10 Things that Bankruptcy Can Teach Us about Life

10 Things that Bankruptcy Can Teach Us about Life

You may find it hard to believe, but bankruptcy is not all that bad. There are many positives to this scenario, like elimination of debt completely or at least partially. Also, filing for bankruptcy can leave you with many valuable life lessons regarding finances. Here are some of the things your bankruptcy can teach you:

1. Every Little Expense Counts

Bankruptcy is just the disappointing climax to an extended saga of being in debt. Most average people go into debt because of compulsive buying habits. When you buy a new pair of Jimmy Choos, you may not see bankruptcy filings in your future. But that’s where it can ultimately lead. So, learn to spend your money very, very wisely.

2. Bankruptcy does not Equal being Broke

Being broke means you don’t have cash at hand to pay for your everyday needs, be it food or the mortgage bills. Bankruptcy simply means you don’t have the financial resources to pay your creditors. Your money could be tied up in property or stock. However, you will still have cash to meet up with everyday needs. And you should do so smartly to avoid being genuinely broke, which is what debt can lead to.

3. Documenting Finances is Very Important

If you have filed for bankruptcy, then you’d know how important it is to document every single expense, even the small ones. Documenting your expenses obsessively is not a bad thing. It will help you understand how much you need to spend each month. This is the first big step towards better money management.

4. Starting a Business Just for the Sake of Starting a Business is Bad

Most people go bankrupt because of bad business decisions. These days you hear all sorts of talk about starting businesses on the side to make extra cash. Starting a business is easy, but running one isn’t. Just because you love eating, you shouldn’t open a restaurant. So, if bankruptcy teaches anything, it will teach you how to invest your money in better business.

5. Be Cautious of “High Return” Investments

A surprising number of bankruptcies is filed each year because someone lost all their money to so-called high-return investments. High return investments are also highly risky. Most people do not consider this when they buy certain type of stock or put money into a business. Do not let the returns overshadow the risk of any business. If an investment sounds too good to be true, assume that it is.

6. Diversification of Investments is Very Important

If you invest regularly, do diversify your investment portfolio. As the common saying goes, don’t put all your eggs in one basket. This has been the cause of a number of infamous bankruptcies in the past hundred years. When you invest, make sure your money is in different industries, like stock, property and precious metals.

7. Hardships Occur During Unexpected Times

It’s easy to see on the bright side of investments and new businesses until you have to call up BLG bankruptcy. You must consider the worst outcome for all the financial decisions you make and prepare yourself accordingly. This may sound too macabre, but it’s a necessity to avoid financial calamity. Do not assume everything is going to work out. Estimate costs and expenses wisely, and you must have savings to cover for any losses incurred by investments or business.

8. Financial Education is not Just a Fancy Term

Lack of financial understanding is the main cause of debt, and later situations like bankruptcy. Financial illiteracy is more widespread than you think. It can affect the average Joe as well as a celebrity alike. Only about 40 percent of Americans can be considered financially literate, according to data gathered by FINRA. You could easily fall into the rest of the 60 percent. So, start today to educate yourself about personal finance before it’s too late.

9. Maintaining a Household Budget May Save Your Financial Life

Do not look at maintaining a household budget as a hassle. It’s relatively simple to do; you just have to note down the money you make each month, money you spend and the money you save. Doing so will prevent you from ending up nose deep in debt.

10. Everyone Must Plan for Their Future

Always assume that money can run out, no matter your income potential. That’s why financial advisors cannot stress the importance of having a plan for the future. The easiest way to plan your money for the next 5 years is to save. You need emergency savings as well as long-term savings for retirement. Savings will prevent you from having to take out short-term personal loans, a major cause of personal bankruptcy.

If you learn all the above lessons by heart, then you will be able to avoid bankruptcy in the future. Learn from your mistakes. If you do, like Will Smith or even Donald Trump, your future finances will look brighter than yesterday’s.

Personal Finance and Avoiding Debt Collection: What Not to Do

Personal finance

Sooner or later most of us will face a situation that will leave us with bills that we can’t pay. Loss of job, death in the family, divorce, illness, and emergencies happen and often it leaves us financially broken. This is when the debt collectors start calling. This is a scary time and if we have never faced these problems before, we may try to hide from them. We simply do not know what to do. We are trying our best, but our options seem nonexistent.

