Tampa Bankruptcy Blog » Debt Problem

What Causes Bankruptcy and How to Avoid Them

dmishesq — Wed, 21 Mar 2012 15:51:12 +0000

No one likes to be a bankrupt. Although bankruptcy protection is one way the law provides for you to resolve your debt problem, it is nevertheless not something people readily go into for obvious reasons. So if you can prevent bankruptcy and remain financially solvent it would be far better than having to seek bankruptcy protection to overcome financial problems.

In my experience as a bankruptcy attorney, I have come across countless individuals who have had to file for bankruptcy because they ran out of options to resolve their problem of debts. And I have noticed that a majority of people who file for bankruptcy got themselves into debt because of certain financial moves they made that went awry. Let me share some of the reasons people have to file for bankruptcy and how to avoid them.

One major cause for filing for bankruptcy is buying a property at too high a price. While everyone would like to own a home, it is vitally important to buy one that is affordable and suitable. If you overcommit yourself to a property that is overpriced, it could spell financial problems for you down the road. Another reason closely linked to that is buying more properties than is needed. Some people want to buy property for investment purposes but doing so carries risk. If your property devalues or cannot fetch enough rental income then you will be saddled with the debt.

Another major cause for filing for bankruptcy is spending too much on credit. Credit spending is dangerous because you do not feel the pinch in terms of cash flow. But you must always remember spending money on credit means spending borrowed money. And just like you would not borrow money you cannot repay, you should not spend on credit more than you can afford to pay off every month. The habit of paying only the minimum amount on your credit cards each month will someday catch up with you and result in a default in your credit card.

Finally, who does not experience unexpected financial setbacks once in a while? We all do and it is only a matter of degree that spells the difference between financial survival and financial disaster. In light of unexpected financial setbacks like sudden high medical bills or a job lay off, one should always have enough cash for contingencies. So a lack of such emergency funds is another major cause for bankruptcy filings.

To avoid declaring bankruptcy, you should avoid the above matters if you can help it. But if you are already in these problems, bankruptcy can help. That’s where I come in, as a bankruptcy attorney. Call us at (813) 200 4133 for a free consultation on how bankruptcy can help you overcome debt and start afresh financially.

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Bankruptcy Alternatives

dmishesq — Fri, 16 Mar 2012 13:35:03 +0000

Filing for bankruptcy is your right under the law. But it is nevertheless a step that should be taken only after careful consideration and consultation with a bankruptcy attorney. So while you consider bankruptcy, you should also look into these bankruptcy alternatives at the same time.

Your first commonsense thing to do is to discuss your debt problem with your creditors. Most creditors would rather help you meet your obligations to them rather than see you file for bankruptcy protection. Bankruptcy protection means an automatic stay in which they as creditors cannot make any collection efforts against you at all. In view of this, many creditors are more than willing to work out a plan to help you pay off the debt you owe them. This might be formulating a payment plan, extending your loan term, exempting you from repayment for a few months or reducing your interest rates. So the first alternative to bankruptcy is to discuss how to clear your debts with your creditors.

Another alternative to bankruptcy is to consolidate all your loans into one. Some financial institutions grant consolidation loans. This would save you from having to deal with multiple creditors and give you the convenience of dealing with only one. But you should only take up this alternative to bankruptcy if you can find a consolidation loan that helps you save money on your loans. So you should examine the terms and conditions of the consolidation loan before you decide to take it up. If the terms and conditions of this loan are worse than your other individual loans, then it is pointless to consolidate them.

A third alternative would be to raise money from personal or unofficial channels. For most people, this entails borrowing money from family or friends who would not charge you interest or be too demanding on you. So if you have some rich friends who owe you a favor or a wealthy relative you who cannot bear to see you struggle financially, then you should talk to them about your debt problems.

One thing you should not do is to take up a loan to pay off existing loans, unless the new loan has much more favorable terms or rates. You should cut your losses, not get into more debt with anyone.
If all these alternatives are not suitable for you, then the most viable option would be to exercise your right under the law to file a bankruptcy petition. In that case, you should hire a bankruptcy attorney who will advise you through the whole process.

Call us at (813) 200 4133 for a free consultation on how bankruptcy can give you a fresh start financially by ridding you of all your debt problems.

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Bankruptcy and Dealing with Debt

dmishesq — Fri, 30 Dec 2011 16:10:59 +0000

With the prolonged economic recession, many people are burdened with debt. As lay-offs continue among big and small companies, people face an increased possibility of losing their jobs. Higher interest rates, salary cuts and job retrenchments exacerbate the debt problem. Filing for bankruptcy is usually the last resort in solving the debt crisis. But before taking that step, there may be other things you can do.

