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Credit Card Purchases: Why Calculating Interest Is the Most Important Step You’ll Ever Take

Posted on Friday, August 19th, 2016 at 11:02 am    

credit-cardsCredit cards are ubiquitous in American society. We get offers to take out a new credit card when we turn eighteen, prisoners get offers to take out credit cards while they are still in jail, and even the recently deceased still get offers to take out a credit card well after the day they died. It is obvious that credit card companies don’t pay much attention to whom they are loaning money to, and therefore have no idea whether they’ll get paid back. So how do they make money? The answer lies in the magic of compound interest.

Most of Lawrence & Associates’ bankruptcy clients never think about the massive amount of money they will put toward compound interest in their lives. Many schools don’t teach students how to manage their finances, and many parents don’t learn these lessons through life experience in time to pass them on to their children. For the poor and middle class, a multi-generational cycle of dependence on debt is now in full swing, where grandparents were sold on an idea that the American Dream is fueled by debt, and their grandchildren already have more debt – starting with student loans – than they can pay off in their working lives.

Some debts are necessary; almost no one can buy a home without financing a large part of the purchase. And some debts are smart; it can be a good idea to take out a low interest SBA loan for the purpose of financing a well-planned business venture. But many debts are neither necessary nor smart, and this brings us back to credit cards. It is important for anyone anticipating a credit card purchase to understand the effect that compound interest will have on their purchase. Unfortunately, a shockingly small minority of people know how to calculate compound interest.

How to Calculate Compound Interest

Before making any credit card purchase, the buyer should determine whether they can pay this purchase off at the end of the credit card’s monthly billing cycle. A credit card purchase paid off before the end of the monthly billing cycle incurs no interest, and is actually a smart decision because it improves the buyer’s credit. Only purchases that cannot be paid before the end of the monthly billing cycle will incur interest and need to undergo the following calculation:

The Compound Interest Formula looks like this:

compoundinterest
There are also a number of compound interest calculators on the internet that will perform this calculation for you, taking into account the effect of your monthly payment toward the debt. (The monthly payment toward the debt makes the formula shown above even more complicated.)

The numbers are staggering once you take a look at this. This article shows how an average credit card debt of $15,956, with the average credit card interest rate of 12.83%, results in the credit card company making a whopping $2,629,628.64 off of you in interest between ages 25 and 65. Again, that is over two-and-a-half million dollars in interest on a balance under $16,000!!!

Is it any wonder 819,240 Americans filed bankruptcy in 2015? Despite that huge number of filings, the credit card industry rakes in billions of dollars every year. As shown by the example above, the interest they charge is so astronomical that the credit card industries are mathematically certain to make tremendous amounts of money even if a large number of the people they lend to file bankruptcy or otherwise don’t pay them back. This is why credit card companies don’t bother checking a person’s credit score, or even whether they are still alive, before sending them a credit card offer. It is a volume industry, and the more money they lend the more they are likely to make.

What Can You Do If You Have Crippling Credit Card Debt?

Given all we’ve said above, a large percentage of the people reading this article are statistically likely to be in credit card debt that they have no hope of paying off. How can they get a fresh start and return to financial stability? There are many ways, but the surest way is to file bankruptcy on the credit card debt. A Chapter 7 bankruptcy wipes out credit card debt completely. A Chapter 13 bankruptcy requires you to make payments toward credit card debt, although often the debtor pays only pennies on the dollar. In either event, the debtor – who has probably paid off the original debt many times over – saves a large amount of money on credit card interest.

Bankruptcy has other benefits as well. All running interest on credit card debt must stop. All lawsuits must stop. Collection calls must stop. In a bankruptcy, for the first time, the debtor has all the muscle and all the power. Credit card companies must follow laws that are favorable to the debtor, rather than the laws that are typically more favorable to the creditor.

If you think you may need to file bankruptcy on credit card debt, call our attorneys for a free consultation. We’ll let you know if bankruptcy is right for you, and if so, what kind of bankruptcy you should file. There is no obligation to a consultation, and our friendly staff will make you feel at ease. We are working hard for the working class, and we can help you!


