The Aftermath of Bankruptcy

By: Christina

11/12/2008

Bankruptcy is a new chance at life. In many ways it is a complete and total financial death, but it is also the opportunity for financial rebirth! No matter what the circumstances that led to the bankruptcy were, it becomes very, very important to manage things correctly from that point on.

I was one of those people who waited far too long to declare bankruptcy. I struggled with my debt for two years before I even considered that bankruptcy could be the right option for me. Because of that I have nearly two years of late, and non-payment marks on my credit report in addition to my bankruptcy. I allowed my debt to be sold from bank to bank during that time. Each time someone new bought my debt, it created another open account and black mark on my credit report.

Once my bankruptcy was discharged I knew that I wanted to take full advantage of it, and create a truly “fresh start” for myself and my family. Except it wasn’t really a fresh start. I no longer owe the money but my entire history is still there, in black and white on my credit report. And it will be for the next seven years.

Poor me right? Not really. I’m strong enough to deal with it, and fix what I broke. I’m also strong enough to deal with the consequences. If you’re considering bankruptcy as an option, make sure you’re strong enough too. Now matter how desperate the situation is right now, it will be even more desperate if you handle your life the same way after bankruptcy as you did before.

I think that’s what people who haven’t declared bankruptcy don’t understand. Yes, I got away with not paying what I owed several collection agencies at that point in my life. But I sacrificed the next ten years of my life as far as my credit is concerned. I stopped the collection calls, and the sleepless nights, but I bought myself a load stress-of-a-different type.

There is a price to be paid when you declare bankruptcy – it’s both emotional and financial. It is emotional in the sense that I feel guilty – I did something wrong, I didn’t pay my bills. I couldn’t pay my bills because I couldn’t even put food on the table. The fact that bankruptcy was the right option for my family at the time does not make it any less painful to know that it was something I should have been able to avoid.

The financial price of bankruptcy comes with the high interest rates that I will pay (if I can get a loan at all) for the next ten years. The price also comes when legitimate lenders refuse to deal with me because I have a previous bankruptcy – no matter how well I’ve handled my finances and my credit since that time.

Bankruptcy is not a free ride, at least that was not my experience. It was a desperately needed life preserver offered when I was drowning. But it is still going to be a long, long swim back to shore!

I think for most of us (those who have declared bankruptcy) the bankruptcy itself is just the tip of the iceberg. Underneath the waters is a long list of troubles, pain and misery – all of which we caused ourselves. Every bankruptcy has a sob story, a list of hard knocks. But what do we take away from that?

Well, speaking for myself I can tell you without a doubt that I took away quite a few lessons from my own bankruptcy:

I had to accept that I was the problem – Even though a large amount of my bankruptcy debt was medical, it does not mean that I get to sit back and blame the health care system in this country. I chose to go without insurance. And so I had to understand that there were consequences for that.
I had to learn to manage my own money – After bankruptcy lenders aren’t exactly falling all over you to offer you credit. So the money that I had was all that I had, and that was such a wonderful lesson for me.
I had to learn to pay my bills on time – Since I didn’t want another series of charge offs, late payments, and black marks on my credit report, I made paying those new bills a priority. Most people out there already get this concept. I’ll openly admit I was stupid abut my finances! It just wasn’t something I ever thought about. There was no money, so I couldn’t pay the bills. After the bankruptcy, I had to pay the bills – which meant that I had to take on a second job to raise my income.
I learned that my credit report is a lot like owning a very nice car – I had the equivalent of a brand new BMW and I chose to drive it off a bridge with my bankruptcy. Now, it is up to me to salvage what is left. No one is going to hand me another Beemer, it’s up to me to fix the one I destroyed. It requires making repairs, active maintenance and regular tune-ups. I learned that my credit report isn’t something that Is just “out there”. It’s my report, and I am responsible for what is included there.

So, in a lot of respects, my bankruptcy is the best that ever happened to me financially. Not because I no longer owe all of my medical debt, but because It forced me to put every single area of my financial life in order. I am a better person because of it today. It’s definitely the most major learning experience I’ve ever had.

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I Can’t Believe I Fell For It

By: Jason Steele

11/11/2008

I am really excited about the new Sony Camera that I bought. I purchased it from Sony’s direct sales website, SonyStyle.com. It takes great pictures, and at $600, it is reasonably priced for an entry level DSLR. When I purchased it, I was presented with an offer to sign up for their Sony Rewards Credit card, offered by Chase bank. I was offered an immediate $150 statement credit, and one year, no interest financing, as well as free shipping. Finally, I was to receive 5 “Sony Points” to the dollar.

Why Not?

Why not, I thought. $150 in immediate saving is pretty good, and the “Sony Points” will add up quickly if I end up ordering addition accessories such as zoom lenses or an external flash. Sony Points are primarily good for Sony electronics, as well as some movie and music offerings.

Beware Of Credit Card Companies Bearing Gifts

A few weeks after the camera arrives, I got an unexpected package in the mail from Sony. In it was a USB device that looked like a game show button. I dutifully plugged in the devise, and pressed the button. Then, my web browser opened up and took me to the Sony Rewards web site. There I was told that I would receive a 20% off coupon after my next purchase charged to my Sony card. Sounds great.

Then It Hits Me

The next day, I bought lunch with my new Sony card. A week later, I received my first statement. Then it hits me. My “promotional interest rate” of 0% was good for the camera, but my subsequent charges will incur interest until the camera is paid off. D’oh! I fell for the oldest trick in the book!

Thankfully, I have enough money to pay off my balance in full. I will pay off the $500 owed on the camera, after taxes and the statement credit, in order to avoid a year’s worth of interest on the $6 lunch.

Does This Make Sense?

