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Many times, I meet with potential clients who are in the process of weighing credit counseling v. bankruptcy in Jacksonville, Florida in hopes of achieving debt relief. These potential clients, who largely become clients, want to know what the main differences are between credit counseling and bankruptcy. I always stress the importance of my client’s goals as they try to decide which option is best for them. For some, bankruptcy is the last possible option they will consider. This is due to the bad stigma many people associate bankruptcy with, but this is why bankruptcy might make the most sense in the long run.

Credit Counseling

Let’s start with defining credit counseling. Credit counseling is when you work with an agency or company you have hired to help you come up with a plan to pay off your debt. However, you must be very careful when choosing a credit counseling agency as many charge high rates and do not actually help you pay off your debt as promised. I have many clients who have come to me after this specific experience. It is best to choose a not-for-profit agency.

It is important to note from the very beginning that credit counseling will not reduce your overall debt. The goal is to come up with a plan to pay off your debt over three to five years. Credit counseling is also not helpful for secured debts such as mortgages and car loans. While your plan can include your secured debts, it is meant to deal with unsecured debts such as credit cards and personal loans.

The number one pro that makes credit counseling v. bankruptcy in Jacksonville, Florida a better option to many is its effect on your credit score. Credit counseling helps you to bring credit accounts in default current and also helps you to lower your balances. Additionally, the fact you are in credit counseling will not appear on your credit report. Because of these factors, your credit score begins to improve almost immediately.

Bankruptcy

Bankruptcy is the legal process in which you are no longer legally liable for your debts because your debts are discharged. A Chapter 7 Bankruptcy is a complete liquidation of your assets in exchange for your debts being discharged. However, because you are allowed certain exemptions to protect your assets, it is possible to not actually lose any of your assets.

The number one pro that makes bankruptcy appealing to many is how quick the process is (around 120 days) versus a payment plan of three to five years through credit counseling. The other major pro of filing a Chapter 7 Bankruptcy is that you do not have to pay back your debts because your debts are discharged. Bankruptcy is also better equipped to help you deal with your secured debts.

The biggest drawback to bankruptcy is its harsh effect on your credit score. Your credit score will be affected as soon as you begin the bankruptcy process and the fact that you filed bankruptcy will appear on your credit report for seven to ten years. However, many are surprised to learn they actually receive credit card applications in the mail shortly after their debts have been discharged. This is because creditors view those coming out of bankruptcy as good candidates to extend credit to because of the very low debt to income ratio. Not only are you able to obtain a new credit card shortly after bankruptcy, but many of my clients have obtained new car loans and mortgages as well. Therefore, although the fact you filed bankruptcy will remain on your credit report for seven to ten years, it is not a complete bar to obtaining new credit for nearly as long.

When weighing your options of credit counseling v. bankruptcy in Jacksonville, Florida, which option is best for you largely comes down to which pros and cons are most important for you and how quickly you wish the process to be completed. A Chapter 7 Bankruptcy is by far a much faster and less expensive process as it is over within a few months rather than several years and you do not have to repay any of your debts. Contact the Law Office of David M. Goldman, PLLC today to speak with an experienced bankruptcy attorney that can help you better weigh your options.

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How to rebuild your credit score after bankruptcy is a question I get asked from just about all of my clients. It is one of the most important unanimous concerns clients seem to have going into bankruptcy and it should be. In fact, the toll filing bankruptcy can take on your credit score is probably one of the most common reasons why many people in Jacksonville, Florida look at bankruptcy as a very last resort and avoid it all costs. Unfortunately, most are falsely under the assumption they will not be able to use any credit for seven to ten years after filing bankruptcy. But this is not always the case. If you start taking steps to rebuild your credit score after your bankruptcy is concluded, you could have a great credit score in just one to two years.

Here are a few simple steps you can take to rebuild your credit score after bankruptcy quickly.

Secured v. Unsecured Credit Card: Get a credit card shortly after your bankruptcy is concluded. Use it for a few purchases each month, but pay it off in full and on time. To put it as simply as possible, do not carry a balance. You will receive several credit card solicitations in the mail, but you might want to do your own research first before applying for the first credit card application you receive in the mail. Many will have horrible interest rates with very high annual fees. Look into getting a secured credit card instead. They usually will have lower interest rates and some do not have any annual fees.

