Chicago Bankruptcy Lawyer Blog

You've heard that money is the root of all evil. But lately, it seems like credit might as well be the culprit. It's said that the average American has almost $10,000 in credit card debt. While experts might argue about the exact cause of our current economic crisis, most seem to agree that a country of people spending more than they earned sure didn't help.

But I'm going to go out on a limb here and suggest that credit isn't all to blame. Maybe it's not the debt that's the problem; rather, it's the fact that most of us can't tell the difference between good debt and bad debt.

If you ask my grandma, she'll tell you that the best kind of debt is no debt at all, even if you're talking about a mortgage (my grandparents paid for their house in cash--of course, it was the 1960s and the house was under $20,000). But that isn't entirely true.

When you make an investment likely to (eventually) go up in value, it can be good debt. The best example is a house (assuming you're getting a good loan with a realistic mortgage payment). If you hold onto the home long enough, it will be worth more than when you bought it. Everyone needs a place to live, so it's not as if you're splurging--in fact, unlike with rent, you're actually gaining equity. And unlike in grandma's day, most people have to take out a mortgage for a home--we just don't have $150K or more sitting around in the bank. So in this particular situation, having debt is beneficial. (And because homes have the potential to increase in value, it's all the more reason to avoid foreclosure, if possible). Other possible good debts are student loans (you're investing in your education/career/future) and business loans.

However, the sad truth is that most of our debts are for material things, which tend to lose value. When you take out a $20,000 loan for a shiny new car, you can lose a couple thousand dollars just by driving the car off the lot. In minutes, it goes from new to (still shiny) pre-owned. Not only do you lose money in terms of value, but you also end up spending more than the original amount of the loan if it takes you a few years to pay it off because of interest but also inflation (which makes your money less valuable in the future). It's not just large purchases like cars that are the problem. Think of the pair of jeans you just bought. Would you pay full price--or even half price--if you knew that someone had been wearing them a few months first? How about your groceries--they're eaten within a week of bringing them home, but if they're on your credit card, you're paying for them long after they've been consumed.

Most everything we put on credit cards ends up costing much more than it would have in cash. To make matters worse, credit card companies charge 15%, 20%, even 30% or more in interest every time you fail to pay off the balance. If you regularly make just your minimum payment, you are only covering the interest, meaning it could be decades before you pay for stuff you don't even have anymore.

Unlike popular myths, racking up credit card debt doesn't help you build a relationship with creditors or improve your FICO score. It just puts you in the hole. When more and more of your money goes towards making credit payments, you have less in your accounts--and are therefore even more likely to use credit. It's a vicious cycle.

If you're like most Americans, you probably already have too much credit card debt. But it's not too late to change. Start paying for small purchases like groceries and gas with cash. Make some minor spending cuts here or there. It will add up. For more tips on changing your finances for the better, check out our free Financial Toolkit. Even if your bad debt is threatening to rob you of your only good debt--your home--there's still time to get help. Sign up for our free debt analysis for some one-on-one expert advice. Think of it as an investment in yourself--one of the few investments that won't cost a thing.

Since the economy began its downward spiral last September with the folding of Lehman Brothers (it seems so long ago now, doesn’t it?), it seems that all we’ve heard are stories of doom-and-gloom. If the news anchors weren’t telling us how much value the market lost one day, they were discussing how many more layoffs would happen on the next.

But this month, for first time in what seems like ages, there were some hopeful nuggets of news mixed in with the bad. In general, the stock market rose in March. Sales of new houses went up. And last month, consumer confidence was higher as well, prompting spending to take an upward turn. When people feel better, they start buying. I think it’s a good sign that the notoriously negative media is acknowledging something positive. It gives so many Americans hope that, yes, the economy will get better and that this recession will eventually come to an end. But on the other hand, I think it’s important to take the good news with a grain of salt.

It’s not so much that I’m a pessimist – I’m actually one of those people hoping the recession will be over by the end of the year. But I don’t want us to get our hopes up prematurely. Most of all, I hope the country won’t unlearn all of the valuable stuff it’s discovered over this (hopefully) brief dark period. While a lot of the damage was out of our hands (thanks a lot, Wall Street) we have to take some responsibility. As a whole, we bought houses we couldn’t afford, put everyday purchases onto our credit cards and basically lived beyond our means.