Probably not, but let’s see: $6.00 at an APR of 11% is only 66 cents of interest for the year. On the other hand, the $500 sitting in my bank account would earn 1.25%, or $6.25 over the next year. Even a money market savings account might have returned $10. The problem is, the only thing I hate more than carrying a balance is paying interest to credit card companies. I am also free to use the Sony card as a backup, without incurring interest.

Why Did I Bother?

First, it is worth noting that Sony products are pretty much price fixed. No matter where I looked, any vaguely reputable dealer was selling this camera for the same price. Since I was saving $150, it would seem like I was receiving a good deal, but the more I think about it, the less I am convinced it was worth it. How could a free $150 not be worth it? While the shipping was free, I did get hit with sales tax. Since Sony has a store in my home state, they must charge me tax on mail order purchases. My local tax rate is 8%, and it applies to the full $600. Remember, the $150 was a statement credit, not a discount from the sales price. If I had ordered from another company without a location in my state, like Amazon, there would have been no sales tax, and likely no shipping on a large item like that. So right there, my $150 savings is down to $106.

Next, I could have gone to one of those frequent flier associated shopping links, such as Delta’s SkyMiles shopping mall. There, I could have chosen from several electronics retailers that would have offered me 2 miles per dollar spent, no tax, and free shipping. If I figure that Delta SkyMiles are worth 2 cents per mile, then I gave up $12 worth of SkyMiles from the Skymiles Shopping alone. Then, add in another 1.25 miles on Delta or many other airlines that I would have missed out on from using my Starwood Amex. All told, I missed out on about $20 worth of miles in addition to the $46 in taxes, so I am really up only about $75, or about half of the $150 statement credit.

When To Take A Sign Up Bonus

Lots of reward cards offer sign up bonuses. In fact, you can’t pay for anything at a department store without getting a credit card offer. No, I do not wish apply for a Target card in order to receive a 10% discount on my sock purchase today. With airline affiliated cards routinely offering tens of thousands of miles, often enough for a free trip, it is difficult to accept credit card offers from every place that you shop.

While determining how many credit cards you can have before your credit score suffers is as much an art as a science, I don’t want to find out the hard way I have too many. I wanted to conserve the number of credit cards I have, yet I thought the $150 statement credit plus the year free financing was a good deal. In retrospect, I should have remembered the old American Express slogan, “Don’t Leave Home Without It.”

Declare Bankruptcy, or Tough It Out?

By: Christina

One of our readers, Jill, had this question for us:

Mr. Credit Card,

We have kept up all our payments and haven’t been 30 days late in 5 years. However, we are really struggling.

Our parents are helping us since my husband became Underemployed 18 months ago. It is becoming increasingly difficult to make it each month. We have considered just defaulting, credit counseling and bankruptcy. Which one will look better in 7 years?

How will each affect us immediately? If we default, how long before they will go away? What can they really do to us? Can we even file bankruptcy while we are current?

Is the new bailout likely to help us any? We currently owe 38,000 in unsecured debt, 116,000 on two mortgages on our home which is valued around $120,000 and 30,000 on our two vehicles which are needed to contiue to work. Our income in 2006 was $72,000. In 2008 we expect about$30,000. HELP!!! Any advice is appreciated.

Hi Jill, thanks for your question. You’re definitely in a tough situation, but you do have options.

Let’s talk about what not declaring bankruptcy would mean for you and your husband, and how you might go about taking that path first, then we’ll look at the reverse situation.

Right now, you are $184,000 in debt including your mortgage, car payments and credit cards / loans.

So, my first question to you would be, can you still afford to make your house and car payments plus a minimum payment on each of your credit accounts each month? If you are not making enough money to do that, then it will not take long for you to go past due on something and start the collection cycle. This will most likely lead to bankruptcy no matter what you do.

So, that is your first step. Decide whether or not you can make your minimums. If you can, do not declare bankruptcy. Keep making your minimums until you can raise your income again, and start paying off more than the interest.

Please hear me when I say this is the best thing that you could do for your family. Squeak by until you can run forward by upping your income. If there is a problem with that (and I do not know your situation) then you are going to have to look at your other options.

The general rule of thumb for bankruptcy is that if you can pay off all, or most of your debt in seven years (especially if you can do it on time!) then do not declare bankruptcy. This is not counting your entire mortgage – just your unsecured loans and your car payments. If that is possible, pay the debt instead because you will come out of the experience a lot better off, and you will get to remain credit worthy throughout the journey.

I gave you the seven year figure because that is how long a bankruptcy will affect your credit report, a minimum of seven years. It will show up on your credit report for ten years. Most lenders though, will not care after the seven year mark.

So, now I’m asking you to look seven years into the future. That’s a long time to get things straightened out. I do understand that things are bad right now. Given seven years to fix things, pay down your debt and raise your income, could you do it? If the answer is yes, do not declare bankruptcy. If the answer is no, and you need an immediate solution, then you may want to consider bankruptcy.

My best advice would be this: Do not declare bankruptcy, work second jobs, get as much help as you can, and negotiate with every single lender to lower your interest rates. Use balance transfers, refinance your home and car if you can, do whatever it takes. Bankruptcy will affect you more than you think it will. I completely understand that you are worried, and stressed out, and bankruptcy will take all of those worries away in one quick remedy. It is a quick fix, but with a long, long penalty. That does not mean it isn’t your best option right now though, ok? Let’s take a look at the other half of that scenario.

Well, you asked what happens when you default.

>>If we default, how long before they will go away? What can they really do to us?

