Continuing with the theme of the past few blogs, I want to point out a common mistake consumers can make that may add to their economic difficulties. The thinking that occurs is like the infamous slippery slope. The best way to illustrate my point is with an example. Let’s suppose you are going to buy a car. You initially intend to purchase an economy model. But then you are in the dealership and discover that there are some nice features to be had for a little more money. This leads you to think why not borrow a little extra and be able to purchase some of the add-ons. Overreaching economically is an easy trap to fall into when buying major purchases. Another two or three thousand dollars does not look like much against $25,000. But it adds up.

Ronald Wilcox, professor of business administration at the Darden School of Business, University of Virginia, and author of Whatever Happened to Thrift?: Why Americans Don’t Save and What to Do about It says, “A dollar is not always a dollar in our minds.

Some days a dollar will be more valuable to you than others. Often when making big purchases, the price seems so overwhelmingly high that smaller add-ons or upgrades start looking like great deals in comparison.

“What you’re doing is pairing the smaller purchase with the bigger number and all of a sudden it looks reasonable in comparison when on any other day you would recognize this as a really bad deal. Marketers are aware of that, so they will add on lots of small items-like warranties for instance-things that have huge margins that they can make a lot of money on.”

Terry Rigg, editor of Budget Stretcher Web site and newsletter recommends that you “Learn not to buy on impulse and plan every purchase carefully. If you don’t have the money now-save until you do.” In other words, know how much you have budgeted for before entering a sales place and stick to that amount.

On that note, if you have any questions and live in Colorado please feel free to contact me. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.

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The fourth financial pitfall that people are susceptible to is not taking responsibility for their finances. Sometimes people find it easier to blame others for their financial difficulties, rather than admit they have used poor judgment. It is a mistake to think that lenders or salespeople are going to protect your interests. It is their job to make money. It is your job to be sure you get a fair deal. Whose fault is it really if an individual doesn’t budget for their monthly expenses?  It is up to each of us to take responsibility for our financial status when it is at all possible. Of course, as I have mentioned many times, there are circumstances beyond one’s control.  But as Ronald Wilcox, professor of business administration at the Darden School of Business, University of Virginia, and author of Whatever Happened to Thrift?: Why Americans Don’t Save and What to Do about It, says, “The savings crisis and the household debt crisis are directly related to each other. We wouldn’t see foreclosures go up as quickly if people had a cushion of savings. So wrath, when targeting others, is often misdirected. Developing a strategy for your finances is a personal responsibility.”

If you develop a budget with both savings and debt pay-down strategies-and stick to it-you will more than likely avoid a financial crisis.

“It’s much easier to tell yourself and your kids ‘no’ if you know what the spending limits are.

Everyone in the family should know that they can’t get everything they want because the money is just not there,” says Terry Rigg, editor of Budget Stretcher Web site and newsletter.

If you have any questions and live in Colorado please feel free to contact me. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.

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Today I want to consider those people who end up in financial trouble due in some part to a fear of mathematics. One look at a list of numbers and issues like terms of a loan can cause some people to freeze. Then they do what many people do when intimidated: go into a state of denial which leads to avoidance. This results in a failure to think about loan terms, late fees, and other details of loans or credit cards. According to a survey done in 2007 by Bankrate.com’s Financial Literacy series thirty-four percent of homeowners had no idea what type of mortgage they had-whether it was a fixed or an adjustable rate.

“I like to use the term ‘financial complacency’ to describe people that never really take the time to get the big picture of their finances,” says Terry Rigg, editor of Budget Stretcher Web site and newsletter.

It is human to fall into the avoidance trap and we all have areas where we are guilty of this, particularly when it comes to facing unpleasant facts. In the financial arena these avoidance areas may involve a large credit card bill or the act of fighting to learn something new, such as the basics of investing, or learning enough about your company’s retirement plan so that you can participate in it intelligently.

 ”Americans don’t really understand parts of those plans,” says Ronald Wilcox, professor of business administration at the Darden School of Business, University of Virginia, and author of Whatever Happened to Thrift?: Why Americans Don’t Save and What to Do about It. “This is probably due in part to Americans’ reduced interest in mathematics relative to the rest of the world. Americans don’t study it as intensely and they don’t really understand the benefits of compound interest.”

It is important not to turn away from the economic issues in your life, but to face them wisely. Be proactive rather than reactive. Don’t be afraid to ask for advice from a competent expert when you need it.

On that note, if you have any questions and live in Colorado please feel free to contact me. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.

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Oddly enough I have found that it is pride that sometimes prevents people from being realistic about their economic situation. The “it won’t happen to me” syndrome often comes into play. This leads individuals into making the mistake of not preparing for the worst-case scenarios.  As hard as it might be for these people to believe, they may be involved in a car crash which involves expenses not listed under their insurance policy, their children may need braces, they may need healthcare that is not totally covered by their insurance, a loved one might die incurring funeral expenses, or they might be robbed while not at home. Such people can be too optimistic about their ability to pay back debt and stay out of harm’s way.