Since the economy took its tumble, consumers have made great strides. We’re driving by Starbucks and our favorite café without stopping, because we know it’s cheaper to make our own coffee and brown bag our lunch. We’re buying our groceries with cash – not credit – because we want to pay off our debt, not add to it. We’re staying in with our families on Friday night to play Monopoly, because it’s more affordable—and interactive—than going to a movie. We’re driving our five-year-old car (or riding our bike) because it works just fine, thank you, and we don’t really care what the Joneses are doing these days.

It’s been a difficult ride, but the even harder part might be still to come. Will the lessons we learned stick, even when the economy is looking bright and sunny? It’s possible, but keep in mind that it will take work. Next time you feel like you can afford to put a TV—or even the groceries—on the credit card, think it through. Remember what it’s like to fear your next mortgage bill or to watch most of your money go towards covering the 30% interest on a credit card, rather than the principal. Then think of what it’s like to be free of those things (or what it would be like to be free, if you’re still dealing with them).

Here’s another thing to think about. At Debtstoppers, our tips on saving money, relieving debt and planning for the future will be here even when the recession is not. If you ever have questions, check out one of our free community workshops in Chicago or Atlanta (see our website), browse the information on our blog and website, or order our free Financial Toolkit. Looking for more personalized help? When you sign up for a free debt analysis, we’ll schedule a one-on-one meeting with one of our finance pros to get you on the path to financial fitness. Just like eating healthy and exercising is the only way to maintain your weight once the diet is done, watching your spending is the only way to keep your finances trim once the economic squeeze has come to an end. The economy might go up or down, but we’re always here to help.

With spring break just weeks away, most people I know (myself included) have no plans to travel to a warmer climate. It seems the staycation trend is here to stay, at least for now.

If you told me a few years ago I’d be planning to hang out at home on Easter week, I probably would’ve called you crazy. Long after I graduated, I was still high-tailing it down to San Diego – my favorite quick getaway – for a week of sun and sand (not to mention fish tacos and beer). Now that seems like ages ago.

Sure, air fares are at an all-time low, but there’s still the cost of a hotel, food, a car rental, etc. In this economy, I just don’t have that kind of extra income. Hey, I’m still recovering from the splurging I did during the holidays.

I’m trying not to look at it as a budget cut, rather a choice I’m making because I’d rather save the money or spend it on the stuff I need. If I don’t pay for a vacation now, I’ll have more money to allocate towards retirement, meaning I’ll actually be able to afford the fun stuff when I’m old (though I’m booking my San Diego adventure as soon as the economy picks back up). But just because I’m not leaving doesn’t mean I can’t take a vacation. Here’s some advice, taken from my own staycation plans, on taking a break without skipping town.

If possible, take a few days off from work. If you’re cutting back on vacations, you likely have a lot of time built up – why not use it before you lose it? Of course, I also realize most of us are walking on eggshells around the office because of the possibility of layoffs. If you know your boss won’t go for a vacation right now, at least give yourself a mini-break on the weekend. Turn off your cell phone and step away from the computer.

Once you’ve temporarily severed yourself from the work world, it’s time to get outside.

Wherever you live, chances are you get tourists right in your town, or at a destination less than a day away. Find out what where they’re headed and why. I’ve found that the most interesting things about my home are often right under my nose – I just don’t notice because I drive by them every day. Local hotel lobbies will often have pamphlets and flyers on stuff to do nearby. You can also type your town or city into the Google search bar along with words like sightseeing, attractions, tour, museums, etc. And try using the word “free” – you might be surprised at the cool options you find.

Don’t forget the potential of in-home entertainment. Do you normally dream of somewhere tropical? Have a Cancun “escape” in your backyard or patio. The cost of taco ingredients and Mai Tai mix is a heck of a lot cheaper than a flight to Mexico. Wishing you were in Las Vegas? Invite your friends over for a poker night and have them bring potluck (that will be the authentic Vegas buffet).

