Chicago Bankruptcy Lawyer Blog

Sometimes paying more actually means paying less.

Confused? Let's say you're out doing some holiday shopping when the sales clerk tells you that you could save 15% just by opening a credit card account with that particular store. You figure that you're buying the goods anyway, why not get a healthy discount? So you sign up.

So far so good. But what happens next? That credit card probably has a high APR, maybe 30% or more -- that's twice the original discount. It gets worse. Store credit cards have some of the lowest minimum payments. We're talking $5 or so. At that rate, your bill payments are solely covering the interest, not the principal. In a year, you'll have paid more than the purchase price, not less - and unless you pay off your principal, you'll be paying for that shopping excursion for years to come. And not just in interest, but with your credit score. Credit bureaus don't like a credit card-happy consumer - and you'll get dinged when you apply for the card and when you open the new account.

You thought you were getting a bargain, but you're being penalized. Want a real bargain? Tune out discounts and use common sense - like eliminating debt through bankruptcy.

Continue reading "Credit Card "Deals" That Can Cost You Money" »

The economy is picking up momentum, but it's not necessarily going to be a smooth ride.

Case in point: sales of new homes recently dropped for the first time in six months. Until now, home sales had been on the upswing since the market hits its roughest patch this January.

You can blame the decline on the fast-approaching expiration date for a temporary homebuyer tax break. The credit, which gives qualified homebuyers a tax break of up to $8,000 for their purchase, ends Nov. 30.

That might seem like bad news for wannabe homeowners - and for the economy - but it shouldn't mean the end of opportunity. Right now, Congress is debating whether to extend the credit through next March, fading it out slowly after that. Besides that, mortgage rates are the lowest they've been in years and there is no shortage of affordable homes on the market. And maybe most significantly, there are other ways to save up for a house - including bankruptcy.

Continue reading "New Home Sales Fall While Congress Debates Extending Tax Credit" »

The sweltering days of summer have been replaced by the crisp days of autumn. Unfortunately, the gas prices of summer seem to be here to stay.

Prices at the pump have jumped more than 20 cents in the last two weeks. And experts are worried it could cause consumers to tighten their wallets this holiday season. Not that a few extra bucks at the gas station is going to wreck a budget, mind you, but with most of us already struggling with a mortgage, credit card bills, taxes, medical bills, student loans, etc. sometimes it's the little things that send us over the edge.

If times are tight, maybe you already expect to cut back on holiday expenditures this year. And creating - and sticking to - a budget rather than spending willy-nilly is one of the most important steps to financial freedom because it keeps you from spending more than you earn (and thus relying on those evil creditors). But you shouldn't have to give up all your fun.

Continue reading "Bankruptcy Can Reduce Pain of Rising Prices" »

Economists have spent weeks pointing to signs that the recession is over, but many Americans are having a hard time believing it.

Despite a pickup in retail, real estate and the stock market, foreclosures are still on the rise, increasing 5 percent just since summer. Unemployment - right now at a 30-year record of 9.8 percent - continues to edge upwards. The cost of living, as always, is outpacing our salaries. And we're more in debt than ever. The economy might be starting to expand on paper; in real life we're still feeling its effects - and might be for some time.

But despite all that, there's good reason for optimism. First, understand that some of the bad news can be attributed to a lag effect. People are still out of work because employers don't want to rush into spending money until they can confirm the economy is recovering - or they may not have the money to spend, period. And when folks aren't earning money at work, it's awfully hard to make their mortgage payments - meaning foreclosures will naturally go up for awhile. In short, just because an expansion isn't obvious right away, doesn't mean it's not there.

Second (and probably more importantly) realize that most folks can improve their financial situation whether the economy recovers today or tomorrow. You don't need to wait for the end of the recession to have a clean slate! Your financial freedom rests in your hands.

Continue reading "Create Your Own Economic Recovery When You Eliminate Debt" »

Every Halloween, I'm amazed at how some folks can smile through the most suspenseful of horror flicks, laugh through our city's infamous haunted house tour and even stroll through the cemetery at midnight on Oct. 31 (OK, maybe that was just my high school friends and me) - and yet remain perfectly petrified of confronting their own financial troubles.

