Working in a law firm, and especially in a bankruptcy law firm, I have been asked some very interesting questions about finances, money and bills. It amazes me the types of questions people ask but then again, considering why they are calling our office, it should not surprise me at all. My husband hates when I climb upon my soap box and begin lecturing that “common sense personal finance” should be a class that is taught every year of high school – – and required to graduate. I realize that some schools might incorporate some of this into existing classes; however, more should be done to teach our children how to balance a checkbook, read a mortgage, complete a loan application, invest funds, etc. Because people are thrown into the world of finance without a firm understanding of even the basics of managing money, these are the types of personal finance questions that I hear on a regular basis.
• Can I use a credit card to pay my bankruptcy attorney? – No, you cannot use a credit card to pay your bankruptcy attorney. In fact, most bankruptcy attorneys only take cash or certified funds because they do not want to deal with NSF checks. If you are contemplating bankruptcy, you should not be incurring any debt – – you are insolvent. Insolvency means you cannot pay your existing debts – your expenses exceed your income. Depending on the specific details, if you incur debt within a certain period prior to filing bankruptcy you may not be able to discharge that debt.
• Can I pay for my new car with a credit card? – Yes, you can use a credit card to pay for a new car; however, the better question has to do with is this a wise financial decision. Some people think they are being financially smart to use a credit card to finance the purchase of a vehicle because the credit card is offering a low introductory interest rate (sometimes even zero). The plan is to pay extra each month so that the car is paid in full (or substantially paid in full) before the introductory period ends. Unfortunately, this is not what happens in most cases. Life gets in the way and extra payments never happen so the balance is very high when the low interest rate expires. Even worse, financial trouble comes along and a payment is late – – the interest rate on that new care is now 29.99% instead of zero.
• If I bounce a check, can I go to jail? – Yes, depending on the law governing that city. In some places, if you bounce a check, referred to as an NSF (non-sufficient funds) check, you may have committed a crime. Some jurisdictions consider NSF checks as criminal actions and an arrest warrant could be issued for you unless you pay the amount in full, plus any charges, within the time prescribed by law.
• If I turn in my car to the lender voluntarily then it is not repossession, right? – Wrong, it is called a voluntary repossession which is the same, for all intents and purposes, as if they lender sent a repo man to your house in the middle of the night to repo the car. It does not matter if you take the car to the lender, hand them the keys and say thank you but I cannot afford the car or if the lender sends someone to repossess the vehicle – – it is still a repossession and will be shown as a repossession on your credit report.
• If the lender repossesses my car, then I do not owe them any more money, right? – Wrong again. The lender will sell the vehicle, subtract what they receive at sale from the balance of your loan (including interest, fees and costs) and any remaining balance is called a deficiency. If you do not pay the deficiency balance, the lender can sue you and obtain a judgment for the balance owed.
• If I pay my mortgage payment before the late fee is added, I am not late then. – Wrong, you are late. A grace period for a late fee does not extend the due date of your mortgage payment. If your payment is due on the first of each month but the late fee is not added until the 16th, your payment is still due on the first day of the month. If you make the payment on the second day, you are technically in default according to the terms of your mortgage. The lender could take any remedies available to them under the terms of the mortgage or the laws governing real property in your state. Read the fine print – – grace periods are not automatic passes to make late payments.
More from this contributor:
How I Saved $2,000 Off the Sticker Price of My New Vehicle
9 Examples of Why Credit Cards Are Evil
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