How to Survive and Prosper After a Financial Misfortune: A Complete Guide to Your Legal Rights After Bankruptcy, Foreclosure, Repossession, and Eviction

By Tracy Carr

The U.S. economy may be on the verge of a slight recovery after the worst recession since the Great Depression, but citizens are still facing a number of financial burdens. Nearly 1.5 million Americans filed for Chapter 7 or Chapter 13 bankruptcy in 2009 — a 32 percent increase from 2008. MSN Money reported that in 2010, more Americans filed for bankruptcy than for divorce, and more Americans will sink further into debt than have a heart attack, be diagnosed with cancer, or graduate college. These financial misfortunes can take a toll, but you do not have to let them ruin your life.

How to Survive and Prosper After a Financial Misfortune will help you make the financial and personal decisions necessary to rebuild your life and come out on the other side. You will learn how to start rebuilding your credit immediately, how to shuck the social stigma associated with filing for bankruptcy, and what your rights are coming out of a repossession or eviction. You will learn the housing options available after you file for foreclosure and how to negotiate with the bank to make the process less damaging. You will learn the different ways you can overcome the black marks on your record, find a new home, and acquire hard-to-find financial assistance. This book also contains advice from experts in debt management and bankruptcy law to provide a comprehensive perspective of financial hardships. Most of all you will learn how to thrive and prosper in your new life.

Atlantic Publishing is a small, independent publishing company based in Ocala, Florida. Founded over twenty years ago in the company president’s garage, Atlantic Publishing has grown to become a renowned resource for non-fiction books. Today, over 450 titles are in print covering subjects such as small business, healthy living, management, finance, careers, and real estate. Atlantic Publishing prides itself on producing award winning, high-quality manuals that give readers up-to-date, pertinent information, real-world examples, and case studies with expert advice. Every book has resources, contact information, and web sites of the products or companies discussed.

This Atlantic Publishing eBook was professionally written, edited, fact checked, proofed and designed. You receive exactly the same content as the print version of this book. Over the years our books have won dozens of book awards for content, cover design and interior design including the prestigious Benjamin Franklin award for excellence in publishing. We are proud of the high quality of our books and hope you will enjoy this eBook version.

• Language: English
• Publisher: Atlantic Publishing Group Inc.
• Release date: Jan 30, 2011
• ISBN: 9781601386830

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How to Survive and Prosper After a Financial Misfortune:

A Complete Guide to Your Legal Rights After Bankruptcy, Foreclosure, Repossession, and Eviction

By Tracy A. Carr

With Foreword By Jenna Keehnen

How to Survive and Prosper After a Financial Misfortune: A Complete Guide to Your Legal Rights After Bankruptcy, Foreclosure, Repossession, and Eviction

Copyright © 2011 Atlantic Publishing Group, Inc.

1405 SW 6th Avenue • Ocala, Florida 34471 • Phone [phone] • Fax [phone]

Web site: www.atlantic-pub.com • E-mail: [e-mail]

SAN Number: 268-1250

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for permission should be sent to Atlantic Publishing Group, Inc., 1405 SW 6th Avenue, Ocala, Florida 34471.

Library of Congress Cataloging-in-Publication Data

Carr, Tracy Alexandra.

How to survive and prosper after a financial misfortune : a complete guide to your legal rights after bankruptcy, foreclosure, repossession, and eviction / by Tracy Alexandra Carr.

p. cm.

Includes bibliographical references and index.

ISBN-13: 978-1-60138-298-6 (alk. paper)

ISBN-10: 1-60138-298-7 (alk. paper)

1. Bankruptcy--United States--Popular works. 2. Finance, Personal--United States. I. Title.

KF1524.85.M38 2008

346.7307’8--dc22

2008038687

All trademarks, trade names, or logos mentioned or used are the property of their respective owners and are used only to directly describe the products being provided. Every effort has been made to properly capitalize, punctuate, identify and attribute trademarks and trade names to their respective owners, including the use of ® and ™ wherever possible and practical. Atlantic Publishing Group, Inc. is not a partner, affiliate, or licensee with the holders of said trademarks.

LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: The publisher and the author make no representations or warranties with respect to the accuracy or completeness of the contents of this work and specifically disclaim all warranties, including without limitation warranties of fitness for a particular purpose. No warranty may be created or extended by sales or promotional materials. The advice and strategies contained herein may not be suitable for every situation. This work is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If professional assistance is required, the services of a competent professional should be sought. Neither the publisher nor the author shall be liable for damages arising herefrom. The fact that an organization or Web site is referred to in this work as a citation and/or a potential source of further information does not mean that the author or the publisher endorses the information the organization or Web site may provide or recommendations it may make. Further, readers should be aware that Internet Web sites listed in this work may have changed or disappeared between when this work was written and when it is read.

A few years back we lost our beloved pet dog Bear, who was not only our best and dearest friend but also the Vice President of Sunshine here at Atlantic Publishing. He did not receive a salary but worked tirelessly 24 hours a day to please his parents.

Bear was a rescue dog who turned around and showered myself, my wife, Sherri, his grandparents Jean, Bob, and Nancy, and every person and animal he met (well, maybe not rabbits) with friendship and love. He made a lot of people smile every day.

We wanted you to know a portion of the profits of this book will be donated in Bear’s memory to local animal shelters, parks, conservation organizations, and other individuals and nonprofit organizations in need of assistance.

– Douglas and Sherri Brown

PS: We have since adopted two more rescue dogs: first Scout, and the following year, Ginger. They were both mixed golden retrievers who needed a home.

Want to help animals and the world? Here are a dozen easy suggestions you and your family can implement today:

Adopt and rescue a pet from a local shelter.

Support local and no-kill animal shelters.

Plant a tree to honor someone you love.

Be a developer — put up some birdhouses.

Buy live, potted Christmas trees and replant them.

Make sure you spend time with your animals each day.

Save natural resources by recycling and buying recycled products.

Drink tap water, or filter your own water at home.

Whenever possible, limit your use of or do not use pesticides.

If you eat seafood, make sustainable choices.

Support your local farmers market.

Get outside. Visit a park, volunteer, walk your dog, or ride your bike.

Five years ago, Atlantic Publishing signed the Green Press Initiative. These guidelines promote environmentally friendly practices, such as using recycled stock and vegetable-based inks, avoiding waste, choosing energy-efficient resources, and promoting a no-pulping policy. We now use 100-percent recycled stock on all our books. The results: in one year, switching to post-consumer recycled stock saved 24 mature trees, 5,000 gallons of water, the equivalent of the total energy used for one home in a year, and the equivalent of the greenhouse gases from one car driven for a year.

Dedication

This book is dedicated to all of the individuals who have gone through the turmoil of financial misfortune and have struggled to find a way out. Rest assured, there is a way to turn your life around and get back on track.

Table of Contents

Foreword: Moving Past Crippled Debt

Introduction

Chapter 1: Common Types of Financial Misfortune

Chapter 2: The Basics of Bankruptcy

Chapter 3: The Fundamentals of Foreclosure

Chapter 4: Your Housing Options

Chapter 5: The Real Facts on Repossession

Chapter 6: Overcoming Eviction

Chapter 7: How to Rebuild Your Credit

Chapter 8: How to Take Control of Your Debt

Chapter 9: How to Overcome the Social Stigma of Financial Misfortune

Chapter 10: Striding Toward the Future

Conclusion: Onward and Upward

Appendix A: Financial Freedom Checklist

Appendix B: Bankruptcy Court Fee Schedule

Appendix C: Foreclosure Assessment Form

Appendix D: Sample Eviction Form

Appendix E: Sample Statutory Will Form

Appendix F: Sample Monthly Budget

Appendix G: Letters Expressing Financial Hardship and Declaring Fault

Appendix H: Sample Small Claim’s Court Fee Chart

Glossary of Terms

Bibliography

About the Author

Foreword: Moving Past Crippled Debt

Financial disaster can strike anyone at any time. It most often takes the form of a medical emergency, job loss, or divorce, but the severity of the impact of a financial crisis varies widely.

Families with a savings cushion and no credit card debt can typically weather a short-term storm with few lasting effects. But for families living on the edge financially, job loss or a severe illness can push high credit card balances past their limits, leaving them unable to meet even basic financial commitments.