For instance, mention a budget and some folks turn practically green. Mention bankruptcy as an option and others turn paler than a ghost. And yet, because of their debt, they deal with creditors harassing them all day and with the worry that a foreclosure notice could show up in the mail any minute. I wish people would realize that the scariest thing about a debt burden is ignoring it.

As humans, we're notorious for our fear of the unknown. But there's a way to get over it - and a way to get out of debt and the suffering that comes with it. We simply have to make the unknown known.

Continue reading "Fear of the Unknown Can Get In the Way of Financial Freedom" »

Imagine paying for the privilege of spending your money. Sounds a little ridiculous, doesn't it?

But it could become reality for millions of credit card holders once the last part of credit reform legislation goes into effect this February. Don't get me wrong - the regulation changes are much-needed. They'll protect consumers by eliminating things like sudden interest rate hikes, fees undetectable in fine print, double-billing cycles and billing periods that are so short it's nearly impossible to get your check in on time.

So what's the problem? Banks just so happen to make most of their money off credit card fees. In the past, they've made it easy for you to make late payments and exceed your credit limit. But without their old tricks, they're forced to come up with new ones - like annual fees. Creditors are returning to the early days of credit, when they billed charge card customers a certain amount just for holding their cards. Bank of America is one of the first banks to pilot the program, charging a $29 fee on 1 percent of its customers.

Continue reading "Annual Fees Are Back As Credit Card Companies Face Reform" »

It's kind of ironic. It was too much credit that got us into this financial mess - now too little credit might be making it difficult to get out.

A FICO study found that 33 percent of Americans - including those of us who haven't done anything to negatively affect our credit -- saw our credit limits reduced between October 2008 and this April. In the six months before that, an additional 25 percent saw limits slashed.

At first glance, that's bad news. A lower credit limit is not only easier to exceed (and thus get penalized for), but it has the potential to worsen your credit rating even when you follow the rules. How? By affecting your debt-to-limit ratio.

The more debt you have relative to your credit limit, the worse your score is going to be. For instance, let's say you have a $5,000 limit and you typically charge $2,500 a month. That means you're using 50 percent of your credit. But let's say that limit gets dropped to just $3,000. Now you're using more than 80 percent of your limit - launching you into the category of the most high-risk borrowers - even though you're spending no more than before.

Continue reading "Chicago Bankruptcy Lawyers See the Benefit in Lower Credit Card Limits" »

The economy might be recovering, but we're not out of the woods yet - especially when it comes to foreclosures.

Even though a $75 billion government anti-foreclosure program recently reached its goal of helping 500,000 folks get loan modifications, that's only one-eighth of the 4 million homeowners it originally set out to assist. And while some banks have helped more than one-third of eligible homeowners with the program, others like Wells Fargo and Bank of America have helped just 20 and 11 percent, respectively.

Now consider that millions more are facing foreclosure but ineligible for loan modification. Still, as many as half of those who receive a modification end up defaulting anyway. It's depressing stuff. But luckily, there's another government program that can save your house. It's been around for years, has been proven to work again and again and doesn't require your lender's approval - it's bankruptcy.

Continue reading "Loan Modification Program Hits Target, But Is It Enough?" »

What's the only thing worse than not paying your taxes? Not filing at all.

This Thursday, Oct. 15 is the final deadline for the whopping 11 million U.S. taxpayers who filed for an extension on their 2008 return. With the economy still down in the dumps, many folks haven't seen an anticipated improvement in their finances - consequently, some are opting to simply ignore the deadline and not file.

Here's why that's a mistake. You might be able to get away with ignoring your creditors for a while, but you can't ignore Uncle Sam. If you don't file, you're immediately going to start incurring fees - these late penalties can be up to one-quarter of your total obligation. Before you know it, your debts could be doubled or tripled. You may even face jail time.

But there's a simple - though maybe not ideal - way to avoid all that.

Continue reading "Tax Extension Filing Date This Thursday" »

When gift cards surpassed traditional presents in popularity, I knew it was only a matter of time before we started just giving cash. And then, just as I predicted, the prepaid debit card arrived.

