This week, it was reported that student loans in America have crossed the $1 trillion mark. Maybe it’s just me, but doesn’t everyone else see a bubble being created. These loans can’t be discharged in a bankruptcy filing and yet graduated students have no way of paying them back. Young adults are getting out of school and finding out they’re just no jobs. All they have is a couple hundred thousand dollars in school loans and no way to pay them back. This is what they signed up for or what they thought they were promised.

The only way a student loan can be discharged when filing bankruptcy is if the debtor could prove they no longer had the ability to pay it off. That is next to impossible, unless the debtor suffers from a debilitating illness or injuries from an accident that makes them unable to make a substantial amount of money giving them the ability to pay back student loans.

What’s tougher these young adults and even older adults that haven’t been able to pay their loans off is many times they file for bankruptcy to get relief from other debts and still are saddled with this massive albatross of a loan. The government is looking in to find ways of collecting on these loans that they guaranteed. They have recently used software programs that cross reference them and chase down people from the past. Most of these programs are bust, because people just don’t have it. Catching up with someone who is already in financial trouble and forcing them to start paying will probably send them straight into bankruptcy.

As the cost of education continues to raise this $1 trillion number will probably double in the next 10 years. These young adults need to wise up and realize if there’s no jobs out there don’t over encumber yourself with loans they can’t pay back. It’s sad to see, people in their 20s already filing for bankruptcy because they got an education.

Bob Jones started DebtFreeBankruptcyAttorney.Com which is a website that helps individuals with debt problems by putting them in touch with a local bankruptcy attorney that specializes in filing bankruptcy under Chapter 7 and Chapter 13 bankruptcy. Check our website for more answers to bankruptcy questions and ideas on how to have a debt free future.
 

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Making ends meet while debts pile up can be a real problem during tough economic times. Personal bankruptcy is always a tough decision, but it’s good business to know which type will best address your situation.

There are significant differences between Chapter 7 and Chapter 13 bankruptcy, and each applies to different cases. The main differences are outlined by the US Courts site:

Chapter 13 enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. During this time the law forbids creditors from starting or continuing collection efforts.

Chapter 7 does not involve filing a plan of repayment. Instead, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds to pay creditors. The Bankruptcy Code will allow the debtor to keep certain “exempt” property; but a trustee will liquidate any remaining assets.

Who Uses Each Type?

Chapter 7 is more commonly used by individuals who have only basic property, like necessary clothing and furniture, with little or no money beyond what’s needed for monthly essentials.

Chapter 13 is more commonly used by individuals who have enough income to pay their expenses and want to keep their home equity or other property, but can’t keep up regular debt payments.

How Long Does It Take?

The process for Chapter 7 bankruptcy moves fairly quickly, and your debts may be discharged within just a few months.

Chapter 13 operates on a schedule that you’ve worked out with the bankruptcy trustee, and allows you anywhere from three to five years to get caught up with payments.

What Are The Advantages?

Chapter 7 lets you start fresh, with no liability for discharged debts. Note that some types of debts cannot be discharged, and property liens cannot be removed. Creditors can’t contact you during an automatic “stay” or after discharge of debt, which provides relief from harassment.

Chapter 13 lets you keep most of your property, and co-signers may be protected as well. Instead of dealing with individual creditors, you can make a single monthly payment to the bankruptcy trustee and not worry about interest during the time you’re repaying what you owe.

Protection From Creditors

Along with the other advantages of personal bankruptcy, consumers appreciate the fact that it can stop pending lawsuits and garnishments that are about to begin or already proceeding. In addition, bankruptcy can result in the removal of outstanding balances from your credit report. While your credit file may indicate bankruptcy, creditors must report that your balance owed is zero.

The bankruptcy process can be difficult and confusing. It is best to speak with a personal bankruptcy attorney because each case is different.

Larry P. Smith & Associates, a Chicago Law Firm, focuses on consumer rights protection. If you are having difficulties with bankruptcy, debt collection or consumer fraud, request a free case review with Larry P. Smith & Associates.
 

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When you are struggling with debt, it may be serious enough to come down to only two resolutions: debt settlement or bankruptcy. When debt issues become this serious, it is important to understand what you are facing with both options.

Here is a look at the basic breakdown of how each debt relief process can affect you and your overall financial life now and in the future:

Comparing the Options

Both debt settlement and bankruptcy are serious undertakings for eliminating debt and starting back on the road to a debt free life. However, neither is an overnight or quick-fix solution.

Debt Settlement

Debt settlement involves the process of the consumer or a third-party debt settlement agency contacting your creditors directly to request a debt settlement. In order to be successful with this process, you need to have the cash to back up your agreement. Once you commit to paying a reduced amount to settle your debts, you must follow through with payment. This will require your review of your budget and even some time to save up enough cash to make a reasonable offer. Some companies will outright refuse any kind of settlement regardless of who is making the request. Other companies will be more flexible because they know that it may be their only chance at getting something from you towards the balance. Rather than face the risk of a total loss, many will agree to work with you to settle the debt for a lesser amount than owed.