Pay everything on time: As already stated above, pay your credit card on time. However, it is important to pay EVERY bill on time. Not just your credit cards. Being late just one time or on one payment can negatively affect your credit score.

Limit the amount of credit you apply for: It can be very difficult to stay away from applying for a lot of new credit. But is it important to make sure you do not get over your head in debt again and end up where you were prior to filing bankruptcy. So be very picky and do your research before applying for new credit.

Create New Habits: Do not regret any past decisions you made, they cannot be changed, undone, or forgotten. So take them as a lesson, learn from them and move on. Figure out what old habits helped you fall into debt and do not repeat them.

Bottom line, it is very possible to rebuild your credit score after bankruptcy in a lot less time than seven or ten years. You just need to set goals and stay on track.

Contact the Law Office of David M. Goldman PLLC today to speak with an attorney today. Not only can an experienced Jacksonville Bankruptcy attorney help you through the bankruptcy process, they can also help you prepare for success after bankruptcy by helping you rebuild your credit score after bankruptcy.

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I have written many blog posts over the years concerning the MEANS test in Jacksonville, Florida and the deductions that can be used. To jog your memory, the MEANS test is required when your income is above the median income in your state for your household size. It is meant to prohibit high-income households from filing a Chapter 7 bankruptcy. The MEANS test allows you to deduct specific expenses that can help you qualify. The MEANS test is also used to determine your disposable income in a Chapter 13 Bankruptcy, which in turn determines your Chapter 13 Plan and your monthly payments. But what types of expenses can be deducted on the MEANS test?

First, it is important to note that some expenses have predetermined amounts. Expenses such as food, utilities, housing and other necessary monthly expenses are predetermined by IRS local and national standards unless you have extenuating circumstances.

Expenses that can help you pass the MEANS test.

Court ordered payments such as alimony or child support.

Monthly mortgage and car loan payments. Instead of only being allowed the IRS standard for housing and car ownership, you can deduct your actual monthly mortgage payment and/or car payment. However, be weary as the amount allowed is the average amount due over the next 60 months. For example, your monthly car payment is $500 per month, and you have three years left on your car loan, which is only 36 months. Instead of being able to use the full $500 per month, you would only be able to deduct $300 per month on your MEANS test.

Involuntary employment expenses. If your employer requires you to pay such things as union dues, mandatory retirement contributions, etc. these amounts can be deducted from the MEANS test since they are not voluntary expenses and are necessary for your employment.

Child care expenses. Monthly expenses for day care, preschool or babysitting can all be used as a deduction.

Term Life Insurance. The actual monthly amount you pay for any Term Life Insurance policy can also be used as a deduction.

Expenses for a chronically ill, elderly or disabled family member.

Continuing charitable contributions. As long as you can show a long history of your recurring charitable contributions, they can be used on the MEANS test.

Educational expenses required for employment or a disabled child.

However, keep in mind that you must be prepared to show and prove these types of expenses and in some instances be able to show that there is a long history of such expenses. It is also imperative to note that many of the expenses listed above, are generally not huge monthly expenses but they might be just enough to help you pass the MEANS test if you are just over the median income required.

If you are thinking of filing bankruptcy because your debt is more than you can handle, a great place to start is determining whether or not you qualify for a Chapter 7 bankruptcy and whether you will have to take the MEANS test. Contact the Law Office of David M. Goldman, PLLC today for a free initial 30-minute consultation.

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Bankruptcy does not have to be a dead end. Instead, it can be the beginning of something so much better. Unfortunately, most people do not see bankruptcy this way and instead equate bankruptcy with utter failure. Bankruptcy allows you relief from bad financial decisions or just poor luck and an opportunity for a fresh start. By using your mistakes as a lesson on what not to do, you can have a lot of success coming out of bankruptcy. Here are some tips for being successful after bankruptcy.

