Chicago Bankruptcy Lawyer Blog

Imagine having the best interest rate, decent loan terms and an affordable payment - but still losing your home to foreclosure. It might sound nonsensical, but it's happening to millions of Americans right now.

Rates are the lowest they've been in years. Uncle Sam has coughed up $75 billion in taxpayer money to encourage banks to modify mortgages (though, unfortunately, it's often more lucrative for banks to keep you delinquent). But foreclosures continue to rise because of a simple fact: Americans are in the hole.

Most of us have tens of thousands of dollars worth of credit card, medical and IRS debt. To make matters worse, the cost-of-living is going up while unemployment is on the rise. Our wallets are shrinking faster than ever - and we have to decide how to allocate what's left.

Continue reading "Bankruptcy Stops Foreclosure By Getting to the Root of Mortgage Problems" »

When I first discovered the wonders of the debit card, I thought I was in heaven. Here was a form of payment as convenient as credit, yet seemingly as safe as cash.

Unlike paper money, it didn't require me to plan a trip to the ATM. But unlike credit, it didn't charge me interest or encourage me to spend beyond my means. I used it at the grocery store, the gas pump, the coffee shop - anytime I didn't have cash but didn't feel like adding to my debt. It seemed too good to be true. Turns out that it almost was.

One day I opened my bank statement and my jaw about dropped to the floor - what should have been a $5 charge for coffee and a muffin appeared as $35. Apparently, I had accidentally debited my snack before my paycheck cleared and my bank decided to make a pretty penny off my error. How did they do it? Through overdraft protection.

Continue reading "Debit Can Help Rein In Debt As Long As You Don't Overdraw" »

I've got good and bad news. First, the bad - credit card companies are raising minimum payments. Now, for the good - credit card companies are raising minimum payments.

No, I haven't gone crazy. You see, higher minimum payments are actually a blessing in disguise. Yes, they might be more difficult to manage if you're accustomed to paying less. But in the long run, being forced to cough up more cash can actually save you money.

Here's how. For the last several years, credit card companies commonly set minimum payments at just 2-3%. For most folks, that rate barely covers the interest levied on their balance. And if most of your payment is going to interest, you're not doing much to reduce the principal - the original payment you made for your purchases. Credit card companies have you right where they want you. The minimum is small enough that you're unlikely to default - and you're given the (false) impression you're not paying that much. On the other hand, they can guarantee you'll be paying them for decades.

Continue reading "Chicago Bankruptcy Lawyers Caution Against Paying Minimum Balance" »

While once upon a time a bankruptcy filing might have meant embarrassment and shame, now it means something else - a fresh start. Those who file for bankruptcy today are intelligent, responsible - heck, they're even famous.

In case you need more proof that the stigma is finally fading, here it is - even the Chicago Cubs are considering filing bankruptcy. The Cubs still pack every game. Wrigley field is an American icon. If one of the oldest and most well-known baseball teams in history can file for bankruptcy, why can't you?

In the case of the Cubs, it's not about insolvency, according to the above video featuring DebtStoppers attorney Patrick Semrad. The team isn't broke - instead, the bankruptcy is a shrewd business move that will allow a buyer to take on the franchise with no liabilities - no chance for creditors to come back and take legal action to recoup debts.

As an individual, you can't file for Chapter 11 like the Cubs - that's a business bankruptcy. But, just like the team, you can gain the same benefit of legal protection.

Continue reading "Take a Bankruptcy Cue From the Chicago Cubs" »

Colleges hold your future (and your tuition) in their hands, so you'd think they'd have your best interest in mind, right?

Surprisingly, no. College is where many people - yours truly included - start the downward spiral into credit card debt. Banks set up recruiting stations on campus to entice students to sign up for credit cards. It's where I got my second card sophomore year (I got my first the summer before college with the encouragement of my parents - gee, thanks Mom!). So why would the school allow such a thing? Because they receive a kickback when you use the card - and the more students who sign up, the more money they get. In some cases, the credit card company actually pays your college to provide a list of student names.

