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Cause of Bankruptcy

The Number One Cause of Bankruptcy: Lack of Financial Knowledge

Number One Cause of Bankruptcy: Lack of Financial Knowledge

You can always trace back an immediate cause for bankruptcy. Ultimately, the number one cause of bankruptcy is lack of financial knowledge. Without adequate financial understanding, you can easily set up your life in a way that leads to bankruptcy. There are, however, three basic financial concepts that if applied will usually prevent any future need for bankruptcy relief.

Live Way Under Your Means

Most people file bankruptcy because they are living paycheck to paycheck. The root of this cycle, however, is that most people live right at or above their means. The solution is simple: learn how to live way below your means. If your living expenses only consume 50% of your income, then your financial life will always be easier. You will also have money to save and invest.

Learn how to live well without paying the accompanying costs that most people accept as part of the package.  Many financially-savvy people are living practically for free due the living situation they have developed over the years. Still, others decide to spend every bit of their business or job income on their house mortgage, cars, and other frills of life.  The truth is in the numbers.  The truth can be found through gaining financial knowledge and then boldly applying it. Sometimes this even requires doing the opposite of everyone else with your income.

Save and Invest Left-Over Money

It almost goes without saying that the next step is to save and invest all leftover money each month.  Investments can increase your income.  Savings can also prevent financial disasters when something unpredictable happens.  As you save and invest, a cycle develops where life gets easier and easier.

Make Sure All Gaps are Covered

It is also important to cover all the gaps in life. This includes important things such as insurance, following legal requirements, and having a balanced and thoroughly-thought-out life.  Remember, all financial “gaps” should be covered in your life at all times.  A small hole in the armor of your financial life can allow a dart to pass through that can wreak havoc and lead to bankruptcy. You cannot plan for every possibility in life. It is vitally important, however, to close all obvious gaps that could lead to serious financial problems.

Conclusion: Application is the Key

Apply these three financial concepts to your life.  Your increased financial savvy will not only prevent bankruptcy but also make your financial life much easier.  Remember, you can actually end up acquiring large amounts of financial knowledge with very little real-life benefit.   Only bold and disciplined action will your life actually change for the better.

 

Why Do Millionaires File Bankruptcy?

Millionaires – Why Do They File For Bankruptcy?

Millionaires file for bankruptcy due to the simplest reason: numbers.  They are always dealing with large numbers with their investments, assets, and banking endeavors.  Sometimes these numbers can quickly get millionaires into financial trouble that cannot be overcome without bankruptcy.

Millionaires’ Investment Downturns Cause Bankruptcy

Millionaire Bankruptcy

Investment downturns can be devastating.  We have all seen what the market can do to stock funds.  We have also all seen a business endeavor fail, even if it was only on a small scale.

The downturns that millionaires face with the business and investments that they own are multiplied due to the shear size of the numbers involved.   The asset sheet of a millionaire can decline rapidly.  These downfalls can quickly plunge a millionaire into financial ruin.  Sometimes only bankruptcy can satisfy all of their creditor obligations.

When a millionaire’s income source is strong and constant, they have the ability to indulge in an expense lifestyle.  If this lifestyle cannot be supported after a financial downturn, the assets of the millionaire are depleted quickly.   Some are unwilling to make major life changes quickly.  This is another source of millionaire bankruptcies that hit the headlines each year.

Millionaires will also have their Corporations File For Bankruptcy

The news also covers a multitude of millionaires that file bankruptcy cases on their corporations (that they own or partially own).   Bankruptcy is frequently the natural demise of any large business endeavor.  In fact, it can create a fair and proper venue for equally distributing the business’s remaining money and assets.  Sometimes, a Chapter 11 case can even result in the successful reorganization of the business. The news usually portrays these “millionaire” bankruptcy cases in a negative light whether or not the case was best for the corporation.

Millionaires Recover After Bankruptcy

Somehow millionaires frequently recover after bankruptcy.  Remember, millionaires usually know how money works.  They are also familiar with large numbers.  Millionaires frequently spearhead large projects even after bankruptcy.  Bankruptcy always offers bold relief after extreme economic downturns.  After bankruptcy, new financial opportunities abound.  Millionaires are not an exception to this rule by any means.  They are able to act on these opportunities and find financial success once again.

Right Time to File Bankruptcy?

When Is the Right Time to File Bankruptcy?

When is the right time to file bankruptcy?

Timing can mean everything in life. Bankruptcy is no exception. When is the right time to file bankruptcy?  A few basic tips about the right time to file bankruptcy can be very helpful.

1. File Before Collection Becomes Too Aggressive

If you were considering Chapter 7 or Chapter 13 bankruptcy, it is better to file your case early. If you wait too long, aggressive collection may follow. If you’re considering chapter 7, a garnishment can make it much more difficult.  The garnishment will take a substantial portion of your paycheck, taking away finds you could otherwise use to pay for your bankruptcy fees.