It's sort of the equivalent of cash, but more convenient than carrying around a wad of bills (and less awkward than gifting said wad of bills). Unlike a gift card, you don't have to guess whether the recipient likes a particular store. Heck, you don't even have to give prepaid debit cards as gifts - more and more folks are buying them for personal use.

As banks like to advertise, you don't even need a bank account or good credit to take advantage a prepaid debit card. Just load the card with your paycheck and spend. Convenient, huh? Unfortunately, it's a little too convenient.

Most of these prepaid cards come with ridiculous hidden fees - take the activation fee, for instance. I mean, why would you buy a card if you weren't going to use it? And that's not all, according to the New York Times.

Continue reading "Why Prepaid Debit Cards Might Not Be Such A Good Deal" »

Personal bankruptcies are on the rise, according to the American Bankruptcy Institute - and there's a reason that might actually be a good thing.

Obviously, filing for bankruptcy isn't ideal. In a perfect world, we'd all be able to overcome our debt burden by making a budget and sticking to it. Actually, in a perfect world, we wouldn't have a debt burden to speak of - hey, we'd probably be rich. But this is real life. And when you're talking about debts of $10,000, $20,000 or more, freeing your finances isn't so simple.

A 2 percent minimum payment on a 20K debt is $400 a month. That's $400 that can't go towards the mortgage, utilities or your car payment. Combine that with a lackluster economy that's not exactly encouraging cost-of-living increases and you get what feels like a hopeless situation.

So what's the good news? More people filing for bankruptcy means more people overcoming their troubles to beat debt.

Continue reading "More Consumers Turning to Personal Bankruptcy" »

It's the beginning of October. So naturally all the stores are putting out their Christmas decorations already.

It's a little hard to get into the Christmas spirit when I'm trying to plan my Halloween. But what's just plain scary is the nagging thought of the money I'm going to have to drop on presents for friends and family come December. Even scarier, the thought that I might not be able to afford some gifts this year.

With the large majority of Americans on some kind of budget, I don't think I'm the only one. Fortunately, there's a way to ease - if not eliminate - shopping pains. The gifts we can afford don't depend just on how much we have to spend, but on the way we spend. Done right, shoppers can save money - and that savings can be stretched to buy more and better presents (not to mention to help pay the bills).

Continue reading "Consider Choosing Layaway Over Credit When Holiday Shopping" »

Today's economy is bad for a lot of things - stress levels, job security and housing prices to name a few. But, believe it or not, it might be good for your health.

Life expectancy actually increased during the Great Depression, according to new research by the University of Michigan. Think it sounds like a fluke? Then how do you explain the fact that researchers found the same pattern in recessions during the 80s and 90s and in countries other than the U.S.?

The theory is that people unknowingly engage in healthier behaviors when times are tight. They smoke and drink less because they have less expendable income to buy cigarettes and alcohol. They drive less and walk or bike more because gas is expensive. They eat out less, and thus eat healthier, to save money. They might even get more sleep, since there's less pressure at work when business is slow - or maybe they're out of work altogether. It seems that the same habits that could save your bank account might also save your life.

Continue reading "Bad Economy Might Have Health Benefits" »

As usual, reading the financial headlines today made my head spin.

On the one hand, it was just announced that the economy shrunk at a much slower rate than expected this last quarter - only 0.7 percent compared to the 6.4 percent drop during the first three months of the year. According to the Associated Press, this supports the belief that the economy is actually growing. That's good news. But wait - according to this story in the Chicago Tribune, consumer confidence plummeted unexpectedly due to job security concerns. It looks like retail will probably be down this holiday season, hurting recovery. Hmmm, not so good news.

Up, down, up, down - it's hard to know what to believe or how to feel about the economy. At times like this, I tune out and worry about the one thing I can control - my personal finances.

Now, I'm not denying that the recession is real or that the economy has an effect on our bank accounts. Hey, I've been feeling the pinch, too. But sometimes I think the recession is a scapegoat for problems we would have had anyway - which is actually good news.

Continue reading "Watch Your Bank Account, Not the Headlines" »