  1. LEARN: As already mentioned, the most important thing to do after bankruptcy is to learn from your past mistakes. It is important to identify which financial decisions led you into bankruptcy in the first place and make sure you do not repeat those mistakes. However, try not to be too hard on yourself. The decision to file bankruptcy is hard enough and comes with enough emotions already. Of course, there are most likely factors that were outside of your control, and there is nothing you can do about that.
  2. PLAN: Create a budget that your income can support and stick to it! Knowing what you can actually afford to spend and sticking to a budget is definitely a formula for success.
  3. GOALS: Set goals and work them into your budget, such as trying to save a certain amount of money each month.
  4. CREDIT: Reestablish your credit, BUT slowly. I always recommend that my clients get a new credit card shortly after receiving their bankruptcy discharge. However, use it for a particular purpose, such as just for gas or food, and pay it off each month and on time. With each payment, your credit will start to rebuild itself. However, keep in mind that the credit terms for this first credit card might not be very favorable. The interest rate will mostly be high and the credit limit low. However, as you use it every month and pay it off, the limit should slowly increase. After a while, apply for a second credit card and it should have more favorable terms after you have started reestablishing your credit.
  5. STAY POSITIVE: Going through bankruptcy can be a very difficult time in one’s life. However, it is important to also focus on the positives of bankruptcy such as the ability to start over again and build something great. If you let your despair keep you down, you will not be any more successful after bankruptcy than you were before. If necessary, seek support or advice. But do not let your despair keep you down!

Many people have come out of bankruptcy and became more successful than they were before bankruptcy. And you can join them! Working with a bankruptcy attorney who can help you prepare for bankruptcy and the recovery thereafter, can be very beneficial. However, keep in mind that recovery from bankruptcy is not going to be quick or easy. It is going to take time and perseverance. Having someone on your side can make all the difference you need. Contact the Law Office of David M. Goldman, PLLC today.

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Taxes. No one likes having to file taxes. If you are among the million other Americans who don’t only have to file taxes but also have to pay additional taxes each year, you really do not like taxes. When you get hit with a hefty tax bill you are likely unable to pay all of it right away. Most Americans cannot. This then leads to the question of how long do you have to pay the taxes you owe and will you owe this tax debt forever. With the 2017 tax season having come to an end earlier this week, I am sure many Americans are asking this very question right now.

Fortunately, against common belief, there is actually a statute of limitations on IRS debt. A statute of limitations is a state or federal law that sets a specific time limit on how long an entity or individual can try to collect a debt from you. The statute of limitations for the collection of IRS debt is ten years. As with most things, there are some exceptions to this rule.

The statute of limitations begins to run when the tax is assessed. Taxes are assessed when an IRS official signs a form that states how much you owe in taxes. This occurs after you file your taxes, but fail to pay the full amount owed. The date on this form signed by the IRS official is the official date from which the ten-year statute of limitations period will begin to run.

However, there are some circumstances in which this statute of limitations might last longer than ten years. For example, the statute of limitations pauses when you file bankruptcy and will remain paused for another 6 months after your bankruptcy case has been concluded. The statute of limitations also pauses, or tolls, when the IRS reviews a possible settlement option you submitted, or if the IRS files a lawsuit against you. When the statute of limitations tolls, the IRS is not able to try to collect from you. The statute of limitations is then extended by the amount of time they were unable to move forward with any collection efforts.

You should also be weary of installment agreements you enter into with the IRS. Often, such an installment agreement includes a waiver of the ten-year statute of limitations.

If the IRS filed a lien against you or your property, you will be happy to know that the lien also expires with the ten-year statute of limitations.

While having an IRS debt can be very taxing and it might be very tempting to try to hide under a rock until the statute of limitations has expired, that is not always the best option. By doing nothing, you could potentially be putting yourself in a worst situation. Knowing your options is always the best option when dealing with any type of debt. Those with IRS debt, likely have other types of debts as well. Consulting with an experienced debt collection attorney can help you understand all of your options. Contact the Law Office of David M. Goldman, PLLC today.

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In most Chapter 7 Bankruptcy cases, debtors do not have any property or assets the Chapter 7 Trustee can take and then distribute among the debtors’ creditors. Once the trustee completes his or her investigation into the debtor’s bankruptcy petition and supporting documentation the trustee requests, and after the 341 hearing (also known as the meeting of creditors), the trustee will file a Report of No Distribution with the court. The purpose of the Report of No Distribution is to tell the court the debtor’s creditors will not be receiving any payments.

