A clarification for individuals looking for advice in financial matters. My goal is to inform the masses with answers to questions I hear frequently. Hopefully the information provided herein will be useful to you or someone you know.
With the economy on a continual downturn and as the big banks get assistance hundreds of thousands of normal hardworking Americans are seeking there own "bailout".
During this frightening time, people can tend to make rash decisions, may it be contributed to duress, the fear of poverty, or actually trying to manage living below the poverty level. There are several other programs available to get out of the vicious debt traps our country has made all too easy to fall into. To clarify, this article points out some of the common myths or "urban legends" of bankruptcy and why one should avoid this option and consider it as an absolute last resort. They are as follows:
• "Bankruptcy will give me a fresh start."- This is one of the biggest misconceptions of people; in fact bankruptcy will give you a negative start for years to come. On top of this, one runs the risk of higher interest rates, not being employed due to credit checks from employers, etc.
• It's easy. - With the new bankruptcy laws, in fact it is harder than ever to file bankruptcy. Also, a large percentage of people will not qualify for Chapter 7 and will be rolled into a Chapter 13, in which the filer will not know until after completing a "ticket-in" course and the "means test".
• Debts are forgiven at no cost. - If you consider a sheriff coming to your house to survey your possessions, mandating you to auction any property that is deemed un-necessary (extra cars, furniture, jewelry, etc.) than sure it's not costly. But even the basics of enrolling have fees. The courts must charge a $245 case filing fee, a $39 miscellaneous administrative fee, and a $15 trustee surcharge. Normally, the fees must be paid to the clerk of the court upon filing. With the court's permission, however, individual debtors may pay in installments. 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b); Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The filer is also required to pay for the ticket in/out programs, as well as attorney fees (which could be as high as $5000 in some cases), take off time from work to file and other miscellaneous costs.
• Eliminates all debt. - Not true. Student loans, taxes, child support, alimony, etc. cannot be filed into a regular bankruptcy.
• "I can still keep some of my good accounts."- People not disclosing all of their accounts even positive accounts are committing fraud and can face criminal charges. The courts will know, even if you give an extra car to your family to avoid having it taken for liquidation.
• Max out cards before filing. - People trying to do this will also be committing fraud, and the creditors are very aggressive towards these people and will make sure to keep those accounts, also the trustee may close the request to file due to this. So, that hard earned money you just spent to file... gone.
• It stops foreclosure. - Especially with the economy in the state that it is in banks are being very diligent as to not let anyone take the easy way out. The minute the bank receives notice of filing, they will stop harassing you but in the background their attorneys are filing a "motion for relief from automatic stay".
• Improve my credit rating. - Opposite effect. One's credit rating will fall dramatically, but even more-so, once your score is back you will pay out of the nose in interest rates as a sub-prime borrower for years to come.
• My spouse doesn't have to be involved. - It's true, your spouse doesn't have to file with you, but the court will demand all of your spouse's information as well, whether filing jointly or not.
• It's no big deal. -While, your friends and family will probably never find out ( or even give a hoot). Bankruptcy definitely changes how you are perceived in the business world, and with more and more employers requiring consumer reports before considering employing people, is that a risk you want to take?
If you are considering bankruptcy, there is a reason for it. Today, there are better, less expensive and costly methods of repairing your situation. I personally recommend "debt settlement" because it is the fastest and least impacting method of getting out of debt. If you ask me, the faster all of your debts are repaid the faster you can get back on the horse and re-establish your credit reputation. Although, it is not for everyone, it helps specifically with unsecured debt (i.e. credit cards, medical bills, etc.) Good luck, and always educate yourself in matters of finance.
How Will Debt Settlement Affect My Credit Score?
The most frequent question that is asked is how are credit scores affected while enrolled in a debt management program. Let me first start off by stating that any and every debt relief or management program will negatively affect your score. In fact, anything short of paying off debt in a timely manner will negatively affect ones credit score. Now, that “disclaimer” is out of the way, let’s get to the facts.
What Options Do I Have to Get Rid of Debt?
Thoughts of a looming depression are causing widespread panic for the average citizen, here in the U.S. and globally. While the President conducts secret meetings and aids big businesses (even those that have committed high end fraud), the risk of hundreds of thousands of jobs are on the line. The normal citizens have been (so far) left out of the equation but left to pay for the years of greedy Wall Street capitalization and the like.
Credit Card Companies Crackdown- What Does This Mean For You?
With all of the banks in a panic to reduce their losses to their mostly fraudulent practices, many of the larger lenders are putting into place more restrictions to yet again deter the hard working citizens from escape of the debt trap. Recent news coverage and yet more to come are announcing changes that will affect life as we know it- even for the responsible card holders and especially for the predatory lending practices for high interest consumers today. So be on the lookout and be very wary of up and coming changes to your credit, may it be bad or good.
