Before you consider filing for bankruptcy, it is important you understand the difference between different types of bankruptcy and your reasons for filing.  Credit rating is affected and much legality is involved.

Full freedom from the debt is not easy nowadays as the changing laws are getting tougher. Federal laws are supplemented by additional laws in many states.

If you are filing for bankruptcy, you can be affected by two main chapters of bankruptcy, Chapter 7 and 13.  Both of these chapters of bankruptcy are common and take into account individual debtors and small filers.

Chapter 7 also known as liquidation frees the debtor from all requirements to repay debt and may result in liquidation of assets.  More commonly, the debtors assets are exempt from the process of liquidation.  Fraud-related loans, student loans debt, State and federal debts may not be discharged through this process.

Chapter 13 is for the restructuring of debt and is commonly known as Reorganization. A repayment plan can be worked out by the debtor and creditor on the basis of approval from the court regarding the payment of the debt.

On the other hand, Chapter 13 an attempt to liquidate assets for the payment of complete debt amount. In order to make part payment of the main debt, re-structuring of payment plans is done more often. You can clear all your debts in less than five years.

Legal and Filing fees: Fees is approximately $800 or may be higher for a single person. Couple fees and business owner fees is $1,000 or more. You have to keep all the paperwork up to date to help your attorney in filing your documents. You will also have to spend time reviewing bills and answering questions to your attorney.

Did you know that certain types of debt and financial obligations cannot be discharged when filing for bankruptcy?  There are debts that are exempt from bankruptcy laws and you need to pay them whether or not you file for bankruptcy protection.

One financial obligation that can’t be discharged through bankruptcy is child support.  You are required to pay for child support by court order and filing for bankruptcy does not mean that you can stop paying it.

An IRS lien is expempt from being discharged by bankruptcy. What happens with an IRS lien is that you owe income tax payments from one or multiple years. At a certain amount of money owed, the IRS will put a lien on your house or some other type of asset that you own, or in lieu of that possibility, may garnish your wages via your employer. This type of IRS lien, in addition to being exempt from a bankruptcy discharge, is also on your credit report for about 10 years as a huge blemish, which would be in addition to the blemish on your credit report from your bankruptcy filing. These types of red flags on your credit report can make it more difficult to get approved for new credit in the future.

A court order, which may have awarded an individual or company a specific amount ofmoney through a lawsuit brought against you is not a debt exempt from bankruptcy either.

If you are behind in one or more debts with your creditors, those creditors will commonly file a lawsuit against you eventually.  This takes time and most creditors are not quick to go to this extreme to collect their money but in time it will most likely happen.  If this type of lawsuit occurs before bankruptcy, it will not be discharged after bankruptcy is filed.  If you have creditors with a judgment against you, filing for bankruptcy may not do much for you.

Government loans such as federal student loans are also exempt from bankruptcy discharge.

Consumers are simply overwhelmed by the financial straits in which many find themselves in and cannot make an informed decision. Many of you have had this experience. Panic begins to set in and you say, “Help I’m in debt. What can I do?” This is when you realize that you owe too much money to too many people and you might not be able to pay it all back. Assuming that you have found the strength to start solving your debt problems, what can be done? In fact, there are many avenues for resolving an uncomfortable financial situation. How you proceed depends on the details.

The Bar associations in almost every state provide some great information to get you started. For example, good attorneys and debt counselors will tell you that, if you are in a serious debt situation, creditors and collection agencies are only able to contact in the early stages. Eventually, the law will force them to stop calling you on the telephone. From that point they will probably be contacting you by mail to let you know they are escalating the situation to include possible legal action.

This means that they may try to recoup some of the losses through either a collection agency arrangement or through a court-mandated settlement. Why is this important information? Because many times, people in debt will make quick emotional decisions that do not solve the problem at hand and which do not protect their own interests. These consumers often feel harassed and hurried by creditors and collection agencies to the point that they just want to end the phone calls and letters altogether, regardless of the consequences to their financial health. In reality though, this may be a good time to take a few deep breaths, talk with family or financial advisers you trust, and start using the tools of the debt system to work for you.

One of these tools that many people have neglected for years is the credit report. If you are in a situation that may require debt consolidation or debt management and counseling, it is imperative you have a full understanding of your credit history. Just knowing the facts contained on your credit report can be a great comfort when creditors and merchants start asking what you intend to do about your debt obligations. Credit reports are issued by credit-reporting agencies that get their information from your creditors. The reports are made available to other creditors, employers and landlords and to you upon request.