How do you get a Report of No Distribution?

Again, a Report of No Distribution from a Trustee means that you have no assets that can be taken and given to your creditors. You either have no assets whatsoever, or you are able to protect the assets you have through exemptions.

For example, in Florida, we have a Homestead Exemption, a motor vehicle exemption of $1,000, a personal property exemption ($1,000 when claiming the Homestead Exemption and $4,000 when not claiming the homestead exemption), and a retirement account exemption.

If you own your residence and it has equity in it, you can protect that equity by claiming the homestead exemption. If you are making payments on your vehicle and you have very little equity in the vehicle (up to $1,000), you can protect the vehicle my continuing to make your monthly payments and claiming the $1,000 motor vehicle exemption. Even your 401K can be protected.

In this scenario, which is very common, you would receive a Notice of No Distribution from your trustee as long as all of your personal property is worth no more than $1,000. Is it also key to note, that if you file with a spouse, you are entitled to double the amount in exemptions. By filing with a spouse, you would get an $8,000 personal property exemption (a $2,000 personal property exemption when also claiming the homestead exemption).

Is my bankruptcy case closed once I get a Report of No Distribution?

Unfortunately, not quite yet. But the only thing left for you to do is to wait. The 341 hearing is held relatively early in the bankruptcy process, roughly 30 to 45 days after you filed your bankruptcy petition. And the Report of No Distribution is generally filed right after that hearing. You will have to wait roughly another two months for your debts to be officially discharged and your bankruptcy case to be closed.

Just because you think you can protect all of your assets with exemptions and obtain a Report of No Distribution, it isn’t always that simple and straight forward. There are assets and issues you might not think to take into account. Not to mention that every trustee can and will act differently. One trustee might want to go after an asset while another might not see the effort as being worth their time. That is why it is so important always to consult and work with an experienced bankruptcy attorney before filing for bankruptcy. Contact the Law Office of David M. Goldman, PLLC today.

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When filing for bankruptcy, many consider the IRA (Individual Retirement Arrangement) and 401K exemption as the most well-known of the exemptions. This exemption allows individuals who must file bankruptcy the ability to keep their treasured retirement accounts out of their bankruptcy estate and safe from their creditors. In turn, this allows the individual to emerge from bankruptcy with their retirement accounts still 100% intact and en route to a fresh start.

But what happens if the IRA was not originally yours? What if it was inherited? Is it still safe from your creditors in bankruptcy? The answer is yes and no. If you inherited your IRA from your spouse, then it will still have the same protections as if the IRA was originally yours. However, if you inherited the IRA from someone other than your spouse, then it will not qualify for the exemption. Thus, it will be considered part of your bankruptcy estate and subject to the claims of your creditors.

The Supreme Court handed down this ruling in Clark v. Rameker ,134 S. Ct. 2242 (2014). In this case, a daughter inherited an IRA from her mother in the amount of $450,000. After a business failure, the daughter was forced to file bankruptcy and claimed that her inherited IRA from her mother was exempt. The Supreme Court surprised many when it ruled that an inherited IRA from someone other than a spouse, is not protected by the exemption. However, there are seven states that have made their own Bankruptcy Rules that differ from the Supreme Court’s decision. The states of Florida, Ohio, North Carolina, Missouri, Texas, Arizona, and Alaska amended their state bankruptcy laws to overshadow the Supreme Court decisions.

Inherited IRAs Outside of Bankruptcy

What if you are not filing bankruptcy? Is your inherited IRA protected from your creditors? After the Supreme Court’s ruling, the answer is not very clear on the federal level. Therefore, you must look to your specific state’s laws regarding what types of assets are protected from creditors when you are not filing bankruptcy in your state. Some states already have very specific laws in place that protect inherited IRAs. In these states (Florida, Ohio, North Carolina, Missouri, Texas, Arizona, and Alaska), your inherited IRA is most likely protected.

Specifically under Florida Statute § 222.21(2), as long as an inherited IRA is “[m]aintained in accordance with a plan or governing instrument that has been determined by the Internal Revenue Service to be exempt from taxation under s. 401(a), s. 403(a), s. 403(b), s. 408, s. 408A, s. 409, s. 414, s. 457(b), or s. 501(a) of the Internal Revenue Code of 1986, as amended, unless it has been subsequently determined that the plan or governing instrument is not exempt from taxation in a proceeding that has become final and nonappealable,” it will be protected from your creditors.