What are the effects on my spouse if I file bankruptcy?

Posted on Thursday, June 9th, 2016 at 7:30 pm    

In this video, Justin Lawrence talks about the effect on a non-filing husband or wife when their spouse needs to file bankruptcy. What happens to their assets? Which debts get discharged? And what happens to the non-filing spouse’s credit score? Watch this video to find those answers and more!


How to Stop a Car Repossession by Filing for Bankruptcy

Posted on Tuesday, April 5th, 2016 at 6:53 am    

Justin Lawrence continues Lawrence & Associates’ bankruptcy video blog series with this discussion about how a Chapter 13 bankruptcy can stop the repossession of a car, or even get your car back if it has already been repossessed!

If you have any further questions about repossession and bankruptcy after watching the video, give Justin a call for a free consultation!


You Can Protect Your Tax Refund in Bankruptcy

Posted on Wednesday, January 20th, 2016 at 10:18 am    

protect-tax-returnThe beginning of the year is always the busiest season for filing bankruptcy. Nobody likes to think about their financial troubles during the holidays, and often the holiday spending that so many businesses rely upon is the same tipping point for balanced debt to begin spiraling out of control. But the beginning of the year is also when many people get tax refunds. If the tax refund can cover the credit card bills, disaster may be averted. But if not, Northern Kentucky debtors need to figure out how to protect that tax refund in bankruptcy.

In the Northern Kentucky and Cincinnati, trustees always watch for bankruptcies filed during the first half of the year that do not properly protect a tax refund. Although the debtor’s tax refund can be appropriately reported and exempted in a Chapter 7 or Chapter 13 bankruptcy filing, do-it-yourself filers or inexperienced attorneys often fail to complete this crucial step. If the tax return is not properly reported or exempted, the trustee can seize the refund and use it to pay creditors. It is therefore very important to get an experienced bankruptcy attorney to properly file and protect the tax refund.

How can the Tax Refund Be Saved in My Bankruptcy?

A tax refund must be listed as an asset in the bankruptcy filing, even if the tax return has not been filed yet and even if you don’t know how much the refund will be. A reasonable estimate of the refund must be given, although you can also say you don’t know exactly how much the refund is. Trustees in Chapter 7 or Chapter 13 carefully review refunds for debtors that have minor children. Having minor children causes the earned income credit to be applied, and this generally provides for a high tax refund. However, the entire earned income credit can be protected from the bankruptcy trustee – again, this is something only an experienced lawyer knows how to do properly!

Chapter 7 trustees in Northern Kentucky are typically more likely to be aggressive in pursuing a high tax refund than a Chapter 13 trustee, since the Chapter 7 trustee can seize the refund outright if it is not exempted properly. This is, in part, how a Chapter 7 trustee gets paid. In Cincinnati, both the Chapter 7 and the Chapter 13 trustees are fairly aggressive in pursuing tax refunds.

There is no specific exemption in the bankruptcy code for a tax refund, so the wildcard exemption has to be used. In Cincinnati, this is a big problem because the wildcard (or miscellaneous) exemption used in Ohio is small. In Northern Kentucky, this is less of a problem because Kentucky law allows debtors to use the federal wildcard exemption. The federal wildcard exemption is very large and most tax refunds will be protected by it.

However, in Kentucky the federal wildcard exemption is also used to cover many other assets, such as the money in the debtors’ bank accounts, any firearms in the home, and any equity the debtor has in a second car. Thus, it is possible that, without proper legal advice, even a modest tax refund could go beyond the limits of the exemption and be taken by the trustee.

How Can Lawrence & Associates Help Protect My Refund?

Experienced bankruptcy lawyers make a big difference. In our consultations, Lawrence & Associates will explain how your tax refund can be spent on reasonable and necessary household expenses to protect it from seizure by the trustee. The lawyers at Lawrence & Associates have spent years learning exactly which expenses can be used to offset the tax refund and which cannot, thus avoiding the risk that the trustee will take the refund or delay the bankruptcy. Details matter, and our attorneys and paralegals are trained to find the details in your life that keep thousands of dollars of tax refunds in your bank account. Lawrence & Associates has been very successful over the years at putting money back in our clients’ pockets by offsetting their tax refunds with our attorney’s fees and thus protecting the debtor’s hard-earned cash from seizure by the Chapter 7 trustee.