Those creditors that are agreeable to a settlement will either expect a one-time lump sum payment immediately or will allow for a few payments for the months going forward. It will depend on the creditor and the size of the debt. If you have not been in communication with your creditors during your hardship, a creditor will likely not take many risks and demand payment upfront. Many will also likely use pressure tactics to try and talk you into paying more. If you stand your ground about your repayment ability and are basically honest with your situation, you can likely settle the debt effectively.

If you hire a third party agency, you will be responsible for not only paying the costs for settling your debts but will also have to pay a percentage to the agency handling the work. If you do the work yourself, you will cut out the costs of the fees but still need enough money to make lump sum payments if required. Debt settlement may also have a significant impact on your credit score as the creditors will report back that you have ‘settled for less than owed’ which signals you may be a credit risk to future lenders.

Bankruptcy

Years ago, bankruptcy used to be used as a fail-safe to get out of debts. Large debts would be put into bankruptcy in an effort to wipe the slate clean for consumers. However, the bankruptcy rules have changed and it is now a much more involved process that may not necessarily come out in your favor. There will always be some debts you can not put into bankruptcy court. Additionally, you will have to go before a judge and your creditors will be requested to appear to plead their case. If it is found you have not been entirely upfront and have acquired debts due to poor money management, you potentially face the possibility you will still be responsible for your debts, even after the long trial process and other legal red tape.

If you are seriously in trouble with debt and bankruptcy is legitimately your only option, it is advisable to seek the counsel of a qualified attorney for help. Bankruptcy should be the very last course of action to take. Depending on what the court decides, you can effectively find relief from debts in order to start rebuilding your credit. However, a bankruptcy filing will remain on your credit report for up to 10 years. You will find it very difficult to secure other financing in that time and your credit score will drop accordingly.

Bankruptcy is also not a cheap option. In addition to attorney fees, there will be court costs for filing and other legal-related services. You must be able to afford bankruptcy proceedings in order to move forward. An attorney can advise you of the process and costs if you are considering bankruptcy but if you are already struggling with debts, bankruptcy costs may not be reasonable.

Making the Choice

Ultimately, both options are a way to get out from under the heavy burden of debt but nothing can be done in a hurry. A good start on the road to debt relief is to measure your capabilities by reviewing your budget and working to free up some money to be used to help your financial issues.

There is no one-size-fits-all solution to debt relief. The ins and outs of both debt settlement and bankruptcy will affect people in different ways. Regardless of your decision know that unless you take control of your debts as soon as possible, your debts can quickly take control of you.

Frank Collins is a seasoned personal and business finance writer. His specialties include budgeting, debt relief and investment. If you want to find out more about bankruptcy and debt settlement as debt relief options visit the debtsettlement.com blog.

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Back in July, I wrote a post on the impending problems coming regarding commercial real estate. Well, it seems it’s ready to start showing its anger, and man, did it start off near the top.

Capmark Financial Group, one of the nation’s largest commercial real estate lenders, which also used to be known as GMAC Commercial Holding Corp, filed for Chapter 11 bankruptcy over the weekend, listing total debts of $21 billion and assets of $20.1 billion. Their banking system remains secure, but the main company states it needs time to restructure. They had posted a $1.6 billion loss for the last quarter.

These guys were heavy into bank rolling strip malls, something else I talked about when I wrote on why banks were closing. All over the country, you see both strip malls and larger malls that have a lot of empty space, with some having over 50% vacancies. It’s a similar thing to the regular real estate market, where these home builders felt if they built it buyers would come, and now there are thousands of homes in fancy developments that are practically worthless.

Unfortunately, this is only the beginning. Another big time investor that’s predicted to probably be filing for some kind of bankruptcy in the next few weeks is New York City real estate firm Tishman Speyer Properties and BlackRock Realty Advisors, who tried to bully tenants into giving up rent controlled apartments so they could build luxury apartments and charge top dollar. Instead, the tenants fought back, the judges sided with the tenants and found $200 million in increases illegal, and that’s probably going to be that.

At this point, it’s unknown what kind of impact the Capmark bankruptcy will have on jobs, other than those people who work for them. If they are funding construction projects in place right now, those will probably stop, in which case all those people will be out of work as well. What the trickle down for this will be isn’t known right now.

Brace yourself, people; it’s only just begun.

So it’s finally happened. After decades of bad decisions and being on the brink of it, General Motors has finally declared bankruptcy today. This giant, the maker of cars from groups such as Saturn and Pontiac, has come crashing down to earth like many of us who have run into financial difficulties, though not all of us can look at our history and say “we messed up.”

How did they mess up? I can only offer speculation and opinion, but in my mind, I think they messed up by forgetting something that other automobile makers forgot; people can only own so many cars. There’s only 300 million or so individuals in this country, only half of whom probably drive, and yet the average number of cars that have already been purchased is almost 2 cars per person. No one can drive two cars, and not everyone is a collector. Too many cars, too many dealers; almost like a Ponzi scheme, only GM was the sucker.

That’s number one. Number two, foreign auto makers came up with brilliant 10 year, 100,000 mile warranties, and made cars better so they wouldn’t be seeing us all the time. Not everyone makes it to the ten years, but they’re certainly making it past the 2-3 year period where car makers start sending those letters saying how they’ll give you a great trade in offer if you will bring your car back.