Well, if you default on any of your payments, this is the order of operations:

You start getting collection calls. If you move, or do not answer the phone long enough, the collection company will call your friends, family members, and anyone listed in the phone book with the same last name.
Your payments will be reported as late, and will begin lowering your credit score.
Your credit card accounts will be closed.
Your debt will be charged off and sold to a real collection company, who will do their very best to harass you within an inch of the law. Calling well before and after allowed times, calling at work, and most likely being rude to you if they do manage to speak with you.
The collection agency will file a lawsuit, and if they are able to notify you, you will have to go to court.
If they successfully obtain a judgment, (which goes on your credit report as well) then they will garnish your wages until you have repaid the debt.

That’s the “completely hands off, I’m going to pretend that this debt doesn’t exist approach.” That’s what happens where your credit cards are concerned. If it’s your house or your car payment instead, you would be looking at repossession or foreclosure very quickly.Best not to do that because it can actually be more damaging to your credit score than the bankruptcy.

If you have no contact with the collections company, and no way for them to garnish your wages, then the debt does eventually disappear thanks to the statute of limitations. You’ve got to be careful on that one though, because even speaking to a creditor can reset the statute and make you liable all over again.

So, let me just say that you do not have to default on anything, nor go through this long, horrible process to declare bankruptcy. If you know you can’t pay your bills, and there is no way that you can possibly repay at least your credit card debt in seven years, then do not default on anything – go straight to a lawyer while you are current and file bankruptcy. That way the only damaging thing on your credit report is the bankruptcy itself, not tons and tons of late or missing payments and charge offs.

You may have missing or late payments reported on your credit report between the time you file for bankruptcy, and the date your bankruptcy is discharged (90 days). If that is the case, be sure to challenge those items as being included in bankruptcy. Get the late notices removed from your credit report, and make sure the accounts show “included in bankruptcy”.

To sum up, and give you the direct answer to which course looks better –

Paying your bills on time, even if it’s just the minimum will always look better. If you know there is no way that you can handle your current level of debt, and no way to change your circumstances, then the best option is to declare bankruptcy before you go past due with everyone.

Have a question for us? Leave a comment below!

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Random Reward Card Info

By: Jason Steele

11/10/2008

Delta, Again

Delta can’t seem to keep quiet for a few days without making changes to something that will affect us reward travlers. Today, the word comes forth that the “Always Double Miles” program is no more. Delta had offered double miles on many types of purchases, including home improvement, gas stations, drug stores. Now, that promotion will end as of the start of next year.

In the past, you could justify the increased number of SkyMiles needed for a Delta reward, by considering the always double miles program on your Delta Skymiles American Express. That day has passed. Unfortunately, nobody told the good people over at the American Express website, who still have a page up advertising this offer.

The Traveler’s Check Loophole Is Now Closed

American Express had been offering travelers checks with little or no fee. These checks could be purchased on your American Express card as a purchase, not a cash advance, and the purchase would accumulate reward miles or points. One could then deposit any unused traveler’s checks in their bank account. Many reward card holders were doing this in order to accumulate extra miles. So many, in fact, that American Express has since ceased to offer this feature to it’s card members.

While some openly mourn this loss, others cite the reward card guru’s abuse of this service as denying legitimate users the opportunity to utilize traveler’s checks. My view is the following: The credit card companies make the rules, we just follow them: It is their world, and we just live in it.

Ebay plus PayPal For Rewards

I always believe that the best reward is gained when you spend less overall, rather than just spending with the right card. I have made it a habit to check the prices of things on Ebay before I order something online or run out to the store. Nine out of ten times, whatever you are looking for can be found cheaper on Ebay.

The preferred payment method on Ebay has always been PayPal. Unfortunately, PayPal will default your payment to an automatic withdrawal from your bank account. Thankfully, you can use your credit card as an alternate source of payment. Unfortunately, PayPal tries it’s best keep you from using your credit card.

Here is the trick: First, log in to PayPal and enter your credit card information as a funding source. Every time you make a purchase, be sure not to confirm payment without choosing an “alternate funding source.” This option is somewhat hidden, and it is easy to miss it. Then you can choose your credit card instead of your bank account, before confirming payment. Sometimes, PayPal will even present another page asking you if you “are sure” you want to pay with a credit card. They will conjure up all sorts of reasons that they think you would be better off if the money was withdrawn from your bank account immediately, rather than a charge placed on your card. Yet by agreeing to the bank withdrawal, you are loosing any reward points as well as the free “grace period” received when you pay your entire balance in full. Finally, you would also miss out on the opportunity to demand a chargeback in the event that the seller doesn’t ship the item, and PayPal won’t refund your money.

Starwood Amex vs. Amex Membership Rewards

I have recently spotted a key difference in the two similar programs. I have always been a big fan of the Starwood Preferred Guest American Express card, while I have family members who love the Membership Rewards program. It turns out that the Starwood program will only allow you to transfer miles from your account to a frequent flier account in your name only. With Membership Rewards, you can transfer an award to anyone who holds a card in your account. The idea is, that if you are a little short of miles, and you want to top off your account, as long as the person giving you the miles will entrust you with an additional card from their account, they can transfer those miles to you.

Transferring Miles and Awards

Of course, one of the aspects of all reward systems that few people understand, is that any award can be redeemed for a ticket in anyone’s name. It is stil your account, with your miles, that you redeem for your award. When the ticket is issued, the person redeeming the award, you, can always choose who the ticket holder will be. This works great when one person is redeeming multiple awards for a trip with friends or family, or for gifting awards. The only thing you should avoid, is ing or selling awards between strangers on Ebay or Craigslist. Not only is this practice ripe for fraud, but selling awards is technically against the program rules of most airlines. Rumor has it that an airline could ask you at check in to identify the account holder that issued the award. If you cannot, the ticket can be invalidated and the award holder’s account could be frozen and confiscated.

