If None Of These Options Is Possible, Bankruptcy May Be The Likely Alternative

Category: Finance, Credit.

Whether your debt dilemma is the result of an illness, or simply overspending, unemployment, it can seem to be overwhelming. While the ads pitch the promise of debt relief, they rarely say relief may be spelled b- a- n- k- r- u- p- t- c- y.

In your effort to get solvent, be on the alert for advertisements that offer seemingly quick fixes. And although bankruptcy is one option to deal with financial problems, it s generally considered the option of last resort. Bankruptcy information( both the date of your filing and the later date of discharge) stays on your credit report for 10 years, and can hinder your ability to get credit, insurance, a job, or even a place to live. The reason: its long- term negative impact on your creditworthiness. The Federal Trade Commission( FTC) cautions consumers to read between the lines when faced with ads in newspapers, magazines or even telephone directories that say: "Consolidate your bills into one monthly payment without borrowing. " "STOP credit harassment, repossessions, foreclosures, tax levies and garnishments. " "Keep Your Property. " "Wipe out your debts! How?

Consolidate your bills! By using the protection and assistance provided by federal law. If you re having trouble paying your bills, consider these possibilities before considering filing for bankruptcy: Talk with your creditors. For once, let the law work for you! " You ll find out later that such phrases often involve filing for bankruptcy relief, which can hurt your credit and cost you attorneys fees. They may be willing to work out a modified payment plan. These organizations work with you and your creditors to develop debt repayment plans.

Contact a credit counseling service. Such plans require you to deposit money each month with the counseling service. Some nonprofit organizations charge little or nothing for their services. The service then pays your creditors. Carefully consider a second mortgage or home equity line of credit. If none of these options is possible, bankruptcy may be the likely alternative. While these loans may allow you to consolidate your debt, they also require your home as collateral.

There are two primary types of personal bankruptcy: Chapter 13 and Chapter Each must be filed in federal bankruptcy court. The consequences of bankruptcy are significant and require careful consideration. As of April 2006, the filing fees are$ 274 for Chapter 13 and$ 299 for Chapter Attorney fees are additional and can vary. Other factors to think about: Effective October 2005, Congress made sweeping changes to the bankruptcy laws. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off your debts during a three- to- five- year period, rather than surrender any property. The net effect of these changes is to give consumers more incentive to seek bankruptcy relief under Chapter 13 rather than Chapter Chapter 13 allows you, if you have a steady income, such as a, to keep property mortgaged house or car, that you might otherwise lose.

After you have made all the payments under the plan, you receive a discharge of your debts. Exempt property may include cars, work- related tools, and basic household furnishings. Chapter 7, known as straight bankruptcy, involves the sale of all assets that are not exempt. Some of your property may be sold by a court- appointed official- a trustee- or turned over to your creditors. The Chapter 13 waiting period is much shorter and can be as little as two years between filings. The new bankruptcy laws have changed the time period during which you can receive a discharge through Chapter You now must wait eight years after receiving a discharge in Chapter 7 before you can file again under that chapter. Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, garnishments and utility, repossessions shut- offs, and debt collection activities.

Personal bankruptcy usually does not erase child support, fines, alimony, taxes, and some student loan obligations. Both also provide exemptions that allow you to keep certain assets, although exemption amounts vary by state. Also, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or security lien on it. You must get credit counseling from a government- approved organization within six months before you file for any bankruptcy relief. Another major change to the bankruptcy laws involves certain hurdles that you must clear before even filing for bankruptcy, no matter what the chapter. Also, before you file a Chapter 7 bankruptcy case, you must satisfy a" means test. " This test requires you to confirm that your income does not exceed a certain amount.

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