Regardless, it is always a better practice to have beneficiaries of an IRA be that of a properly drafted trust to ensure the asset is safe to leave to the beneficiary. You never know where a beneficiary might be living. If they are outside of Florida, the IRA might not be safe.

Regardless, if you believe your inherited IRA will be protected if you file bankruptcy, you should always confirm with a bankruptcy attorney before filing. If you file a Chapter 7 Bankruptcy and then learn that your inherited 401K will not be protected, there will be very little that can be done at that point to protect the IRA. Contact the Law Office of David M Goldman, PLLC today.

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Winn-Dixie has been a staple in Jacksonville, Florida for decades! Being based in Jacksonville has even made it a landmark for those traveling down Interstate 10. However, Southeastern Grocers, the parent company of Winn-Dixie, Bi-Lo, Harveys Supermarket and Fresco Y Mas, made the enormously difficult decision to file for Chapter 11 Bankruptcy in hopes of remaining afloat. The decision was announced Thursday, March 15, 2018. Winn-Dixie’s president and chief executive officer, Anthony Hucker has been quoted saying “[t]his course of action enables us to continue writing the story for our company and our iconic, heritage banners in the Southeast.” Southeastern Grocers operates stores in Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina and South Carolina. This announcement comes right after Amazon’s entry into the grocery business, just a few short months after the online retail giant obtained Whole Foods Market.

Coming with the filing of a Chapter 11 Bankruptcy is the closing of 94 stores that are underperforming, 35 of which are in Florida and four of those are local to Jacksonville. After the bankruptcy, which should be completed within 90 days, there will be 582 stores remaining.

The object of a Chapter 11 Bankruptcy is very similar to that of a Chapter 13 Bankruptcy but is geared mostly to large corporations. A reorganization plan is submitted to the court for review and confirmation. Through the reorganization plan, debts can be renegotiated for more favorable terms, paid off or even discharged depending on what is in the best interests of the corporation and the priority of the debts. Chapter 13 Bankruptcy, also called a Reorganization Bankruptcy, is designed for debtors with steady income who can make regular payments towards their debts through a repayment plan. Some of the main benefits of a Chapter 13 Bankruptcy are the ability to catch up on missed debt payments, retaining personal property (including non-exempt assets) and nondischargeable priority debt payments.

For Winn-Dixie, this will hopefully mean they will no longer be liable for the leases on the stores that will be closing and an overall debt reduction of around $500 million.

Just like Winn-Dixie is proposing a payment plan to the court, individuals who file a Chapter 13 Bankruptcy do a similar thing. They have the option to break leases, walk-away from secured debts, and lower their over all debt. The biggest difference is how long a Chapter 13 Plan lasts versus a Chapter 11 Plan. A Chapter 13 Plan must last 60 months while a Chapter 11 is usually concluded within 18 months.

Making the decision to file for bankruptcy is not a easy one. If you are facing the prospect of filing for bankruptcy, you should first consult with an attorney who specializes in bankruptcy law to provide you with peace of mind and a clear path forward. The Law Office of David M. Goldman PLLC has guided hundreds of individuals through bankruptcy proceedings and takes an empathetic approach to working with its clients. Contact us today for a complementary consultation. (904) 685-1200

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One of the best bankruptcy exemptions offered to those filing bankruptcy is the retirement account exemption. As long as your 401K or IRA is ERISA (Employee Retirement Income Security Act of 1974) qualified, then your 401k or IRA will be protected if you file bankruptcy. Amazingly, there are not a lot of limitations to this rule. This is a wonderful law as it is very common for a person’s biggest asset to be their retirement account. Some of the qualified ERISA retirement accounts include 401(k)s, 402(b)s, IRAs (Roth, SEP, and SIMPLE), Keoghs, profit-sharing plans, money purchase plans, and defined-benefit plans. It is important to note that most employer-sponsored retirements plans are ERISA safe in bankruptcy.

