Discharging Debts In Bankruptcy
A bankruptcy discharge releases a debtor from being personally responsible for certain types of debts. So, after a bankruptcy discharge, the debtor is no longer legally required to pay any debts that are discharged.
The discharge prohibits the creditors of the debtor from collecting on the debts that have been discharged. This means that creditors have to stop all legal action, telephone calls, letters, and other type of contact with the debtor. This prohibition is permanent for the debts that have been discharged by the bankruptcy court.
You cannot discharge all debts in bankruptcy. Some of the most common debts that you cannot get rid of in bankruptcy are debts from child or spousal support, most student loans, most tax debts, wages you owe people who worked for you, damages for personal injury you caused when driving while intoxicated, debts to government agencies for fines or penalties, and more.
What If I Just Stop Paying
You may feel so overwhelmed that you simply stop paying your bills, and attempt to carry on this way. In this case, you will find yourself avoiding answering the phone, not opening your bills, and possibly feeling guilty. Of course, you know that avoiding your creditors will only make matters worse. You may be hoping for a windfall that stubbornly doesnt arrive.
Can You Avoid Bankruptcy With Outside Help:
If you cant pay off your debt within three years on the present terms, contact Consumer Credit Counselors, or a similar, well established non profit organization.
They can help you make a budget and negotiate a repayment plan that may include a reduced or even zero interest rate on your existing debt. Creditors generally cease collection actions against those participating in CCC plans.
These plans usually work best when the debt is primarily credit card debt.
CCC counselors sometimes exclude non dischargeable tax debt from the repayment plan, leaving the consumer paying unsecured, dischargeable credit card debt while non-dischargeable taxes or delinquent support go unpaid.
That approach seldom gets the debtor the relief needed.
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Youll Probably Get To Keep All Of Your Stuff
Folks in more than 95% of all Chapter 7 bankruptcies filed in the United States keep all of their belongings. Thatâs because the law protects certain property – called exempt property – from your creditors. Whether thatâs your monthly social security check, your watch, or your kitchen table, if itâs protected by an exemption, you get to keep it.
Borrow Money From Friends Or Family
You may have friends or family who have stable finances and are willing to lend you money. This should be the last option before bankruptcy, because its loaded with pitfalls, the biggest one being that if you fail to repay the loan on time, it could end the relationship with a family member or friend.
If you go this route, treat it like a loan from a bank. Sit down and figure out what you owe, what you make and what you need to avoid bankruptcy. This will determine how much to money to ask for from your friend or family member.
Put it in writing, agree to a payback schedule and stick to it. While its hard to have financial problems, destroying a good relationship over it can be much worse.
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Benefits Of Filing Bankruptcy
Despite the fact it is often viewed in a negative light, there are many benefits to filing bankruptcy.
For instance, bankruptcy helps to stabilize your finances. If you file Chapter 7, you can erase some of your unsecured debts, including:
- Civil judgements for charges excluding fraud
- Business debt
- Past due rent and utilities
- Certain older tax debts
This will make it a lot easier to pay your bills each month and effectively manage your finances.
After I Pay Off My Debt Is There Anything I Can Do About My Credit
No one can legally remove accurate negative information from your credit report so dont believe anyone that tells you otherwise.
Only time can make accurate information go away. A credit bureau can report most accurate negative information for seven years and bankruptcy information for 10 years. Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. The seven-year reporting period starts from the date the event took place. But there are steps you can take to repair your credit over time.
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When To Consider A Debt Management Plan
One of the tools used by credit counselors in dealing with credit card debt is a debt management plan . This type of plan is not free, but the fees are affordable. A DMP is a systematic program, acceptable to most creditors, of repaying 100% of your debt at reduced interest rates, generally in five years or less.
Any open lines of credit are usually closed once they are being repaid under a DMP, and that will negatively impact your credit score. However, given that one card is already in collection and the other two seem close behind, chances are the damage to your credit score has already been done.
When it comes to potential employers, taking advantage of credit counseling may work in your favor because it sends a powerful signal that you are serious about working on your debt issues and finding a solution.
I recommend contacting the National Foundation for Credit Counseling. All of their counselors undergo hours of training and certification in order to find solutions to all kinds of debt issues for all kinds of consumers. Most offer services over the phone or internet, but Im old-fashioned enough to value meeting with a counselor face to face if that is an option.