2.  File After You Have Received and Spent Your Tax Refund

In Indiana, it may be wise to file bankruptcy after you have received and spend your tax refund. In Indiana, only a very low exemption is allotted to protect your tax refund. Therefore, if you were owed a tax refund in the upcoming weeks or months, you may lose a portion or all of that tax refund during the bankruptcy.

3.  File As Soon As You Discover Bankruptcy Is Right For You

Many people put off bankruptcy for years.   If you have determined with an attorney that you need to file for bankruptcy, file your case as soon as possible. If you are carrying a heavy debt load, talk to an attorney right away. People wait for years to file bankruptcy much to their disadvantage.  After you file for bankruptcy, you can get a fresh start to move on with your life.

4.  Always Follow the Advice of Your Attorney

Ultimately, the greatest guidance as to the right time to file for bankruptcy will come from your attorney. A consultation with a bankruptcy attorney is many times free. If you follow the advice of a bankruptcy attorney as to the right time for bankruptcy, you can avoid costly mistakes and unnecessary stress.

Debts of the Deceased

What Happens to Someone’s Debts When They Pass Away?

What happens to the debts of someone who has passed away?

When a loved one passes away, it can be difficult for the entire family. The situation can be also become confusing when the notices for the deceased family member’s debts keep coming in the mail. The creditors are demanding payment, but your loved one is now deceased. Do you need to now pay these bills? It is important to understand what happens to someone’s debts when they pass away.

Many Creditors Will Simply Write Off the Debt if Presented a Death Certificate

When a person passes away, many times their debts pass away with them. This is because many creditors will simply write off the decedent’s debts if they are presented with a death certificate. Although many creditors are not required by law to write off the debt, credit card companies and even many medical providers offer to either write off the debt entirely or drastically reduce the size of the debt.

If you were a cosigned with your recently deceased family member, you will still be responsible to repay the entire debt yourself. The creditor will not very likely write off the debt if only one signer on the debt passes. In addition, do not continue to use the credit cards of deceased person. If the credit provider finds out you used the card personally after the death, they may take legal steps to make you responsible to pay back that portion.

Some Creditors will Seek to Be Paid Out of the Estate if One is Opened

When someone passes away, the property that they own will be placed into an “estate” if the property exceeds a certain set value. This estate is usually opened in the county court where the deceased person resided. It is assigned a court case number. An administrator of the estate is named and certain required legal documents must be filed before estate can be full administered.

If someone passes away and an estate is required to be opened, the creditors may seek to be paid from the proceeds of the deceased person’s estate. This can drastically reduce the proceeds available to other family members from the estate. Although some creditors may elect to write off the debts beforehand, certain creditors may file a claim to be paid through the deceased person’s estate.

Seek the Advice of an Attorney

Because various complex situations can arise when someone passes away, seek the advice of an attorney. Not all situations will play out the same way. Also, law differ from state to state. If you have a loved one who passed away and now you are receiving their debt notices, seek the advice of an estate or debt relief attorney.

 

Will My Employer Learn if I Have A Wage Garnishment in Indiana?

After filing Chapter 7, when can I file Chapter 13?

A wage garnishment on your paycheck can come after receiving a judgment during a lawsuit.   This wage garnishment can damage your budget severely.  In Indiana, the creditor will frequently take up to 25% of your gross income.  Will your employer know about the wage assignment?  On some level, it is very likely that your employer will learn that you have a wage garnishment.

Wage Garnishment Orders Are Sent to Your Employer

Wage garnishment orders are sent to the payroll department of your employer.  Small employers sometimes manually deduct this amount from your paycheck.  Smaller employers may be required to set this money aside and manually send these payments to the court for your creditor.  If your employer does not use a payroll service, then the staff must manually send these payments.

Most employers, however, use a payroll service.  If you work at a larger company, your company will either use a payroll service or operate an internal payroll department.  In such cases, only an initial entering of the wage garnishment information is required.  From that point, the payroll system will automatically deduct the amount and send it to the court.

Your Manager and Fellow Employees May Have No Knowledge of the Wage Garnishment

Because many companies use a payroll service, it is very likely that your fellow employees or manager may never learn about your garnishment.   Although the payroll person or department may have knowledge of the garnishment, this information may not be passed to others within the company.   If you work for a larger employer, it is much less likely that this information will be passed to other employees.

Wage Garnishments Can be Stopped by Bankruptcy

If you have excessive debts, you need to consider filing for bankruptcy.  Bankruptcy has the power to instantly stop wage garnishments.   If you are suffering from a garnishment on your check, consider contacting our office for a free consultation.

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