Clutter can lead to your financial demise.  Consider those who cannot keep track of receipts, records, bills, checkbooks, retirement accounts, or any other aspect of their financial lives.  Chances are, their desks have paperwork strewn across it, possibly even spilling onto the floor.  If asked how much money is in their checking account, they probably could not tell you.  They likely do not know the balances on their credit cards, or amounts owed on other loans such as automobile loans or student loans.  Many financial advisors have uncomfortable images of their clients sitting desolate amongst mountains of loose papers, bills, and receipts.  So before you begin your search for a qualified bankruptcy attorney in Suffolk County, you should ask yourself this question: are you having genuine financial difficulties, or are you simply disorganized. 

Many people discover that their financial distress is almost entirely unfounded, and that the real problem is that they know far too little about their financial situation simply because they are terribly disorganized.  This is why thousands of Americans sign up for debt management and consolidation companies each year.  These companies, known as consumer credit counseling services, know that disorganization is a financial killer.  They organize all of your expenses, and convince you to pay for their services because you will only have to make one payment a month to cover nearly all of your bills.  This simplicity is what many of us seek.  However, we can achieve this simplicity ourselves, and not suffer the credit damage that occurs when you work with a consumer credit counseling service. 

In order to break from the cycle of confusion caused by disorganization, spend a weekend getting yourself and your finances in order.  File your bills according to their due date.  As you do so, create a sheet detailing each bill, the balance owed, and the balances.  Create a corresponding chart that details sources of income, total amounts, and the date those amounts are available to you.  Create folders to store receipts and paystubs in according to type: household, automobile, electronics, tools/equipment, healthcare, and so on.  Relearn to use your checkbook!  Many people are now doing their banking online, which is as safe as or even safer than issuing checks each month.  Spend $5 and procure one of those large desk calendars.  Write your bills in spaces on the date they are due. 

With this type of financial organization comes clarity.  Knowing your total balances, to whom they are owed, and the methods with which you will pay these obligations will tell you essentially what a financial advisor will tell you.  Using the information gleaned by creating order in your financial life, you should be able to tell if a bankruptcy is in your future.  You will learn one of three things:

            1.) You have more than enough money to pay your expenses. 

            2.) You have just enough money to pay your expenses.         

            3.) You do not have enough money to pay your expenses. 

With this information, you can then make personally-informed decisions.  If you fall into category number 1, then you have no problems.  If you are a number 2, you need to speak to a financial advisor to discuss ways to reduce expenses and increase income.  If you are a number 3, you should talk to a financial advisor, or a consumer credit counseling service.  They may then advise you to contact a bankruptcy attorney.  If this is the case, the attorney will greatly appreciate the fact that your situation is clearly disclosed and very organized.      

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We now have a full year ahead of us.  This means that we have 12 months to create a more realistic plan for our immediate and long-term future.  We must learn from the mistakes we have made in the past.  Americans in general are operating at 130% debt to income ratio.  Is that realistic?  We spent $700 billion on fast food in the 6 years leading up to this nationwide financial debacle.  Does that make sense?  We transferred the use of crops from food to fuel.  Is that a wise idea?  We are quickly exhausting our natural resources.  What will we do when they are gone?  This type of unrealistic thinking has not only gotten us into trouble, but is also keeping us in and deepening these dire straits we are experiencing. 

There are thousands of Americans experiencing severe financial distress.  We can see how we got to this stage; however, even our most intelligent minds cannot seem to see a rational way out of it.  For example, let’s consider for a moment Obama’s new stimulus plan.  His plan, of course, rests heavily on top of the first bailout plan of $700 billion.  We can, at least initially, use this as an example of how we have started to show some limited foresight.  With Bush’s bailout, we accomplished very little, although we have only spent about half of the money so far.  The credit situation has certainly not been alleviated.  So, seizing on that information, and wanting to make a splash with a strong move as he comes into office, Obama wrote policy into his stimulus package that seeks to correct the economy by adding more jobs.  One could argue that he is simply following Roosevelt’s lead by instituting changes similar to The New Deal.  And by well he should, as our country grew exponentially after the changes brought about by the Depression. 