First, let us look at what we should not do.

Do not ignore or avoid the contact.

This is not going to work. Computers and technology are so advanced that even a novice collector can find you in little to no time. They will first access the information on your credit application. This contains your address, place of employment, relatives, other companies you do business with and your banking information. Even if you have changed addresses, this is enough information to find you. It is amazing what comes up when they do a basic and free background check online, done by a private citizen. This is nothing compared to the programs the collection companies use.

Stop the bleeding. A debt collector is not out to ruin your life. Their job is to collect money for their employer. That is how they stay in business. They would rather work with you than against you. In most cases, the collector is one of your best allies. Debt settlement is your best option. Many times they can stop additional charges from adding up which absorbs the money you send them. If you explain the situation, they have programs to help. Sometimes payments are deferred and interest payments are accepted to allow more time on the principle.

What happens next?

The calls stop?

Of course, every debtor who ever checked their call waiting is hoping that the bill collector will just give up and go away. While it could happen, the chances are slim. People think because they get a small window of time when the phone is quiet that they gave up. More often than not, they are escalating their efforts. Sometimes that means they are selling your debt to another company. For whatever reason, they feel it is better to receive a portion of the money and let your account become someone else’s headache. Enjoy your break, because your procedure just began again with a new company.

This new company buys hard to collect debts, because they have the tools and resources to collect them. They will probably come at you harder and be less willing to work with you. Your credit report takes another hit from a new collector.

They reach further

In a last-ditch effort to find you before they take the matter to legal measures, they contact people associated with you. The secretary at work tells you about a person who complained that you would not return their call. Your neighbor mentions someone calling asking for your number. Your family members get calls. This adds more stress and embarrassment to your life. Even now, it is wise to return the calls. This company is going to take the next step if you do not find a resolution. It is embarrassing, but it is just a phone call.

Legal action

Time is up. They have tried to reach you and they have tried to work with you. But your fear held you back. Now they will bring a lawsuit against you. You can fight the lawsuit, but if you owe the money and you have a broken contract, you will not win. If the lender wins in court, he can then garnish your wages and get his money directly from your employer. Your credit score takes a major hit with a judgement against you for lack of payment. Recovery from the situation could take years. If this happens enough times, by enough creditors, you may end up in bankruptcy.

Debt Got You Down?

Debt can be a huge drain on your ability to gain any ground in life. There are many different reasons that people go into debt. Maybe the financial climate has hit you hard or maybe you are simply trying to pay back student loans. No matter the cause, if you are in debt your number one goal should be to eliminate it. However, you might want to tackle your debt differently depending on the type of debt and the circumstances of your unique situation. So where are you in your financial game? Are you coming along well but you feel like you need a little help or are you in financial ruin?

For each stage of your financial path and each level of debt there is a solution but first you should evaluate your position. Take a look at this infographic by Consolidated Credit that highlights each league of debt and the possible solutions for them. Find out which category best describes your situations and which solutions might help you tackle debt.

Debt Relief Options

Debt Relief Options: The Series

credit card billMisery Loves Company 

If you are finding it difficult to pay your bills these day, know that you are not alone. If you are worried about your home being foreclosed or your automobile being repossessed, millions of your fellow Americans are in the same boat. Most people face financial troubles at some point in their lives. The reason can range from losing your job, a serious illness in the family or simply reckless spending.

Although owing a lot of money can seem overwhelming, there are steps you can take for debt relief. If you take proper action right now, your financial picture does not have to go from bad to worse. If you find yourself in turbulent financial waters, please take a few minutes to fill out the form on the bottom of this page. Our debt relief professionals will contact you with ways to extricate yourself from the web of continuous debt.

Options for Debt Relief 

Some options to start you on the road to financial freedom include:

Establishing a realistic budget
• Credit counseling
Consolidating your debt
• Bankruptcy

Which of these options may work for you depends on your level of debt, your prospects for the future and how much discipline you have.


