Information and advice on debt settlement and bankruptcy - The Bills.com Blog
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Information and advice on debt settlement and bankruptcy
Question: My husband and I are $95000 in credit card debt. We have entered into a debt settlement program. We have about $650 a month extra to pay towards the debt. Do you think that most of our creditors as we have 12 of them to pay off will wait the full 5 years to get their portion of the money or should we go ahead and filefor bankruptcy?
Answer: First, I must advise you that I am not an attorney, so I cannot provide you with legal advice.
Second, you should apply and get a free consultation to see and hear from a debt counselor what is the best option for you... you can apply for free for a debt reduction quote with one of Bills.com's pre-screened providers here:
Debt Relief Savings Quote
If you are looking at bankrupcty, you should consult with a qualified attorney licensed in your state to find out if bankruptcy is the right option at this time. That being said, I do hope you did your homework when you signed up for the settlement program, meaning you did proper research on the company that you signed up with to make sure they are genuine and have a good rating with the better business bureau. Five years sounds a little long for a settlement program. Usually, settlement programs last anywhere from 12 to 36 months. Another important factor is who your creditors are, because some creditors do not work with settlement firms at all. It is important to keep in mind, however, that during the life of your debt settlement program, you are NOT paying your creditors on a monthly basis, so there is a chance that one of your creditors might get impatient and
file a suit against you. Even at that stage, your settlement firm should be able to work out a deal for you. Therefore, only time can tell whether or not you will be successful with this program. My suggestion to you is to have a consultation with a bankruptcy attorney before you decide on either course of action. While we are on the subject, let me give you some information on bankruptcy.
There are two basic types of consumer bankruptcy: Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, also called a liquidation bankruptcy, a bankruptcy trustee will examine your assets, and if you have any assets which are not exempt, sell those non-exempt assets to repay your creditors. Once your non-exempt assets have been sold to pay your creditors, all remaining unsecured debts will be discharged by the bankruptcy court. Many people who file for Chapter 7 protection are able to keep all of their property because they have no non-exempt property. Each state has its own schedule of exempt assets, so you should consult with a qualified bankruptcy attorney in your state to find out if Chapter 7 is a workable solution for your situation. An attorney will also be able to tell you if you qualify to file Chapter 7 under the new guidelines enacted by Congress in 2005. You mention in your question that you may lose your
home in bankruptcy, so it sounds like Chapter 7 was the bankruptcy chapter you discussed with your attorney. There is an alternative, though, in Chapter 13 bankruptcy.
A Chapter 13 bankruptcy, also called a ?wage-earner?s bankruptcy,? allows you to propose a plan to repay creditors over time?usually five years. Your monthly payment amount will be based on your monthly disposable income as defined by the bankruptcy code. After you have made payments to your creditors for five years, any remaining unsecured debts will be discharged. Chapter 13 is commonly used by debtors whose assets exceed the exemptions offered by state law. It is also used by many consumer debtors who do not qualify for Chapter 7 relief under the means test, which went into effect in 2005 with the Bankruptcy Reform Act.
Again, if you are considering filing bankruptcy, you should consult with an attorney to find out if bankruptcy will benefit your financial situation. I encourage you to read more about bankruptcy at the Bills.com Bankruptcy Information page .
I hope you will be able to resolve your financial problems without the need to file bankruptcy.
I hope this information helps you Find. Learn. Save.
Good Luck,
Bill
www.bills.com
Also, make sure to get a free financial health check-up with Bills IQ!
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1. Posted by Tom Bates on Friday 1st February 2008 00:53
WOW, I am sorry to hear of this mounting debt. I am however not in shock. I must say this thogh, if you do in fact decide on Bankruptcy you should know this: When considering bankruptcy as an option to fix your debt problem, as a Texas consumer, there are things to consider and options you should know. First, is the debt secured or unsecured. If it is secured, your stand a chance of loosing it if you file bankruptcy or not. If it is credit card debt or medical bills or this type of debt, there is nothing the bank can take to repay the debt. This makes it an unsecured debt. AS a Texas consumer, in most ever issue your wages and home are protected from garnishment or seizure. According to a Harvard Study from February 3,2005, Illness and medical bills caused half of the 1,458,000 personal bankruptcies. The study estimates that medical bankruptcies affect about 2 million Americans annually -- counting debtors and their dependents, including about 700,000 children. As Texas consumers, we are protected from aggressive collection efforts in most cases. Most of the medical bankruptcy filers were middle class; 56 percent owned a home and the same number had attended college. In many cases, illness forced breadwinners to take time off from work -- losing income and job-based health insurance precisely when families needed it most. Do not count on your employer to be there for you, you have to take charge yourself. Should you go to a bankruptcy attorney for advice, he or she will give you the advice they are trained to provide. That is to file bankruptcy, after all, that's why you went to them. Keep in mind, if you don't file, they don't get paid. You must weigh your options and look at the entire picture to make a well thought out decision. Do you want a Federal Court Case attached to your name for the rest of your life? Or perhaps debt settlement is in your best interest. Bankruptcy attorneys are trained and well educated in the law, and how to file bankruptcy. It is unlikely they will have contacts at the banks they would be able to settle your debt with for pennies of what your owe. Settling your debt avoids the long term affect and pain of going through with a bankruptcy. And now that there are new rules in the bankruptcy court, life has become even more stressful. When looking into your options, I can say with confidence, that an Certified Debt Arbitrator will know more about your best interest than any bankruptcy attorney. While in the search make sure you use only an expert with a perfect BBB report, and make sure they are in fact certified. Ask all the questions you feel you need to ask, and if they do not offer full disclosure into all your options, they are most likely not certified with IAPDA. Kind Regards, Tom Bates,CDA