Bankruptcy, Debt Settlement and Damage Points for Your Credit Score

 

 

I have clients who can’t continue to make their credit card payments and seek a debt solution.  Often one of the questions they have is what the real number impact is on their credit score. The answer was in given in generalities or on a scale one options less of an impact than another. Now FICO has released real world numbers for debt solutions and their impact on your FICO score.

Before I give you the numbers, I want to emphasis that for some debtor’s the impact on their FICO score  is irrelevant. If your debts are unmanageable, and your ability to repay them not likely, your credit score is not your primary concern.  And let’s be honest, the most important costs for you cover are the basic; food, shelter, auto, medical and let’s hope; personal sanity.  No matter what these FICO credit numbers offer, your financial life is not over and can be rebuilt over time.

FICO Damage Points for Actions of Bankruptcy and Debt Settlement

Action	Starting Credit Score 680	Starting Credit Score 780
Bankruptcy	Down 130-150 points	Down 220 – 240 points
Debt Settlement	Down 45-65 points	Down 105-125

 

Once again my motto rings true, “Debt Settlement is the least amount of damage to your credit for the greatest financial gain.”

  

 

Garnished Checking Accounts

What is the quickest way to have your income reduced by 20%? Wage garnishment.

Wage garnishment for a debtor is a way of extracting monies owed, directly from your paycheck from a debt judgment. In other words before you receive your pay the monies owed to your credit card company can be paid directly, up to 20% of your income. Most debtors can’t survive on a 20% reduction in pay. It’s is not realistic in our current pay check to pay check America.

Wage garnishment is serious, painful and difficult to correct once it is executed. It is the worst case scenario I discuss with my clients. I urge my clients to address their debts and match them to a debt program before they are served with a lawsuit.  Once you are served in a lawsuit you are unable to enter a debt program.

Here is how one of my clients’s narrowly avoided a wage garnishment. I will obscure some of the information in generality to maintain my client’s anonymity.

My client, let’s call him John had accumulated a large credit card debt with a well known bank, and was starting to fall behind on his payments. The debt was a result meeting his basic living expenses with his credit cards as he recovered from an illness. The late notices, fees and collection calls started to increase and John inability to pay grew larger with every passing month. John was referred to me by the time he was 60 passed due from his last payment. The deadline was looming for John, if he did not chose a debt program quickly. John chose a debt program that was within his budget and 30 days after he entered the program, he was served with a lawsuit. If John had waited 30 days more he would have been unable to enter a debt program. Much to John’s relief, he was able to avoid wage garnishment that would have rendered him unable to pay his mortgage, meet his utility bills and care for his family’s basic needs.

Often my clients will ask me, “How long until I am sued for the debts?”  Unfortunately no one really knows the answer.  Lawsuits are now being filled in mass with the assistance of technology, as credit card companies have grown increasing impatient.

Stop wage garnishment for your debts, before being served.

Pay Down Your Debts and Conserve Cash

Much of the financial advice that has flooded our nation’s newspapers can be summed up in two action steps; pay down your debts and conserve cash.

Most of us have a finite amount of money to work with each month. How can these two goals tackled at once?

One approach is to set aside a percentage of your income monthly and save for an emergency fund, while finding extra income to add to your debt payments. But what if you only have a set amount of income over your bear minimum living expenses? Do you save it or use it for debt?

I recommend to my clients to save the cash and pay down the debt. There are a number of programs available for consumers who want to have their emergency fund built while they rid themselves of debt. The programs are designed with the client’s specific financial goals and needs in mind. I have seen programs for clients that were able to save from a few hundred dollars a month and more. Most clients are able to eliminate their debt within 36 months. The increase in cash flow enables the client to create a rapid savings for emergencies all within their current income. These programs give client’s are reset button, and place them on the road to sound financial footing.