You should not put off filing for bankruptcy if your debts cannot be repaid under your current interest rates, or if you are behind on payments and in danger of being sued or having a vehicle repossessed. Lawrence & Associates can help Northern Kentucky and Greater Cincinnati clients protect their assets. We are Working Hard for the Working Class. Call us today and learn how we can help you!


A Debt Collector Threatened Me with Fraud and Jail. Can They Do That?

Posted on Tuesday, October 13th, 2015 at 3:01 pm    

jailcellLawrence & Associates has told you before about creditor harassment, and with a list of things the creditor can and cannot do. We’ve also talked repeatedly about illegal scams where someone calls and pretends to be a debt collector in order to swindle you out of money. This post is slightly different. Here, we talk about the debt collector’s threat of fraud and related threat of jail time. Fraud allegations are different because a debtor really can go to jail for actual fraud. However, because debt collectors generally don’t understand the real meaning of the word fraud, the threat of jail time for fraud charges is almost never a real concern for every day debtors like you. Here’s why:

What Is Fraud?

So what separates an average joe who can’t pay his credit cards on time from a criminal who is defrauding business of its hard earned money? In a word, intent. One must actually intend to commit fraud, because a necessary element of fraud is the knowledge that a representation made is false. For judges and prosecutors, there is no question that someone has not committed fraud simply because they find themselves unable to pay their bills. The real question is whether the person with the unpaid bill, at the time he or she took out credit, knew that the debt would never be paid back. As a practical matter, that is difficult to prove in the context of taking out a loan. It is one thing to show that a bad check was written when the check writer knew the account balance was too low. It is another thing entirely to say that someone signing for a loan never intended to pay it back. None of us have a crystal ball.

As a practical matter, most creditors don’t even try to prove fraud. The bar is simply too high, and the likelihood of winning too small. Further, the fact that some debts won’t be paid back is factored into the creditor’s business model. That is why credit card companies and banks are billion dollar businesses despite the bankruptcies filed on their loans every day. Rather than prove fraud, these companies simply sue for money. The difference is profound. Fraud is criminal and involves jail time. A civil suit for money is a matter of a garnishment or lien against property.

There Is a Way Out of Crippling Debt

Debt Consolidation Companies aren’t always a solution, but bankruptcy is always the nuclear option to debt problems. Although you don’t have to worry about debtor’s prison or fraud, you do need to worry about your credit score, your debt-to-equity ratio, and many other variables that determine the kind of life you live. Although it is counterintuitive, bankruptcy can drastically improve these factors and your ability to live the life you deserve.

Lawrence & Associates has helped many clients who have been hassled by debt collectors, and we’d be happy to help you. We are Working Hard for the Working Class, and we want to work for you! Give us a call for your free consultation, today!


If I’m Struggling With Bills, Which Should I Pay First?

Posted on Wednesday, July 29th, 2015 at 10:42 am    

Many of our clients are facing the same problem: there isn’t enough money to go around, and they are robbing Peter to pay Paul. Some clients come in for bankruptcies after some financial calamity and are juggling credit cards just to put food on the table. Others come in for an injury, following a car wreck or work injury, and suddenly find that they are unable to work and don’t have enough socked away for a rainy day. And our disability clients face a year-long wait for a hearing with an Administrative Law Judge, during which they typically have no income and cannot work. Any way you cut it, if you need the services of a lawyer you are probably facing some hard times.

If you have more bills than money, you need to know how to prioritize the money you do have to maximize your chances of returning things to normal in as soon as possible.