First, review all your expenses, not just the major fixed expenses like mortgage and lease payments but also the minor, incidental expenses like your morning cup of coffee, your massage sessions or pedicures. These may be small and irregular but when you add them up, they come up to quite a sizable amount of money.

Next do something about your credit card debts. The most obvious thing to do would be to spend less on credit and keep up with at least the minimum payments due each month. Also, most people have more than one card. Consider transferring part of your balance from the card with the higher interest rate to the other one with the lower interest rate.

Finally, do not hesitate to negotiate with your creditors for a lower interest rate or extended payment period, both of which would reduce your monthly expenses and ease your debt situation. Here’s a tip – when you mention that you are likely to file for bankruptcy, some creditors may be more willing to reduce their interest rates or give you more favorable terms because they would want to avoid having their debt discharged in bankruptcy.

Now assuming you have taken every step you possibly could to alleviate as much of your debt problem and still find yourself mired in insurmountable debt then it is time to consider filing for bankruptcy. The question then is when you should do so. Every person’s situation is different so it pays to consult a bankruptcy lawyer to decide when the best time would be.

For example, if you have charged a lot of expenses to your credit cards recently, it may not be a good time to file for bankruptcy just yet. This is because the bankruptcy trustee might decide that your recent credit card debts are exempt from discharge which means you have to pay them in full. The worst outcome is the bankruptcy trustee dismisses your case if you have racked up your credit card debts just so that they can be discharged by the bankruptcy. Likewise, if you expect your debts to pile up soon, it might not be the best time to file for bankruptcy.

You can discuss all this with an experienced bankruptcy lawyer who will help you save money and discharge as much of your debt as possible through bankruptcy. Call us at (813) 200 4133 for a free consultation on how bankruptcy can benefit you.

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Jefferson County to Decide on Bankruptcy

dmishesq — Thu, 10 Nov 2011 22:15:56 +0000

Alabama Governor Robert Bentley is fighting to help Jefferson County avoid filing for potentially the biggest municipal bankruptcy in the country. At this point, the governor is determined to find a solution to the $3.4 billion debt problem that stems largely from a botched sewer contract. At the same time, local officials are set to resume deliberations on either a settlement with creditors or filing for bankruptcy.

Governor Bentley had met with the president pro tem of the state Senate, Del Marsh and the speaker of the House of Representatives, Mike Hubbard on the massive sewer debt owed by the county and other financial problems. Governor Bentley said, “All three of us are 100 percent committed to solving this issue in the Legislature. My administration and the legislative leadership stand ready to work with the rest of the state Legislature in a special session. This is a problem that can and must be solved for the good of both Jefferson County and the entire state.”

In a provisional agreement approved by commissioners in September, the county and JPMorgan Chase & Co have agreed to making $1.1 billion in concessions on the debt and implementing increases in sewer rates by as much as 8.2% for the first three years.

According to Commission President David Carrington, the agreement stipulates that JPMorgan Chase, which arranged most of the bonds, will take the biggest loss. In a briefing on November 7, Carrington told the press that the county and creditors are $140 million apart. Commissioners are continuing to deliberate over the final draft of the agreement and will decide whether to accept it, continue to negotiate it or file for Chapter 9 bankruptcy.

All 25 members of the county’s legislature have not been able to unanimously agree on steps to take to implement the provisional agreement, including the important matter of how to generate revenue for the county’s general fund.

In Jefferson County, members of a local delegation are able to block any law that applies to their jurisdictions on the basis of “local courtesy.” Generally, if the full Legislature acts on the financial crisis without local approval, it could result in an internecine political war, Jefferson County lawmakers have said.

If you are having financial problems individually or in business, consider filing for bankruptcy protection. Bankruptcy will protect you from your creditors until you have the chance to sort out your financial situation. It can be your ticket to financial freedom again. Call us at (813) 200 4133 for a free consultation. Bentley is fighting to help Jefferson County avoid filing for potentially the biggest municipal bankruptcy in the country. At this point, the governor is determined to find a solution to the $3.4 billion debt problem that stems largely from a botched sewer contract. At the same time, local officials are set to resume deliberations on either a settlement with creditors or filing for bankruptcy.