Hidden Cost of Bankruptcy

 

Consumers who are over loaded with debt and chose to file bankruptcy may not know the hidden life time cost. First you have to stand in front of a judge and declare publicly that you have failed to manage your finances. The information is a public record. I have had clients who have sought other remedies than bankruptcy for this very reason. One client was a professor at a local college and was concerned his finances would harm his career advancement. Another client was in the financial field and would lose his license for his profession, if he sought bankruptcy. These clients were midlife and had built successful careers that bankruptcy would either limit or destroy.

Clients who are new in the fields of their chose and young, below mid life, may be attracted to bankruptcy as a debt relief option due to the appeal bankruptcy offers as a fresh financial start. Often these clients cannot predict how bankruptcy will limit their careers. According to the US Department of Labor the average adult changes careers three to seven times in their life time.

If you have ever declared bankruptcy you are ineligible for a career in the financial field such as stock brokers, insurance agents or mortgage brokers. In addition anyone who needs a government clearance would be ineligible due to a bankruptcy. An example is anyone one in the armed forces or an engineer whose company has landed a government contract and the engineer and has had a bankruptcy. Bankruptcy can also follow to your retirement years. Consumers who retire after a long career and chose to start a business will find themselves shut out of obtaining a Small Business Loan from their local SBA, Small Business Association. The bankruptcy is seen as a failure, no matter what the cause of the great financial stress.

Educated and Responsible and Bankrupt

  

 

This is a great article in USA today about how educated and responsible middle class American’s are filling for Bankruptcy.

http://www.usatoday.com/money/perfi/general/2009-11-19-bankruptcy19_CV_N.htm?POE=click-refer
It is unfortunate that many believe that bankruptcy can solve your financial woes. The effects of bankruptcy is, it often increases your financial stress and permanently damages your credit. In this article the person wanted to start a business and invested all of her capital in the process. New starts up businesses are known for sucking up capital. Now that she has declared bankruptcy in an attempt to protect herself from her creditors, she has poisoned her ability to receive future venture capital. The consequences of bankruptcy can be unseen, when you are in the filing stages.

Many potential investors will not even read a business plan that has been presented by someone who has declared bankruptcy. The recent show on ABC’s “Shark Tank” highlights this fact, as a capitalized investor with billions looks at a man presenting a business plan, which has declared bankruptcy and says “you’re toxic”.

The best way to handle an unmanageable debt load is to seek professional help with an advisor that can give a number of recommendations.

 

 Credit Card Debtor’s Beware

  

A recent news article that has been published in The New York Times and The Huffington Post, on law suits filed against debtors. Everyday American consumers who have fallen behind on credit card payments now have a target on their back, and the credit card companies have out sourced the hit men.

http://www.nytimes.com/2010/07/13/business/13collection.html?_r=1

http://www.huffingtonpost.com/2010/07/12/debt-collection-lawsuits-ftc_n_643920.html

Before I give a summary and my thoughts on the articles above I would like to remind you of some basic facts for American’s today-

• Unemployment rates across the country are 10%
• Bankruptcies are set to exceed last year’s all time high of 1.4 million filings
• Current Foreclosure rate in 2010 is just short of 2 million (1,961,894)

Debt collectors have grown impatient and are now spam filing lawsuits in order to intimidate debtors to pay.  Collection firms are able to use very little information such as; social security number, date of birth, address and the account to filing against the debtor. Computerized software is assisting in these mass filings.

 Often the defendant is not notified of the court date, and fails to show. Once you fail to show the creditor can receive a default judgment, and file a wage garnishment to collect the amount owe.  By this time the amount owed has ballooned up to several times the original debt. The wage garnishment can be up to 20% of your income.

If you owe credit cards, and can’t continue to make the payments, here is your action plan.

