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Plan for Success

Posted by Kevin on August 5, 2017 under Bankruptcy Blog | Be the First to Comment

Although the Great Recession started in December, 2007 and ended technically in June, 2009, economic growth has been sluggish through the 2016 election and even to this day.  Participation in the work place went from 66.4% in January, 2007 down to 62.5% in October, 2015.  That means that people lost their jobs and withdrew from the work force for extended periods of time for a myriad of reasons.

In July, 2017, the Department of Labor indicated that US employers added 209,000 jobs.  More importantly, wages are going up.  This is bringing many people back into the work force.

It is not surprising that many of the people who had been sitting on the sidelines for extended periods of time have accumulated significant debt over the past few years.  In the past, I would receive a steady stream of calls from people who were outsourced (or otherwise laid off) or downsized concerning lawsuits or threatened lawsuits, and garnishments from their creditors.  In the last few years, however, I get less such calls.  That does not mean that people have not accumulated debt.  It probably reflects certain policy decisions made by creditors about the viability of suing people when they are out of work and, therefore, judgment proof.

Once you get a job, however, you may not be judgment proof.  Granted, if you go from unemployment to a minimum wage job, you may not be subject to creditor harassment.  But, what if you were unemployed for a year or more because your job was outsourced.  You have education and skills that in the right job market, could translate into a sizeable salary.  In that case, if you get back into your field, it is only a matter of time before debt collectors will be in touch with you.

So what do you do?  Wait for the telephone call?  Or the summons and complaint to be delivered by the sheriff?   Probably, it would be better to be proactive.  At the least you should do a personal financial audit.  How much debt do you have?  Is it unsecured like credit cards or medical bills, or secured (collateral involved).  Is it student loan debt that may not be dischargeable in bankruptcy?  How much are you going to have from each paycheck after your monthly expenses to pay those back debts?  Are there areas where you can cut back?

When we deal with prospective clients, we try to tailor our advice to their specific economic situation.  Some may have defenses to creditor action so fighting a collection action in State court may be the way to go.  Others may find negotiation with specific creditors can get a payment plan or settlement at a reduced amount.  Some are better served by engaging a reputable creditor counseling agency.  Others may need the protection afforded by the Bankruptcy Code.

Congratulations.  The economy is getting better and you are back in the job market.  But, if you have accumulated debt over the last few years, have a plan to deal with it.


Food for Thought

Posted by Kevin on April 21, 2014 under Bankruptcy Blog | Comments are off for this article

From various sources, I have been reading about the results of a study done by PayScale concerning the financial return (or lack thereof) of various types of college degrees.  Given that student loan debt now exceeds one trillion dollars, this study (and others like it) should be considered by both prospective college students and their parents.
A little aside.  My father was of the WWII generation.  He did not go to college.  However, he pounded into me from an early age that if I wanted a good job, I had to get grades and go to college.  Did a good job follow from a college degree?  Or was it that there was roughly a one to one ratio between good jobs and the number of people going to US colleges in the 1950″s?
I started college in 1969 and finished my JD-MBA in 1978.  By that time, there had been an explosion in the number of college students.  And while good jobs increased because the economy grew, there no longer seemed to be a one to one relationship between college grads and good jobs.  That was the bad news.  The good news was that college and law school were far less expensive than they are today.  With the help of my father’s union scholarship and my parents’ financial support, I was able to finish college and two grad schools with less than $7,000 of debt- a manageable sum.  Nowadays, however, young people are finishing college with over $30,000 of debt.  Forget about graduate school.  Some students who attend professional schools (medicine, law, business) are coming out with over 100K of debt.  Unbelievable.
The PayScale study indicates that certain degrees, such a engineering, pretty much insure that the graduate will earn at least 500K more over a 20 year period than someone who did not attend college.  At the same time, an arts or humanities degree from a lower tiered college may translate into a six figure deficit vis-a-vis high school graduates.  OUCH!
Predicatably, graduates of elite schools including the Ivies fare better than graduates of lower tiered schools.  Moreover, a study by McKinsey, highlighted in a recent article in The Economist, points out that in this less than stellar job market, 42% of recent graduates are in jobs that do not require a 4 year degree.
What to do?  In the long run, study hard (or run 4.4 in  the forty yard dash for a football scholarship) so your chances of getting into a top tier school are better.  In the short term, however, students and parents have to be smart about the type of financial commitment that college is.  Explore financial aid opportunities especially through local clubs or civic organizations.  For example, our local Rotary awards scholarships to about 10 students per year.  Second, look into community colleges for the first two years.  You can test your abilities for two years at a pretty reasonable price.  If you do well, you can transfer into a 4 year degree program in your third year.  As a transfer with a high GPA, not only will you be in a better position to get into a school that may have been out of reach out of high school, you may be able to negotiate a better financial aid package.
Finally, you have to be on top of your student loans once you graduate.  The last thing you want to do is fall into default.  More than that, you would want to be pro-active in finding the right repayment plan which will allow you to pay your student loans and not live in poverty.  Do not shy away from seeking expert help in this area.  It may be money well spent.