The latest credit industry polls show that on average American's are 130% in debt. That means that 130% of their monthly income goes to debt or debt reduction. We are not suggesting you ignore your credit card or car payments, but if your crystal ball shows that your war chest is irreplaceable over the next 3 to 6 months; it's time to consider an alternative approach (i.e. preparation for bankruptcy, or foreclosure) and stretch the dollars you do have in the interim to cover Shelter, Electricity, and Food. Compare what your grandparents would have done; pay for the big screen TV or make sure there is food in the fridge? The average four (4) person U.S. family consumes about $1,000 in food per month- that is your big screen TV! With the economy in free fall and unemployment on the rise, over 5 million homeowners are facing an unfortunate reality of a lost job and tough times ahead. If you're one of these American's, you have already looked in your crystal ball and realized how far you can stretch what you have in cash assets. Incorporating your lost income, unemployment, or in many cases no unemployment in tough times ahead. We must consider life's essentials: Shelter, Electricity, and Food.
Unsecured Debt: This is your credit cards. Pick up the phone, call your Credit Card Company and say, "I am broke, am considering declaring bankruptcy and need to speak to a Supervisor". After you do that, ask the supervisor if you can do one of the following: (1) Make a one-time payment to satisfy the debt; (2) Request a reduction in payment, making sure that the reduction includes a reduction in your monthly interest payments. Have your attorney contact the Company if they say "No" to either (1) or Don't be shy!! Don't be embarrassed!! Disengage yourself and act as if you're calling for your teenager and you just found out she bought $6,000 purse online and you want to send it back. By disengaging yourself your emotions are restrained, and you can be more objective to getting the best deal.
Bankruptcy: After you have completed re-negotiating your unsecured debt (credit cards), and secured debt (boats and cars); you can now re-evaluate your monthly financial situation. If it looks and feels a little bit better, then be positive. If after a few days, or even months, it seems to have had little to no impact, then it may be time to declare bankruptcy. Bankruptcy is no longer the end of diplomatic relations with your creditors, but it does require that you seek an attorney if you want to maximize your effectiveness in what assets you are allowed to maintain and not sell. If you declare bankruptcy, but want to keep the car you are still paying for then you can keep it out of bankruptcy. As long as it is secured by another creditor, you do not have to declare bankruptcy on the item. Normally in bankruptcy, unless a car has a secured loan on it outside of bankruptcy, you are allowed to keep a car with a value of up to $5,000 to avoid a forced sale if you own the car free and clear. Consult an attorney for the best approach when declaring bankruptcy or debt reduction to fully understand your rights prior to declaration.
Bankruptcy: After you have completed re-negotiating your unsecured debt (credit cards), and secured debt (boats and cars); you can now re-evaluate your monthly financial situation. If it looks and feels a little bit better, then be positive. If after a few days, or even months, it seems to have had little to no impact, then it may be time to declare bankruptcy. Bankruptcy is no longer the end of diplomatic relations with your creditors, but it does require that you seek an attorney if you want to maximize your effectiveness in what assets you are allowed to maintain and not sell. If you declare bankruptcy, but want to keep the car you are still paying for then you can keep it out of bankruptcy. As long as it is secured by another creditor, you do not have to declare bankruptcy on the item. Normally in bankruptcy, unless a car has a secured loan on it outside of bankruptcy, you are allowed to keep a car with a value of up to $5,000 to avoid a forced sale if you own the car free and clear. Consult an attorney for the best approach when declaring bankruptcy or debt reduction to fully understand your rights prior to declaration.
Foreclosure: After you have addressed your secured and unsecured creditors, it is time to address your mortgage. In Florida, we have the protection of the Homestead Exemption Statute. Without going into too much detail, what it essentially means is that unless you have a mechanics lien, or a judicial decree, nobody can take your home away but your mortgage company (unless eminent domain issues apply). Just as you did with your secured and unsecured debt, you want to call your mortgage company. First, you pick up the phone and say, "I lost my job, I have no money and I believe I am not going to be able to pay my mortgage shortly." Your options are similar as before: (1) Lower my interest rates or monthly payments, (2) Restructure my loan agreement, or (3) Talk to my attorney because I can't afford my house. After this phone cal is made, you need to consult an attorney about the next step to take. You need to consult an attorney before you make one more house payment. Do not worry because you are not going to get kicked out of your house tomorrow. We have all seen claims that can be postponed indefinitely. The fact is nobody really knows how long it can be postponed, as the courts begin to be clogged with foreclosures; yet, if you have to pay a power bill or your mortgage at this point - pay your power bill. The electrical company can cut you off, there is no laws that say they have to put you back on. The power company is absolute. You consumed the power, so consider your wallet wisely if you know your going to go under with your mortgage conserve your assets to take care of the same things our grandparents would a roof over your head, electricity, and food. It is the ultimate fall back situation, but faced with the alternative many of us will have little choice but to recess until the billion dollar budget plans put in place by the federal government, and a general credit stabilization takes place.