1. Yearly pull your credit report on the only free site annualcreditreport.com.
2. If you think you are unable to continue making your credit card payments call for help.
3. If you have your checking and saving accounts with the same bank you owe for a credit card, move your account. I recommend a local credit union.
4. If you receive a notice from a collection agency check your credit report to validate the debt.
5. If you contact the collection company, do so by mail and keep a file on your communications.
6. If you receive collection calls, screen your calls and ask to be contacted only in writing.
7. If you can’t pay the debt find a debt solution program.
8. Be aware any payments on the debt can re-age a debt and the collection process will continue.
9. Create a new action plan if the debt is beyond your state’s statues for collection

http://www.creditcards.com/credit-card-news/credit-card-state-statute-limitations-1282.php

The action plan above is just the beginning steps to get your financial life back on track. Give me a call, send me an email and I will add many new insider industry tips to avoid a lawsuit.

Warning Signs of Bad Debt Help

 

 

In any good trade there are tools. My bag of tools I use to assist clients who seek me; a listening ear, a wide knowledge of their debt choices, a clear understanding of their goals and a plan to move them forward. Warning signs of bad debt help is anyone who offers a solution before they know your goals. Sound financial advice does not mirror a trip to McDonalds. Sound financial advice is not rushed. Sound financial advice is clear and explores your options with consequences in a clear logical pattern.

If you are being advised and you feel as if you are ordering off the menu board at McDonalds, stop! Get up and find another advisor.

First, Last Warnings

 

 

Humans are a people of first last warnings. The first warning of heart attack is often the last and only sign of the disease, which often results in sudden death. The day we are served with divorce papers, is the day we wonder why our spouse is not happy and packing. The car blows a tire, and causes a crash after miles of excessive tire wear and low tire pressure. It seems in this world of information overload it takes a major crisis or an external pressure to get our attention. It is the same for those who seek debt help. Consumers, who are drowning in debt, wait to address it after the car has already been repossessed, the house has been in foreclosure for months or they are served with a law suit from their creditors.

Remember the adage ‘an ounce of prevention is worth a pound of cure’? Debt help is no different. It is the ounce of prevention. Measures of debt help are counsel, guidance and a plan. Seek good counsel and explore your options verbally, get guidance to prevent a catastrophic financial attack and make a plan to get back in good financial health.

 

How to Raise Your Credit Score- When You Still Have Debts Outstanding

 

  

Debt Consolidation

  

Definition of Debt Consolidation – A loan, usually secured with the equity in a home, used to pay off other, higher interest debts resulting in one monthly payment. Debt Consolidation sometimes is also called Debt Management Plan. The difference is in Debt Management not all unsecured debts are accepted and only the interest rates are reduced, late fees are set aside then one payment is created. In Debt management or Debt Consolidation some one other than your self is making the payment.

Quick Fact Sheet

• Creates a TPI mark on your credit
• TPI is short for Third Party Intervention. It occurs anytime you pay an entity that then pays your debts.
• TPI mark reads more damaging than automobile repossessions on your credit report, but not as bad as a bankruptcy
• Lump some of the debt together, not all creditors accepted
• Creates one monthly payment
• Temporary lowers interest rate
• Does not reduce debt
• You stay in debt longer than before you consolidated your unsecured debts
• Highest Failure Rate of all programs

Often consolidation programs take an unsecured debt and roll it into a secured debt. An example would be credit card debt debt with a high interest rate of 18% rolled into a home loan at 6% interest rate, this is not advisable per the Federal Trade Commission. If you increase your cost of your home with unsecured debt, you increase the chance you could lose your home if you begin to miss payments. Even the FTC, Federal Trade Commission warns of this harmful tactic on it’s website.

In addition, the FTC has a number of warnings to be aware of when looking at a consolidation program. First watch out for high up front fees. Second if you feel pressure to make additional contributions that are for fees and not for your debt balance. Third if the consolidation program wants your credit card account numbers before setting a budget with you or teaching you money managements skills.

The best course of action is to seek information from a creditable, skilled individual. If there is someone you can see in person who meets the above criteria, that is ideal. There is much to be said for accountability, transparency and full disclosure counsel in person.