According to the New York Times, most college seniors leave with $2,500 in debt - and that's in additional to nearly $20,000 in student loans. Not exactly representative of the freedom mostly associated with graduation.

Continue reading "Bankruptcy Can Relieve the Debt You've Been Carrying Since College" »

When I was a kid, I based a lot of decisions on what my friends thought was cool. If they were on the softball team, I wanted to be on the softball team. If they were dying their hair pink and wearing pleather pants, I became an unfortunate victim of fashion right alongside them. My mom's catchphrase from my childhood was: "If everybody else jumped off a bridge, would you?"

Luckily, it didn't take me long to realize it's a lot more fulfilling to march to the beat of your own drummer. And I thought that's exactly what I was doing as an adult until I realized I was still a follower in one important arena of my life - my money habits.

Several years ago, I had a lot of credit cards. And I used them for almost every purchase. Seriously - other than birthday money from my parents, I survived on plastic and plastic alone. And, as you can imagine, I racked up quite a lot of debt. I'd like to think that it was because I didn't know any better. Or because, poor college student me, I couldn't afford to live on cash. But that's not true. Though I was definitely in denial, I knew what I was doing. Because whenever I used credit to spend beyond my means, I'd get a sinking feeling, and questions would start popping up in my head, like: Is my debt going to keep growing? How will I pay it all off? Will I ever be able to afford a house - or be able to retire?

Continue reading "Don't Follow the Crowd When It Comes to Your Finances" »

The foreclosure saga continues. This week, the Washington Post reported that unemployment has officially overtaken subprime mortgages as the leading cause of foreclosure. An estimated 1.8 million homeowners could lose their house to the bank this year, compared to last year's 1.4 million.

Folks without jobs have an extra hard time qualifying for loan modification (so much for the federal government's modification program). As if that's not bad enough, lenders like to tack on late fees for delinquent borrowers - so that when they do find work again, they have to pay a lot more than just their missed mortgages.

But that's enough negativity for one post. How about some good news? Here it goes - even if you're dealing with unemployment, you still don't have to give up your house!

What's the catch? You need to act fast.

Continue reading "Bankruptcy Can Protect the Unemployed From Foreclosure, Advise Chicago Attorneys" »

There's a new law to protect consumers on the horizon - and credit card companies aren't exactly taking it sitting down.

In anticipation of next year's Credit Card Accountability Responsibility and Disclosure Act - which aims to end hidden fees and unfair term changes - credit card issuers are looking for last-minute ways to squeeze money out of consumers before their clock runs out. How are they doing it? Well, one method is by switching your card from a fixed rate to a variable rate, according to a recent story.

It might not seem like such a big deal now, since the prime rate (what creditors use as a base to set variable-rate APRs) is about as low as it can get. But that means that it's only going to increase - and that's exactly what credit card companies want to be able to take advantage of. Hey, they might even give you back your fixed rate - once it settles at a much higher rate, of course.

Continue reading "More Credit Card Issuers Are Switching to Variable Rates In Anticipation of New Law" »

Even though it's been a while since the end of summer meant back to school, I still find myself intrigued by the new clothes, backpacks and books on store shelves.

It's not so much the stuff - since I don't have kids yet, I'm not planning a back-to-school shopping spree - but the feeling I get when summer winds down and fall is just around the bend. It makes me feel like finally getting organized - like this is my chance to start fresh.

And with the economy struggling to recovery, this year might be the perfect time to reflect and reorganize. For instance, have you been putting off starting a budget? Maybe this is the time to do it. Consider taking a look at your expenditures so far this year and brainstorm ways to cut back if necessary. Maybe devise some new saving methods. For instance, I'm still having luck with the $5 bill plan. Every time I get a five back with my change, I keep it. When it reaches $30 or so, I deposit it into my savings account. Not only am I spending less, but there's less incentive to use a credit card because no cash means no change.