There is no need to be ashamed nor afraid; you are a survivor and this is part of surviving. Material things can be replaced. See your icebergs before they arrive, and start planning ahead. Keep a three (3) month plan in place, if you get within the ninety (90) day period and do not see the light at the end of the tunnel, you must hunker down and take care of the primary things that support life - shelter, electricity, and food.
Unsecured Debt: This is your credit cards. Pick up the phone, call your Credit Card Company and say, "I am broke, am considering declaring bankruptcy and need to speak to a Supervisor". After you do that, ask the supervisor if you can do one of the following: (1) Make a one-time payment to satisfy the debt; (2) Request a reduction in payment, making sure that the reduction includes a reduction in your monthly interest payments. Have your attorney contact the Company if they say "No" to either (1) or Don't be shy!! Don't be embarrassed!! Disengage yourself and act as if you're calling for your teenager and you just found out she bought $6,000 purse online and you want to send it back. By disengaging yourself your emotions are restrained, and you can be more objective to getting the best deal.
Bankruptcy: After you have completed re-negotiating your unsecured debt (credit cards), and secured debt (boats and cars); you can now re-evaluate your monthly financial situation. If it looks and feels a little bit better, then be positive. If after a few days, or even months, it seems to have had little to no impact, then it may be time to declare bankruptcy. Bankruptcy is no longer the end of diplomatic relations with your creditors, but it does require that you seek an attorney if you want to maximize your effectiveness in what assets you are allowed to maintain and not sell. If you declare bankruptcy, but want to keep the car you are still paying for then you can keep it out of bankruptcy. As long as it is secured by another creditor, you do not have to declare bankruptcy on the item. Normally in bankruptcy, unless a car has a secured loan on it outside of bankruptcy, you are allowed to keep a car with a value of up to $5,000 to avoid a forced sale if you own the car free and clear. Consult an attorney for the best approach when declaring bankruptcy or debt reduction to fully understand your rights prior to declaration.
Bankruptcy: After you have completed re-negotiating your unsecured debt (credit cards), and secured debt (boats and cars); you can now re-evaluate your monthly financial situation. If it looks and feels a little bit better, then be positive. If after a few days, or even months, it seems to have had little to no impact, then it may be time to declare bankruptcy. Bankruptcy is no longer the end of diplomatic relations with your creditors, but it does require that you seek an attorney if you want to maximize your effectiveness in what assets you are allowed to maintain and not sell. If you declare bankruptcy, but want to keep the car you are still paying for then you can keep it out of bankruptcy. As long as it is secured by another creditor, you do not have to declare bankruptcy on the item. Normally in bankruptcy, unless a car has a secured loan on it outside of bankruptcy, you are allowed to keep a car with a value of up to $5,000 to avoid a forced sale if you own the car free and clear. Consult an attorney for the best approach when declaring bankruptcy or debt reduction to fully understand your rights prior to declaration.
Foreclosure: After you have addressed your secured and unsecured creditors, it is time to address your mortgage. In Florida, we have the protection of the Homestead Exemption Statute. Without going into too much detail, what it essentially means is that unless you have a mechanics lien, or a judicial decree, nobody can take your home away but your mortgage company (unless eminent domain issues apply). Just as you did with your secured and unsecured debt, you want to call your mortgage company. First, you pick up the phone and say, "I lost my job, I have no money and I believe I am not going to be able to pay my mortgage shortly." Your options are similar as before: (1) Lower my interest rates or monthly payments, (2) Restructure my loan agreement, or (3) Talk to my attorney because I can't afford my house. After this phone cal is made, you need to consult an attorney about the next step to take. You need to consult an attorney before you make one more house payment. Do not worry because you are not going to get kicked out of your house tomorrow. We have all seen claims that can be postponed indefinitely. The fact is nobody really knows how long it can be postponed, as the courts begin to be clogged with foreclosures; yet, if you have to pay a power bill or your mortgage at this point - pay your power bill. The electrical company can cut you off, there is no laws that say they have to put you back on. The power company is absolute. You consumed the power, so consider your wallet wisely if you know your going to go under with your mortgage conserve your assets to take care of the same things our grandparents would a roof over your head, electricity, and food. It is the ultimate fall back situation, but faced with the alternative many of us will have little choice but to recess until the billion dollar budget plans put in place by the federal government, and a general credit stabilization takes place.
There is no need to be ashamed nor afraid; you are a survivor and this is part of surviving. Material things can be replaced. See your icebergs before they arrive, and start planning ahead. Keep a three (3) month plan in place, if you get within the ninety (90) day period and do not see the light at the end of the tunnel, you must hunker down and take care of the primary things that support life - shelter, electricity, and food.
About the Author:
James Kunkel is a contributory to the AIM Law Group. The AIM Law Group's practice areas include debt reduction, bankruptcy, and Orlando Foreclosure Attorneys The AIM Law Group Foreclsure prevention Lawyers have offices offices in Cleveland and Akron We work with the Cleveland Bankruptcy lawyers
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