Pay Secured Debts First – the House and the Car

holding-money-1315930-639x426Lawrence & Associates tells clients to make sure their car payment is taken care of first (assuming they want to keep the car). Missing even one car payment can cause the repo man to start cruising down your street. A repossession is one of the few ways a creditor can take your money or assets without getting a judge’s approval first, and that means it can happen fast. Clients filing bankruptcy can be forced into a Chapter 13 if they are behind on a car payment, and cars that have been repossessed by surprise are difficult (but not impossible) to get back. While repossession applies to other types of assets as well – for example, if you take out a loan on an engagement ring and fall behind on payments, the ring can be repossessed – but nothing else you own is as exposed as a car sitting on the curb overnight. Keep car payments up to date if at all possible!

The next most common secured debt is a mortgage on a house. While houses cannot be repossessed, a judicial foreclosure is a relatively uncomplicated court battle (for the mortgage company) where many homeowners have little chance for relief. A bankruptcy will stop a foreclosure in its tracks, but Northern Kentucky courts allow the mortgage company to include its legal fees in the money that has to be repaid, further increasing your burden. And like car loans, even one month arrearage on a mortgage payment can force bankruptcy filers into a Chapter 13.

Similar to the mortgage payment, it is important to keep rent payments up to date. Although a rental agreement is not a secured debt, it’s important to protect your home. Also, once an eviction is filed it cannot be stopped, even if the renter files for bankruptcy protection.

Next Pay Back Due Taxes, Student Loans, and Utilities

Taxes and student loans have one thing in common: they are non-dischargeable, which means you only get rid of them if you pay them off or die trying. Therefore, it’s a good idea to continue paying on taxes and student loans even if you are falling behind on credit cards and lines of credit. If you eventually fall into bankruptcy despite your best efforts, unsecured debts such as credit cards, lines of credit, and medical bills will get wiped out. Taxes and student loans won’t.

Utilities are important for an obvious reason: you don’t want your lights shut off. However, be sure to prioritize utilities. Electricity is more important than a cell phone, for example. Pay the utilities you can afford first. While a bankruptcy will discharge an unpaid utility bill (and the utility company cannot cut your power for filing bankruptcy), it won’t help you any if your lights are cut off while you prepare your bankruptcy paperwork.

Finally, Pay General Unsecured Debts – But Do It Right!

Unsecured debts are the lowest of the low under the law. This category includes credit cards, medical bills, lines of credit and personal loans, debts related to old repossessions, and pay day loans. If you have the money to pay them, you should. But there are some limits on this line of thinking. First, it is a bad idea to cash in a retirement fund, or to stop saving for a child’s college education via a 529 fund, in order to catch up payments on a debt. This is not just opinion: the law makes these types of funds completely exempt from seizure even when filing a bankruptcy. Uncle Sam wants you saving for your retirement to ease the pressure on the overburdened social security system, not sacrificing your retirement to add a few bucks to a billion dollar company’s bottom line.

Before you take big risks to pay back creditors, talk to an attorney. Lawrence & Associates has represented thousands of Northern Kentucky and Greater Cincinnati residents just like you. We are Working Hard for the Working Class, and we can help. Call today!


Steps To Take Before, During, and After a Bankruptcy To Reduce The Impact On Your Credit

Posted on Friday, April 17th, 2015 at 4:42 pm    

credit-scoreMany people wonder how they can protect their credit during a bankruptcy. There are actually several steps you can take before, during, and after a bankruptcy to help reduce the bankruptcy’s impact on your credit to the greatest extent possible. The Fort Mitchell, Kentucky offices of Lawrence & Associates can help you find ways to mitigate credit damage based on your particular circumstances. In the meantime, here are some tips:

Tips Before Bankruptcy

A Fort Mitchell, Kentucky resident with credit card accounts that have zero balances should stop using them immediately! If the balance is less than six hundred dollars, paying it off may be a good idea before the bankruptcy. However, you should never pay more than $600 toward your debts prior to bankruptcy, and you should always consult with an attorney before doing so. Many credit card companies will keep a person’s account open during bankruptcy if the card has a $0 balance when the bankruptcy is filed. If the account remains open until after the bankruptcy, then that card can be used to rebuild credit.