401k Loans

Many who file bankruptcy may have also taken out a 401k loan in an effort to avoid having to file bankruptcy. It is important to understand how your 401k loan will be treated in your bankruptcy. First of all, a 401k loan is not considered a regular debt and will not be treated as any other creditor. In other words, a 401k is not dischargeable through bankruptcy and you will still have to repay it after your bankruptcy is completed. Additionally, in a Chapter 7 in which assets are available to be liquidated, your 401k loan would not receive any portion of the liquidated funds as a normal creditor would. In a Chapter 13, your 401k loan would not be part of your chapter 13 plan. However, you most likely will be allowed to still make payments towards the loan through automatic deductions on your paystubs.

Can you take out a 401(k) loan before filing bankruptcy?

Yes. You can take out a 401(k) loan before filing bankruptcy. However, there are several considerations you should first think about because you will be stuck repaying that loan after bankruptcy. You do not want to use a 401k loan to pay off any debts unless it is going to completely solve your debt issues. This is because, again, you will still have to repay the 401k loan after bankruptcy. Also, as long as the funds remain in your 401k, they will be protected. As soon as the funds are released from your 401k, they lose that protection. Finally, funds received from a 401k loan can be treated as income on your MEANS test. This could cause you to no longer qualify for a Chapter 7 because your income is too high.

Can you take out a 401k loan during or after bankruptcy?

Yes. But it is still never advised. If you are in a Chapter 13, you will have to get the court’s approval first.

Paying off your 401k loan before filing bankruptcy.

Since a 401k loan is not treated as a normal debt in bankruptcy, if you payoff the loan before filing bankruptcy, your Trustee could potentially undue the transfer and redistribute the funds used to payoff your 401k loan to your other creditors. But, this is very jurisdiction dependent. In some jurisdictions, there is rarely any objection over the repayment of a 401k loan.

Regardless of whether you have a 401k loan, it is always important to talk about your 401k and how it will be affected by bankruptcy with an experienced bankruptcy attorney. Please call the Law Office of David M. Goldman, PLLC today.

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I remember turning 18 and being so excited to get my first credit card. I was still a senior in high school, so I went to my favorite department store and applied for my very first credit card. To my surprise, I was approved right away! It seemed all too easy. Shouldn’t getting a credit card be a little more difficult to get?

When I got that credit card, I was so excited to purchase a Coach wallet (my first very own big purchase) and vowed to not use the card again until it was paid off. Of course, I fell into the same trap as many other 18-year-olds and did not stop there. I wanted another credit card and went to my second favorite store and filled out another credit card application.

When I arrived at college that fall, I was shocked to see credit card company after credit company with booths set up on campus. They offered ridiculous free items to get students to sign up, and, guess what, it worked! The booths were always busy with students filling out credit card applications. I don’t know what kept me from filling out one of those applications (maybe it was that I already had one or that it had been drilled into me by my family never to purchase what you cannot afford) I never did and am so thankful today I did not.

Today, as a bankruptcy attorney, I now see many of those “students” needing to file bankruptcy, because they racked very high credit card bills on those credit cards before they had the experience or knowledge to understand the repercussions of using a credit card. They were young, excited to be away from home, and just wanted to have a good time.

Well that all changed with the Credit Card Accountability Responsibility and Disclosure Act of 2009, better known as the Credit CARD Act of 2009. The Credit CARD Act put restrictions on how credit card companies can advertise to consumers who are under 21 years of age. Specifically, credit card companies cannot mail advertisements to persons under 21 unless they “opt in” for such mailings. Credit card companies also can no longer use free gifts to get college students to apply for a credit card. Finally, if you are under 21, you will need to have a co-signer or prove you have your own independent source of income.

For some, this is a very good thing. For others, it could be a burden. It can be burdensome on those 18-year-olds who are ready to have a credit card and understand the significance of having one. It is also burdensome for parents who choose to become a co-signer for their child. If their child abuses the credit card, they run the risk of the child ruining their credit along with their own. Regardless, the Credit Card Act of 2009 is doing a lot of good in preventing many young people from ruining their credit before they even get the chance to build good credit.

If you have found yourself in this sort of situation, it is never too late to do something about it. By filing bankruptcy, you can discharge all of your credit card debt and get a fresh start at building a strong credit report. Contact the Law Office of David M. Goldman, PLLC for more information.

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