According to the California Bar Association, a “credit report includes such information as whether you pay your bills on time, have had a foreclosure, owe money as the result of a lawsuit or were convicted of a crime. Each piece of information stays in the report for a certain number of years. For example, a bankruptcy usually will be listed for 10 years.”

Debt negotiation may be another option. If you shop carefully and work with a company that makes you feel comfortable, a counselor or professional manager may be able to handle your debt stress with a good plan.

Experience has taught many of us that late-fees and back payments can be stopped when you undertake a serious debt settlement plan with a reputable specialist. Then, and only then, can you move forward with your life and get out of debt completely.

The origin of the word budget is the Latin bulga which is a little pouch or knapsack, which may have come from a Gaulish source that’s related to the Irish bolg, “bag”.

The word turned up in English in the fifteenth century, having traveled via the French bougette, a diminutive form of bouge, “leather bag”.

Its first meaning in English was “pouch, wallet, bag”, and followed its French original in usually implying something made of leather.
So the great traveler Thomas Coryate could write in 1611, “A certain peddler, having a budget of small wares”, and Aphra Behn had the character Hellena say in her play The Rover in 1677: “And was it your Man Friend, that had more Darts in his Eyes than Cupid carries in a whole Budget of Arrows?”.

At the end of the sixteenth century, the word could refer to the contents of one’s budget as well as to the container itself. People used this in the figurative sense of a bundle of news, or of a long letter full of news, and the word formed part of the name of several defunct British newspapers, such as the Pall Mall Budget. This was the sense that Washington Irving used in The Legend of Sleepy Hollow in 1820: “From his half itinerant life, also, he was a kind of traveling gazette, carrying the whole budget of local gossip from house to house; so that his appearance was always greeted with satisfaction” and which Thomas Jefferson meant in a letter he wrote in 1785: “I receive by Mr. Short a budget of London papers. They teem with every horror of which human nature is capable”.

The connection with finance did not appear until 1733, as the result of a scurrilous pamphlet entitled The Budget Opened, an attack directed at Sir Robert Walpole: “And how is this to be done? Why by an Alteration only of the present Method of collecting the publick Revenues … The Budget is opened; and our State Emperick hath dispensed his packets by his Zany Couriers through all Parts of the Kingdom” (the anonymous writer is using zany in the sense of the comical assistant of a fairground quack medicine salesman or mountebank, a decidedly unflattering comparison). The allusion was that the government minister responsible for financial affairs opened his budget, or wallet, to reveal his proposals. It probably also echoed the idiom to open one’s budget, “to speak one’s mind”, which was current then and continued to be so down into Victorian times (it turns up in Trollope, for example).
If he survived a few years, the pamphlet writer must have been chagrined to see his intended victims expropriate his satirical term and turn it into political jargon. By the 1760s, it was clearly well established, and has been the standard term ever since. But it was only in the 1880s that it began to be used as a verb in the sense of planning one’s expenditure, and the attributive meaning of “inexpensive; suitable for someone of limited means” is first recorded only in 1958.

There are two other closely-related words in English. One is bulge, which at first had the same meaning of a bag, but soon came to refer to an irregular swelling, lump, or protuberance, not a surprising change if you think of the often irregular shapes of old leather containers. The other is bilge, the lowest part of a ship’s hull. Because foul odors collected there, the word was used figuratively to mean nonsense or rubbish, a bit of British public-school slang current in the early years of this century, especially in the phrase “he talks the most utter bilge”.

So if an honorable member in the House of Commons should lose his cool and refer to the Chancellor’s budget speech as bilge he’s committing an etymological tautology as well as showing how out of touch he is.

Let’s take a look at how we have ended up so heavily in debt as a nation of consumers.

Easy credit

In the past, it was simply too easy for consumers to obtain credit.  Because credit was so easy to get, consumers figured out how to leverage their credit card rewards and balance transfer cards in order to make money. Many tried to perform credit card arbitrage by taking out cash advances and balance transfers from these cards, then investing the amounts into a rising stock market. This was one of those things you’d consider to be a “sign of the times.” Of course, things are different today, but the 2000s was a decade during which our debt ballooned due to these types of products. Subprime loans, jumbo mortgages and other forms of costly debt are inventions of our capitalistic society; these are high-risk financial tools which countless consumers have gambled with, often with dire results.

