Is It Time For Bankruptcy?

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Deciding whether or not to file for bankruptcy is a stressful and complex situation that is further burdened by social stigmas. Nevertheless, bankruptcy might be the right choice for you. Many people believe that by filing for bankruptcy, they will never be accepted for loans again, but this is not true at all. Your bankruptcy stays on your credit report for 10 years, but you can get credit again within that time period, depending on your pre-filing payment history, income, debt-to-income ratio, and how well you pay off your debts after the filing.

Now that you know that filing for bankruptcy doesn’t doom your credit forever, the question remains: should you file for bankruptcy? Here are some general details to take into consideration when making your decision.

Can You Avoid Bankruptcy?

Firstly, you should sit down and take all aspects of your finances into consideration. You may find that you can alleviate your financial issues by fixing some problems or scaling back on certain purchases. Even though bankruptcy isn’t a permanent detriment to your credit, it is still a huge undertaking that shouldn’t be initiated unless you are sure it’s your best option.

What Type of Bankruptcy Should You Choose?

If you intend to go through with a bankruptcy, there are two major types that are commonly filed by individuals: Chapter 7 and Chapter 13. Chapter 7 bankruptcy can discharge most of your debt within a few months, but you may lose some of your personal property to help pay off the debt. Chapter 13 bankruptcy consists of a repayment plan based on your income, which helps you pay off your debts over the course of several years.

It’s important to know whether or not you quality for the type of bankruptcy you intend to file. If your income is too high, you may be denied from Chapter 7 bankruptcy and be expected to pay off your debt. On the other hand, if your income is too low, you might not be able to manage a repayment plan. There are many other deciding factors, so make sure to consult an experienced bankruptcy lawyer to help you determine eligibility.

Which Debts will be Forgiven?

Some types of debts cannot be wiped out no matter what type of bankruptcy you file. Some examples of non-dischargeable debts include alimony, child support, and tax debt. Most of the time student loans also can’t be discharged. If the majority of your debt will not be wiped out by bankruptcy, there is little point in filing.

What will Happen to Your Assets?

Before you file for bankruptcy, you need to take your assets into consideration to make sure that you don’t lose something that puts you into a worse situation than before. If you have a lot of equity invested in your home, you may lose it if you file for Chapter 7 bankruptcy. However, filing may alleviate the strain from your mortgage when other debts are forgiven. If your income allows for Chapter 13 bankruptcy, your mortgage will be incorporated into your repayment plan.

The fates of your other assets depend on the circumstances. Only certain items are included in exemption laws, and this depends on your location. Also, if you put an asset such as a car or boat down as collateral on a loan, the creditor may be able to take the property even if you are filing bankruptcy. Make sure that you would keep what you need to survive after the filing.

What will Happen to Your Credit Card Debt?

Bankruptcy is often an effective way to discharge your credit card debt, but not all credit cards debts can be wiped clean. Check with a bankruptcy lawyer to ensure that your credit card debt is dischargeable. Some examples of situations where credit card debt is a problem during a bankruptcy filing are if you lied on your application or used the cards to an extreme extent.

What will Happen to Your Pension and Insurance Plans?

Most pension and life insurance plans are protected from bankruptcy proceedings. However, you should check before you file to make sure that this is the case for any plans you have, including 401k, IRA, or life insurance policies.

What Happens to Co-Signers?

You need to make sure that co-signers on your loans will not be left with your debt after bankruptcy wipes it clean from your record. If you go through a bankruptcy filing with co-signed loans, the people close to you who helped you get your loan may be stuck with the entirety of the remaining payments. In general, Chapter 13 bankruptcy protects co-signers, but Chapter 7 bankruptcy does not.

How will Bankruptcy Affect You?

Fear of social stigmas shouldn’t stop you from considering bankruptcy, but you should be warned that the process involved in filing for bankruptcy is invasive and demanding. You display your entire financial life to the court. If you file Chapter 7, you may lose some of your personal property. If you file for Chapter 13, your spending habits will be scrutinized for several years.

