Monday, February 28, 2011

Famous Bankruptcies Who Knew?

We hear about famous bankruptcies all the time. I mean, everyone knows that Donald Trump has filed bankruptcy multiple times. And we always hear about celebrities like Willie Nelson or Kim Basinger filing bankruptcy. We hear about the Teresa Giudice bankruptcy and how Eva Longoria just filed a business bankruptcy of her restaurant. Toni Braxton has filed for bankruptcy due to illness. Edit: Teresa Guidice, one of the real housewives, has also filed with her husband.

But the last president's day got me thinking. I wondered if any presidents have ever filed for bankruptcy.

So have any presidents filed for bankruptcy? ---I really expected the answer to be a big, fat no, but I did some poking around and was really surprised by what I found.

The following presidents have all had a bankruptcy--

Thomas Jefferson (twice), Ulysses S. Grant, William McKinnley and Abraham Lincoln have all taken advantage of bankruptcy protection!

I wish I had had this information when I filed for bankruptcy. I might have felt a bit better of it knowing that a founding father and Honest Abe were once in the same bankruptcy boat as me. After all, misery does love company, and that's pretty good company for misery to love!

Good luck to all,


Monday, February 14, 2011

Bank Accounts & Bankruptcy

Learn what I did about choosing a bankruptcy lawyer here, or skip ahead to find out about Bankruptcy and Paypal.
Are you worried about what will happen to your bank account during bankruptcy? I was. It was a major concern of mine before I filed so I thought that you too might like to know about bank accounts and bankruptcy.

My personal bank accounts were with my employer's credit union. My checking account was overdrawn due to overdraft fees and I had two delinquent personal loans with this financial institution as well. I hadn't been able to make payments on the loans for several months.

The loans were going to be included in my bankruptcy petition but I wanted to bring my checking account current so I could continue to use it...I was attached to my credit union despite the threatening letters I had been receiving regarding my overdue loans. My attorney told me not to bother.

He said that the checking account could also be included in the bankruptcy and it was possible that the bank could use something called cross-collateralization, to freeze the bank account. That meant that they could essentially freeze direct deposit funds from my employer, leaving me nothing to live on.

An example of cross-collateralization is when a debtor has a checking account and a loan at the same bank. The debtor becomes past due on the loan and then the financial institution takes money out of the bank account or freezes the account until the loan becomes current.

The practice of freezing bank accounts due to past due loans is most commonly used by credit unions but other banks can do it. Going one step further, it is currently being reported that Wells Fargo/Wacovia is freezing the bank accounts of individuals who file bankruptcy, even if they don't have any debt with them and despite a court order deeming the practice illegal. That's scary stuff.

My bankruptcy attorney suggested changing bank accounts before the bankruptcy petition was filed, I wasn't able to close the accounts because of the negative balance but I did immediately stop my direct deposits and I opened new bank accounts at a local bank to whom I owed nothing. I could have also opened an online bank account. I know people who have successfully opened a bank account online for the same reason.

Had I not opened a new bank account prior to filing bankruptcy, it would have been very difficult to do so. Traditional banks do not check your credit report, but often they do use something called ChexSystems (or Chex Systems) or a similar company to check your banking history.

If you have outstanding (unpaid for) checks or an overdrawn checking account that has not been resolved, your bank will probably report you to ChexSystems and ChexSystems will report that information to banks that request it for up to five years.

So what do you do if you didn't open up a new account before bankruptcy? Is there a "bankruptcy bank" or are there "bank accounts for bankrupts" out there? Yes. There are second chance bank accounts. Second chance checking accounts, also known as Fresh Start bank accounts, can often be found online.

Don't be afraid of banking online. More and more people are banking on line (regardless of whether or not they have filed bankruptcy). Online bank accounts are sometimes easier to get and online banking is safer than it ever has been. You just need to remember to never sign into your account from an email.

That's the skinny on bank accounts and bankruptcy. As always, I wish you all success with your fresh start!

Tuesday, February 8, 2011

Automatic Stay In Bankruptcy

I was asked to write about the automatic stay in bankruptcy so this is a special request post.

If you are anything like I was you may be having a hard time before the bankruptcy with the harassing creditor calls. I didn't get much peace for nearly a year. The calls literally made me sick to my stomach and I eventually stopped answering the phone altogether.

That didn't stop it from ringing though and it made me flinch every time it did. It was a job in and of itself just to check my voice mail for the 10 percent of calls that I actually wanted to answer.

For this reason alone, once I made the decision to file, I couldn't wait to actually do it. It would take me a while to pay off the lawyer so he could file but I knew that once I filed the bankruptcy automatic stay would go into effect and my creditors would have to leave me alone.

In bankruptcy law, the automatic stay is an automatic injunction that halts actions by creditors to collect debts from a debtor who has declared bankruptcy...this means they cannot contact you about your debt through any medium for any reason! The automatic stay goes into effect the moment your bankruptcy petition is filed. This is the moment you begin to wipe the sweat from your entire body.

Talk to your attorney about your situation though because there are some exceptions. Secured creditors (creditors that have collateral backing the loan such as a car or house) can petition the court for relief from the automatic stay and it can be granted if they can show cause. Cause usually means that they have to show that there was some type of fraud committed.

When the debtor gets a discharge, the automatic stay is replaced by a permanent injunction prohibiting creditors from ever attempting to collect on those discharged debts. The permanent injunction does not apply to any debts acquired after the date of filing.

I hope this post satisfies the person that requested it. I'm gonna have a lot more to say about creditor harassment in the future but if you have any more questions about the automatic stay in bankruptcy, please let me know. I know there is much to cover.

As always..the best of luck to all!


Sunday, February 6, 2011

Bankruptcy Credit Counseling

Some people grow a little concerned when they hear that they have to complete bankruptcy credit counseling courses in order to receive a discharge. Be aware of this but don't sweat it.

In a Chapter 13, the Trustee will offer the required courses but Chapter 7 debtors are to take the courses on their own. There are two different credit counseling courses that debtors must take. In a Chapter 7 bankruptcy there is a pre-filing class that must be taken within the six months prior to filing and a debtor education course that must be taken after the 341 hearing but before the discharge.

When you pass the pre-filing course, you are issued a certificate that gets filed with your case. The debtor education certificate will also be filed with the court after you pass that class.

These classes can be taken online and I found them pretty easy. If memory serves, the pre-filing bankruptcy credit counseling course took about two hours and the second one was less that that. The bankruptcy courses that I took cost between 35 and 50 dollars at that time.

One thing you must do is make sure that the classes you take are from a debtor education company that is government approved for your state, otherwise it won't count.

I used Springboard here in California and was pretty happy with it. I think they gave me 20 dollars off on the second course after I took the first one. Your bankruptcy attorney should be able to give you a recommend a good qualifying credit counseling agency.

Here is a link to the government approved companies providing debtor education by state (from the government web site):

Government Approved Bankruptcy Credit Counseling Classes

Good Luck To All!