Three, gas mileage. I used to drive a Grand Prix, bright red, and loved it, but in regular driving I only got 19 miles a gallon. If I’d had that car last year,… well, I might not have gone broke, but I wouldn’t have been happy. Toyota’s average 30 MPG, and the Prius gets over 50 MPG; nice. GM? Hummer, 10 MPG; bad boys,…

GM filed Chapter 11, which means they won’t close, but they’re going to emerge a much leaner car company. Lean how; that’s the question. No matter what, though, the car industry has already changed, and one way or another, GM will either change with it, or this bankruptcy will be permanent.

Yes, we’re in tough economic times. However, we don’t have to sit around worrying about going broke all the time, or worry that things will never get better. As a matter of fact, there are numerous times when this type of thing has happened, and some very famous people have recovered from losing it all. That’s the premise of a news article in PopCrunch titled Bankrupt! 65 Famous People Who Lost It All.

Of course, in their story, some people lost it all and that was that. However, for my purposes, I’d like to highlight a few people who lost it all, then came back. However, if you’d like, check out the above story for more.

P. T. Barnum, the famous circus impresario, actually went bankrupt many years earlier when loans he’d made to a company working on developing East Bridgeport, Connecticut, went under, and he went under with them. However, he had built up great goodwill over his years, and many of his friends came together to help him raise money so that he could start over again, and the rest is history.

Francis Ford Coppola came back from bankruptcy twice. The first time, he was $300,000 in bankruptcy when The Godfather came out. The second time he had to declare bankruptcy when his movie One From The Heart (which I actually liked, though it was odd) flopped, and he had to borrow money from his mother to continue. However, he recovered quite nicely afterwards.

David Crosby had to file for bankruptcy in 1985 after his solo career wasn’t going so well. Of course, get back with your buds, record both a number one album and single, and it’s the good times once more.

Walt Disney had to declare bankruptcy after a company he was trying to start called Laugh-O-Gram failed after a couple of years in business (a precursor to singing telegrams; anyone still know what a telegram is?), and he left for Hollywoord, came up with a cartoon mouse, and the world changed forever.

Milton Hershey, the chocolate magnate, actually declared bankruptcy after four initial tries at starting a candy company, but he showed that perseverance in a dream could pay off, and, well, Hershey’s chocolate is one of my favorites.

Larry King had to declare bankruptcy in 1978, even though he was working in radio at the time, pounding away at the same career that he gets multi-millions a year for now at CNN.

Finally, two presidents had to file for bankruptcy in their lives, another one came close, and one of those after he got out of office, which would never happen in today’s world. Well, it might, if they exhibited behavior like Ulysses Grant, who had a major drinking problem, then developed cancer. He had to write a memoir to get out of bankruptcy not all that soon before he passed away. Abraham Lincoln actually was probably the one president with the most failures in his life, which included bankruptcy in 1833, and didn’t really find success until 1856, which led to him not only becoming president, but being named one of the top 10 presidents in history. Harry Truman came close to declaring bankruptcy when his haberdashery store went bust, but he found a way to pay all his bills and get out of debt.

There you go, some people who failed, then came back. The moral of this story is to never give up; you always have another chance to be someone special.

Yesterday, January 16th, Circuit City announced that they were closing all of their stores and liquidating their entire inventory. TFB talked about that in the post about did stores really do that badly. Anyway, the sales supposedly start later today, and will continue until the company decides they’ve been picked clean enough. By the way, they’re only closing the stores in the United States, which will put approximately 35,000 people out of work; the Canadian stores will remain open for the time being.

There will be a bunch of people heading to Circuit City stores across the country tomorrow, looking for big time deals on electronics. Many people will wait and hope that some of those items are still around in a couple of weeks when the discounts start getting bigger. Circuit City has already taken down their online store, though they may put it back up, because I’m betting they don’t want to have to shoulder the expense of sending anything through the mail. As it is, my bet is that from this point on every purchase will be non-refundable and non-returnable.

And that’s my problem with buying electronics from a store going out of business. It was fine when I bought supply items from drug stores or office products stores that were going out of business because I could store that stuff for a long time, and I didn’t have to worry about any of it breaking. When one buys items from an electronics store, often it’s not quite what you want or need, and it’s always nice to be able to take it back and swap it out for what you really needed. When you’re stuck with something you can’t use, when all you wanted to do was swap it for something else, you feel cheated, but hey, you knew the rules going in.

Another thing about going in too soon is that the real sales aren’t there yet. Some people don’t care, feeling that a 10% discount is a big deal, but my mind doesn’t quite work that way. The one thing I’ll be holding out for is a GPS for my wife, but I’m not buying anything that doesn’t have a 50% discount attached to it. At that point, I figure that if it’s damaged or doesn’t work properly, at least I didn’t get taken that badly.

What are your feelings of shopping at stores that have declared bankruptcy, and then what are your feelings when it pertains to technology or electronics? I’ll be interested in seeing what y’all have to say.