The creation of jobs by improving our infrastructure is a wise move.  Seeking alternate means of energy makes sense.  Both of these policies have been quite delayed, but at least there is now hope they will actually occur.  However, the third part of Obama’s plan makes no sense at all.  Saying so is probably not what the general American public would want to hear.  Nevertheless, tax cuts for individuals and businesses are probably not going to have tangible effects other than increasing Obama’s popularity.  For most Americans, a few hundred dollar tax cut is not going to mean anything except that another bill gets paid.  In order for the money to be used to boost the economy, we need consumers to use the money on consumables- televisions, automobiles, snow-blowers, and virtually anything sold at the retail level.  Try asking someone in Nassau County who is considering Chapter 7 Bankruptcy to spend their money on a new flat screen T.V.  This is laughable.  People are going to use the money to pay the bills they are already or nearly behind on.  It is going to go to mortgage payments, utility payments, loans, other bills, and possibly groceries and gasoline.  If Americans use the money for these items, as they have in the past when given stimulus checks, then the purpose of providing those funds in the first place are null and void. 

But above all else, let us not forget who is going to pay for all of this- the same people getting the “stimulus” checks.  We’ll all be made to suffer when taxes increase in order to fund these congressional bills.  Talk about robbing Peter to pay Paul.  Is the fleecing of America beginning all over again?    

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In a country that can often be overly zealous in preventing what it perceives to be threats to its security, Americans still sometimes make serious mistakes by simply acting in good (but perhaps oblivious) faith.  We scrutinize every detail of our children’s daycare centers.  We search aggressively for trustworthy mechanics to work on our vehicles.  We read food labels and make decisions based on research we might have conducted.  We wear our seatbelts and have front, side, and curtain airbags.  We buy things like credit protection insurance.  We investigate potential employees, employers, and even our landscapers and maintenance workers.  With the level of security-mindedness of most Americans, one would think that it would be difficult to fool us.  However, despite all of our precautions, we are now facing what is perhaps the largest swindle ever committed in the world.  Apparently, when it came to Bernard Madoff, all of our natural and learned safety senses went out the window of a high-rise in Manhattan. 

Even before these frauds- both alleged and admitted- were revealed to the public, we were already facing serious economic difficulties, as evidenced by the sharp increase search engines experienced for terms such as “qualified bankruptcy attorney in Long Island” and “chapter 7 bankruptcy in Suffolk County.”  While most of the filings that probably resulted from those searches were personal, the Madoff fiasco is shaking the country in its financial core.  Especially in New York, there are a number of great and prestigious companies and organizations that are now considering those same lawful financial protection options afforded to every day consumers.   

So, is it really fair that the American public is being made to suffer even more?  This “ponzi scheme” is robbing countless aid and charity programs and organizations of critically needed funds.  As a result, many of them are closing down operations.  In addition, investors and other large financial firms are in danger.  All of this means that the American people are yet again bearing the brunt of these poor decisions.  The most tasteless aspect of this is that we simply must accept at least partial blame.  Dozens of reports are surfacing that Madoff’s operations were rarely investigated or scrutinized.  Very intelligent people trusted enormous amounts of money with Madoff while knowing full well that what he promised was virtually impossible by all accounts.  But sometimes, greed warps our better judgment, and we may choose to ignore that little voice that says: “If it sounds too good to be true, then it probably is.”

We can therefore add this to our New Year’s resolutions: to be as diligent and safe with our financial matters as we are with the safety of our family, our bodies, and our neighbors.  Because after all, the act of each of us making smart decisions about our money will help everybody- all over the world.  That is, as long as we recognize this as the wake-up call that it really is.    

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With all the dramatic economic and political changes that are occurring in the United States recently, one would think that the implementation of major beneficial changes to the credit industry would be a widespread media event.  This should especially be true if the changes were beneficial solely to consumers.  However, apparently this is not the case, as very few people overall have heard of the sweeping changes that were brought to the credit industry on Thursday, December 18^th.  New regulations adopted and passed by the Federal Reserve, the United States Department of the Treasury, and the National Credit Union Administration brought unprecedented changes for virtually anyone that uses or issues credit. These changes are designed to protect consumers.  This is highly unusual, as credit reform in the last decade has usually been favorable for the creditors and lenders- not the consumers.  Analysts are already predicting that these changes may lessen the spate of recent filings of chapter 13 bankruptcies in Nassau and Suffolk counties.  But don’t go swiping that card at the terminal just yet- the changes do not take effect until July 2010.  