Consumer Credit Counseling

  

Before I give you the fact sheet for Consumer Credit Counseling I want to tell you my personal story. In the 1990’s my husband and I were living in Seattle, Washington and were making good money. At that time we had not developed the habit of creating and maintaining a budget. The lack of budget created a wide opportunity to live beyond our means. As a result we accumulated an unimaginable load of unsecured debt. The unsecured debt was beginning to increase rapidly with fees and interest fueling ever increasing debt load. Everyone we asked for help; family, friends, business associates, business accountant & church all told us to call Consumer Credit Counseling.

After entering the Consumer Credit Counseling program, we learned the truth. Consumer Credit Counseling places a CCC mark on your credit report. This fact was NOT disclosed to us at the time of entering the program. The CCC mark is a Third Party Intervention mark, which means that someone other than the debtor paid the debt. Consumer Credit counseling programs are set up to have you pay them and they pay your creditor. That is how the Third Party Invention mark appeared on our credit report. And why was that mark so devastating to us? CCC or TPI marks read in the mortgage industry as worse than repossession but not as bad as a bankruptcy.

A year later we were ready to buy a home on Lake Stevens, Washington. I will never forget that we could not get the mortgage due to the mark Consumer Credit Counseling created on our credit report. That house had a lake view, and backed into a reserve green belt. To this day I will never forget the loss of lot #4 and the potential for joy in the house that was never built for our family.

Quick Fact Sheet

• Make one monthly payment to Consumer Credit Counseling
• Creates a CCC mark – Third Party Invention
• CCC mark reads worse than a repossession, not as bad as bankruptcy
• Charge monthly fees for forwarding your payment
• Do not take all creditor unsecured debts
• Call themselves nonprofit but take back end fees from Credit Card Companies
• 75% Drop out rate in the first year
• Programs can be drawn out for 4-6 years
• Come under recent scrutiny from the IRS and FTC
• Fail to disclose credit effects
• Fail to create a budget

Every debt load is unique, feel free to call me for a free consultation. 512-919-2123.

Debt Consolidation

  

 

Ever watch the show on A&E channel “Hoarders”? It is about people who have accumulated so much stuff they can barely walk through or use their home. The spaces look like plies of junk. There is such a mass of unorganized stuff; some well-used and some with price tags chaos, disorder and clutter. What is apparent to everyone except the hoarder is that there is too much stuff and most of it needs to be donated or thrown out. The only way the hoarder is able to receive help is with a professional who helps the hoarder discover the yearnings to add more stuff. Then they work with the hoarder to create a plan with a deadline to change their behavior. The net result is often the hoarder becomes free from the chaos.

Debt consolidation is much like the “Hoarders” show. Instead of seeking help with a professional, the debtor adds to the mass of debt by entering a debt consolidation program. New debt is dumped on top old debt and renamed. No debts are eliminated and the underlying cause for the debt is never addressed.

The debtor is also left without the assitant’s of a debt coach. A debt coach can keep the debtor on track with thier debt elimination, handle the creditor calls and help the debtor to reach the goal to be debt free. It is no wonder debt consolidation programs failure rate is 75% in the first year alone.

Instead of seeking a debt consolidation program, sit down with a debt consultant who is going to find out exactly where you are in terms of monthly budget, debt payments, and total debts owed. Once you know what the numbers are, make sure your goals for your debt are thoroughly outlined and defined with a time frame. When you leave a debt consultation you should fee a sense of peace and be on the road to sound financial footing.

The Insatiable Appetite of Credit Card Companies

 

 

As the rise in US bankruptcies continue, the insatiable appetite of credit card companies grows. It reaches across over to Asia to feed.

China, Taiwan, South Korea, Philippines, Japan, Hong Kong, Singapore and India have seen a surge in credit card transactions of 158% between the years of 2004-2009. The new use represents a quarter of the global card volume. And 50% of all consumers in this region have one credit card, most have two credit cards.

Three factors are motivating the debt surge; Technology, Status Symbols & Government. The players in this new debt market are; Visa, Master Card, Citibank and American Express.