“All human beings suffer from overconfidence-but Americans more than anyone,” says Ronald Wilcox, professor of business administration at the Darden School of Business, University of Virginia, and author of Whatever Happened to Thrift?: Why Americans Don’t Save and What to Do about It. “Our nation has seen great benefits from the confidence to take risks. Risk-taking built Manhattan. But there is a dark underbelly,” he warns. “There are some winners and they do great things, but there are a lot of losers. And one of the risks that people take is spending all their money now and not saving for a rainy day.”

 ”We hear it all the time, but everyone has got to have an emergency fund. It’s not if it happens, but when,” says Gail Cunningham, senior director of public relations for the National Foundation for Credit Counseling.

In other words, don’t be too proud to budget for the unexpected–it can happen to you.

If you have any questions and live in Colorado please feel free to contact me. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.

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Over the many years that I have been a bankruptcy attorney a multitude of people have arrived at my office needing my help due to circumstances beyond their control. Being laid off from work, unexpected medical expenses, and emergency repairs for a home are some of the events that propel individuals into debt. The few clients who do not fit into this category generally fall prey to one of the following behaviors that lead to financial missteps: envy, pride, carelessness, unwillingness to claim financial responsibility, greed, gluttony, and lust. It is my intent in the next few blogs to alert people to these pitfalls in hopes that it will help prevent them from ending up overwhelmed by debt.

Let’s start with envy. All around us we see people living a life of luxury, particularly on the media. Expensive objects are more accessible than they were before; wealth is no longer a prerequisite. The combination of these two factors causes people to make purchases they can’t afford in an attempt not to feel left out or less than.

“The income disparity has gone up considerably, and what has happened is that it has changed our consumption patterns,” says Ronald Wilcox, professor of business administration at the Darden School of Business, University of Virginia and author of Whatever Happened to Thrift?: Why Americans Don’t Save and What to Do about It.

Envy colors our perceptions. What we view being consumed all around us is what we come to believe is reasonable to consume. “But,” Wilcox says, “because income disparities are so incredibly unequal, what we view around us really is beyond our ability to afford.” Individuals can get caught up trying to keep up with the upper-middle-class families they see on television, believing they are entitled to own the same things others possess at far too high a cost.

Tomorrow I will discuss pride and the impact it has on your financial situation. If you have any questions and live in the Denver, Colorado area please feel free to contact me. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.

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The next item on the list of changes to the Personal Bankruptcy Law posted on The American Bankruptcy Institute site relates to a limit on the automatic stay. The application of the stay is now limited or it does not go into effect in situations where there are serial filings under circumstances that would show bad faith or abusive filings. The stay terminates after thirty days if you file a Chapter 7, Chapter 11 or Chapter 13 (but not Chapter 12) bankruptcy case within one year after the prior case was dismissed. (Of course, this does not include a case refiled in another chapter due to a dismissal of a Chapter 7 case based on the means test). Any interested party may move to extend the stay and demonstrate that the filing is in good faith. A case is determined to be in bad faith for this purpose if more than one case was pending in Chapter 7, Chapter 11 or Chapter13 and at least one such case was dismissed for any of the following reasons: failure to file required documents without substantial excuse, failure to provide adequate protection or failure to complete a plan. In addition, there must be no evidence that your financial situation has changed so as to allow a final discharge or completion of a plan. If two or more cases under any Chapter were dismissed during the prior year, the automatic stay does not go into effect until ordered by the court after a hearing and an indication that the filing was made in good faith. The same bad-faith factors described above apply to this determination. The law also provides that the stay will terminate if you do not file within thirty days after the petition date your statement of intent with respect to property that is subject to a security interest and if you do not comply with the stated intention within thirty days after the first date set for the §341 meeting.

If you have any questions and live in Denver, Aurora, Arvada, Boulder, Brighton, Broomfield, Commerce City, Englewood, Golden, Highlands Ranch, Lakewood, Lafayette, Littleton, Northglenn, Westminster, or Wheat Ridge, Colorado please feel free to contact me. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.

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Here is a further discussion of the changes to the Personal Bankruptcy Law after 2005 that are listed on The American Bankruptcy Institute site. The next change listed involves reaffirmations. There are extensive new disclosures that detail your rights and specify the amount of debt to be reaffirmed in Section 524:

• rates of interest
• when your payments will begin
• the filing requirements with the court
• the right to rescind
• a certification that the agreement will not impose undue hardship on you

NOTE: The agreements are presumed to create a hardship if your expenses, including the reaffirmed debt, exceed your income. If this hardship is presumed, you must explain to the court why you can nevertheless still afford to satisfy the debt (such a requirement does not apply if the reaffirmed debt is owed to a credit union).