I suspect you are reading this book because you fall in the latter category. At this point, the damage is likely done, and you are weighing which option is best for you and your family. Whether it is credit counseling, debt settlement, or even bankruptcy, it is important to not only focus on your options for getting out from under your debt, but also to gather the tools that will help you build a healthy financial future after your debt has been resolved.

Before embarking upon any debt reduction effort, it is important to understand the options available and whom they are best suited for. There are three basic ways to alleviate debt — each very different, and each with its own impact on your credit score and total debt. If you have yet to file for bankruptcy or become involved with a particular debt relief alternative, weigh each of these options and determine which is the right fit for your unique situation:

Credit counseling

Credit counseling does not reduce principal balance — only interest and fees. This option is best for consumers not completely overwhelmed by debt and who are looking for a way to better manage their finances. Credit counseling typically includes a financial education and budgeting component in addition to the actual debt management plan.

Debt settlement

Debt settlement is more aggressive than credit counseling and involves a third party negotiating with your creditor to reduce the principal amount owed. This is a great option for consumers interested in avoiding bankruptcy at all costs. To learn more about debt settlement and get a list of accredited debt settlement companies, visit www.usoba.org.

Bankruptcy

Bankruptcy is the option best suited for people with the most severe and unmanageable amounts of debt. While bankruptcy might feel like a quick fix, it carries the most long-lasting impact to your credit score and financial reputation. You can read more about bankruptcy and your filing options in Chapter 2 of this book.

Bankruptcy, while scary, is sometimes the only choice a consumer has to get out of debt. Consumers should not let fear keep them from doing what is best for their financial situation.

What is most important to remember is that there is no easy or quick fix. Any program that is designed to help you get out from under crippling debt is typically going to be a long process, and one that involves sacrifices on your part. Conduct research and make comparisons before making any decisions so you know exactly what you are signing up for, how long it will take, and exactly how it works.

The good news is that in most cases, once your debt is paid off, settled, or forgiven via bankruptcy, you have a fresh start. You will need to begin rebuilding your credit to demonstrate to banks, apartment landlords, creditors, and even potential employers that you can be trusted to meet your financial commitments. Chapter 7 provides excellent tips and tools for rebuilding your credit score, but the main idea is to start with a secured line of credit, pay on time and as agreed, and demonstrate your new financial responsibility. Following is one such story of rebuilding financial security:

My name is Penny. My husband had severe health issues that resulted in us having to close our family business. Due to the business debt, a great deal of which was in our personal name, we had to declare bankruptcy.

My husband was unable to work, so I had to return to the job market, and we had to use our credit cards for many necessities in life (e.g., doctors and hospital bills, medicines, and vehicle expenses). The debt kept climbing, and our income was stagnant.

When I heard about debt settlement, for the first time I thought that maybe there was light at the end of the tunnel. After a personal consultation and review of my financial situation, I was told I qualified for the program. I told my account specialist I wanted to get this settled as quickly as possible, so we set it up for an 18- to 24-month program.

I stuck to the program, and when the first debt was settled — what a wonderful feeling. Once I was able to tell the creditors that I was in a debt management program, the harassing telephone calls stopped, the threatening letters began to come less and less, and my husband and I could begin to see a brighter future. The monthly calls from my account specialist were a comfort — she always encouraged me to stick with the program and kept me apprised of the progress being made with my debt.

I am happy to say I graduated early despite some months in which I was not able to make my payment due to family emergencies. We are able to live within our means and have credit cards, which we kept only for rare emergencies and paid off immediately.

All thanks to our debt settlement program, the quality of our life has been greatly enhanced by the fact that we are at last debt free. I would highly recommend the program to anyone who is in what appears to be a hopeless financial situation. It was a lifesaver to us.

Staying out of debt is simple in theory — do not spend more than you have. But we all know it is much harder in reality. It will take practice and a continued focus on your financial goals. Without the cloud of credit card debt looming, you can do things you were never able to do before: save for family vacations, prepare for retirement, and put money toward your children’s college educations. What begins as a long and painful process ends with great feelings of liberation and relief.

Best wishes in your journey!