Negotiating With Your Credit Card Company

By: Christina

Prior to my bankruptcy I successfully negotiated with three different credit card companies. I had my interest rates reduced, and my late and over the limit charges removed. One of our readers, Surbhi had several questions about that process, and I wanted to take a little time to relate my experiences, as well as help Surbhi take the next step:

Hello,

I have been searching your website. Our debt at the moment amounts to about 66% of our salary. We are so far current with all our cards but are finding it increasingly difficult to pay minimums. Also all of the minimums are going towards interest only, so making those payments is of no use.

I was thinking of going to a credit reduction plan when I came to your site I have the following questions. I intend to call all my companies to see if they will reduce my interest. How low should I request the interest to go before I accept. Can I request them to take out late payments for the past year or is it limited to the month you are calling?

Also can they recalculate your interest for past months on a lower interest rate, Is it something that consumers can ask for? Or is it limited to that month only?

Also to expedite the payment can you fix a minimum for the months coming and the dates for it as well.

I really would like to solve this problem on my own. I find it rather unnerving that I have to go through a credit company and give them any sort of power of attorney.

Thanks
Surbhi

Hi Surbhi! Let me break down your question a piece at a time.

>>We are so far current with all our cards but are finding it increasingly difficult to pay minimums.

It’s excellent that you are current on your payments. It should give you a bit of bargaining power when you call your credit card company.

>>Also all of the minimums are going towards interest only, so making those payments is of no use.

Well, while those minimum payments are not helping you to get your debt paid off, they do serve a useful purpose – they protect your credit rating. Not having to take time to go back and fight bad information on your credit report, or pay more interest on your future loans is still useful. We just need to get you one step further so that you can reduce your debt – that’s the most important thing.

>>I was thinking of going to a credit reduction plan when I came to your site.

You can certainly do that if you need to. I’ve linked several articles at the end of this post that will help explain that process a bit, and help you select a service if you do choose to use one.

>> I intend to call all my companies to see if they will reduce my interest. How low should I request the interest to go before I accept.

It depends on what you are currently paying. Personally, I would try to at least get zero percent rate for a few months, even if the rate goes back up again. But if it is going to take you a while to pay down your debt, then it makes more sense to negotiate with them for a permanently reduced interest rate that will be higher than 0%. The answer here is, take what you can get! But don’t be afraid to keep negotiating until you are satisfied with the answer.

As a general rule of thumb, if this is a high interest card (19% to 24%) I would at least get them to knock the interest down to 9%-10%. If you have a clear and on-time payment history, you should be able to get them to do this. If the card already has a 5%-10% interest rate, you may not have as much luck getting the rates reduced.

>>Can I request them to take out late payments for the past year or is it limited to the month you are calling?

You should absolutely ask to have the last years worth of fees removed from the card. It doesn’t mean they will do it – each company’s policy on this is different. Capitol One, in particular does not like to remove fees. Some credit card companies will remove every fee on the card for the entire year, and sometimes they will remove all fees period. But one thing is sure: your credit card companies will never remove any fees for you unless you ask – and be persistent! Ask them if they can remove more than one fee for you, or waive the yearly membership fee, etc. You will need to talk to a manager.

>>Also can they recalculate your interest for past months on a lower interest rate, Is it something that consumers can ask for? Or is it limited to that month only?

You should definitely ask about this – again it will depend on the company’s policy. If they do it at all, they can likely adjust the entire balance, not just the last month.

>>Also to expedite the payment can you fix a minimum for the months coming and the dates for it as well.

You can definitely set up a payment plan with them, yes.

Ok Surbhi. There is one more piece of advice I can give you here – but you may not want to take it.

The things that you are talking about doing, a normal customer service representative might not be able to help you. They just aren’t trained to do it, and they may not have the authority to do it. So, if you call them, and they are unable to help you, you have two options.

1) Threaten to balance transfer your debt unless they work with you & speak with a manager – Do not threaten to close your account, balance transfers are the more effective weapon. Just keep reminding them what good customer you have been, and how happy you have been with them. But be firm and assure them that you will not allow the situation to continue like it is. A simple:

“The high interest and fees on this card are killing me! I am going to have to balance transfer my debt to a different company if you are unable to help me today.”

2) If the manager will not work with you, and you actually do not want to balance transfer your debt, then your best option is to go about 2-4 weeks past due on your bill. Just to the point where you get a phone call from a collections rep.

The collections reps at every credit card company are trained to do everything you need. They usually have the authority to negotiate and make changes to your account. If they do not, the collections manager certainly does. Just make sure that you can make a payment with them the day that you negotiate.

I put this as a last option because it will hurt your credit score. However, you can also negotiate with them to not report the payment as “late” on your credit reports as long as you make a payment that day.

Also know that if you go through a credit counseling agency, they will most likely hold your payments until you go past due anyway – because that’s when it’s easiest to negotiate. So – be warned of that! It’s a lot better in my opinion to manage things yourself so that you can control the amount of damage done to your credit rating.

If you do want to know more about credit counseling, you can check out the articles below. Thank you so much for your question – I hope this helped!

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Credit After Bankruptcy: A Book Review

By: Christina

11/09/2008

This is a book that I have really been looking forward to reviewing. I am very glad that I finally got the chance.

Just after I declared bankruptcy, I was researching ways to repair my own credit, and I ran across Stephen Snyder’s website. He is the author of this book, “Credit After Bankruptcy” and he has an excellent series of free newsletters that I made good use of when I began my own journey of recovery.

At that time I didn’t consider ing and reading the book that went along with the emails though. So, I was very happy to find it on the list of used books available on Amazon.com. Although the book does contain some of the same information mentioned in his emails, there was quite a bit of entirely new information too. Here are a few of the highlights:

Snyder Begins the book with a laundry list of some historical, and very famous people who have all declared bankruptcy.