Whats A Debt Management Plan
After a credit counseling agency has thoroughly reviewed your financial situation, it might recommend that you enroll in a debt management plan to help repay your debts. Debt management plans are for unsecured debts like credit card or medical debts. They arent for secured debts like houses or cars.
In a debt management plan, a credit counselor sees if you and the companies involved can agree on a plan for how you will repay the money you owe them. Once a plan is worked out, every month you deposit money into an account held by the credit counseling agency. The credit counselor uses the money to pay your bills according to an agreed payment schedule. You dont stop paying until your debt is repaid.
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What Do I Need To Do Before I File For Bankruptcy
You have to get credit counseling from a government-approved organization up to six months before you file for any bankruptcy relief. You can find a state-by-state list of government-approved agencies at the U.S. Trustee Program, the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees.
Also, before you file a Chapter 7 bankruptcy case, you must satisfy a means test where you confirm that your income does not exceed a certain amount. The amount varies by state and is publicized by the U.S. Trustee Program.
What To Expect When You Meet With A Licensed Insolvency Trustee
Licensed Insolvency Trustees are professionals licensed by the Federal government to deal with insolvency situations. They are the only professionals who can file your bankruptcy or consumer proposal paperwork with the government.
Licensed Insolvency Trustees undergo rigorous training, and many are also Accountants. They have a solid understanding of both the causes and solutions for insolvency.
When you meet with a Licensed Insolvency Trustee, youll find a professional who is not judgemental of your situation they know that you did not intend to have debt problems! The Trustee is also aware that many companies and institutions that offer credit do so knowing that many of their customers will have trouble making their minimum payments. You are not alone! Your Trustee will understand.
In your first meeting, you will give the details of your situation to the Trustee, and you may also provide exact numbers if you have them on hand. The Trustee will also ask questions about your job and your monthly expenses.
With this information, the Trustee can explain options for moving into a better financial future. These may include some that we have described above: credit counselling, consumer proposal, perhaps personal bankruptcy. The Trustee can explain the pros and cons of each, and how they apply to your unique situation.
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Learn Better Money Management
Create a budget by listing all your monthly income and expenses. Analyze it to see if you can raise your income or lower your expenses. You might be surprised that when you put your income and expenses down in a list, you immediately see ways to economize without greatly impacting your lifestyle.
Realize that a lot of what you are buying may not be necessary. Dont waste your money by giving in to impulse buying.
Once you have reduced your expenses, use the cash you have freed up to repay your debts. Get rid of most of your credit cards as soon as you can pay them off, so the temptation is removed. Keep a couple of credit cards and rebuild your credit rating by using them responsibly. This way, youll be able to get necessary credit more easily and at lower interest rates.
You can get free help with budgeting and other money management skills from a professional credit counsellor.
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Talk To A Bankruptcy Lawyer
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What Are The Main Types Of Personal Bankruptcy
The two main types of personal bankruptcy are Chapter 13 and Chapter 7. You file for them in federal bankruptcy court. Filing fees are several hundred dollars, and attorney fees are extra. For more information, visit the United States Courts.
Both types of bankruptcy may get rid of unsecured debts like credit card or medical debt and stop foreclosures, repossessions, garnishments and utility shut-offs, as well as debt collection activities. Both also provide exemptions that let you keep certain assets, though how much is exempt depends on your state.
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Debt Counseling Vs Chapter 13 Repayment Plans
Participating in a credit or debt counseling agency’s debt management program is a little bit like filing for Chapter 13 bankruptcy. The agency will help you develop a plan to pay back your creditors over time, somewhat like a Chapter 13 plan. But working with a credit or debt counseling agency has one advantage: No bankruptcy will appear on your credit record.
However, a debt management program also has some disadvantages when compared to Chapter 13 bankruptcy. First, if you miss a payment, Chapter 13 protects you from creditors who would start collection actions. A debt management program has no such protection: Any single creditor can pull the plug on your plan. Also, a debt management program usually requires you to repay your debts in full. In Chapter 13 bankruptcy, you often pay only a small fraction of your unsecured debts. Finally, debt management and debt settlement scams abound. Many companies don’t care about helping you they want to collect fees for their services. So tread carefully before you sign up for a plan.
