Law Offices of David P. Leibowitz LLC
Lakelaw is a registered assumed name for Law Offices of David P. Leibowitz LLC
Best Buy is a fun place to shop. It has lots of gadgets, gifts, and games for men and women, boys and girls. It’s very tempting to overspend or try to finance purchases we can’t afford.
In bankruptcy, the goal is to shed the debt that bothers us. In order to get a fresh start in Chapter 7, that means making tough choices about what debts to hold on to and keep paying. The majority of our clients need a car to get to and from work, working appliances and adequate furniture. The bigger issues come with electronics and gadgets.
Best Buy wants to sell you things. They do a good job of it. One way they do this is by offering financing on their Best Buy cards, typically through HSBC. HSBC is a huge banking company, and Best Buy is the local brand that makes folks happy by selling TVs, iPads, and gaming systems.
Schedules I and J of the bankruptcy petition are the budget for the debtors in bankruptcy. Sometimes, the budget does show a small positive amount every month. Subtracting fixed expenses (food, utilities, rent/mortgage, car payment, insurance, etc.) from net income, we get a final number. If that number is “-$400″, that means that our clients are still running a $400 budget deficit per month – even with their credit cards, medical bills, and unsecured loans excluded. So when our clients then ask if they can keep the 3D TV and Wiis they financed, it comes time for tough decisions.
With secured goods like electronics, we have 3 options to present to our clients: They can surrender the goods and let Best Buy pick them up at their own expense. We can have them offer a lump sum amount in a redemption for the fair value of the item. Or they can reaffirm the debts through long term payments that now survive the bankruptcy.
As an attorney, I am really reluctant to recommend this last option, because typically it means another $2000 or so in debt that remains after bankruptcy. If there is no car payment, mortgage payment, or other long term debt, then maybe it’s workable. But these items are not as essential to living as, say, a car is to get from work to home and pick up the kids.
We’re not here to make these decisions, but it is part of our job to advise our clients as to how to proceed. Like any other debt, we must look at the whole picture and make a choice that won’t put our clients in a bad situation in the future.
If you have an item or two financed on a Best Buy card, and bankruptcy is an option in the near future, call or e-mail us to discuss.
While each situation is different, it is possible for you to get back on your feet very quickly after a bankruptcy – maybe even as fast as a few months. There are certain steps you should take while also being careful not to get yourself right back into financial trouble.
The first way to build your credit back up is by reaffirming debts within the bankruptcy. A reaffirmation is simply an agreement to keep paying a debt even though you declared bankruptcy. You shouldn’t take this idea lightly and should discuss all of the pros and cons with your attorney. But if you do reaffirm a debt, your credit report will reflect the positive payments you make on the debt. This is why we say it’s possible to file bankruptcy and still keep a car or home.
Another way to improve credit is to take out a credit card and pay off the balance every month. This way you will show potential creditors that you borrow money but are a good risk because you always pay it back. These payments will show up on your credit report and make a positive impression. However, this is something that should be done with caution. You will not be able to declare bankruptcy again for several years so it is important to pay off the balance every month. This is another important discussion to have with your bankruptcy attorney.
Finally, a good way to rebuild your credit is to take out a small secured debt. A secured debt is a debt where you and the creditor agree that if you don’t pay the creditor can have the property back (like a car loan). While it might be hard to take out a large loan for a car you can probably take out a small loan for a television, washer or dryer or have a debt tied to a bank account or credit union account so long as you show the creditor that you have some money in the bank.
Taking on debt after a bankruptcy is a big decision. Many people are afraid to borrow again because they are afraid they will be back in the bankruptcy court again. Other people need to take on debt or want to take on debt to establish credit and possibly make a big ticket purchase in the future, for instance a home. Any decision to take on debt after bankruptcy should be made after consulting with your bankruptcy attorney. The only way to earn credit is to borrow and successfully pay off debts, whether the debts are for utilities, gas credit cards, or car loans.
This post was authored by Lakelaw associate Nicholas D. Strom.
We’ve consulted with thousands of people who often ask us a version of the same question: “How do I improve my credit?” Whether you are coming out of bankruptcy, in foreclosure, or just a typical consumer, there are several easy steps you can take, as seen on sites such as this, to improve that all-important credit score.
1. Fix your payment history by paying as many bills as possible on time, responding immediately to collection agencies when they call or write about a debt, and paying certain debts in full so they no longer have a balance owed.