Saving money doesn’t have to be a drag. For tips on ways to have a good time on a budget, take a look at our Give Yourself a Raise flyer, one of the money-saving tools in our free Financial Toolkit (you can order one here) or join our DebtStoppers Community for access to even more financial information. Worried that you’re too deep in debt to benefit from advice alone? It’s never too late. Sign up for our free one-on-one debt analysis or reserve a spot at our upcoming free community workshops (check our website for dates). You’ll learn how to save so you can start paying down debt and preventing consequences like foreclosure. Lifting your financial burden will ensure that when you do take a vacation, you’ll have the peace of mind to truly enjoy it.

Maybe you’ve heard of the term jingle mail. It’s when a homeowner mails her house keys (hence the jingling) to the mortgage lender to show she plans to walk away from her house – and outstanding mortgage – to avoid the hassle of foreclosure. Most often, jingle mail stories involve homeowners in an upside-down mortgage – when their home’s value has fallen well below the amount of the original loan. When someone owes far more than the property is worth, it can seem futile to keep making payments, especially when they can barely afford them.

It’s hard to say whether the number of walking homeowners has actually increased or if the news media is just feeding rumors. With an estimated 20 percent of U.S. homeowners facing a foreclosure, it’s not surprising that some would simply throw in the towel. But I’m here to tell you that it’s not as easy as it sounds. First, it’s not exactly legal. Even if you’ve fallen victim to the crumbling housing market and maybe a bad loan (you wouldn’t be the first), you still have to follow through on your promises (unless, of course, you can prove your bank used predatory lending practices – not exactly a piece of cake). Second, it will destroy your credit –and you won’t have a house to live in while you work to build it back up.

No matter how bleak the financial situation, there are always other options, all of them smarter and more beneficial than walking away. First, there’s refinancing and loan modification. It’s a good idea to speak with your lender before making any rash decisions, as some lenders are willing to forgive or at least defer the amount you owe over the value of your home. If that fails (or you’re stuck with an uncooperative lender) there’s always Chapter 13 bankruptcy, sometimes the most sensible solution.

If you can use one of these means to hang on to your home long enough, the market will begin to recover (though no one can guarantee when it will start, or how long it will take). It’s worth a shot. Wouldn’t you rather have either a) a house or b) money in your pocket from selling your house? When you walk, you surrender all of your options.

Unless you’re a financial expert yourself, your best bet is to seek advice from a pro before making a decision. If you absolutely must sell, there are ways to do so without giving up (for example, short sales, in which you get the current value and your lender forgives the rest). If you’re set on keeping your house, bankruptcy is often the surest solution. It will ensure you legal protection (and is the only guaranteed way to keep your home) as you make lowered payments as part of the Chapter 13 plan.

Here at Debtstoppers, we can walk you through the process right for your family. To speak with our experts, simply fill out our free personal financial evaluation or sign up for one of our upcoming community workshops (dates are posted on our website). You can also browse information about foreclosure and bankruptcy. You wouldn’t walk across a street without looking both ways first, right? Well, why walk away from your home without looking at all your options? It’s not a matter of what you have to lose, but of what you have to keep – your house.

On a beautiful day like today—maybe not the warmest, but pretty sunny in most parts of the country—you might expect people to flock to the outdoors. But it doesn’t always happen that way. Even when the sun is shining in my town, the neighborhood kids head straight for their living rooms after school to play video games or watch TV. It’s not just the kids, though. Their parents park their two separate cars after work, go inside and often don’t come back out again until they leave for work the next morning.

I thought I’d be a lot older before I said this, but here goes—things were different back in my day! If it wasn’t raining, my mom kicked my brother and me out of the house and told us to “go play.” And we didn’t mind! All the action was outside anyway.

But aside from breathing in the fresh air and soaking in the sun, there are actually some financial benefits to being outdoors that a lot of people miss out on nowadays. For instance, you can:

Get a workout – for free

A few months back, I sold my treadmill for a quick buck (actually, a cool $300). Since then, I’ve been burning my calories outside, either by walking or jogging through the neighborhood or doing yard work. Who needs to spend a fortune on gym memberships or exercise equipment when all you have to do to work up a sweat is go outside? And if you have kids, buying them a football to toss around outdoors is a lot cheaper than the latest video game.

Do it yourself

If you have a yard—or even a small patio with enough room for pots—you can grow a vegetable garden. When the weather cooperates, consider drying clothes outside on a line. And why pay for a car wash when you can do the work yourself outside? (And in my book, washing a car also counts for exercise.)