Jenna Keehnen

Jenna Keehnen is the executive director of the U.S. Organizations for Bankruptcy Alternatives (USOBA). USOBA is dedicated to providing its member companies with important, industry-related information, including compliance requirements, as well as advocating on behalf of its membership for fair and appropriate industry regulation that maintains the utmost in consumer protection. USOBA members are provided a USOBA State Law Summary guide, the only one of its kind in the industry, to better ensure and promote national compliance. This guide contains the laws and regulations, state by state, and has been reviewed by regulators and legislators. For further information, visit www.usoba.org.

Table of Contents

Introduction

You are reading this book because you have found yourself in a financial dilemma. Maybe you lost your job due to a recession. Maybe you were hit with extraordinary medical bills. Maybe you were the victim of a lawsuit. Or maybe you tried to help someone else out financially and the person never paid you back. Whatever the reason, you are not alone. Take a look at the headlines in any major newspaper across the country: from Economic Troubles Plague Families to Foreclosures at Record Rates to Bankruptcies on the Rise, you can see the state of the economy affects everyone, everywhere. The ups and downs of the economy impacts millions of working people and their families. Jobs disappear. Mortgage rates increase. Prices go up. For some families, there is little that could have been done to prevent these financial crises. For others, a little financial planning and discipline would have prevented a detrimental outcome. No matter what got you into this mess, you can rest assured that there is a way out. This book is the first step.

Throughout these chapters, this book will go into detail on the top personal financial disasters:

• Illness: Whether it is an accident or a long-term illness that threatens to keep you out of work, becoming sick or injured can be a real financial disaster for you and your family. However, with an adequate health insurance plan and disability coverage, you can overcome this financial threat.

• Job loss: In an uncertain economy, job loss becomes a reality for thousands of workers, and more and more families find one or both spouses out of work. If you have lost your job, you will need to rely on severance, unemployment benefits, and savings to keep your head above water.

• Divorce: Divorce is a devastating financial disaster to millions of men, women, and children. It takes a massive toll on a family’s household finances — essentially fracturing it and disrupting the income(s) that supported the family’s home and lifestyle. The key to coming out on top financially is making sure you have a good lawyer who can help you get, or keep, what you deserve.

• Unexpected death: There is no more tragic and emotionally devastating personal event than the unexpected death of a loved one. The shock and power of grief can be overwhelming and debilitating. There may be significant medical bills that accumulated quickly. There are arrangements to be made. To ensure that a loved one’s unexpected death does not leave you on rocky financial ground, take steps now to make sure wills, living trusts, and life insurance plans are in order.

• Judgment against you: A momentary lapse of judgment, an act done in anger, something that may not have been your fault, or simple carelessness may produce a court judgment against you that can tie up your assets. The key to getting out of this situation financially unscathed is to be up-front; attempt to negotiate a settlement and pay what you can. Good faith with creditors may be your best bet.

• Civil calamity: The most traumatic result of hurricanes, tornadoes, wildfires, floods, earthquakes, and other natural disasters is the feeling of helplessness that engulfs those who have lost their homes and possessions. Your pre-disaster solution? Insurance. Insurance. Insurance.

• Bankruptcy: If you have lost your job and can no longer pay your bills, you may be a candidate for bankruptcy. If you find yourself in this situation, know your circumstances. Be aware of how much money you owe and what your monthly payments are, individually and as a whole. It is also essential to communicate with your lenders and make them aware of any changes in your circumstances. Whatever you do, do not ignore letters or phone calls. It will not help the situation go away, and will actually make it worse.

• Foreclosure: If you are facing foreclosure because you cannot make your mortgage payment, communicate with your lender and offer a plan to keep your home. If your financial crisis is temporary, explain how you will become current on your loan. If there is no hope of becoming current, become proactive in the foreclosure process by learning your state’s laws and your rights under those laws.

• Repossession: Repossession is an action to seize property that was used as collateral in a debt. The most common cause of repossession is the inability to pay the monthly obligation. Before you agree to purchase or lease a vehicle, know the terms of the agreement you are signing and whether you can make the payment without causing your personal budget to collapse.