Tips During Bankruptcy

A Northern Kentucky resident can help to improve credit as well. Reaffirming on a loan or lease for a car will help to improve your credit rating. Future car payments will also help boost your credit score. It is not wise to reaffirm on a vehicle if the payments are beyond your ability to pay, but with a careful budget in place payments toward a mortgage or a car loan will continually improve your credit score. A good Northern Kentucky Bankruptcy attorney will prepare a budget that allows for such payments.

Tips After Bankruptcy

In Fort Mitchell, Kentucky, almost everyone that exits a bankruptcy gets credit card solicitations immediately. If the solicitation comes from a legitimate and well known credit card company, they might help you improve your credit. You’ll need to make sure that the company reports the credit line to the credit bureaus, so the payments on the card will help your credit. If you do accept such a credit card, be sure to charge only minimal amounts to it such as gas or groceries. Most importantly, ALWAYS pay the card off at the end of the month to avoid interest taking a big bite out of your budget. Finally, be sure to always pay all loan or credit card payments on time, as timeliness is important to your credit rating.

Unfortunately, our office does not provide additional services for rebuilding your credit after bankruptcy, although we can help you file bankruptcy or preserve your credit rating before filing bankruptcy. If you’d like more advice on filing bankruptcy or maintaining or preparing to preserve credit during bankruptcy, call Lawrence & Associates at our Fort Mitchell, Kentucky or Warsaw, Kentucky today!

If you are overwhelmed by mounting debt and tired or receiving harassing phone calls from creditors, contact Lawrence & Associates today. We can help you obtain that fresh start that you deserve!

Contact Us (859.371.5997) for a Free Consultation


Lawrence & Associates Help a Client Keep Her Home Using Chapter 13 Bankruptcy

Posted on Tuesday, April 14th, 2015 at 4:47 pm    

save my home from foreclosureThere are many reasons that individuals and families find they can no longer afford to pay monthly bills. Some may have recently gone through a divorce or been saddled with overwhelming medical bills. Others have been injured at work or in an accident and are unable to earn an income. Many are facing increased interest rates on mortgages or credit cards and cannot keep up. There are also people who simply let spending get out of control and cannot find a way out. We want to share a recent case we handled to give you an idea of what we can do for our clients. We will supply as many details as possible while still respecting our clients need for privacy.

The Situation

Our client needed to stop a foreclosure on her Northern Kentucky home. She was behind on her mortgage because she had unexpectedly gotten laid off, and it had taken her a few months to find a new job. The foreclosure had been filed and she had no way to defend it.

What We Did

When out client called Lawrence & Associates, we let her know that she could save her home with a Chapter 13 bankruptcy, so long as she filed the bankruptcy before the Master Commissioner’s sale on her home. Even if the mortgage company gets a judgment on the foreclosure, they cannot take the home so long as the mortgage arrearage is repaid inside a Chapter 13 bankruptcy.

The Result

Our client got to keep her home and she was able to repay her mortgage arrearage. With her new job and reduced debt, F.S. has gotten the fresh start through the bankruptcy court.

Contact Us (859.371.5997) for a Free Consultation

Providing You With Debt Relief Solutions Through Bankruptcy

Regardless of the reasons that brought you to financial distress, filing for bankruptcy does not make you a bad person. In fact, the government created bankruptcy in order to help people recover from unmanageable financial problems. At Lawrence & Associates, we help our clients understand how bankruptcy laws are made to protect them and will allow for a brighter financial future.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

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Illness and Overwhelming Medical Bills Send Many into Bankruptcy

Posted on Thursday, April 2nd, 2015 at 3:53 pm    

chapter 7 bankruptcyAccording to a 2007 study, 62.1% of all bankruptcies have a medical cause and the share of bankruptcies attributable to medical problems rose by 50% between 2001 and 2007. [1] Moreover, a recent article in Forbes highlighted one woman’s story of illness and mounting debt and stated that overwhelming medical bills cause 17-62% of all bankruptcy declarations. [2]

Stephanie Casey Diagnosed with Multiple Sclerosis

The woman featured in the Forbes article, 30-year-old Stephanie Casey, discusses her diagnosis with Multiple Sclerosis and the skyrocketing medical bills and debt associated with the diagnosis. Before the diagnosis, Mrs. Casey and her family were in an ideal situation- they had health insurance, IRA accounts, a sizeable emergency fund, were saving for a home, and no debt. However, the medication for MS rose from $2,800.00 to $3,600.00 per month and even with health insurance, Mrs. Casey was responsible for $250.00 per month. That’s over $3000.00 a year spent just on injections to help slow the progression of MS!