The first thing you should do when preparing a budget is to realistically assess how much money is coming into your household each month and how much money you spend. You will need to set up a list of your fixed expenses, such as mortgage or rent payments, utilities, school loans, car payments and insurance premiums. You should then list such variable expenses as entertainment, clothing and medical bills. Writing down all income and expenses will help give you a clear picture of your spending patterns. The main idea of a budget is to insure that you have allotted the necessary funds to cover such basic needs as housing, food, insurance and medical expenses. If you are trying to pay off debt, this must also be included in your budget plan. 

Credit Counseling

You may want to consider credit counseling if you do not have the discipline to stick to a budget and are unable to work out a payment plan with creditors. There are many credit counseling organizations that are legitimate and not-for-profit. These may be found at your local college, military base, credit union, housing authority, your financial institution or local consumer protection agency. A reputable credit counseling organization will advise you on a personalized plan to manage your finances and can offer realistic avenues to debt relief. Be aware that not all debt relief organizations are free, affordable or legitimate—do your homework before signing on the dotted line.

Debt Consolidation

You may actually be able to lower your credit costs by consolidating your debts through refinancing your home with a second mortgage or equity line of credit. However, you must be careful. Since you are securing your loan with your house, if you cannot make your payments on time, you risk losing your home to foreclosure.


Filing for bankruptcy should be your last resort since the outcome is both long-lasting and far-reaching. A bankruptcy filing remains in your credit report for ten years and can make it very difficult for you to purchase a home, obtain life insurance or even get a job. However, it is a legal option that offers a fresh start for people who absolutely cannot find another way out of their debt.

Chapter 7 is known as straight bankruptcy and involves the sale of all assets that are not exempt. Exempt property may include cars, work-related tools and basic household furnishings. You must wait eight years between filings under Chapter 7 bankruptcy codes.

Chapter 13 allows you, if you have a steady source of income, to keep such property as a mortgaged house or car, which you might otherwise lose. Under Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off your debts during a three-to-five year period, rather than surrender any property. When you have made all the payments stipulated in the plan, you will receive a discharge of your debts.

Both Chapter 7 and Chapter 13 bankruptcy will get rid of unsecured debt and stop foreclosures. They can also stop repossessions, garnishments, utility shut-offs and debt collection activities. Both also provide exemptions that allow you to keep certain assets.


Tips to Deal With Creditor Phone Harassment

harassing phone callsIf your creditor has sold your debt to a 3rd party debt collector, you are undoubtedly going to be contacted by phone. Debt collectors can be ruthless in their efforts to secure the money owed to them, continuously calling and using various threats to do so. Some debtors opt to ignore these harassing phone calls, but that is almost never the best course of action to take, even if the calls are aggressive and uncomfortable. What is the best way to deal with phone harassment about my debts?

Determine if the Debt is Yours

The first thing you have to do is to determine if the debt is genuine. This is an important step for a number of reasons. Firstly, it’s common for the ownership of a debt to switch hands multiple times between creditors and 3rd party debt collectors. This means contact information could get garbled, and you could be getting calls for a debt that doesn’t belong to you. If you’re unsure, you can send a written request for the verifications of the debt. It’s your right to do so.

More seriously, a debt that might not appear to be yours could in fact be an indication that you are the victim of identity theft! If you look into it and find the debt to be legitimately yours, and it isn’t one you incurred yourself, you need to take action immediately to prevent further harm to your credit.

Halt Phone Harassment

If you determine that the debt you are getting calls for is in fact yours, the next step you should take is send a cease and desist letter. By law, debt collectors must honor your request, so it’s worth it to formally send one if your life is being interrupted by constant contact with the agency.

There are two types of cease and desist letters you can send. The first asks the debt collector to cease all communication with you entirely, which many people opt for. The second requests the collectors only contact you through written means, including letters, and in some cases e-mails. If the debt collector do not honor your request, then they are violating the law, and you can report them to the Federal Trade Commission.

