Credit Counseling

Last night we completed the mandatory, pre-filing credit counseling. It wasn't an entirely long process, because the attorney gave us a worksheet to fill out, so we had all the answers right in front of us as we went through the counseling.

This is the outcome of the counseling:

Analysis of Consumer's Financial Situation

When a loss of income has affected your finances take a good look at your total financial picture. Limit your non-essential spending. Then create a new spending plan or budget and try to balance it using your new income. Look for ways to increase your income. For example, a part-time job or overtime on your present job may help. Please keep our money saving tips page handy as a reference source when balancing your budget.

You have overspent or made poor choices. It can be hard to face and admit, but everyone makes mistakes. 'To err is human.' It is always better to recognize and deal with your mistakes than to pretend nothing is wrong (denial) or ignores the problem until it becomes a crisis (lawsuits, wage garnishment, etc.). Avoid 'beating yourself up' or feelings that you are a failure, a bad person, etc. Remember, everyone makes mistakes and it takes courage to recognize them and deal with them! The key is to determine why you got into debt so that you can avoid making the same mistake in the future. There are many excellent resources to give you the financial knowledge you probably did not learn in school. Hummingbird offers a great deal of free information as well as a list of other resources.

You have experienced an increase in your expenses. When your financial well-being is affected, it is wise to consider all options. There are usually more options than you might first think. Limit your non-essential spending. Then create a new spending plan or budget and try to balance it using your new expenses. Look for ways to increase your income. For example, a part-time job or overtime on your present job may help. Please keep our money saving tips page handy as a reference source when balancing your budget.

Re-examine your total financial picture. Do you see any possibilities to increase your income? Are there ways to reduce your expenses? Brainstorming is a great way to come up with possibilities. Get two pieces of paper. On the first piece of paper, write down any and every idea to increase income. On the second, write down any and every idea to decrease expenses. If only one idea helps you're better off then when you started.

If you receive substantial tax refunds each year, it means that the government has had the use of your money all year instead of you. It may be helpful to talk to someone in your payroll office to find out if you can change your tax exemptions so that you still have enough taken out so that you do not owe taxes, but you get a smaller refund. This will put more money in your pocket.

Analysis of Living Expenses

Your percentage of your income spent on housing and utilities is above average. Compare home and auto insurance policy rates. Often if you insure home and auto with the same company you can save money. Can you save on your utility bills by being more energy conscious and sealing home leaks? If you are paying PMI (private mortgage insurance), call your mortgage company to see if it's still necessary. Can you reduce telephone, cell phone or Internet costs by reducing the level of service or shopping for a better deal? Expenses included in this category are: Mortgage or rent, homeowner's or renter's insurance, utilities other than cable and satellite, HOA dues, Lot rent, and real estate taxes if not included in mortgage.

Your percentage of income spent on transportation is above the average. Some ways to reduce spending in this area are to take public transportation where possible, share rides, car pool, and shop for better insurance rates. Often if you insure home and auto with the same company you can save money. Expenses included in this category are: Vehicle payments, public transportation, tolls, parking, gas, oil, maintenance, licensing costs, vehicle tax and auto insurance.

The amount you spend on food and other groceries is above the average. Do you have special circumstances such as a more expensive diet for medical reasons or several young children requiring diapers and formula? If so, your percentage in this category may be understandably higher. Some ways to reduce your food costs are to use coupons, take advantage of grocery store specials or discount cards, pack meals eaten at work or school and buy produce when it is in season. Expenses included in this category are: Groceries, baby expenses such as diapers, and school lunches.

The percentage of income you spend on entertainment is above the average. This is the area in which you have the most ability to reduce expenses. Some ideas for reductions are to check your local library for books, movie rentals or entertainment for children at no cost. If you eat out, buy take out foods or order food in, reduce the number of times that you do so to achieve your financial goals. Cable and satellite services can also be reduced. If you use tobacco or alcohol, reducing or eliminating your usage will save money. Expenses included in this category are: Entertainment, dining out, cable, satellite, alcohol, tobacco, newspapers, magazines, health club or gym, and children's activities.

Your percentage of income spent in the “other” category is above average. Note that this category normally includes payment of credit card and other unsecured debt, but no such debt payments have been added to your “other” category. Is there any place you can reduce expenses here? Expenses included in this category are: Personal grooming, pets, education expenses, child daycare, life insurance, other insurance, alimony and child support payments, student loans, personal property taxes, savings, and charitable contributions. Ideally, savings should be 5-10% of your take-home income.

Budget Analysis

Assuming all of the information you have given so far is true and correct, after paying all of your living expenses and debts, you will either break even, or have negative $-1568.66 at the end of the month. That means that you will have -1568.66 dollars less than what you need to pay living expenses and your debts and will have no money at all left for unexpected expenses or emergency savings.

You have substantially less than you need for your living expenses and payment on your debts. Your situation is generally considered to be one of financial crises. Seek professional legal and financial advice as soon as possible.

*****AS IF THIS WAS A SURPRISE!*****

This morning, I have to fax over a few last-minute items to the paralegal and that should be all until we have our final meeting with the attorney next week, which is the same day our case will be filed with the Bankruptcy Court.