Thomas Jefferson

Larry King

Francis Ford Coppola

Kim Basinger

Burt Reynolds

Donald Trump

Abe Lincoln (Abe Lincoln?? Are you serious?)

Well, I was a bit encouraged by the list…after all it seems past bankruptcies do not always prevent future success..at least, if the names on that list are any indication. I know that I very much want to be successful. I don’t want to live my life they way I did before my bankruptcy. So any bit of knowledge that I can understand, and put into practice, is very valuable to me.

Happily, this book was full of knowledge. Better yet, it was easy to read, and I am betting that it will be easy enough to actually use the information that it gives.

Chapter 1: The story of Stephen and Michele.

Their bankruptcy was caused by living beyond their means. Stephen changed jobs, which reduced their income, but they kept right on living they way that they had always lived. Even though they no longer had the income to support their lifestyle.

They did not file their bankruptcy jointly, as my husband and I did. Instead Stephen’s wife Michele filed first, using a lawyer, and Stephen filed shortly afterwards on his own, with no legal representation. They quickly made, and quickly broke the resolution to never use credit again. They made several other resolutions though, and they did manage to keep those. Some of the foremost resolutions included:

Radically changing their spending habits and thinking about the proper use of money.
Save 10% of their income.
Donate 10% of their income.
Live within their means.
Find a home church and attend.

They did make good on their other resolutions, and this book is the story of how they did it. It did turn out to be a good thing for them that they returned to using credit as quickly as possible. The Snyder’s were able to have a much better quality of life faster than if they had returned to cash only. This is 100% because they managed their credit correctly though.

I do not believe that it is advisable for everyone who is fresh out of a bankruptcy to begin using credit immediately. Especially if credit cards are what led you to bankruptcy in the first place. From my own experience, I think that a return to using credit should only happen when you reach the level that Stephen and Michele did – when you understand completely how it works, and how to help yourself (instead of hurt yourself) by using it.

Chapter 4: Why Re-establishing Credit is Important

I skipped chapters two and three here because they dealt with the Snyder’s qualifications to teach about bankruptcy recovery, and a definition of what bankruptcy is. Chapter 4 went into a lot more detail about why you should work hard to raise your credit scores again once your bankruptcy has been discharged. Stephen presents a six step strategy for bankruptcy recovery. These are good sounds steps, and they would probably benefit a lot of people who have not yet declared bankruptcy, or are in dire financial straits.

Make Life Changing Decisions about how you handle your money –Decide exactly what your problem with managing money is, work to fix those problems, and then make a new plan of action.
Strategically Go Into Debt Using Mainstream Lenders – This is the part I have the most problem with, even though I know it is necessary in order to rebuild my credit. After my bankruptcy, I didn’t want any more debt. Even if it was “helpful debt”. So, while I choose to have and maintain credit accounts, I typically borrow as little as possible, and never more than I can pay back within a month’s time.
Commit to Paying Your Bills Early – This does help avoid getting new black marks on your credit report, and it is an essential step towards rebuilding credit. There are months when I may make several payments on my credit cards. I do this partly because I know how important not making late payments is, but also because it ensures that I do not carry a balance on my cards from month to month. After my own BK experience, I figured it was better to be overzealous when making payments, than to not pay enough attention.
Become Debt Free – Well bankruptcy pretty much wipes out nearly all debts, so it goes a long way toward making you debt free. Also included in this step is learning to live within your means by actually living on less than you make. That’s pretty much some of the best financial advice ever, and I was glad to see it come up in this book – a book that is completely about using credit again after your bankruptcy!
Repair Your Credit – This is the point where you strategically take on new loans, and correct any mistakes on your credit report. Snyder also warns that this step is not free!
The sixth step is considered optional, but Snyder advises paying back the debt that you declared bankruptcy with. – I think this would be a very healing thing to do. I hope that some day I can afford to do that.

While these are the basic steps for success (and they are repeated throughout the book) I found a literal ton of examples, and advice that I believe will help me in the future.

Besides bankruptcy recovery tips, Snyder included specific questions to ask your future lenders, the best way to finance a house and a car after bankruptcy, and a specific formula that lenders use when deciding whether or not to give you a loan. All of which was invaluable. But the real surprise, and the thing that I liked most about this book was that there are several large sections on personal development.

I think that when you have a mistake as large and looming as bankruptcy, it’s probably wise to spend some time on personal development. At least, I have found that to be true in my own life. The more I read, and the more I expose myself to the knowledge of those who have walked the same path, the easier it is for me to change my own bad habits.

I do place one caveat on this book: It is the personal story of Stephen and Michele Snyder. To some degree, what worked for them can work for me or you. However, it is just one story. It is not a far-reaching, all-encompassing story, it is their story. So please, take the advice given with that grain of salt. They understand the situation far better than someone who has not been through bankruptcy, but their words are definitely colored by their own experiences.

I would definitely recommend this book to anyone who has declared bankruptcy. If for no other reason than after you read it, you will have a little more hope than you did before. You are not alone. I am out here, recovering, and they Snyders, they have recovered too. It’s never an easy thing, but it can be done. And Stephen has given us a clear road map with markers that show us the fastest, and easiest methods of recovering from a bankruptcy.

If you are going to this book, or check it out from the library, I recommend checking it out along with The Complete Guide To Credit Repair.

This is because the Snyders recommend using a company to help clean up your credit report (which is expensive!) and the Complete Guide to Credit Repair shows you how to do it on your own. I think right now you can get them both used, on Amazon for under $10. Or better yet, for free from the library!

Have a question for us? Leave a comment below!

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The Return of Sanity

By: Connie Brooks

11/08/2008

Profits are down, the market is still volatile, and for the last few months I have seen hundreds of articles pointing fingers at the “culprits”. You know, they bad guys who brought all this madness and mayhem upon us. Everybody wants answers, fall guys, lessons.

