The new wave--credit cards? Some ideas how to use them properly.

Recent reports in the New York Times indicate that lenders faced with loss of profits in this difficult environment are rediscovering the benefits of issuing credit cards to people with less-than-stellar credit.

We have always felt that having and using credit cards is an important part of financial success. Proper use for purchases gives you protection through the billing dispute process. Proper use paying each month's charges in full is an important building block to a good credit score. And a charge card may be a lifesaver in a true emergency. The trick, like everything else, is knowing how to use cards.

For useful guidance, check out Federal Reserve Guide to Credit Cards. We recommend to avoid using charge cards for anything you can watch, listen to, eat  or drink (other possibly for on-line purchases). But most important is to do a budget and keep track of what you are charging.

The budget is easy. Add up how much money you can reliably and consistently count on receiving each month. Let's call that Monthly Net Earnings.

Next, calculate your Required Monthly Expenses. For items like food and groceries, you may want to track what you spend on a weekly basis, then multiply by 4 1/3. Some items like clothing are easier to use an annual figure and divide by 12. Don't forget medical expenses, prescriptions, co-pays etc. Think carefully about transportation, and don't forget to add $10 per month for the cost of replacing tires. Our website's Forms page has a a personal budget spreadsheet template you can use if you have Microsoft Excel. Others are readily available.

This is something you can do yourself. Be realistic. Now you know how much you can afford to pay for any new debt.

Next you have to avoid the "minimum payment" trap. Say you charge $1000.00. You may only have to pay 4% or $40 per month. Sounds easy, right? In fact, you might end up having to pay for as long as 10 years or more, and a lot of interest. Check out this calculator. Worse, the feeling that you can afford to charge more can easily get you in over your head. Instead, if you cannot pay your balance in full in a particular month, stop using the card until you have paid off the balance, and allot enough to pay off the balance in 6 months or less.

So that you do not charge over your head, keep track of your charges. Save each month's charge slips, clipped together in your wallet or purse. With each charge, write the total monthly charges to date on the slip. This should be easy as the last charge will have that cumulative balance to date. The numbers need not be exact, approximations will do. Or keep a "check register" listing all the charges. Even better, don't use the card more times than you can easily keep track of.

From over 27 years of helping people in financial trouble, this advice comes from their hard experience.

New rules in federal court for expert witnesses

Effective December 1, 2010, there have been major changes to the rules governing expert witnesses and discovery in bankruptcy courts and federal courts.  As those of us who are involved regularly in litigation in federal courts know, this is very significant.

The major changes are

• 1.       Draft expert reports for “retained experts” are no longer discoverable “regardless of the form in which the draft is recorded”. This implies that the draft needs to be recorded in some form. Q. is a purely oral draft report discoverable?
•            Each party has to provide disclosures about the expert under rule 26(a)(2). Drafts of such disclosures are no longer discoverable the same as draft reports.
•            Communications between a party’s attorney and an expert are protected “regardless of the form of the communications, except to the extent that the communications:
• (i) relate to compensation for the expert’s study or testimony;
• (ii) identify facts or data that the party’s attorney provided and that the expert considered in forming the opinions to be expressed; or
• (iii) identify assumptions that the party’s attorney provided and that the expert relied on in forming the opinions to be expressed.
• The commentary to the rule proposal makes clear that exceptions (ii) and (iii) are intended to be narrowly construed, and are not to include discussions of the relevance or import of particular documents or facts. This will be an area of controversy as the courts apply the rule changes.
• There is a new requirement for more limited disclosure by persons who will provide expert testimony but who are not “retained or specially employed” to provide expert testimony. This could include a party, a spouse, a debtor, a friend or an employee who could give expert testimony. A common example is where a party testifies as to market value of her property or an employee testifies as to a company's viability or the feasibility of a plan or proposal as part of the plan confirmation process. These types of experts must disclose
• (i) the subject matter on which the witness is expected to present evidence under Federal Rule of Evidence 702, 703, or 705; and
• (ii) a summary of the facts and opinions to which the witness is expected to testify.

Here is a link to the text of the rule: Rule 26 text . Here is the advisory committee report with commentary showing in blackline the changes made to the rule and other rules: Proposed rule revisions commentary and blackline (may need Wordperfect to open)

For those of us who regularly practice in federal courts or bankruptcy courts or provide expert testimony there, this is a major and largely welcome development.