• Eviction: Eviction is a form of repossession or foreclosure. Your landlord is taking back the property by forcing you to move out. Know the terms of your lease or rental agreement and avoid verbal agreements, details of which can fade over time and result in misunderstandings and hard feelings.

Once you have a sense of the most common ways that people get into financial distress, this book will encourage you to accept your problem, however overwhelming and frightening it may be. It will inspire you to not just accept, but to embrace your solution. Your success will depend on your dedication to solving this financial problem. This book will help you to set goals for what you want to achieve, where you want to go, and provide valuable checkpoints along the way to unburden you and help you move forward. It will explain the process of bankruptcy and your options, should you determine that it is your best, or only, alternative. It will explain foreclosures and how the process works, as well as the housing options available to you after undergo foreclosure. This book will even discuss eviction and repossession, and offer you strategies to overcome these financial burdens. Overall, this book addresses the steps you can take to rebuild your credit score and outlines ways to change your attitude about credit and spending so that you can get out — and stay out — of debt.

Most importantly, this book will arm you with the tools necessary to make the best financial decisions for rebuilding your life. You can recover from even the worst financial crisis and move on with your life. It may not be quick or easy, but it is possible, and you can live a prosperous, financially stable life.

It is time to begin transforming your financial future. Welcome to the first day of the rest of your life.

Table of Contemts

Chapter 1: Common Types of Financial Misfortune

Overcoming the Debts Associated with Illness

Studies have shown that about half of all Americans who seek protection under bankruptcy laws cite medical problems as a primary reason they are in financial crisis.

Surveys of those who have filed bankruptcy petitions show that illness or accidents can create an avalanche of debt and financial misery, particularly if the family does not have health insurance or other benefits to help pay medical expenses. One study showed that the average person filing for bankruptcy because of medical bills was a middle-aged woman who had children, owned a home, and had a job.

The effects of illness on your family are:

• Loss of income from medical expenses.

• Loss of jobs if the ill family member is unable to work — or a healthy family member must quit his or her job to become the caretaker.

• Stress from being ill — or from being the caretaker.

Take Jackie, for example: She suffered from acute arthritis that hindered her from completing her data-entry job. During the two years prior to filing for bankruptcy protection, she lost her telephone service, missed doctor and dentist appointments, failed to fill one or more prescriptions, and may have gone without food — all because of the financial disaster that was produced by her health problems. In order to help pay the bills, Jackie was forced to take out a second mortgage on her home, and she had piled up credit card debt. By the time Jackie went to bankruptcy court, she was emotionally and financially drained. She worried that the illness that had produced this financial calamity would create more bills in the future and that health insurance coverage would be denied — or that state or local benefits would also be denied.

The financial implications of debts associated with illness are the inability to pay bills and the potential for bankruptcy, foreclosure, and repossession.

Serious illness or injury can devastate the financial picture of solid, middle-class, hard-working people who have a history of paying their bills on time and handling their money responsibly. The tidal wave of bills and expenses can overwhelm family savings, threaten home ownership, and produce serious hardships on the entire family.

As you can imagine, health insurance is the single most important resource to handle this type of catastrophe. Millions of people have no insurance at all and wake up each morning hoping that they will not become ill or injured. Others have limited coverage, which is not nearly enough to cover major medical expenses. Both types of people often put off doctor’s visits or filling prescriptions, like Jackie, for fear of spending unnecessary money. Some people, however, have excellent coverage that will pay most, if not all, of their medical bills should they need hospitalization and doctor care.

If your employer offers medical insurance, sign up for it. You may balk at the cost, which could be several hundred dollars or more each month, but ask yourself what would happen to you and your family if a medical crisis were to strike. It is essential for you to explore your options and obtain the best coverage available.

If your employer does not offer medical insurance, look into individual plans. They will be expensive, particularly if you have a history of medical problems. If there is a serious, pre-existing condition, you may be turned down for individual family health insurance. If that is the case, look into government benefits packages that may be available to you. Web sites like www.usa.gov/Citizen/Topics/Health/HealthInsurance.shtml are a good place to begin in your search for this information. However, you may be able to find an individual plan that can be customized to include the services you need, excluding the services you do not need.

Medicaid, a government health program, may also