To this I say “pffftttt….“.

America, for too long we have allowed greed to blossom in our own hearts.

Instead of recognizing the wealth and plenty around us, instead of understanding the concept of enough, we have continued to feed the machine.

We purchased items we did not need on credit, we purchased homes and cars on credit when we weren’t sure that we could make the payments.

As a society, we moved our houses, and our families to the beach. We wanted that beautiful ocean view, and we wanted it now. Yet we were building our homes, and our economy on the shifting sands of equity and credit.

Each and every one of us (to some degree) have allowed greed into our homes. We fed greed, made it a welcome guest, and asked it’s opinion on every purchase we made.

Too long have we allowed this unwanted guest to dictate our thoughts, and the actions of our families.

It is no great sin to want, but to want at any cost, at any risk, is nothing less than insanity.

And so, I welcome the return of Sanity, the grandfather of Greed – the one to whom all bills are handed, no matter how past due.

It is Sanity that will clean up the mess we are in. Sanity, who will show us how to return to the good ways of true prosperity, security, and enough.

From the moment he walked back into our country, Sanity accepted the hard work of cleaning up the mess Greed joyfully made.

When you see lending practices being restricted to only those who are credit-worthy, that is Sanity at work. When you see businesses fail because they overextended themselves in their greed – well, that is Sanity at work too.

But be aware; Sanity is no gentle animal to be cuddled, fed, and kept as a pet. Sanity comes in like a hurricane. Eyes blazing, he cuts away sickness wherever he finds it.

There will be times when we feel like his cure is not preferable to the slow poison of Greed. But it is necessary if we are to have a chance to pick up the remaining pieces of our economy and our financial lives.

The influence of Greed was so widespread that many of us will find ourselves trapped between the breakdown of the lives we used to live, and the beginning of the ones we must now live. We are used to taking Greed’s easy advice, and now we must begin to listen to the harsher voice of Sanity as he tells us, “You must change.”

The folks in Washington have long ago exiled Sanity. He is not invited to their meetings, nor present within their hallowed halls. And though he beats and rails at their walls, his cries fall on deaf ears.

It is for this reason that I advise you not to rely on the government to fix our economic crisis. They are still keeping Greed fed, and fat within their hearts. And Greed is an expensive guest! Their last offering to him alone was worth $17 billion.

Instead I ask you, throw the doors of your own home wide, and welcome Sanity. We, the people, are the backbone of the economy. It is we who must decide if this country will prosper, or slide into depression.

Though Sanity is not as pleasing a house guest as Greed; his form is not as fair, and his words are not as soft, you will find that he pays his own way.

Sanity is willing to work for us in a way that Greed never did. He will be there for each of us as we shore up our own finances. He will work beside us, plugging the leaks that threaten to sink us.

It will not be without pain, and it will certainly not be without work. But the work and the pain are ours to bear, for we each owned a small part of the chaos that was allowed to foster and grow.

And when all is said and done, when all of the chain reactions have stopped, it is Sanity who will help us rebuild a new tomorrow.

The articles below are all hand-picked. Chosen, because they contain the voice of Sanity, each in their own way. I hope that you enjoy them as much as I did.

If you enjoyed this article, please pass the link on to a friend, or give it a Stumble. You can also subscribe to our RSS feed. We would love to have you join us!

Additional Commentary on the State of Things:

The Shallowest Generation at Seeking Alpha – This is my pick for the best article of the week! I don’t agree with everything said, but it is a well thought out, well written commentary.
Excuses, Excuses at The Simple Dollar. Making excuses sometimes s you time, but it never fixes the problem.
Eight Financial Questions for Success in a Bad Economy at Money Smart Life
Blaming Parents for Financial Problems at Frugal Dad.
The Nightmare that Nobody Wants to Talk About: The Next Depression at Penny Jobs
Obama’s First Presser Features Economy, Dog at TIME.com

Saving Money:

10 Quick Tips To Winterize Your Home at Blueprint for Financial Prosperity.
Saving Money on Car Maintenance at Clever Dude.
The Most Beautiful Way To Save Money While Heating Your House at Financial Ramblings.
Three Unique Subscription Services that Might Save You Money at Wise Bread.
Save some money: De-clutter at I Pick Up Pennies
Thanksgiving Turkey Dinner – Trim the Budget without Forfeiting Taste at Not Made of Money

Healthy, Wealthy, and Wise:

Burning the candle at both ends, isn’t good for anyone. These articles deal with many of the common sense topics that it’s easy to forget about in our day-to-day lives.

Why you need a nap at The Smart Spending Blog. It tuns out that not getting enough sleep can cost you money as well a time.
Obama healthcare plan boon for hospitals from Reuters.com. Not sure I’m 100% in favor of this, but they are thinking positive.

Giveaways:

Freebies are always welcome, in any economy! The sites below all have contests or giveaways going on. Check them out!

Nuru Personal Finance Flash Cards: Review and Giveaway @ Bible Money Matters
Extend the Life of Your Razor Blades and Get Free Razor Samples @ Prime Time Money
Book Giveaway: $1,000 Dollars & An Idea – Entrepreneur To Billionaire @ My Two Dollars
Romancing The Yarn is giving away more yarn than you can shake a needle at. If you knit or crochet, be sure to check it out.
Bargain Briana lists tons of freebies each Friday.

Carnivals, Festivals and Celebrations:

Many thanks to these carnivals for featuring our articles this week!

