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Bad Advertising That Is Encouraging Debt Assistance May Actually Be Presenting Bankruptcy Options Instead,
Washington, D.C.
Debt got you down? You are not the only one. Consumer debt is higher than ever before. It doesn’t matter if your debt dilemma is the outcome of a medical emergency, unemployment, or just overspending and not budgeting correctly, it becomes so overwhelming. In your attempt to get back on the right side with your creditors, be aware for advertisements and promotions that propose apparently rapid solutions. The advertisements pitch the guarantee of debt assistance. They never mention the word bankruptcy but this is there only valuable tool and when wielded incorrectly the bad reputation is gained for all companies trying to promise debt relief. Though bankruptcy is not the only option to treat your financial problems, it’s widely thought of as the option of the last resort. The reason being, it has a long term adverse effect on your credit score and ability to obtain credit. Bankruptcy data (both the date of your filing and the later date of discharge) is on your credit report for the least 10 years, and can greatly obstruct your capacity to gain access to credit, employment, good insurance, or even your home.
The Federal Trade Commission (FTC) alerts consumers to carefully read whatever advertisements and promotions you are considering. They might have disclaimers like the ones below.
“Consolidate your bills into 1 monthly payment without having to borrow.”
“STOP credit harassment, foreclosures, repossessions, tax levies, and garnishments.”
“Keep Your Property.”
“Wipe out your debts! Consolidate your bills! How? By using the protection and assistance provided by federal law. For once, let the law work for you!”
You might find out down the road that such terminology often means filing for bankruptcy relief, which will harm your credit score and cost you attorneys’ fees.
If you’re having difficulty paying your creditors, you may contemplate these options before pondering the filing of a bankruptcy whether Chapter 7 or Chapter 13.
Make sure that you have a talk with your lenders and creditors. You will be surprised as they might actually be willing to create a modified payment plan thus giving you a credible loan modification.
You can also contact a credit counseling organization. These facilities assist you and your creditors to acquire a debt repayment plan. These services do command that you deposit money each month or on a stipulated date with the counseling service. This service will then pay your lenders and creditors. A few of the nonprofit companies actually charge very little if no charge at all.
Cautiously consider a second mortgage or home equity line of credit. Although these types of loans might permit you to consolidate your debt, the worst part about it is that they command your house as collateral.
If these options are not possible, bankruptcy may be your only choice. There are two main types of personal bankruptcy: Chapter 13 and Chapter 7. Each of these types must be filed in federal bankruptcy court and requires you to have an attorney. These filing fees can range from several hundred dollars to the thousands, but like most legal fees they vary and are extra to the additional charge.
The penalties of bankruptcy are substantial and necessitate careful consideration. There are other factors to think about too: Effective October 2005, The US Government and Congress made drastic revisions to the bankruptcy laws. The overall result from these changes was to give consumers extra motivation to seek out bankruptcy assistance under Chapter 13 other than Chapter 7. Chapter 13 lets you, if you have a steady income, to keep property, such as a mortgaged house or car that you might lose if you didn’t file Chapter13. Chapter 13, the court agrees to a repayment strategy that permits you to the usage of your future income to pay off outstanding and current debts during a three-to-five-year period, rather than forfeit any goods or property. After you have made all of your payments under the current new plan that you have agreed upon, you receive a release of your debts.
Chapter 7, otherwise known as straight bankruptcy, includes the selling of all assets that are not exempt. Exempt property may include cars, work-related tools, and basic household furnishings. Most of your property will be sold by a court-appointed official, a trustee and or turned over to your creditors and lenders. The new bankruptcy laws have altered the time period during which you can receive a discharge through Chapter 7. Right now you must wait eight years after getting a discharge in Chapter 7 before you can file again under that chapter. The Chapter 13 waiting period is much less and can be as short as two years between filings.
Both types of bankruptcy will relieve you of unsecured debts and stop foreclosures, repossessions, garnishments and utility shut-offs, and debt collection actions. Chapter 7 and 13 will also afford exemptions that allow you to keep specific assets, though exemption amounts differ by state. Personal bankruptcy typically does not remove child support, alimony, fines, taxes, and some student loan obligations. Unless you have an adequate design to get current with your creditor under Chapter 13, bankruptcy usually does not allow you to keep property when your lender or creditor has an unpaid mortgage or security lien on it.
Another key modification to the bankruptcy laws contains clear hurdles that you must establish before you can even consider filing for bankruptcy, no matter what the chapter. You are required to get some type of credit counseling from one of the government-approved organizations within six months before you are allowed to file for any type of bankruptcy relief.
You can find a list of all states that has government-approved organizations for bankruptcy help. These websites were born of the U.S. Trustee Program, the organization within the U.S. Department of Justice that controls all bankruptcy cases and trustees. A requirement before you file a Chapter 7 bankruptcy case, you must complete a “means test.” This test forces you to confirm that your income does not exceed a certain amount. The amount varies by each state and is listed publicly by the U.S. Trustee Program
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