FILING FOR BANKRUPTCY MIGHT OFFER BEST SOLUTION TO ELIMINATE DEBT
Posted on November 17th, 2014
Overwhelming debt brought about through unexpected life changes such as unemployment and illness or injury have caused many Americans to seek debt relief through personal bankruptcy. Some people have been lured by promises from debt settlement companies to eliminate debt quickly and easily without any negative effects. According to the National Association of Consumer Bankruptcy Attorneys, over half a million people with $15 billion in debt are currently in debt settlement programs, and only 10 percent of the people in debt settlement programs will actually succeed in reducing their debt.
The struggling economy has left many people seeking ways to resolve financial challenges that include excessive credit card debt and unpaid bills. Some debt settlement companies tell people to stop paying their bills and give money to the settlement company to be used to settle the debt. The usual results are late fees and collection efforts by creditors. This and other abuses were uncovered by federal and state consumer agencies.
A person overwhelmed by debt and threatened with foreclosure can speak with a bankruptcy attorney to discuss options to eliminate debt, stop foreclosure and stop repossession. Chapter 7 bankruptcy can eliminate debt for those debtors who meet income eligibility guidelines. Chapter 7 could require the sale of a debtor’s assets, but a bankruptcy attorney will review the property that is exempt from liquidation under the bankruptcy code and the law of the state in which the debtor resides.
Chapter 13 bankruptcy is for individuals who have a steady income. The debtor is allowed to keep the property he owns, including property that is subject to a foreclosure proceeding and property subject to repossession by a creditor. A debtor repays his debts under a court-approved plan that has manageable payments each month for three to five years. At the end of the plan, the remaining debt balance is discharged in bankruptcy.
Source: Tulsa World, “Consumer Page: Debt settlement plans often backfire,” Phil Mulkins, Oct. 24, 2012