Save money on gas

If you’re within a reasonable distance of work—or at least of the bus or train station—consider commuting by bike. It saves gas and puts less mileage and wear on your car (and is yet another form of exercise). If leaving your car at home is out of the question, how about walking or biking to the grocery store? It doesn’t cost much to buy a wire basket for your bike. Looking for some weekend entertainment? How about a walk or ride to the park or movie theater (bonus if you make it early enough for the matinee price) on Saturday?

Save energy

Open up the windows on a nice day to warm up the house without using the heater. Alternatively, you could use a fan to suck hot air out of the house on a scorching summer day.

Want even more tips on saving money? Order our free Financial Toolkit to find out how to keep up to $20,000 of your income each year by making minor changes. In need of a more immediate way to save? Sign up for our free debt analysis and we’ll show you how to change your financial future for the better. Because when you gain control over your debt, every day will feel a little sunnier.

Maybe it’s because I’m not Irish, but the most I’ve ever done to celebrate St. Patrick’s Day was have a glass of Guinness. Potatoes, cabbage and corned beef just never seemed that appetizing.

But I was shopping with a friend the other day for her annual St. Paddies dinner when I realized I may have been too harsh on the Irish. They had one thing right: you just can’t get more affordable than potatoes with the occasional carrot or head of lettuce. And stew meat and corned beef are some of the cheapest cuts at the store. When my friend’s meal is finished, it’s going to have cost just a buck or so per person (counting the leftover stew she’s going to freeze for several future meals).

It’s not just the Irish, either. Poor countries the world over have always had to be creative with food because their options were so limited. Less tender cuts of meat they can’t sell, but can simmer in a stew until it falls off the bone or cure, smoke or grind into sausage. Vegetables a peasant family can easily grow themselves (root vegetables like potatoes are favorites because they’re so starchy and filling, you don’t notice there’s not that much on your plate to begin with).

In America, however, it’s a different story. Most of our grocery stores are packed with options from all over the country and even the world. Elaborate end-of-aisle displays and special sales are all designed to get us to spend more than we should. We have gourmet shoved in our face every day, even if we can’t afford it.

Maybe I won’t be making corned beef anytime soon, but in honor of the Irish, I’ve vowed to pay more attention to the food I put in my cart. This St. Patrick’s Day, my family is eating baked potatoes—filling, but cheap. Want to cut down your grocery bill as well? Here’s some advice.

Learn to tune out a lot of your options. For instance, snack food isn’t necessary. Not only does it add extra calories and usually lacks in nutrition, but it can get expensive. A bag of chips might seem cheap, but if your family can tear through it in a day or two, it will add up before you know it. While you’re at it, why buy name brand food when you can get something nearly identical for half the price? My family significantly cut down our bills by switching to generic for pantry items like cereal, soup, sugar and flour. And instead of getting frozen, pre-packaged dinners for $4-5 a pop, make your own meals and freeze the leftovers for a much smaller cost.

Shopping smart just takes a game plan. Make a list of what you need before you go to the store so you don’t get suckered into any spontaneous spending. And, you probably already know this, but never go shopping hungry—you’ll leave the store broke, guilty and with way more food than you can possibly eat.

For more tips on smart shopping, send away for our free Financial Toolkit or mark your calendar for our upcoming community workshops (not only are they complimentary, but attendees will get a hot meal on-the-house and the chance to win a new laptop). If you still need some guidance, feel free to register for our one-on-one debt analysis, a no-cost hour-long meeting with one of our professional debt relief attorneys. Loads of free advice that will help save you money? I’ll raise my green beer to that any day.

When you’re living paycheck to paycheck, it’s easy to blow off savings. As a reformed over-spender, I thought I had developed a solid saving routine—until I looked at my checkbook recently and realized I haven’t transferred any money to my savings account for a couple months. Back to the drawing board, I guess—I think it’s finally time to sign up for automatic deposit.

Sure, I’d like to keep all the money I earn. But I know it’s not realistic. Our crumbling economy has made it more essential than ever to have a cash cushion. Most importantly, you should have an emergency fund—a few months of income saved up so that if the worst happens—you lose your job, have a medical emergency or the car breaks down—you’ll be able to manage.  