Festival of Frugality 11/4 Election Day Edition @ Bargain Briana
Carnival of Financial Planning – November 1 2008 Edition @ The Skilled Investor.
Carnival of Financial Goals–Election Day 2008 Edition @ The Dough Roller
83rd Carnival of Money Stories – Election Day Edition! @ Simply Forties
37th Carnival of Money Hacks: Wonders of the World @ Living Almost Large
The First Ever Carnival of Consumer Credit @ Arrive Financial

That’s it for this week’s commentary and links. Hope you have a great weekend!

Teaching Your Child The Difference Between Wants and Needs

By: Brooke Kaelin

11/07/2008

Teaching children the difference between what they want and what they actually need is one of the most important jobs a parent can do. It is arguably every bit as important as making sure that they get good grades.

Children who understand the difference between wants and needs are:

Less likely to be swayed by emotional marketing techniques
More likely to save money for what they want instead of putting it on credit
Less likely to throw a screaming fit in the middle of a grocery store
Less likely to judge their own worth by what they own

The problem is, teaching your children the difference between wants and needs isn’t something that you can do just once. After all, when is the last time you were able to teach your child a valuable lesson in one go? The difference between wants and needs has to be taught throughout your child’s life.

You can start by laying an easy ground rule with your child:

“I will always, always take care of your needs. You will never go without food, clothes, shelter, or school supplies. I am not here to give you everything you’ve ever wanted though. I love you very much and if there is something you want, I will help you save for it and show you how – just like I do. “

This statement pretty much works at any age, any time you are having trouble with your child begging for something that they want, but do not need.

Let’s also take a look at a few specific examples that you can use to help teach your child the difference between what they want, and what they need.

When purchasing school supplies:

Children do need school supplies in order to have a good experience at school and complete their education. And school supplies can be expensive – there’s no way around it!

If your child is old enough, you can hand them the list of supplies they need, and an amount of cash that you are comfortable spending. Carefully help them keep track of the cost of the items in the cart, and have them check the items off of the list as they decide what they want.

Now, the beauty of this plan is that your child will mess up. They will probably pick out the most expensive calculator, pens, or notebooks at first. Take a calculator with you and keep that running total going. Use the experience as a chance to talk about the real value of the items they are ing. Yes, they need a notebook. But can they afford to spend $8 on a single notebook?

Do be careful not to assign the value for your child. The whole point is for them to figure it out on their own while you are there to support them. Yes, obviously a 25 ¢ notebook is better. But your child may attach great value to the $8 one. That is the perfect time for you to help them question why they want it:

Is it a better notebook? Higher quality?
Do they have any other notebooks like it at home?
Does it have a cool picture on the front?
Is it a “cooler” notebook than their friends will have?

If you can show them that they will have to sacrifice in other areas if they want the more expensive item then that is a valuable lesson too. Just make sure you don’t give your child additional money to purchase what they want – that will defeat the purpose 🙂

Letting your child pick their own school supplies can be an excellent experience for both of you – if you can let go and allow them to make the mistakes right there in the store. It also requires a fair amount of patience, as well as taking things in and out of the cart. If they do manage to get everything they need and stay within their budget, make sure that you celebrate a bit. Tell them you are proud of them, and have an ice cream, or some family time together afterwards.

At the Grocery Store:

Taking your child to the grocery store with you give you a wonderful opportunity to teach them about marketing. It can be a very frustrating experience to have a child who wants sugar-filled cereals, and junk because they have seen advertisements on T.V.

I have solved that problem in my own home by disconnecting the cable, and monitoring what my child watches on video. I don’t expect that to last forever though. Sooner or later my daughter will be exposed to the “advertising machine”.

It helps to have some idea of how you can talk to your child about marketed products – since 99.9999% of them fall into the “want” category, and not the “need”.

You can try all of the following quick ideas with your own kids:

Ask them about the ad they saw for the product – Why did they like it? Why did it make them want the product? Ask your child if they think their life will be like the commercial if they the product.
Show them the price difference between the item they want, and a less expensive quality item.
Allow them to add the single choice of a “want” item to the grocery list – before you leave the house. Talk to them about ing on impulse. If they see something else that they want, you can have them wait until next week and think about the purchase.
Make them use their own money to the item – Few things drive a point home like having to decide whether or not to spend your own cash on a purchase.

No matter how you go about teaching your children about wants and needs, they will benefit from it. As a parent, don’t worry if you make a mistake, or give in once in a while. Smart purchasing, and money management skills are taught over a lifetime. You don’t have to be afraid to get in there and lay the groundwork for your child. Perfect or not, it will be a firm foundation.

How do you teach your child about the difference between their wants and their needs? Do you have advice you can share with other parents? Please tell us about it in the comments section below!

You can also subscribe to our RSS feed to keep up with our articles on kids, credit and money.

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The Topsy Turvey World Of Delta Rewards

By: Jason Steele

11/06/2008

Delta fliers have been on a roller coaster ride for years now. They went in and out of bankruptcy in recent years, and they have just completed their acquisition of Northwest. They are now the largest airline in the world, and they are starting to do some confusing things.

The thing that Delta, and Northwest fliers have been wondering is whether the combined airline would impose the best or the worst policies of each carrier on the new combined entity. Based on all of their recent changes, it seems like there is no rhyme or reason to explain what’s happening.

Fees Go Up, Fees Go Down

Delta had been the lone hold out among the major airlines in not charging the dreaded “first bag fee.” This week, they have announce that they will no impose a $15 fee for your first bag, ostensibly because Northwest does. At the same time they are reducing their fee for the second checked bag from $50 to $25.

Fuel Surcharges Eliminated

This is about the most welcome piece of news. Fuel surcharges are a despicable practice, especially when they are imposed on frequent flier awards. Many travel bloggers have speculated that no airline will reduce these surcharges, even with the price of fuel at far lower levels than when the charges were imposed. It is comforting to see this actual happen at Delta.