Taking the positive and negative factors into account, if you are still considering bankruptcy, it’s crucial to consult an experienced and certified bankruptcy specialist. Dan Higson, with Hathaway Perrett Webster Powers Chrisman & Gutierrez A Professional Corporation, is such a resource in the Ventura and Oxnard counties of California. He can help guide you along every step of the bankruptcy process, including your decision on whether or not to file in the first place. Call him today! (805) 644-7111

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RadioShack’s Rollercoaster History of Boom and Bankruptcy

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RadioShack is an American chain of electronics stores that has experienced both highs and lows through its long history. It was founded in 1921 by brothers Theodore and Milton Deutschmann to sell ham radio equipment. The company originally consisted of a single location for retail and mail order sales. RadioShack issued its first catalogue in 1939, and even extended into the high fidelity music market by producing its own private label products with the brand name Realist. Throughout its history, the company constantly attempted to rebrand itself, changing its name, slogan, management, and purpose time after time.

By the 1960s, RadioShack had expanded its mail order business, and included 9 stores. However, at this time the company fell on hard times and had to file for bankruptcy. Luckily for RadioShack, entrepreneur Charles Tandy took an interest and bought the company for $300,000 in 1962. Tandy Corporation was interested in expanding their leather goods company into other hobby businesses. In order to make RadioShack viable again, Tandy ended the mail-order business and credit sales and dropped most of the upper management positions. Tandy led the ailing company through a period of growth and success in the ‘60s and ‘70s before his death.

In the ‘80s, RadioShack attempted to edge into the IMB PC compatible market. This didn’t last long, however, as the company struggled against rivals like Dell. In 1982, people were moving towards owning their own phones instead of renting them after the breakup of the Bell System, and RadioShack jumped on board by offering 20 models of home phone.

In the ‘90s, RadioShack once again attempted to change, this time having to restructure over 200 store locations. The company wanted to shift away from components and cables towards more mainstream consumer electronics, which it continued to do into 2015 by selling things like cell phones. In 1994, the company began to offer inexpensive, non-warranty repairs for over 45 brands of electronics. In 1998, RadioShack claimed to be the largest seller of consumer telecommunications products in the world. By 2011, smartphone sales accounted for over half of the company’s revenue.

Unfortunately, management issues, a stream of bad CEOs, and tough competition led to several bouts of restructuring, purging of management, and financial instability after the turn of the century. In 2005, a switch in the wireless providers that RadioShack featured caused a huge decline in profits. This along with management problems led to several cuts in 2006. Nearly 500 stores were closed, and the stock prices plummeted. The company also attempted to cut overhead expenses by laying off a fifth of its headquarters workforce.

Since 2006, RadioShack continued to close more stores and lay off more people. At the beginning of 2015, the company faced over $1 billion in debt and filed for Chapter 11 bankruptcy in the hopes that another restructuring would save it. Late in 2015, the bankruptcy plan was approved, and RadioShack began the liquidating funds to pay off its creditors. The chain was forced to shutter or close nearly all of its remaining 4,000 stores.

In September of 2015, many problems still faced RadioShack’s Chapter 11 plan. Standard General LP and Wells Fargo claimed that RadioShack was obligated to pay the substantial legal fees accrued from lawsuits with junior creditors, estimated at around $15-20 million. This stipulation would have probably led to the collapse of all of the creditor repayment plans. Luckily, the junior creditors decided to drop the lawsuit instead.

As part of the restructuring plan, Standard General bought RadioShack’s brand and saved around 1,700 stores. Standard General, Wells Fargo, and other banks will provide $9.4 million in cash and savings to a liquidation trust, and Standard General will give up its rights to $30 million in unsecured bonds.

Time will tell if Standard General will manage to salvage anything from RadioShack’s remains. If not, this longstanding household name will go down in history as yet another company that failed to keep up with the speed of modern technological advances.