On this episode of Two Frugal Dudes, we’re breaking down bankruptcy with Carmen Dellutri, CEO of the Dellutri Law Group and expert in bankruptcy, personal injury law, and a consumer protection advocate. Find out more at Dellutrilawgroup.com
If there’s anything Carmen has learned throughout the years, it’s that you should talk to your kids about money. Carmen grew up in a very frugal household, but not one that explained the thought process behind frugality and money management. It’s this idea that he brings forth to his clientele who are facing bankruptcy: talk to your family and be candid about what’s happening.
The Power of a Five Dollar Bill
Carmen knows how to be innovative when it comes to savings. He and his son made an agreement that every time they received a five dollar bill, they’d put it in savings. So, if they gave a cashier a ten and received a five in their change, they would have to put it away. Within no time at all, they had $1000 saved.
When Should You File Bankruptcy
The recommendation on filing bankruptcy is different from lawyer to lawyer, as well as the specific scenario. Carmen has worked with people you wouldn’t expect to have financial troubles– doctors, finance experts, CPAs, fellow lawyers, etc.– which just goes to show that anyone can end up in this situation.
Generally speaking, there are four main reasons for bankruptcy:
- Loss of a loved one
- Loss of a job
- Medical bills and credit cards
Lots of the aging generation is ending up in financial situations while helping the younger generation through financial difficulties.
Alternatives to Bankruptcy
Carmen has a background in personal injury law. When he stumbled upon bankruptcy law, his inner problem solver saw an opportunity. In many cases, bankruptcy is avoidable and Carmen helps to find different solutions before resorting to that route, such as suing a debt collector.
Carmen advises finding a bankruptcy specialist who has a background in consumer law. Look to the National Association of Consumer Bankruptcy Lawyers (NACBA), National Consumer Law Center (NCLC) or National Association of Consumer Advocates for resources. Rather than filing for bankruptcy, you may find yourself with a check in hand and your lawyer paid by someone else.
It’s worth noting that it’s not worth trying to handle this process on your own, as you can end up owing more money due to the complexity of the paperwork involved.
Types of Bankruptcy
There are two main types of bankruptcy that you can file. A Chapter 7 bankruptcy is simple and quick. It’s the most common and results in a quick liquidation. These are the bankruptcies that take place when someone has limited assets, a lot of credit card debt, and is generally at their wit’s end.
Chapter 13 is a whole other world. For this, you need an experienced attorney to help. It’s getting rid of debt while keeping your house and car, and paying off your credit cards at your own pace without interest. Rather than scraping by to make minimum payments, you end up having small, consolidated payments for a set period to make it all go away.
Recovering from Bankruptcy
By the time people file for bankruptcy, their credit score has already suffered. You need to be willing to make a commitment to improving your credit score after filing a Chapter 7. All of your bills must be paid on time, and your credit score should be back on track in a couple of years.
With a Chapter 13, you have sworn to a judge that you will pay a certain amount every month to pay back your debt. That means pulling a credit report every four months and meticulously track your progress and highlight any discrepancies.
Basically, the key to recovering from bankruptcy is education and communication.
Frugal Tip of the Week
Check out the free resources on Dellutrilawgroup.com. Send an email to [email protected] for a free copy of Are You the Next Financial Success? and the upcoming How to Find, Interview, and Hire the Best Bankruptcy Attorney in Town
Where Our Money Went
Kevin’s recovering from the purchase of a ride on lawnmower last week, so didn’t spend any money this week. He did, however, get to use the lawnmower and feels the investment was well worth it.
Sean’s money went toward jet-setting to Orlando for FinCon. With some crafty booking strategies, he was able to get a decent price on a round-trip flight.
Show Links & Related Episodes
Disclaimer: Kevin and Sean are not professional financial advisors. Do not take any advice they give without first speaking with a professional and performing your own due diligence.