Consumer debt is currently at an all-time high; suffering the combined statistical attributes of layoffs, illness, unemployment and indulgent overspending. Troubled debtors, faced with mounting credit card debt and accumulating large rates of interest, alongside potential mortgage foreclosure, are a perfect target for scam artists, promising financial magic with ads that offer “re-solvency”, and quick resolutions through debt relief. However, these wordsmiths are actually leading the troubled debtor even further into almost certain involuntary bankruptcy and foreclosure.
While bankruptcy may be one option to solve insurmountable financial problems, it is generally the option of last resort, with a long-term negative impact on debtor credit. Bankruptcy records of dates of filing and discharge remain on one’s credit report and rating for ten (10) years, and may seriously affect one’s ability to obtain credit, employment, insurance coverage, or even a future, leased apartment rental.
Debtors must be wary of ads that promise: “Consolidate your bills into one monthly payment without borrowing” or “STOP credit harassment, foreclosures, repossessions, tax levies, and garnishments.”, or “Keep Your Property”, or “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!” This NOT TRUE!!!
Only after signing such fine print contracts and paying advance fees for promised relief will the debtor come to realize that such enticements often amount to merely filing for bankruptcy, which will also require additional Attorney fees and filing costs, all of which they can ill afford.
Recognized credit counseling services may be able to work with the debtor and creditors to develop debt repayment plans, requiring money deposits each month with the counseling service, to be paid by them to individual creditors. Some nonprofit credit counseling organizations charge little or nothing for these services. If no other options appear workable, bankruptcy may still be the only realistic alternative available. The two primary types of personal bankruptcy, Chapter 13 and Chapter 7 require filing in Federal Court, with the payment of filing fees. Attorney’s fees, an additional cost, vary widely, based upon experience and the specifics and complexity of the debts to be resolved.
Chapter 13 bankruptcy may permit the debtor with a steady income to retain a mortgaged house or car, which might otherwise be forfeited. The Court may approve a repayment plan permitting the use of future income to pay off debts during a three-to-five-year period, rather than surrender any property. After all the payments under the plan have been made, the debtor may be discharged from all debts.
Chapter 7, known as straight bankruptcy, involves the sale of all assets that are not exempt. Exemptions may include cars, work-related tools, and basic household furnishings. Other property of the debtor may be sold by the Court-appointed Trustee, or turned over to creditors. Under the latest revisions to the bankruptcy laws, debtors must wait eight years after receiving a discharge in Chapter 7 before being permitted to file again, whereas under Chapter 13 waiting period is much shorter and can be as little as two years between filings.
“Men must turn square corners when they deal with the Government.”
Oliver Wendell Holmes, Jr., Justice, U.S. Supreme Court