Old Fees Gone, New Fees Are Here

Gone is the $3 curb side check in administrative fee. New, is the charge for a seat assignment in coach, arrgh! Now, when you redeem and award or purchase a ticket, your are blocked from choosing a many seats without paying $5-$25. That fee is per leg, not per flight, so you could end up paying this fee two, four, or even six times depending on your itinerary.

All of these changes take place on tickets purchased today, for flights on or after December 5th. See Delta’s site for more information.

What Does This Mean To Reward Card Fliers?

As you might guess, this is a mixed bag. You can’t help but like the dropping of the fuel surcharge on award tickets. For international awards, you would not have noticed a bag fee anyways. For domestic awards, the new first bag fees will add up on family ski trips, but you might even end up a little ahead if you had intended to check two bags.

Overall, the combined entity is doing some confusing things as it irons out the differences in the two airlines policies. A good way to stay up on all things Delta is The Ticket blog. I was reading this way back when I was a Delta Frequent Flier living in Atlanta. Although the blog is technically geared toward Atlanta based travelers, Delta and Atlanta are so synonymous, they are practically the same entity.

If you are a Delta, or Northwest customer, you are going to have to fly through Atlanta some day. As they say in the South, when you die, you have to change planes in Atlanta to go to heaven..

Some Other Delta Reward Travel Tricks

Delta is fairly unique in that you can use your miles for one way travel. This is an advantage when booking a round trip very far in the future. Say you will be taking a trip for a month. Since your best shot at getting an award seat is by booking it 331 days in advance, you can book the out bound exactly 331 days in advance, wait a period of time equal to the duration of your trip, and then book the return 331 days early as well.

Screwy Upgrades

The Delta website’s awards chart shows some fairly reasonably priced upgrade awards. They mention briefly that upgrades are available from “some fares”. What they don’t say, is what fares are upgradeable. It turns out those are only the higher fare classes. For example, I priced a flight overseas that came out to $1200 in coach. In order to purchase an upgradable seat, the same ticket was $2800. In reality, this is far worse than even United’s co-pay upgrade program! After I did the math, it made sense to just use the miles to get a business class award.

Northwest People Take Note

I know that this is a lot of info about airline rewards on a single airline, Delta. The reality is, that the Delta/Northwest merger has concluded. These two are now the largest airline in the world, and reward card holders who fly either airline need to fasten their seatbelts for turbulence ahead.

Removing Yourself As An Authorized User

By: Christina

Removing Yourself As An Authorized User One of our readers, KR, had this question for us:

I tried to call the credit card companies (my ex put me on 5 of his cards) to have myself removed as an authorized user (something I never agreed to or knew about until it was too late) and they refused to take me off/talk to me.

They said he would have to remove me, which of course is not going to happen being as he is my EX. It’s totally trashing my credit as he has over 60k in debt. Is there anything I can do about this short of getting a lawyer?

Hi KR, thanks for your question. This is a difficult situation, and there really is no easy solution. However, there are a few things you can do to try to get your name off of those accounts, and to prevent them from trashing your credit.

Here’s the best procedure for removing yourself as an authorized user from someone else’s account:

Call the credit card companies back – Stay calm, and whatever you do, get yourself transfered to a manager, not normal customer service rep. You may have to call back multiple times until you find someone willing to help you. Keep repeating that you did not authorize him to put your name on these accounts. That is identity theft, and they will be liable for your losses or lack of ability to get credit.
Tell them you have no problem suing them if they do not remove your name, and remove the information from your credit report. Make sure you don’t get too emotional to negotiate – just keep yourself cool, and keep repeating that it is a case of identity theft, and that you must speak with a manager to resolve the situation.
Send certified letters to the credit card companies – If a phone call to this effect does not work, send the various credit card companies certified letters stating that you never authorized your name to be put on these accounts. If you get no response to the letters, you can call them back, state that you have sent them a certified letter telling them about the problem, and that you have the receipt that shows they received the letter.
Freely tell them that you are building a case against them in court. Even if a lawsuit would never fly, it should be much easier for them to just remove your name than be held responsible. Make sure you get the names and operator numbers of anyone you speak to.
Get a lawyer – You can certainly get a lawyer as a last resort. Your ex will have to drag himself into court and resolve the issue.
Challenge the items on your credit report –This is one thing that you can do right away. You can go online to the three major credit bureaus and challenge those authorized user accounts on all three of your credit reports. You can cite identity theft as a reason.
Also, there is a small statute in the Fair Credit Reporting Act that states that your credit report can only be made up of your credit history, and not someone else’s. People do frequently use this as a reason to have authorized user accounts removed from their credit reports. FICO has only recently decided to start including authorized user accounts in their credit score formula again, and you definitely do not want your ex husband’s accounts messing with your credit score!

I’d like to give you a few links here, that will help you get started.

The three main credit bureaus, where you can challenge your credit report, and get those accounts removed:

Here is an in-depth walk through on “How to Challenge Items On Your Credit Report“. You can download a step by step guide at the bottom of the post.

If you are requesting copies of your credit reports because you intend to challenge bad information, you should be able to get all three of your credit reports immediately by going online. Normally I would send you to Annual Credit Report.com because it walks you through the process of getting your reports from each bureau. But, you have to deal with the individual bureaus to challenge information, so it’s probably best to just start there instead.

The information on the FCRA (Fair Credit Reporting Act) statute: click here.

A sample letter / authorized user removal request (PDF) that you can send to your husband’s credit card companies. There are several sample letters here. The best is the one near the bottom of page 8 (the last page.)

Thank you very much for your question, I know it will help others out there in the same boat. I wish you the best of luck as you work to get your own credit reports cleaned up, and I hope that you get everything resolved quickly!

Have a question for us? Leave a comment below!

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