Perhaps the most significant change adopted this month was to limit a creditor’s ability to arbitrarily and unfairly increase interest rates.  In the past, most credit card companies had policies that stipulated their ability to increase your interest rate for practically any reason.  This practice has served to seriously damage the financial health of thousands of individuals who revolve credit card balances.  Often, rates were increased if a debtor was late by even a few days with a payment- including those people with otherwise stellar credit.  Other times, rates were increased to offset losses sustained elsewhere in the financial institution.  With the new changes, such practices will no longer occur.  New regulations mandate that rates may not be increased on existing balances.  People who establish a new account are, of course, subject to whatever rate they sign to.  However, once a consumer revolves a balance beyond one repayment period, their interest rate cannot be increased as long as they carry that particular balance.  If the consumer makes new purchases, those purchases can be subject to a higher rate. 

Few consumers have heard of a neat little credit card company trick called payment allocation.  This is where the creditor allots your payments to balances with the lowest interest rates first.  Different types of transactions have different types of interest rates with credit card companies.  One way creditors lock consumers into debt cycles is to allocate their payments to the transaction balances with the lowest interest rate first.  In this way, you pay for a much longer period of time on the higher balances, making it hard for your overall balances to actually decrease.  Not a very nice trick, eh?  Well, this will no longer occur.  Effective July ’10, payments must be allocated to the highest interest rates first.  This is a substantial benefit to consumers, and will help to alleviate the debt of tens of thousands of people. 

The reforms also call for 45 day notices to be issued in the event of changes to an account’s terms, longer time periods to pay balances in, and reduced over-the-credit-limit fees and late fees.  However, all these positive changes will have some negative impacts.  Primarily, these reforms will make it harder for people with substandard credit to obtain subprime credit cards.  For everyone, the changes will result in increased costs associated with credit cards such as yearly fees and new account interest rates.  There has also been speculation that the exchange rate (the rate a merchant is charged each time a credit card is swiped in their business) may be increased, which will likely result in a corresponding increase in goods and services at locations where merchants accept credit cards.  However, it should be noted that the benefits of these comprehensive credit reforms far outweigh the few problems they might create.  And besides, Americans need a break- this could be exactly what many of us are looking for.        

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Many people who consult with a bankruptcy attorney in Nassau & Suffolk Counties find that their options are far greater in scope than they might have imagined.  The reason for this is that part of a bankruptcy attorney’s job is to ensure that filing for chapter 7 or chapter 13 bankruptcy protection is the right choice for you.  Whether the decision that is made is to forge ahead with the bankruptcy proceedings, or to avoid it altogether, there are a number of resolutions that you can make for the New Year to better your financial situation. 

One of the most important aspects of your financial life is the maintenance and, where necessary, the repair of your credit.   Good credit is crucial regardless of whether or not you have a recent bankruptcy discharge.  Your first step should be to gain access to your credit report via www.annualcreditreport.com.  This website was setup after legislation mandated that each United States citizen be provided with a copy of their credit report for free, once per year, per credit reporting agency.  Examine your report, and check for any errors contained within.  If there are errors, contact your creditor and the credit reporting agencies to correct the information immediately.

Recent changes to credit laws have substantially benefitted consumers.  Knowledge of these changes will help you to better manage and understand your credit.  Primarily, two of these changes will impact consumers immediately upon taking effect.  The first is that interest rates will no longer be allowed to be raised on current balances.  New balances and purchases may be charged higher rates, provided that you have been given at least 45 day’s notice prior to such changes taking effect on your account.  However, balances that you already have must remain at their current rate.  The second change is related to payment allocation.  Previously, creditors used your payments to pay down the balances of your account that are at the lowest interest rate first.  Because different transactions have different interest rates, this meant that balances at higher rates accumulated the higher interest for much longer than any other balances.  The new regulations passed at the end of 2008 require that the opposite be done: beginning in 2010, payments must be allocated to balances with the highest interest rates first.  Take advantage of this!

As part of your New Year’s resolution, build a complete budget for your household.  Include all expenses- from car payments to tanning fees, clothing to utilities; make sure you account for everything.  Start by examining and compiling data on all your income sources.  When you subtract your expenses from your income, you will understand what your disposable income is.  If there is no disposable income, you should seek the advice of a financial advisor or a consumer credit counseling service.  However, if there is disposable income, you should use it to invest in savings, or to pay down high interest rate loans and lines of credit.