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
AUTHOR / EDITOR: J. NORMAN STARK is an Attorney-at-Law, a Registered Architect, (AIA, NCARB) Registered
Landscape Architect, Interior Designer, Planner and Senior Appraiser (ASA), admitted to practice law before the Bar of
Ohio, the US District Courts, Ohio and Illinois (Central Dist.), the US Court of Appeals, and the United States Supreme
Court. He is a Mediator, Arbitrator and Litigator with experience in Business, Construction Law, and Public Works, and with
additional experience in Real Estate, Construction Attorney (Legal Project and Crisis Management), and as an Expert Witness
(Forensic Architect). His office is in Cleveland, Ohio.