This process may seem too good to be true, but it’s not. It’s part of the Fair Debt Collection Practice Act (FDCPA), which was created specifically for protecting the rights of debtors like you. You can read more about the FDCPA here for more information: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf

Choosing To Ignore Phone Harassment Regarding Your Debt

Still, some people find it best to try and put off dealing with debt collectors. This is often not a wise move. In some states, creditors can take legal action against you. If the courts side with your creditors, they can legally freeze your bank accounts until some payment option is worked out. Furthermore, they can even garnish up to 10% of your wages from each paycheck! The best course of action is to face your debt head on before it ever reaches this point. There are other forms of bill collection harassment protection that you can take, and ignoring the problem is never the right option.

What’s the Best Option for Dealing with Phone Harassment?

Of course the answer to this question relies mostly on your particular circumstances. Often times however, Debt Consolidation can be the best route for debtors having trouble getting out of debt. It’s possible to group all your debts into one big loan with lower monthly payments, and halt those dreadful harassment calls.  I hope that you have not been a victim of phone harassment.

If you hear of anyone that has been a victim ensure you are compassionate towards them as we do not know all the circumstances regarding their situation.

Photo by: Nyataylor

Bill Harassment, What are your rights?

stack of billsI thought I would write a little bit about getting behind on credit card payments or other bills that you owe. There will probably be a mini series on dealing with creditors and what you should do if they come knocking.  There is no promotional material within these posts, it is just something that many of us deal with on a daily basis and can cause undue stress on relationships.  Thankfully my wife and I have not had to endure any of these tactics by creditors, but others are not so lucky.

If you get too far behind on some of your credit payments, there’s a good chance you’re creditor might sell your debt to an outside party at a discounted price. Why would a credit company do this? The reason is simple: Selling your unpaid debt will benefit the creditor because they get some of the money that is owed to them and are free from dealing with the situation. The reason a 3rd party agency would purchase a bad debt from a creditor is because they can pay less than the debt is worth and gain the ability to retrieve the full amount that is owed, thereby making a profit.

This tradeoff between the creditor and the 3rd party agency makes it more apparent why these debt collectors are often so harsh with their collection methods; if they can’t collect the money owed by the debtor, they lose the money they put up to buy the debt! However, some debt collectors get a bit greedy with this process, and have been known to use extreme (and unlawful in some cases) methods for obtaining money from debtors. This is usually done by continuously contacting the person who owes money and demanding the payment. This is called bill harassment.

Types of Bill Harassment
It’s strange to think of debt collectors as being creative, but it can’t be ignored that many strategies have been developed by these agencies seem to be very effective. It’s the nature of their business, they HAVE to be creative and form effective strategies or it wouldn’t be a financially worthwhile endeavor. It’s important to note that most of these collection tactics are effective due to their unexpectedness. A debt collector can only get the jump on you if you don’t know what to expect. Knowing their strategies is the key to parrying their efforts. Some bill harassment tactics debt collectors may use can include:

Threatening Calls- this is the most common collection method and is also called Phone Harassment. It can include rude language and intrusive demands. Callers will sometimes threaten to involve the authorities if a bill is not paid. Sometimes the threat is open ended, “pay up, or else”.

Contacting You Family- one particularly intrusive method is to pry into your personal life by contacting your family members about the debt. The ploy here is to annoy your loved ones to the point where they also get on your case about paying the bill, adding additional pressure to your situation.

Lying and Bullying- another method commonly used in bill harassment, which focuses on scaring the debtor into paying the debt. Bill collectors have been known to lie about the total amount owed in order to secure a more sizable profit from the transaction. It’s not uncommon for 3rd party agencies to tack on extra fees to your debt without telling you. This scare tactic can be used to bully people into paying extra money that they don’t actually owe.

Continuous Calling- this method aims to wear you down with the shear volume of calls you receive about your debt.

Is Bill Harassment Illegal?
Some of the above mentioned methods, though commonly used, violate the Fair Debt Collection Practices Act (FDCPA) and are against the law. Do you know your rights?

You shouldn’t have to deal with debt collectors who are breaking the law to get what they’re after.  Take a few minutes if you are being hassled to understand your rights.

What have your experiences been if you care to share?  If not drop an anonymous comment.

Photo by: Elwillo