Technology; millions of cell phones are now equipped with credit card information. The appeal is speed from a smart chip on your cell phone, has drive the market. Any purchase can be made from public transit, movies or cars. Visa and Master Card have flourished in this new growth market. Citibank is capitalizing on this growing market and releasing cell phones with phone payment capacity in the next year. American Express is seeing a growth with their cards, especially in Japan where the card has to be paid off in full monthly. Local stores have added ‘store loyalty cards’ that are stored on cell phones as well as coupons.

Status symbols; having a platinum card is seen as the new status symbols. As the region becomes more affluent, the market for credit cards has increased. The amount of spending increases when you move from cash to credit transactions. Retailers are following the trend and adding merchant credit card processors to feed the demand.

Governments; an aggressive marketing campaign directed from the governments of these countries to shift the spending habits of consumers from cash to credit drives the market. The prorogated adage is for governments to ‘grow the economy’, when in reality they are only increasing their own citizen’s debt burden. In South Korea the demand for credit cards grew due to the government’s tax deductions, offered to consumers who purchase with credit cards. Across the Asia – Pacific credit card transaction added $1.1 trillion to the global GDP from the years of 2003-2008.

 No Longer a Debtor Lifestyle

Every summer holiday was a double bonus. Good weather, bbq and retailer sales!  The t.v would boom out those special deals, with balloons and fanfare. The glossy ads that came in the mail touted special lower prices for that weekend only! Oh the excitement, the room décor, the cars to select! 

There is one store that always stood out for sales excitement more than the others, IKEA.  IKEA can be magical for those that are in love with a new look. Your household can transform with a new vibe just by being inspired by those real life vignettes.  The first floor of an IKEA has many little rooms set up. Each room has three walls you may peer into the room and see how the many IKEA products can be assembled and recreated in your home.  It is real life magazine with the perk of being able to sit on the furniture, look at the price tag and yearn to fill your basket with those goodies.   And I did just that, over and over again. I was a little like the lady in the current IKEA ads who runs over her front lawn with a semi flat bed truck full of those little flat boxes.

 IKEA furniture comes in flat boxes, to save on shipping cost and they pass those savings on their customers. All it takes is an Allan wrench and BAM!  Fill your room with furniture.

But somehow this year my holiday sales drive was missing. Gone. Nonexistent. I had a calendar and could see the holiday coming; I heard the ads and got the mailers all to no avail.

 I imagine I am not unlike many American’s who ridden the road of the economic bubble only to have it burst with and leave me with the after taste of soap bubbles.  This suspension is back by, The International Council of Shopping Centers, sales volumes are down 3.3% this year on average following a 10.2% decline in sales in 2009.

Retailers are responding to this trend by offering deep sales discounts in order to move their merchandise. So if you are without debt, have an emergency fund, live within a budget and well insured, your purchase power will temporarily rise.

For me lure is gone, so off to the lake I go, happy and free!

 

 

 

How Real is Debt Settlement?

  

For many who have never heard of Debt Settlement, the concept can seem unreal. Debt Settlement is a legitimate method to reduce unsecured debts. The method to reduce those debts is negotiation. The debtor makes monthly payments in a secured trust account for the purpose of settling the debt. After the payments have risen to the settled agreement amount, usually 50%-60% of the original debt, the money is then transferred from the debtor to the creditor. This is known as a ‘lump sum settlement’.  If you would like to see the detailed plan in which this debt elimination process is completed please see my Debt Settlement page.

The explanation of debt settlement is very straight forward. But often I am meet with a gasp, or disbelief that in debt settlement as a legitimate or legal means to eliminate debt.

Debt Settlement is more common that you might think. An article published 7-25-10 in the New York Times, entitled “One Way to Lower a Doctor’s Bill”, is just another example of how common and effective is the practice of debt settlement. The article outline gave the example of how a medical bill was reduced. The bill was reduced instantly, by 25%.  The transaction was over the phone and the monies were paid in lump sum.

