your house and retirement savings? When will you be able to borrow money again? Get the facts on these questions and more.

Like most big, bad scary things, bankruptcy has a reputation based on a few tidbits of truth and a lot of embellishment. And like most creepy crawlies, it’s not nearly as frightening once you know the truth.

With a mind toward declawing the monster, here are a dozen misconceptions about bankruptcy:

1. Everyone will know I’ve filed for bankruptcy. Unless you’re a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors. While it’s true that bankruptcy is a public legal proceeding, the number of people filing is so massive that very few publications have the space, manpower or inclination to run all of them, although some local newspapers do print the names of those who have filed in that community.

2. All debts are wiped out in Chapter 7 bankruptcy. You wish. Certain types of debts cannot be discharged, or erased. They include child support and alimony, student loans, restitution for a criminal act and debts incurred as the result of fraud.

3. I’ll lose everything I have. This is the misconception that keeps people who really should file for bankruptcy from doing it, says Chris Viale, the chief operating officer of Cambridge Credit Counseling in Massachusetts.

“They think the government will sell everything they have and they’ll have to start over in a cardboard box,” Viale says.

While bankruptcy laws vary from state to state, every state has exemptions that protect certain kinds of assets, such as your house, your car (up to a certain value), money in qualified retirement plans, household goods and clothing.

“For most people, they’ll pass through a bankruptcy case and keep everything they have,” says John Hargrave, a bankruptcy trustee in New Jersey. If you have a mortgage or a car loan, you can keep the property as long as you keep making payments (like the rest of us).

4. I’ll never get credit again. Quite the contrary. It won’t be long before you’re getting credit card offers again. They’ll just be from subprime lenders that will charge very high interest rates. “There are innumerable companies that will provide credit to you,” says California bankruptcy attorney and trustee Howard Ehrenberg.

“I don’t advise any of my clients to run out and run up the bills again, but if someone does need an automobile, they can go and will be able to get credit,” he says. “You don’t have to go underground or something to get money.” (Do you know your credit rating? Take MSN Money’s quiz for an estimate.)

5. If you’re married, both spouses have to file for bankruptcy. Not necessarily. “It’s not uncommon for one spouse to have a significant amount of debt in their name only,” Hargrave says. However, if spouses have debts they want to discharge that they’re both liable for, they should file together. Otherwise, the creditor will simply demand payment for the entire amount from the spouse who didn’t file.

6. It’s really hard to file for bankruptcy. It’s really not. Technically, you don’t even need an attorney — you can do the paperwork without one. However, going through the procedure alone is not recommended.

7. Only deadbeats file for bankruptcy. Most people file for bankruptcy after a life-changing experience, such as a divorce, the loss of a job or a serious illness. They’ve struggled to pay their bills for months and just keep falling further behind.

8. I don’t want to include certain creditors in my filing because it’s important to me to pay them back someday, and if the debt is discharged, I can’t ever repay them. Bless you for even thinking about such a thing. You’re no longer obligated to repay them, but you always have the opportunity. If your conscience won’t let you sleep because you didn’t pay your debts, there’s nothing in the bankruptcy code that prevents you from doing that once you’re back on your feet. But it is nearly impossible to leave any account with a balance out of your list of creditors. In general, all creditors receive notification of your bankruptcy filing, whether they are listed in the petition or not.

9. Filing for bankruptcy will improve my credit rating because all those debts will be gone. Filing for bankruptcy is the worst “negative” you can have on your credit report. Unlike other negatives, which stay on your report for seven years, bankruptcy can be there for 10 years, but you do get to rebuild your credit eventually.

10. You can’t get rid of back taxes through bankruptcy. Generally speaking, this is true. However, there is such a thing as tax bankruptcy, says tax educator Eva Rosenberg, known on the Web as TaxMama.

11. You can only file for bankruptcy once. The truth is, you can file for Chapter 7 bankruptcy only once every eight years, says Justin Harelik, Bankrate’s bankruptcy adviser. For Chapter 13 reorganization, you can file more often than that.

Of course, that doesn’t make it a good idea.

“Multiple bankruptcies are really bad,” Rosenberg says. “Many people get into the habit of once they’ve done it, it becomes a way of life. This is not good for your karma.” Or your credit rating.

12. I can max out all my credit cards, file for bankruptcy and never pay for the things I bought. That’s called fraud, and bankruptcy judges can get really cranky about it.

If you have any questions about your own financial situation, please give us a call. We’re here to help, and walk you through your options. No one is alone through this process! Contact The Consumer Bankruptcy Law Center today.