After you’ve stocked up the emergency fund, the rest can go towards paying down debt. If it wasn’t for getting my savings act together a few years back, I’d still be carrying the thousands of dollars of debt I racked up spending recklessly in college. Back then, I couldn’t get approved for an apartment let alone dream of owning my own home. Now that my debt’s paid, I need to keep saving for a house, retirement (don’t want to be a working grandma, after all) and for those dream vacations I want to take someday. Here are some tips that worked for me—and that I hope can keep working.

Trade your credit card for cash

Paying with plastic makes it too easy to spend more than you bring in each paycheck—and to continue adding to your debt burden. Withdrawing only what you need from the ATM will make it easier to prioritize purchases. I know that when I put myself on a cash-only diet and my wallet is nearly empty, it’s a lot easier to pass up the drive-thru java station on the way home from work. I’d rather save the money for groceries and gas, which I know I need no matter what.

Pinch pennies

Now that you’re using cash, drop your leftover coins into a jar every week or so. I don’t skimp on mine—I like to put quarters and dimes in there along with pennies and nickels. Seeing the jar fill up is a physical reminder of how discipline can pay off. Roll it up and turn it in every month, then use the money to pay off your credit card debt. I still put my change into the jar. When I’m good about saving part of my paycheck, I sometimes use the jar money just to treat myself. When I forget to save otherwise, I put the jar earnings into my account and feel better knowing that I at least saved something that month.

Automatic savings

If you earn a steady paycheck, consider having a portion of your check deposited automatically into your savings account. I’ve used this in the past, and I’d like to start doing it again. When you never see the money to begin with, it’s like it doesn’t exist. There’s no urge to spend it and no resistance to saving it.

At this point, you might be thinking, How exactly am I supposed to save when I’m scrimping to make ends meet as it is? I know what you mean. And if you’re consistently spending more than you earn, suddenly living on less will probably be difficult. First, you’ll first need to budget. Don’t let the “B” word scare you—it’s really not as painful as it sounds. Budgeting is just taking a look at everything you’re spending on to see where you can do without, or at least cut back. Maybe you buy bottled water. Why not refill a reusable bottle instead? Spend a fortune at the grocery store? Try going meatless a couple nights a week (meat is one of the most expensive items you’ll buy at the store). Find the least painless places to make changes and then do it.

Still overwhelmed? Don’t worry. We’ve done a lot of the work for you. Order our free Financial Toolkit to learn how you can save up to $20,000 a year by tweaking your spending habits, among other tips. Want a more personalized plan? Sign up for our free one-on-one debt analysis. Saving is often intimidating at first, but it’s really all about momentum. I liken it to climbing a hill or mountain—it’s an uphill battle initially, but once you get a steady pace going you build momentum and it gets easier. And eventually, you get to the point where the rest is downhill. Not to mention you have a great view.

I never used to understand yard sales. While my boyfriend saw them as treasure hunts, I just saw a bunch of junk spread over somebody’s lawn. Not that I minded getting a bargain or buying used—I like a good deal as much as the next person—but I didn’t like the idea of first wading through a bunch of stuff I didn’t need (but might be tempted to buy). Not only did I never attend yard sales, but I never held them either.

But when I recently decided to purge some of my belongings in exchange for extra cash, I had to let go of my reservations. First, though, I tried the Internet. Unlike a yard sale or pawn shop, eBay and Craigslist allow access to millions of potential buyers all over the world—so you can get prices closer to the true value of your items (that is, if there’s a market for them). One week I listed a lot of name-brand stuff in my closet—some still with tags—as well as some CDs and DVDs on eBay and made close to a hundred bucks! But the next week I just about broke even with some lesser known clothing, spare computer parts and other knick knacks.

Next up, I tried Craigslist. Unlike eBay, it’s free to list your item (eBay requires listing fees and takes a percentage of the sale), but in return it’s up to you to handle all the details. I decided to hock a treadmill—bought when money flowed a little more freely—that was just taking up space in my house. It took a few weeks and a few phone calls, but I got $300 for it (of course, now I have to exercise outside, where it’s a lot colder, but I don’t mind a little healthy discomfort in exchange for cash).