The High Cost of Healthcare

In the article, Mrs. Casey also expresses concern for her future and the future of her family. She states, “If I lose my vision, like 81% of MS patients do, and can’t work–this would mean that I’d no longer be covered by health insurance after 18 months of COBRA–we’re prepared to file for bankruptcy. If I don’t have insurance, and I lose my income, our family would be functioning on my husband’s salary alone to cover a $2,200 a month mortgage–and my $3,500 per month medication.” She goes on to state, “We’d be bankrupt within a few months of running up credit card bills to pay for the drugs, so it would be better for me to file individually, get down to no income and qualify for disability insurance and patient assistance programs from the drug manufacturers.”

Filing for Bankruptcy May Help

Although Mrs. Casey’s situation may seem extreme, many insurance companies in Northern Kentucky cancel coverage when the employee suffers a disabling illness because they become too sick to work, leaving them with medical bills and no insurance.With the rising costs of medical care and the increase of individuals struggling to stay on top, filing for bankruptcy may help relieve some of that debt. A Northern Kentucky Bankruptcy Attorney can help you get a better idea of what disclosures are required in order to file for bankruptcy and what debts will be discharged.

If you are overwhelmed by mounting debt and tired or receiving harassing phone calls from creditors, contact Lawrence & Associates today. We can help you obtain that fresh start that you deserve!

Contact Us (859.371.5997) for a Free Consultation


A Fresh Take on Bankruptcy: Filing for Bankruptcy Can Benefit Individuals, Companies and Society

Posted on Friday, March 27th, 2015 at 4:08 pm    

fresh start bankruptcyThe Webster Dictionary defines bankruptcy as the quality or state of being bankrupt or the utter failure or impoverishment. Although the definition of bankruptcy gives off a negative connotation, it doesn’t have to. Filing for bankruptcy can benefit individuals, companies and society as a whole.

A Fresh Start

People often don’t understand the process of filing for bankruptcy, however, bankruptcy is a legal procedure by which an individual or a business can discharge its debts when the petitioner (the person or company filing bankruptcy), does not have the means to pay off the debt within a reasonable period time. Bankruptcy can help both individuals and companies have a fresh start.

An Over Abundance of Debt Options

In today’s environment of the over abundance of credit cards, pay day loans, car loans, and first, second and third mortgages, it is very easy to fall behind in paying bills, which often leads to people drowning in debt. Falling deep into debt is not a positive thing for either the individual or for society. In fact, according to the Federal Reserve, the average household in the United States has approximately $15,799 in credit card debt, $54,000 in household debt and credit card debt for the United States totals $793.1 billion. [1] With statistics like this, it is no wonder why so many of us are struggling and forced to file for bankruptcy.

Earnings Are Meant to Motivate

Although our clients often worry about embarrassment that may come from filing for bankruptcy, many of our clients who are forced to file for bankruptcy are hard working individuals who can no longer afford to hand over every penny they make to creditors and there is nothing embarrassing about that. After all, the purpose of earnings is to motivate people to work hard, but how motivated can you be if you know that most of the money you make will go to creditors? Without the option of filing for bankruptcy, many people would work long hours just to hand over hard earned money to creditors.

Bankruptcy Stop the Calls and Collections Immediately 

Bankruptcy helps to give debtors a fresh start, alleviating what could be a tremendous burden. Further, when an individual or company files for bankruptcy, the automatic stay goes into effect meaning the harassing phone calls, letters and potential lawsuits from all creditors stop.

If you are overwhelmed by mounting debt and tired or receiving harassing phone calls from creditors, contact Lawrence & Associates today. We can help you obtain that fresh start that you deserve!

Contact Us (859.371.5997) for a Free Consultation

Footnote: [1] http://www.statisticbrain.com/credit-card-debt-statistics/

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