Here is a link to the article http://bucks.blogs.nytimes.com/2010/07/25/how-to-lower-a-doctors-bill/

At this point you could be thinking; gee Marcella, that was great! Thanks for the information, I will now go forward and negotiate my own debts, since it is a legitimate method. And for some readers, that would be a realistic option.

Take a moment and compare the different results between Debt Settlement from a professional firm and do it yourself debt settlement.

Professional Debt Settlement

• Allows the debtor to save monthly until the settled funds have accumulated to meet the new lower settled debt amount
• Reduces the debt by 50-60% not 25%
• Increases the debtor’s buying debt power by using a ‘volume debt buy down ’
• Legal terminology to finalize the debt. Prevents the creditor from treating the settle amount as a payment and then pursuing the debtor for the remaining amount.
• A professional negotiator to negotiate the debt for the best possible current accepted debt discount available.
• A team of debt professionals who know the industry standards for unsecured specialty debts
• A good standing relationship with creditors across the country to negotiate for the debtor
• Stream line methods of communication to limit the chaos and stress from other do it yourself settlements
• Online monthly statements to view the progress of your Debt Settlement Team
• A specific target date that you will be debt free

Do it yourself Debt Settlement

• A possible discount on your debt
• All  monies must be ready at time of settlement agreement
• Narrow window of time to meet new settlement agreement

 

Compare the list and ask yourself, “Which would I rather have; a debt settlement professional or another do it yourself project?”

  

Debts Should Be Paid

There are times, when I share with others what I do for clients, that I do not get a favorable reaction. You can almost see the reaction coming; the posture stiffens, they look down and scowl lines start to appear on their face. The next thing that follows is a variation of, “I believe debts should be paid.”

It is as if I have assaulted their moral stance in the world, and they must protect it. I am sure that the person, who utters those words, has had a tough row to hoe at one time or another and came through it with hard work and sacrifice. I respect those who have paid the price for their financial mistakes and spent years to redeem themselves. They followed the ‘pull yourself up by your boot straps’ mentality or ‘tighten your belt’ thinking that has gotten them through financial crisis.

What is missing in those ‘self made individuals’ can be a lack of understanding for those who are in financial crisis, who could not resolve it with those same means.

When I encounter folks with that self made mentality, I draw a patient breathe and give real world examples.

What about my client who spent his life’s savings for his wife’s stage 4 cancer, only to bury her and still receive outstanding medical bills? Does he get a chance to start over and provide for himself? Do you realize that the number one reason for bankruptcy in this country is medical bills? If the client declares bankruptcy and is able to wipe out the debt, both he and the hospital lose. Debt Settlement is a fair option, for borrower and the creditor, it is a win – win relationship.

What about my client a self-employed trucker, who was pay check to pay check when the gas prices hiked, and used up his credit card limit to stay employed? Let him enter a debt settlement program and get some breathing room so he save a little aside for the next gas crisis, and get back on sound financial footing.

Or my client who soon to be ex-husband ran up multiple credit cards in both names, only to serve her with divorce papers? In divorce court she will be awarded half of all martial debts. Should she pay for his actions? What protection are we really offering whose are robbed from their own family members?

I can list over and over client stories, the one factor is stays constant, the need to begin again. It’s is our do over, second chance, renewal. It’s the mercy factor. Yes I believe ‘debts should be paid’, and that we can have enough mercy to allow a portion of the debt repaid to satisfy the demand for the debt.

A Lesson In Avoiding Bankruptcy

There is an inspiring story in the Wall Street Journal this week. It illustrates a small business owner, who was facing bankruptcy. The story is entitled, “Starting Up, and Conquering the Numbers”.

The business went from $600, 000 in debt to $2.8 million in annual revenues. To summarize the lengthy article here are the steps the business owner chose instead of bankruptcy.