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Alabama Governor fights to Save County from Bankruptcy

dmishesq — Thu, 30 Jun 2011 11:54:47 +0000

The impending bankruptcy of Alabama’s largest county, Jefferson County has prompted Governor Robert Bentley to intervene. Recently, Governor Bentley pledged to try to do “everything possible” to help Jefferson County avoid bankruptcy by reaching a settlement with creditors over the $3.2 billion sewer debt the county owes.
Although Bentley earlier said that bankruptcy was an option for resolving Jefferson County’s sewer debt problem, he has since changed his view of how serious a bankruptcy by Jefferson County could be. Besides Governor Bentley, Attorney General Luther Strange has also stepped in to help.
At first, Bentley met with County Commission President David Carrington and Commissioner Jimmie Stephens to discuss the matter. Subsequently, Strange met with commissioners at a downtown Birmingham law firm. As a result, Carrington recently announced a 30-day “standstill period” for county officials to discuss a potential settlement with creditors.
Bentley said, “Our goal is to do everything possible from a state standpoint to try to help Jefferson County avoid bankruptcy. We may not be able to reach that goal, but that is our goal.”
At the same time, the governor confirmed that the state is not contributing any money toward a sewer-debt settlement. County commissioners said they are prepared to vote for bankruptcy if progress is not made with creditors over the next 30 days.
State Finance Director David Perry, who acts on behalf of the governor in talks, said, “We will not do anything that is not in the best interests of both the state of Alabama and Jefferson County. Ultimately, this is an issue for the Jefferson County Commission to decide. But a bankruptcy filing by Jefferson County has statewide implications. That’s why the governor is actively involved in trying to help the parties reach a solution that does not involve bankruptcy.”
Bentley said a settlement could involve holders of the county’s sewer debt getting less than 100 cents on the dollar back from their debt holdings. Also, Bentley and Perry said the state might offer a way to enhance the credit-worthiness of the county’s sewer bonds.
Credit enhancements can come in a number of forms including letters of credit, lines of credit, revolving credit or bond insurance. Another part of the resolution may be the creation of an independent public corporation that would own and/or operate what is now Jefferson County’s sewer system. The resolution would probably also entail passing new legislation.
One thing that the state government is not going to do to repay the debt is raise taxes. “We’re not interested in raising state taxes to solve this, and we’re not interested in raising local taxes to solve this issue,” Perry said.
Bentley is aware that bankruptcy by Jefferson County would hurt the state’s image and the credit ratings of the state and of cities and other counties also, which in turn would increase their costs of borrowing money for schools, roads or other needs.

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Bailout Only Hope for Greece to Avoid Bankruptcy

dmishesq — Tue, 27 Jul 2010 17:55:40 +0000

In what seems like the only way out of a catch 22 situation, Greece has to borrow money from the International Monetary Fund (IMF) and its fellow EU countries to avoid national bankruptcy. The country is two weeks away from defaulting on €8.5 billion worth of bonds maturing May 19 for which it does not have the money to pay.

During a heated debate in parliament, Greek Prime Minister George Papandreou said the government has to avail itself to the €110 billion three-year package comprising of loans from other eurozone countries and the IMF. But the package comes at a price. The government must agree to severe austerity measures over the three year period. These measures include slashing salaries, pensions and increasing taxes. The government was trying to rush through legislation in parliament to authorize the austerity measures.

The loan package is also aimed at preventing the debt problem from spilling over to other European countries with vulnerable economies such as Portugal and Spain. Portugal and Spain has had their debt ratings downgraded which contributed to the depreciation of the value of the Euro from as high as $1.51 to below $1.28.

The austerity measures have sparked outrage among the Greeks, with approximately 100,000 people spilling into the streets last Wednesday, torching buildings, destroying public property, smashing windows and fighting with police. Three bank employees – a man and two women, one of whom was pregnant – died when they were trapped inside their building set ablaze by rioters. Another four people were rescued by fire fighters using a crane from the balcony of the bank. The deaths were the first protest-linked ones in more than 20 years and have shocked the nation in which protests are common but rarely result in fatalities. A makeshift shrine with flowers and candles was set up in a charred window of the Marfin Bank, the scene of the deaths.

41 policemen and 15 civilians were injured in the riots, while 25 people were arrested. When the journalist union canceled their participation in the protests, newspapers were rushed through the press on Wednesday just in time to report on the riots and deaths. But despite the fatalities and general carnage, unions and far left groups were planning for more protests on Thursday.

The bank workers’ union called for a strike Thursday to protest the deaths of their members and at the same time laid the blame for the violence on the government’s austerity measures. However, most banks in central Athens remained open.

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Bailout Only Hope for Greece to Avoid Bankruptcy

dmishesq — Mon, 24 May 2010 16:25:50 +0000