Need for instant gratification

As a society, we’re impatient. It’s ingrained in us to be able to get immediate access to the things we covet, even if we can’t really afford these things at the moment. We live in a highly consumerist society that encourages materialism and is not ashamed of excess. Have you seen just how huge the portions are served in most American restaurants? It’s all about more, more, more right now! So it’s often the case that funds that should wisely be funneled into highest interest savings account or into high yield savings are instead being used to keep up with the Joneses, a syndrome that many of us harbor, and which has caused many a household to fall into debt.

Lack of financial education

Personal finance isn’t given importance in schools. A lot of us don’t learn about finance while in school and instead are picking it up through experience and trial and error. Unfortunately, this lack of understanding and awareness about money management can make us vulnerable to making many financial mistakes, particularly those that land us in debt.

Lack of accountability

It’s too easy to procrastinate about our finances, go in denial or sweep things under the rug when we get into trouble. But also detrimental is when we can’t take responsibility for our own actions and mistakes. We blame the government or the financial industry for causing the rifts in our economy, but we’re just as guilty about causing the crisis as they are. Both lenders and borrowers contributed to the subprime lending boom, subsequent bust and credit crisis, but guess who’s getting the lion’s share of the blame?

Debt as a cultural phenomenon

In other cultures, debt is heavily frowned upon and is only gingerly used by households. But in America, debt is socially acceptable and ingrained in our culture; it carries no stigma. If bankruptcy, foreclosure, debt and being broke are things we easily accept in our culture and way of life, then these aren’t things we’d readily condemn (or worry about) until too late or until we’re forced to face the painful consequences.

When the economy blew up last year, it prompted the government to start making some changes; they’ve since introduced policies that help regulate the financial industry to some degree (e.g. credit card rules) but in many respects, it’s still pretty much “business as usual.” Instead of worrying about what the Fed or Obama is going to do next, we should focus on the things we have control over, and take responsibility for our own financial predicaments.

Before a new law of reforms becomes effective in February of 2010, Credit card companies are raising interest rates, penalties and fees. As of July, interest rates spiked an average of 20% across the board from December 2008 with some issuers raising the interest rates 30 and even 50 percent. When the Pew Health Group examined credit cards offered by the twelve largest banks, they found :

99.7 percent of bank cards allowed the issuer to raise interest rates on outstanding balances by changing the account agreement unilaterally – up from 93 percent in December 2008.

95 percent of bank cards allowed issuers to apply payments in a manner that the Federal Reserve found likely to cause substantial monetary injury to consumers.

90 percent of bank cards had penalty interest rates that could be triggered by late payments or overlimit transactions. All but 10 percent of these cards had penalty repricing terms that would qualify as “hair trigger” under Federal Reserve guidelines – triggers of one or two late payments in 12 months

99 percent of bank cards included a late fee – median $39.

80 percent of bank cards included an overlimit fee – median $39.

The median bank penalty interest rate was 28.99 percent. Most – 90 percent – penalty rate increases could continue indefinitely even if the cardholder resumes.

The first payment-based debt for the average American gets incurred while still in high school.

Interest rates on department store cards can be as staggering as 33%.

Target is in the top 10 issuers of credit cards.

Over 173 Million Americans own at least one credit card.

The average rate for standard bank credit cards is around 19%

Only 2% of undergrads have no credit history

The average undergrad has $3,200 in credit card debt.

84% of college students have credit cards.

Med School graduates leave school with an average of $113K in debt.

Doctoral students amass another $29,000

On average, master’s degree students take on an additional $17,000 in student loans.

Half of all college graduates 4 or more credit cards

The average graduate student has $8,600 owing on his/her credit cards.

¾ of American households have multiple credit cards.

The average student amasses over $20,000 in student debt toward his/her first degree.

The average auto loan is $30,738, a 40% rise in the last 10 years.

Most auto loans are over 6 years in length.

This is double the loan term of a typical auto loan 25 years ago.

The average auto loan interest rate varies between 7% and 9%.

The average home mortgage costs around $240,000.

After 30 years of making payments, a homeowner with a $240,000 mortgage loan will have paid over $580,000 on his/her house.

Two-thirds of all American households own 2 or more automobiles.

Most Americans use loans to finance every vehicle they drive.

By age 60, the average American has 5 or more credit cards.

The average household in America with credit card debt is $10,637.

The median credit limit on family credit cards in America is $18,000.

Refinancing a mortgage is often an attempt to consolidate overwhelming debt from a variety of sources.