Now, the Internet hasn’t made yard and garage sales totally obsolete. All the stuff that wasn’t valuable enough to make it online is going on our front lawn as soon as the weather warms up. We’ll just make sure to post lots of signs and price everything a bit higher than what we expect to get. Don’t want to sell ourselves short!

If money is tight and the closets are overflowing at your house, I’d definitely recommend selling a few things. Not only has selling our stuff provided some extra padding in the bank account, it’s also cleared out our house. Even though we haven’t made any major home purchases in quite some time, our place actually looks better than ever because it’s less cluttered. We can better appreciate the things we really love and use because they’re not surrounded by junk. It’s like the famous quote by architect William Morris: “Have nothing in your house that you do not know to be useful, or believe to be beautiful.”

That said, your home shouldn’t be totally bare. Though it’s admirable to let go of material things, everyone deserves some keepsakes and comforts. Stuff to remind you of the good times, stuff that you worked hard to earn. If you’ve reached that point where you worry you might have to get rid of it all—the furniture, the car, even the house—don’t hesitate to get help. At DebtStoppers, we have free tips and workshops to get you back on track. With our free debt analysis, we’ll get your situation sorted out and your finances on track—so you don’t have to sell the clothes off your back.

Watch the news or read the paper nowadays and you’d think it was financial Armageddon. Just this week, the media started tossing around the dreaded “D” word (depression) and comparing modern photos of people lined up outside the unemployment office to pictures of 1930s-era men in suits and hats doing the same thing more than 70 years ago. Not very comforting—it’s adding fuel to the fire, if you ask me.

We get it. Yes, the economy is bad. Yes, it’s been a lot better. Now can we please just deal with it and move on? I realize this is not so easy to do when you need money for the mortgage and/or you’ve just lost your job. But rather than get overwhelmed by the enormity of it all—as the media seems to have been hoping for since day one—let’s take it one day at a time.

It’s what my mom used to tell me when I was buried in schoolwork and finals were coming up—or when I was danger of missing a deadline or two at my first fast-paced job. You can sweat about it or you can tackle it calmly—it’s not going to change the fact that it’s happening, so why make yourself suffer more by freaking out? In fact, when you calmly break down tasks into one step at a time, you’re more likely to succeed because you’re doing it with a clear and rational mind.

So when you’re feeling the burden of the recession—as so many of us are—try taking it a day, and a problem, at a time.

Lost your job? Don’t give up hope. While more than 7% of people are unemployed, that means over 90% are still working—there are still jobs out there. When the economy picks back up (which it will eventually) there will be even more. For now, do what you can—it’s all you can do. Touch up your resume, build a portfolio of your best work and start searching. If you didn’t love your former job, this is your chance to make over your work life. Is there a career that’s always interested you? Can you get a part-time job while you intern or take classes in that field?

Of course, it’s understandable that you might have to take another job as soon as you find one—maybe even one that isn’t your favorite—because you need to put food on the table. So take the time to appreciate the positives of unemployment, whether it’s more time with your kids, the chance to catch up on reading or the time to reinvent yourself.

I hope that when things do pick back up, they’re a bit different—that we never quite return to our workaholic, keeping up with the Joneses, fast-paced career culture.

Then there’s the mortgage. What if you’re one of the many Americans facing foreclosure? Maybe it’s because you lost your job. Maybe you’re one of the lucky ones still earning a steady paycheck, but you’re too deep in debt. Maybe you bought high and now you owe more than the house is worth. These are all common tales, but they don’t have to have sad endings.

Even if you’ve already been served a notice of foreclosure, there’s still a way to stop the process—Chapter 13 bankruptcy. Once you file for Chapter 13, you’ll be able to work out a payment plan for your mortgage and other debts (find out more about filing here). If the plan is court-approved, you can keep your home if you make the agreed smaller payments over a five-year period.

There truly is a solution to any financial problem—but you might have to stop panicking to find it. Do you need to allocate more money towards groceries and less towards creditors? More towards saving for the future and less towards the present? It can be done with a plan. If you need guidance along the way, give us a click or a call. With our free one-on-one debt analysis, we can get you steered in the right direction. We can even help walk you through the next steps—be it for a budget or bankruptcy. The future—and, hopefully, a better economy—is coming, regardless of how we each react personally right now. So why not make it easier on yourself and take it one day at a time?