• Sought help her bookkeeper, Small Business Administration
• Create a ‘picture of business finances’ ; cash flow, accounts receivables, accounts payable
• Increase cash flow by cutting unnecessary expenses.
• Get educated on debt options other than bankruptcy
• Created a plan to pay off debts
• Reviewed financial picture weekly and quarterly

These same steps can be applied to every day consumers who are burden with high debt loads.

• Seek the help of a Debt Consultant
• Complete Free Debt Worksheet and get working snap shot of your finances
• Discuss all of your debt options and what the results of each choice will be for you
• Create a plan that best fits your needs and goals to eliminate debt
• Chose the debt plan that increases your cash flow
• Review your plan and keep in continual communication with your Debt Consultant to stay on track

There are many paths to becoming debt free. Use your money to create a future rather than to continue to pay for your past.

 

 

A New Agency Created for Student Loan Debt

 

• Consumer Financial Protection Bureau – federal watchdog agency
• New bill may be signed into law July 4
• Bill does not dictate private student loan terms
• It does oversee lending practices and address borrower complaints

Four new protections are covered in the bill; Disclosure, Complaints, Meditation & Future regulation.

1. Disclosure

• Private lenders are required to inform borrowers that they may be eligible for federal student loans regardless of their family income.
• Lenders must disclose interest rates before a student signs up for the loan.

2. Complaints

• A source for borrowers looking to file a complaint.
• Able to spot a pattern of abuse and then regulate those lenders.

3. Meditation

• If a dispute between borrowers and lenders arises the new agency would meditate that dispute.

4. Create future regulation

• Yearly reports from the Secretary of Education and Secretary of the Treasury are issued to Congress. The new agency will be able to spot abuse trends from private lenders and recommend additional law in the future.

Guard the Money

Family financial advice is a funny thing. It is often cloaked in stories from family member’s firsthand experience with hardship and preservation. I grew up in a household that canned fruits in the summer and garden veggies in the fall. We clipped coupons, and my mother helps us sew some of our clothes. We did not live on a farm and visited the grocery store weekly for the majority of our food needs.

We were not poor, but always felt the need to be careful. If you were given a gift of cash, the words always accompanied it, “guard the money”. The implication that you need to save your money, so you have it in a time of need. My father always worked and my mother worked from time to time as extra funds were needed. Looking back it was a rather financially stable childhood. The sense that we would always have a car, a roof over our head and food to eat was constant. Also our medical and dental needs were met, I breezed into offices gave my name and saw the dentist or doctor.

My parent’s probably felt that they were providing well for their children. But there was one financial need that went unmet. It was financial education. The one thing that I needed to be a fully functional adult was a financial education. I was missing the ‘how to’ in recreating that same financial stability for myself as a young adult. Lacking the basic understanding on how to create a monthly budget, pay bills or save I made a number of poor financial choices throughout my 20’s. It was a classic learning to ‘fly while falling’. Compounding the learning curve was the intense emotion of shame with every failure. Somehow I should have known better, done better or asked my father for help. The after burn from my choices gnawed at my sense of self worth and created a hole of self doubt that grew with age. I attended college taking classes such as macro economics and made good grades. But attending college without the fundamentals of money management is as if, you ate dessert at a four star restaurant without knowing what you have ordered. The process was backward and not scaled to my real world understanding or needs.

I do not blame my parents. They thought they were providing well for me. And I made my financial choices myself. There is no undoing the past, only preparing for a better tomorrow.

My aunt once told me, “when you know better you do better”. Today I know better and do better. I teach my children about the real cost of life and they see mommy create a budget and spend with in it. I have a chance to forever change their heritage and give them the tools they need to be a fully functional self sustaining adult. You can too. Sit down with financial advisors; get a thoroughly understanding of where you are at and where you need to grow. Learn how to teach your children, discuss this with your friends and prevent others from years of learning to financially fly while falling.