On average, about half of refinances result in a higher overall loan amount.

The average American has a total of 13 credit obligations right now.

Over a lifetime, the average American will pay over 600,000 in interest.

You pay your credit card off every month, but happened to miss an auto loan or an electric bill payment.  A single late payment on your credit report can trigger a rate increase.  It is called Universal Default.

0% APR is great, but if you miss a payment, it can revert to a default APR of up to 35%.  There is no going back to 0% after that.

Even when you think you made a payment on your due date, the deadline might be in the morning or afternoon, payments made by 2pm on the due date may still be considered late.

The highest fixed late fee charge is currently $39 but percentage based late fees can cost hundreds of dollars per charge depending on the balance.

Variable rates can change without notice, and even fixed rates can change with 15 days notice.  Your rates and fees can be changed for any reason at any time.

Two cycle billing will ensure your finance charges are much higher if you don’t pay your bill in full every month.

Out of the country?  Be prepared to add a 1%-3% fee to all purchases in addition to a 1% exchange rate fee.

Taking our a cash advance?  Be prepared for a high APR as well as a percentage fee.  Payments made will apply to the lowest APR first.  You will have to pay off the entire balance before paying off the high APR cash advance.

Low minimum payments may sound like a convenience, but the lower the payment, the longer you will have to pay, finance charges piling up every month.

If you transfer a balance to a new card, the limit on the new card may be changed so it’s actually lower than the balance transfer.  This results in a new card that is already maxed out.  The first time you use it, you go over your limit and fees are charged.

Once your credit starts turning south, you will get offers for cards with starting fees.  A card with a $300 limit may come loaded with a Program Fee of $96, an Annual Fee of $48, an account Set-up fee of $56, and a monthly Participation Fee of $8, but charged annualized at $96.  All of a sudden your $300 card has $296 already charged on it.  If you make a purchase over $4 you will be hit with a late fee and possible rate change.

So you have cut up your cards, great, but be prepared to be hit with an inactivity fee.

Now you are up to your eyeballs in debt.  Your cards are maxed out, the APRs are high, and the only new credit you can get is tiny and expensive!

A Lifetime of Debt .

The total liabilities of the United States government, including future social security and medicare payments that the U.S. government is already committed to pay out, now exceed 65 trillion dollars, which is more than the entire GDP of the whole world.

According to the 2008 Financial Report of the United States Government, an official United States government report, the U.S. actually had a budget deficit of 5.1 trillion dollars in 2008.

So why did the Congressional Budget Office report that the federal budget deficit was only 455 billion dollars (which is certainly a total disaster) in 2008?

The difference lies in accounting. The CBO’s figures are based on cash accounting, while the 2008 Financial Report of the United States Government is based on GAAP accounting. GAAP accounting is what is used by all the major firms on Wall Street and it is regarded as a much more accurate reflection of financial reality.

So why is there such a big difference?

Well, what the Congressional Budget Office does is some really bad accounting. When you pay social security taxes, the federal government takes that money and instead of putting it away to pay your social security benefits in the future, it takes that money and spends it however it wants.

So what about the future social security and medicare benefits that the government owes you?

There is no money there for those payments.

The government is using that money right now to make the budget look better.

That’s right, you have been conned.

And as bad as the numbers from 2008 look, they do not reflect any significant money from the monstrous financial bailouts that Congress has passed.

So 2009 is going to look MUCH worse.

Pretty picture, eh?

The reality is the the United States of America is a total financial disaster.

Already, 13 banks have already failed in 2009. All of the bailouts certainly don’t seem to be helping much yet.

But that doesn’t mean that the federal government is going to give up trying to help. It seems a new “bailout” or a new “stimulus” is being passed almost weekly now.

Instead of accepting the fact that we must adopt a lower standard of living and deal with the reality of our massive debt, the politicians are trying to crank up the debt spiral one more time.

All of this government spending will help the economy in the short term, but it will make the long term problems of the U.S. government far worse.

Who is going to buy all of this new government debt? China has doubts about who is going to buy all of America’s new debt. The reality is that the only way that the government can “bailout” anyone or pay for any “stimulus” bill is to borrow.

America borrows and borrows and borrows.

If your personal finances were like that, how do you think it would end?

Ah, you are starting to get the picture…..

The “American Dream” is becoming the “American Nightmare” and the politicians don’t have a clue.

What are you going to do when the economy collapses and everything you ever worked for starts coming apart?

It’s time for all of us to start thinking about what is truly important…..