“The disclosure requirements are satisfied if ‘given in good faith.’” If the creditor “believes in good faith” that the agreement is effective the creditor can accept payments under a noncompliant reaffirmation.

If you have any questions and live in Denver, Aurora, Arvada, Boulder, Brighton, Broomfield, Commerce City, Englewood, Golden, Highlands Ranch, Lakewood, Lafayette, Littleton, Northglenn, Westminster, or Wheat Ridge, Colorado please feel free to contact me. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.

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My last blog discussed the first item on the list of changes to the Personal Bankruptcy Law after 2005 that is posted on The American Bankruptcy Institute site. I want to continue with a review of the list of changes.

• The next area on the list that is discussed is mandatory credit counseling. You cannot be a debtor under title 11 unless you receive credit counseling from an “approved nonprofit budget and credit counseling agency” within 180 days prior to filing.
• The third area involves a limit on auto lien-stripping under Chapter 13. (Stripping down an auto lien means you reduce the debt you owe on your vehicle by reducing your payment to the value of the car only. You also may obtain a decrease in your interest rate.) “A Chapter 13 plan must provide that a secured creditor retain its lien until the payment of the entire debt, not just the secured portion, where the creditor holds a security interest in a motor vehicle purchased within 910 days of the filing.”
• The fourth area is about mandatory debtor education. A Chapter 13 discharge cannot be granted unless you have completed an education course in personal financial management that is approved by the U.S. Trustee. You may be denied discharge under §727 if you do not complete the course.
• The next topic entails the scope of discharge. Any debts you owe to a single credit that exceeds more than five hundred dollars for luxury items incurred within ninety days of filing bankruptcy are considered non-dischargeable. And cash advances of seven hundred fifty dollars within seventy days of filing are also non-dischargeable.
• The sixth and seventh issue listed relates to serial bankruptcy filings. You will not be granted a discharge under Chapter 13 if you obtained a discharge under a Chapter 7, Chapter 11, or Chapter 12 bankruptcy within four years before the date of filing the present case. This will not prevent you from filing a Chapter 13 bankruptcy to receive the benefits of a stay. You cannot receive a discharge under Chapter 7 if a prior discharge was received within eight years of the new filing.

If you have any questions and live in Denver, Aurora, Arvada, Boulder, Brighton, Broomfield, Commerce City, Englewood, Golden, Highlands Ranch, Lakewood, Lafayette, Littleton, Northglenn, Westminster, or Wheat Ridge, Colorado please feel free to contact me. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.

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The American Bankruptcy Institute has a list of the changes made to the Personal Bankruptcy Law after 2005. The first one that is discussed involves the means test for Chapter 7 bankruptcy.  As I have already explained the trustee or any creditor has the right to bring a motion to dismiss your case, under §707(b), if your income is greater than the median income for the state you reside in during the time of filing. The bankruptcy court will presume abuse if your current monthly income (as determined by an average of the previous six months), minus a variety of debts and expense allowances, is more than $100 per month of a Chapter 13 bankruptcy plan. In deciding whether or not the threshold for median income has been reached, the law considers the number of people in your household and compares that to the census figures adjusted by the Consumer Price Index (CPI).

If you have any questions and live in Denver, Aurora, Arvada, Boulder, Brighton, Broomfield, Commerce City, Englewood, Golden, Highlands Ranch, Lakewood, Lafayette, Littleton, Northglenn, Westminster, or Wheat Ridge, Colorado please feel free to contact me. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.

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I am aware that many people believe that facing foreclosure, or being forced to resort to filing personal bankruptcy to avoid foreclosure, is primarily the plight of the lower class or lower middle class individual. These same people feel ashamed of being in this situation. But as an article in the New York Magazine and one in the Wall Street Journal pointed out last week many of the rich and well-established are finding themselves in the same predicament.

For example, last week, Nicolas Cage’s Tudor mansion in Bel-Air was in a foreclosure auction and was acquired by the foreclosing lender.

And last Wednesday, Richard Fuscone, a former top executive at Merrill Lynch declared personal bankruptcy in order to stop the foreclosure of his 18,471-square-foot, eleven-bathroom Westchester mansion.  Fuscone graduated from the University of Chicago with an M.B.A. and also attended Harvard Business School. After a few bumps in the road he eventually became a great success at Merrill Lynch, working his way through the ranks to become the Executive Director of the Latin American division.

Foreclosure and personal bankruptcy are clearly not anything to be ashamed of since those who are well-educated, powerful, wealthy, and famous have been in the same position. If you have any questions and live in Denver, Aurora, Arvada, Boulder, Brighton, Broomfield, Commerce City, Englewood, Golden, Highlands Ranch, Lakewood, Lafayette, Littleton, Northglenn, Westminster, or Wheat Ridge, Colorado please feel free to contact me. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.

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