Archives for December 2014

A proposed New Years resolution: review finances and plan ahead; if bankruptcy might be an option, do not ignore it

Most businesses and individuals we see have plodded along for years with mounting unresolved financial problems. Too often, through a lack of careful thought and planning, they make matters worse. So herewith our modest proposal for the new year:

1. Do a year-end review of what your earnings were and where they went. If it was a good year, will that continue? What will be different this year coming up? Do we have to adjust our spending?

2. Look at what may have caused trouble last year, and work out a plan how to avoid it happening again. If bad luck or a bad call has put you or your business in a bind, work out a plan to get out of the bind. Maybe the plan involves paying down debt. Maybe a bankruptcy or other debt relief should be considered as an option of last resort.

3. Do a budget, or cash flow projection, so you have some idea what has to be spent each month, and what will be coming in. Many people avoid this for several invalid reasons:

a. “We don’t have exact figures for all our expenses”. Folks, the numbers do not have to be exact. Give it your best guess. Then with those figures in place, you can compare them to what is actually being spent.

b. “Those expenses do not come up every month-how are we supposed to put a number on them?” Examples are auto repairs, medical expenses, equipment repairs or replacement, home repairs. The trick is to look back and figure out how much is spent over a longer period, say a year, then convert that to a monthly figure. Most people know how often they have to replace tires on a car and what that costs. Say the figures here are $500.00 every 3 years. The monthly figure is 500/36 or $13.90 per month. The goal is get a working figure in place for planning purposes.

c. “My income is never the same” Response here is the same as above. Put together an average. Some months will be better, some worse. So long as you stick to the plan, over time it all works out.

d. “I know I am in trouble…why do I have to do this? It’s depressing.” What is depressing is being out of control. A budget is the first step in a plan, and a plan is the first step in taking back control of your life. No matter than you are running short each month. At least you know where you are, and can know what needs to be done to set things right.

4. Develop a plan and consider all alternatives. Bankruptcy is a choice that few want to make, but it is an alternative to learn about. Whether or not it is something you do, knowing what is involved and how it works for you can avoid your making things worse needlessly.

All these are tasks you need not do alone. Advice from qualified professionals may be the best money you spend. Talk to your accountant. Assemble the needed records. Talk to a qualified bankruptcy specialist not just about bankruptcy, but also some ways to avoid it.


Avoiding the debt trap: high-interest car title loans

For most people, reliable transportation is the key to survival. Without a way to get to work, there is no income to pay for food, rent or mortgage payments, and the other essentials. But few people have the cash to buy a car outright. And with poor credit or poor planning. the quest for a car can become a trap in itself. But there may be a way out…

Remember the subprime mortgage fiasco? Anyone who was breathing and had some income could buy a home with little or no money down. Now the same thing is happening with car loans. But these loans often come with very high interest. Those who have not done a budget to know how much they can afford can get trapped.

Even worse are the “title loans”. Just as many states have outlawed “payday loans” with high interest and never-ending payments, shrewd subprime lenders and the investors that back them have come up with a new twist: lending money at high interest backed up by the title to your car. They have accurately concluded that most people will do anything to avoid losing a car that is essential to working and living.

The trap this creates was recently illuminated by a New York Times article, “Rise in Loans Linked to Cars is Hurting Poor” Sky high interest rates. Working people trapped by the never-ending cycle of payments. Loans advertised as “easy cash” that are anything but. Loan balances that far exceed the value of the car.

Those who, out of need or desperation, are considering these types of loans should read this article. With a bit of luck and some planning, these types of loans should be avoided whenever possible.

For those who are trapped in these types of non-purchase money car title loan arrangements and who otherwise qualify, a bankruptcy under Chapter 13 may provide relief, including reduction in loan balances or interest rates, (“cramdown”) or the alternative of buying back the car at market value through payments over as much as 60 months.

Avoiding being a fraud victim shopping during the holidays

We came across this timely article about avoiding fraud or other problems in making holiday purchases, in the December 3, 2014 edition of The New York Times:

The article is well worth reading. Too many of our clients are victims of one or another forms of fraud. We have had some firsthand dealings with some of the perpetrators. Credit card fraud and financial fraud are a continuing problem.

We wish all our readers well for the holidays and hope none of them have to deal with these types of problems. Still, forewarned is forearmed.



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