Consumer advocates have also raised concerns about credit counseling agencies because they receive most of their funding from creditors. As a result, critics say, these agencies could face a conflict between the interests of their funders and their clients.
Learn more about debt management plans.
How To Get Out Of Debt Now Without Filing Bankruptcy
By | Submitted On February 19, 2009
Contrary to what many people believe, bankruptcy is a legitimate way of getting rid of overwhelming debt and getting a fresh financial start. Far too many people avoid bankruptcy out of embarrassment or because of poor advice when it might be the best solution in their situation. Still, declaring personal bankruptcy should not be treated as a casual event, but rather as a serious financial step that has long-term consequences.
So if you can get out of debt without filing for bankruptcy, that’s a good thing. Learning how to get out of debt without filing bankruptcy is important because it can save you years of damaged credit, as well as the expense and effort of the bankruptcy process itself.
So how can you get out of serious debt without actually declaring personal bankruptcy? Well, there are no overnight solutions unless you win the lottery or get an inheritance. The first thing you should do is gather all your financial documents and see where exactly you stand at this moment. It may be scary and a little unnerving, but you need to know exactly what you owe and compare this to your monthly income.
Depending on your specific circumstances , you should consider taking on a second job to bring in some extra income. You might be surprised how a part time job can help bring in extra funds to pay off your debts much more quickly than you would have imagined.
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Whats A Credit Counseling Agency
A reputable credit counseling agency can give you advice on managing your money and debts, help you develop a budget, offer you free educational materials and workshops, and help you make a plan to repay your debt. Its counselors are certified and trained in credit issues, money and debt management, and budgeting.
Good credit counselors spend time discussing your entire financial situation with you before coming up with a personalized plan to solve your money problems. Your first counseling session will typically last an hour, with an offer of follow-up sessions. Good counselors wont promise to fix all your problems or ask you to pay a lot of money before doing anything.
Debts That Are Difficult To Discharge In Bankruptcy
Student loans are notoriously difficult to discharge through bankruptcy it is only possible if you can demonstrate undue hardship to yourself or your dependents, such as being unable to maintain a minimal standard of living. In some cases, a court may discharge part, but not all, of your student loan debt. If student loan debt is a major reason for your considering bankruptcy, contact your loan servicer first and see if itâs possible to negotiate a repayment plan that would work for you. In the case of federal student loans, for example, several repayment plans are available.
You cannot have income tax debts discharged without a special exemption, which can only be obtained by petitioning the bankruptcy court and explaining why you deserve relief. So if you have income tax debts that you cannot repay, then you may be better off consulting with a tax attorney to discuss your options before filing for bankruptcy.
In the case of federal taxes, for example, the Internal Revenue Service can offer several alternatives to people who are unable to pay what they owe. One is an offer in compromise, in which the IRS agrees to accept a lesser amount. The IRS may also arrange for a payment plan, or an installment agreement, that will allow you to pay your taxes over an extended period of time.
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Situations Where Filing Bankruptcy Is A Smart Choice
There are a variety of reasons why people who are overwhelmed with debt are afraid to file for bankruptcy. They may fear losing control of their finances or be scared about the damage bankruptcy will do to their credit score.
Those are valid concerns, but there are some situations when bankruptcy is your best option for managing your debts.
If you are wondering if bankruptcy is the best option for you, contact the Cincinnati bankruptcy attorneys at OConnor, Acciani & Levy today for a free legal consultation. We can carefully review your situation and help you decide the best course of action, which could include filing how to order ambien Chapter 7 or Chapter 13 bankruptcy.
If you decide to file bankruptcy, we can guide you through the process to help ensure you achieve the most favorable outcome possible.
Debt Relief: Understand Your Options And The Consequences
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Find that you’re just not making progress on your debt, no matter how hard you try? If that’s the case, you might be facing overwhelming debt.
To break free of this financial burden, look into your debt relief options. These tools can change the terms or amount of your debt so you can get back on your feet more quickly.
But debt-relief programs are not the right solution for everyone, and its important to understand what the consequences might be.
Debt relief could involve wiping the debt out altogether in bankruptcy getting changes in your interest rate or payment schedule to lower your payments or persuading creditors to agree to accept less than the full amount owed.
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