2. Avoid excessive balances on credit cards and loans that are simply too expensive (or have too high an interest rate) to repay in full. That includes loans for furniture and other items where “no money down!” is promised, but interest rates immediately become outrageous the moment the promotional period ends.
3. If you have a credit or charge card you pay every month on time, keep it open. Positive payments are your friends. Also, start early if you can by taking out very small limits on credit cards when you are young (but not going overboard with using them) to establish a good history from an early age.
4. Check your credit report periodically (our firm recommends Annual Credit Report because it is free) and avoid paying to view the reports. There is no need to pay $20 per month or more for a company to “monitor” your credit report and send you the same reports you can get for no cost every year.
The bottom line is that credit is a statistic, a figure or number you can help manipulate and stay strong to help you when you need it. Beyond the obvious advice to pay everything on time, you can manage which debts are outstanding, which are closed and which carry large balances to be a smarter, strong consumer. For more information, contact Lakelaw at 866-LAKELAW ((262) 694-7300 in Wisconsin), or a trusted financial advisor.
Happy New Year!
And for Illinois job-seekers with credit problems or who have filed for bankruptcy before, it really is a Happy New Year.
Effective January 1, 2011, it is against the law to discriminate in employment in Illinois based on credit except in limited circumstances.
This Act prohibits discrimination on account of credit history in employment decisions except in the following circumstances:
So the bad news is that quite a few jobs still might allow for credit checking. But most won’t.
Keep in mind that the Act nevertheless allows for a thorough background check which can include information about the job-seeker – without credit history.
If you feel you have had an issue with this, call Lakelaw. You may be able to recover damages as well as attorneys fees.
Clients have asked whether a minor can file a bankruptcy case. Why might this happen? A minor could be indebted for example because he or she was involved in a car accident and injured somebody. Or the kid may have been a college student who abused credit cards. Or the child may have lost her drivers license for driving without proper insurance.
Bankruptcy can help adults in this situation and also can help children.
Here’s what you have to do. A child can’t start a legal proceeding without the action of the adult guardian. So the bankruptcy petition would have to be filed by the adult parent or guardian on behalf of the child. This also applies to credit counseling requirements as well as financial management issues.
Call us at Lakelaw and we will navigate you through all the details and in so doing, we will help you put Junior on the road to financial freedom
Posted by David Leibowitz on May 18th, 2009 in Life After Bankruptcy
If you choose to pay off the judgment in full, you must get a signed “Release and Satisfaction of Judgment” from the creditor’s attorney. The Release and Satisfaction of Judgment must be filed with the clerk of court that entered the judgment. When filing your Release with the Clerk, you need to request a certified copy for the Secretary of State. To get your driver’s license reinstated, you must deliver the following documents to your local Secretary of State’s office:
You may agree to a payment plan to pay off the judgment over time. In order to reinstate your driver’s license, the payment plan must be entered as a court order that is signed by the judge. After the order is entered, it must be certified by the clerk in Room 601 of the Daley Center. A certified copy of the payment plan must then be delivered to your local Secretary of State’s office along with the SR-22 proof of insurance form and $70.00 re-instatement fee mentioned above. Be cautious about entering into a payment plan that you cannot afford. If you sign an agreement, and fail to make the payments on time, your license can be re-suspended.
You may file a Bankruptcy to discharge this judgment and other debts. Your license can only be reinstated after the bankruptcy has been completed and the judgment is discharged. You must deliver a certified copy of the Discharge in Bankruptcy (including a schedule naming the creditor) to your local Secretary of State’s office along with the SR-22 proof of insurance form and $70.00 reinstatement fee mentioned above. A bankruptcy cannot be accepted in alcohol-related cases that result in personal injury or death.
If the judgment was entered against you in error, you must file a Motion to Vacate or Dismiss the judgment in the trial court. You should consult an attorney for assistance with this process.
Once an order vacating or dismissing the case is entered, you must take a certified copy of the order to the Secretary of State along with the SR-22 proof of insurance and $70.00 reinstatement fee.
If your judgment is more than 7 years old, and has not been revived, your suspension can be removed. Go to Room 601 of the Daley Center and give the clerk your case number. The court will order your file. After the file is obtained, make a photocopy of the half sheet located inside the file and get the half sheet certified by the cashier. Go to the Secretary of State and present a copy of the half sheet. You will also have to provide SR-22 insurance from your insurance agency.
If you can’t afford the damages you will have to pay as a result of the uninsured accident, you may be forced to file a bankruptcy case.
If you do end up filing bankruptcy and need any help getting your license reinstated, please contact us and we’ll help you through the process.