Note: For affordable legal assistance The Center For Debt Management highly recommends Standard Legal's Do-It-Yourself Software Kits. For credit repair services, Lexington Law Firm
is the most trusted law firm in America, with over 15 years of experience.
Advertisements Promising Debt Relief
May Be Offering Bankruptcy
Debt got you down?
You’re not alone. Consumer debt is at an all-time
high. What’s more, record numbers of consumers
— more than 1 million in 1996 — are filing for
bankruptcy. Whether your debt dilemma is the result of an
illness, unemployment, or simply overspending, it can
seem overwhelming. In your effort to get solvent, be on
the alert for advertisements that offer seemingly quick
fixes. 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. And although bankruptcy is one
option to deal with financial problems, it’s
generally considered the option of last resort. The
reason: its long-term negative impact on your
creditworthiness. A bankruptcy stays on your credit
report for 10 years, and can hinder your ability to get
credit, a job, insurance, or even a place to live.
The Federal Trade Commission 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,
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’ll find out later that such
phrases often involve bankruptcy proceedings, which can
hurt your credit and cost you attorneys’ fees.
If you’re having trouble paying
your bills, consider these possibilities before
considering filing for bankruptcy:
- Talk with your
creditors. They may be willing to
work out a modified payment plan.
- Contact a credit
counseling service. These
organizations work with you and your creditors to
develop debt repayment plans. Such plans require
you to deposit money each month with the
counseling service. The service then pays your
creditors. Some nonprofit organizations charge
little or nothing for their services.
- Carefully consider a
second mortgage or home equity line of credit.
While these loans may allow you to consolidate
your debt, they also require your home as
collateral.
If none of these options is possible,
bankruptcy may be the likely alternative. There are two
kinds of personal bankruptcy: Chapter 13 and Chapter 7.
Each must be filed in federal court. The current filing
fee is $160. Attorney fees are additional and can vary
widely. The consequences of bankruptcy are significant
and require careful consideration.
Chapter 13, also know as a
reorganization, allows you to keep property, such as a
mortgaged house or car, that you otherwise might lose.
Reorganization may allow you to pay off a default during
a period of three to five years, rather than surrender
any property.
Chapter 7, known as a straight
bankruptcy, involves liquidating all assets that are not
exempt in your state. Exempt property may include
work-related tools and basic household furnishings. Some
property may be sold by a court-appointed official or
turned over to creditors. You can file for Chapter 7 only
once every six years. Both types of bankruptcy may get
rid of unsecured debts and stop foreclosures,
repossessions, garnishments, utility shut-offs, and debt
collection activities. Both also provide exemptions that
allow you to keep certain assets, although exemption
amounts vary among states. Personal bankruptcy usually does
not erase child support, alimony, fines, taxes, and
some student loan obligations. 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
lien on it.
Note: For affordable legal assistance The Center For Debt Management highly recommends Standard Legal's Do-It-Yourself Software Kits. For credit repair services, Lexington Law Firm
is the most trusted law firm in America, with over 15 years of experience.
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