Merry Christmas!

In the spirit of the holiday, I thought that I would veer slightly off-topic from bankruptcy law, but I think many of my clients may find value in this post as they work to recover financially.

I suppose this post would have been more appropriate before Christmas or – better yet – before Black Friday.  But this idea can be implemented at any time of the year, and if you’re hoping to get special mileage out of it at Christmas, you can begin laying the groundwork for next year’s holiday now.

Last year, one of my New Year’s resolutions was to have more experiences in 2016 – specifically manifesting as more travel and other work that I enjoy doing on the side.  Around springtime, I was introduced to the concept of “minimalism” and have embraced it as a method of clearing out clutter to help me focus and make room for more important things.

Minimalism is not about living in a “Spartan” home with no furniture or luxuries, though some people who practice minimalism do prefer that sort of environment.

Minimalism is about intentional living – retaining material possessions only if they bring value to your life, and removing clutter (both material and ethereal) to make room for important things.  There is no right way to be a minimalist, and if minimalism is something that you find value in, you ultimately decide how that will manifest itself.

The Minimalists: Joshua Fields Millburn (left) and Ryan Nicodemus (right)

That being said, there is plenty of help out there for people who need or want advice.  My favorite resource – bar none – is a podcast run by Ryan Nicodemus and Josh Millburn (“The Minimalists“).

As of the time I’m drafting this post, there are 44 episodes – most run about an hour long.  I don’t recommend that you spend the next 2 days binge-listening to these episodes, but I’ve made a list of some of my favorite episodes – ones that I think will quickly get you up to speed on what minimalism is and do a much better job of articulating the philosophical principles than I can.

  • Episode 1: Declutter
  • Episode 2: Technology
  • Episode 4: Education
  • Episode 5: Priorities
  • Episode 11: Sentimental
  • Episode 15: Consumerism
  • Episode 19: Mental Clutter
  • Episode 21: Travel
  • Episode 27: Passion

The reason I thought about sharing this today is because the holiday season does tend to be a great source of stress – not just for my clients, but for many people.  There’s the stress of purchasing gifts, receiving gifts that have no value to you, coordinating holiday celebration schedules with family, friends, and coworkers, and so forth.  Christmas is supposed to be one of the happiest times of the year, but – due to market forces, social forces, and many more influences – it has become one of the most despised times of the year.  And I think minimalism has a lot to offer people in terms of scaling back expectations and giving people the freedom to voluntarily remove stressful elements.  If you’re looking to get particular help with Christmas, you might also be interested in…

  • Episode 38: Giftgiving
  • Episode 41: Holidays

But beyond Christmas – minimalism can help you financially by changing the way you purchase and consume goods.  You can train yourself to be more deliberate with the things that you bring in to your life, and it doesn’t take a rocket scientist to understand how that can have benefits to personal finances.  So I hope my bankruptcy clients can find extra value in minimalism.

Prime Rate

Historically, the prime rate was something that changed several times per year.  That was true until the market crash and recession in 2008 when – in December 2008, the prime rate was adjusted to 3.25% and remained unchanged for over 7 years.  Then, the day after the 7 year anniversary of its last change (on December 17, 2015), prime rate finally budged off its historic low by a quarter percentage point to 3.50%.  Almost one year later, it has risen another quarter percentage point, now standing at 3.75%.
But the more interesting item is that the federal reserve anticipates raising the rate three more times (presumably by similar gradual increases) in 2017.  So by the end of the year next year, we’re likely going to see a prime rate of 4.5% interest.  This still isn’t terrible.  Rates were at 8.25% in 2006, and if you go back to 1984, they were as high as 13%.
What does that mean for you?  Well, generally, it means that it will become more expensive to borrow money in the future.  Specifically in bankruptcy, it means that the “Till interest” rate (the rate used to pay certain secured debts – mostly vehicle loans and other loans secured by personal property in Chapter 13) will go up slightly, since the “Till” rate is based on the prime rate.
Again, a quarter point interest rate hike isn’t a huge amount.  For a thousand dollar loan over 5 years, the added amount paid in interest is only about $7.  But that number obviously compounds for larger balances (say a vehicle with an outstanding balance of $20,000), and the difference between prime rate last week and prime rate a year from now will likely be a full percentage point.  So that same $20k auto loan could be more than $550 more expensive if your bankruptcy case is filed a year from now.
So with that in mind – a little extra incentive – if you need to file Chapter 13 Bankruptcy for any reason – to get your case filed sooner rather than later.  The applicable Till rate is based on the prime rate at the time the case is filed.

Source of Funds

There is a misunderstanding among a few people who elect to go through Chapter 13.  I want to emphasize “few” – this is by no means a common misunderstanding.  But I’ve had to debunk this myth one too many times, so it’s time to put this out there and clarify.
The Chapter 13 Trustee is NOT an independently wealthy individual who pays all of your debts for you, and then you pay the Trustee back over the course of your Chapter 13 Plan.
The Chapter 13 Trustee acts as a conduit for your payments to creditors.  You make payments to the Trustee, and the Trustee then redistributes those funds to your creditors in a manner (order of priority and amounts) that are dictated by the terms of the Plan, statutes, and other regulatory policies.
Your creditors are enjoined from pursuing you separately for their unpaid balances while you are in bankruptcy, until at the end when you ultimately receive your discharge from certain remaining unpaid balances.
If you default – if you make less than your full monthly plan payment or if you stop making your plan payments altogether – the Trustee simply will not have funds to pay your creditors.  It should not come as a surprise to anyone that individual creditor accounts show no recent payments from the Trustee if you have stopped making plan payments to the Trustee.

Trustee Garcia’s Financial Management Course

As a policy, my clients who file for Chapter 13 Bankruptcy are not charged for the second counseling course under the assumption that they will take the free version offered by Trustee Garcia’s office.  This policy has been in place almost as long as the course has been offered (back when Trustee King’s office implemented it) because it is (1) free and (2) better – in my opinion – than the online versions of the course that are available out there.

Due to declining attendance, Trustee Garcia’s office is considering discontinuing the course in the near future.  Although no final decision has been made yet, this is a possible and even likely scenario.  Those of you who have already filed your Chapter 13 bankruptcy case (Chapter 7 debtors are ineligible for the free course) but not yet taken the second counseling course, please do so immediately, before the program is discontinued.

Some 2017 dates have been announced.

Oshkosh location (Chapter 13 office):
Thursday, February 23, 2017             12:00PM – 4:00PM
Wednesday, April 12, 2017                8:00AM – 12 Noon
Monday, June 19, 2017                     12:00PM – 4:00PM
Friday, August 18, 2017                    8:00AM – 12 Noon
Thursday, October 12, 2017              12:00PM – 4:00PM
Monday, December 4, 2017               8:00AM – 12 Noon

Green Bay Location (NWTC):
Friday, January 13, 2017                    8:00AM – 12 Noon CC 145
Monday, March 20, 2017                   12 Noon – 4:00PM CC 145