Continue reading "Chicago Community Workshops Are One More Way to Learn About Finances" »

Thanks to the new government incentive program Cash for Clunkers, we might be seeing a lot more hybrid and other low-mileage vehicles on the streets - and that's both good and bad.

It's good for the auto industry, because it spurs people to buy more cars. And it has potential to be good for the environment, if people who would have otherwise purchased a less fuel-efficient vehicle opt for a greener version. But it might not necessarily be so good for the wallets of consumers.

In summary, here's how the program works. You trade in a low-mileage vehicle for a version that gets better gas mileage, in accordance with government standards. In exchange, Uncle Sam knocks between $3,500 and $4,500 off your price tag. Looks like a great deal, right? Well, that depends. If you planned on buying that cute new Prius come hell or high water, then yes, you're getting a bargain. If you didn't plan on buying a new car - either because you couldn't afford it or didn't need it - then it's a different story. You can actually lose - rather than save - up to $4,500.

Continue reading "Consider the Real Cost of Cash for Clunkers" »

It's a catch-22. We're supposed to make it through tough economic times by saving - but then we get blamed for slowing down the economy.

What do I mean? In June, consumers reduced their credit card debt for the fifth month in a row, according to a Federal Reserve report. Total consumer debt in the U.S. dropped by nearly 5 percent. But instead of focusing on the good news, the media is speculating about how Americans are hurting their chances for recovery by not providing enough stimulus.

It's not like I was expecting a pat on the back or anything, but sheesh - a little understanding might be nice.

Continue reading "Paying Down Debt Should Take Priority Over Spending to Stimulate Economy" »

Something rare happened to me recently - I actually heard some positive economic news. In this day and age, that's reason for some (cautious) celebration.

So here's the happy newsflash. Proof has finally arrived that the $787 billion economic stimulus package passed in February was (no surprise) worth the money, according to a New York Times editorial. Last week, second-quarter economic performance results were released and, at long last, the economy seems to be shrinking at a slower rate. We're losing 1 percent a year instead of the more than 6 percent loss we experienced in the first quarter.

OK, so we're still at negative economic activity, but it's a lot closer to becoming positive. And there's another good sign: the majority of the stimulus money hasn't even been spent yet. That's due to happen between now and September.

But the outlook isn't all roses (you knew there had to be a catch, right?).

Continue reading "Illinois Bankruptcy Lawyers See Economic Growth, But Warn Road to Recovery Might Be Long " »

On Tuesday, the federal government made a deal with mortgage company execs to perform 500,000 loan modifications by Nov. 1 - a significant scale back from than the 3-4 million first expected to be helped by the Making Home Affordable program. While Uncle Sam struggles to revive its ailing loan modification incentive program, some homeowners fed up with waiting are opting for what they figure is the easy way out - they stop making mortgage payments and surrender their home to the bank.

But foreclosure isn't free.

When you give up your home, you lose more than the roof over your head - you lose your credit and any equity in your house. And just because you aren't paying the mortgage doesn't mean your financial obligations are over. In some cases, you can be held responsible for the remaining balance once your loan servicer sells your house, meaning you lose future as well as current financial independence - especially if you're already in debt.

Continue reading "Chicago Bankruptcy Lawyers Explain There's No Such Thing as a Free Foreclosure" »

Now that the government is offering a financial incentive for lenders to perform loan modifications, you should be less likely to face foreclosure, right?

Don't hold your breath.

Turns out that the $75 billion Making Home Affordable program forgot one important thing - banks are in it for the money. And in this case, the $1,000 the Obama administration is offering for each modification has proven paltry compared to what banks can pull in by keeping you delinquent, according to this New York Times story.

Continue reading "Chicago Bankruptcy Lawyers Explain Why Chapter 13 Can Be More Effective Than Loan Modification " »