3 Action Steps You Need to Take with an IRS Letter

First open it. Sounds simple enough but 50% of those who receive an IRS letter don’t open it. And the clock is ticking; IRS letters have different time frames to respond. Second, decide if you need help. Do you understand what the letter is asking from you? If there is any doubt contact a Tax Attorney. Third, gather all your documents; tax returns, paychecks stubs, etc to meet with your Tax Attorney. Together you will create a plan to resolve any tax issue.

Do I have to File a Tax Return Every Year?

In short the simple answer is yes. Failure to file a tax return is a crime punishable by a fine up to $25,000 and one year in prison for each year you don’t file.

Do not panic! If you owe taxes or have not filed a refund, gather your documents and give us a call. If you are prepared and contact the IRS before they give you notice you will avoid most of the penalties.

The IRS motivates tax payers in two ways; penalties and loss of refund.

Penalties: If you owe taxes, you can fined a “failure to file” penalty and interest on the amount owed, adding as much as 25% to your tax bill.

Loss of Refund: If you are due a refund, you won’t be penalized, but you will not be able to collect your refund either. There is a three year window to file a return and receive your refund.

IRS can be the most intimidating creditor, gather your documents, seek good council and handle it in a timely matter.

  

Occupy Wall Street

Will this spark a financial revolution?

 

 

 

  

The Lies of Good Debt

“Third World America” by Arianna Huffington

Bigger than the ‘Housing Bubble’

Margin & Money

Retailers, Credit Cards & Pleadings

New Money Stream for Business Owners

 

 

 

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I Maybe Able to Help You

Money to Blow

 

 

A recent article in USA Today entitled, “Bank failure is 83in ’10; pace more than double last year’s” outlines the speed of small bank failures and the cost to, Federal Deposit Insurance Corp known as FDIC. The article states the bank failure rate is the highest since 1992 but in reality our bank failure rate saw its greatest impact in 1930. 600 banks closed in 1930 and in 1933, 28 states did not have a bank open. This is sourced from the recent series offered on the History Channel, entitled “The Story of US” which is sponsored by Bank of America.

The cost of the losses from bank failures reported to the FDIC as of March 31 totals $20.7 billion. The FDIC expects those losses to grow over the next four years to $100 billion. In order to ensure against those expected losses the FDIC mandated last year that banks prepay $45 billion in premiums, for 2010 through 2012, to rebuild the insurance fund. How are the banks going to generate those revues? Banks have to make a profit for their shareholders and the shareholders will sell if their returns are not realized. Banks raise money by increasing fees and decreasing services. That is why I recommend finding a local credit union for personal and business needs. Those depositors in a credit union are members and share in the profit instead of suffering from big bank fees. Ask yourself; “Why should it cost me money to use my money?“

Debt Dogged Americans Stressed Out

 

 

 

 

 

 

 

In a recent article on the Associated Press entitled “Poll finds debt-dogged Americans stressed out”. The articles outlines that about half of all American’s are feeling stress over their debts. The article site the factors that are attributing to the stress are ; high unemployment, climbing foreclosure rates, tight credit markets, tight household budgets on fixed income or those with high medical bills, heavy workloads on many Americans who are working multiple jobs to cover basic needs.

These finding are not a surprise to most of us, who talk with friends, family and coworkers. This is not a surprise to those who have read the headlines, tracked history and drawn conclusions as to the reason for this stress. An example is Michael Moore’s movie “Capitalism: A Love Story”. One of the many quotes is that “1 % of the wealthiest Americans have more wealth than 95% of all the rest of American’s combined.”

Every day I hear stories from my own clients as to their financial stress. Some of the stories are a result of living for today and not planning for emergencies. Most of my clients are facing these financial stressors do to serious illness of the wage earner, under insurance for medical expenses, extensive education costs, death of a loved one, failed businesses from the economy and divorce. These clients cannot work their way out, nor face bankruptcy to remedy the stress. They need other options that give them a plan and hope. It is for them, that I read, listen, answer the call and continue to report.