Posts Tagged ‘Chapter 13’


5 Ways to pay off debt
Tuesday, August 24th, 2010

There are 5 ways to get rid of debt and lead a stress-free life. But what’s important is that you choose the one that works for you.

1. Interest rate arbitration: This is where you choose an independent third party to negotiate low interest rates with your creditors. So, you can consolidate multiple bills with one low monthly payment. This is also known as loan consolidation. The benefits are:

  • Pay less each month
  • One monthly payment instead of many
  • Credit score improves

2. Debt management: This is where you work with a debt solutions company to help you pay off your debts and create a budget. The benefits are:

  • Interest is reduced
  • Late fees may be waived off
  • Manage multiple bills with ease

3. Debt settlement: This is where you have a settlement company/law firm working with your creditors to lower your payoff amount by 40-60%. With settlement, you have 2 major benefits:

  • Creditors reduce interest
  • They cut your principal balance

4. Chapter 13 bankruptcy: Chapter 13 is a court monitored debt repayment plan. The benefits are:

  • Creditors reduce interest on your debt
  • They trim the principal debt balance
  • You don’t use your assets to pay off debt

5. Chapter 7 bankruptcy: This is where you hand over your assets to a court-appointed trustee who sells them off and uses the sale proceeds to pay off your debts. With Chapter 7 bankruptcy, you get the following benefits:

  • Interest on your debt is lowered
  • Principal balance is reduced

However, your credit score takes a hit and it’ll take quite a few years till you actually rebuild your score.


Determine the Extent of Your Debt Problem
Tuesday, July 13th, 2010

Determine the Extent of Your Debt Problem

Step 1
Request a copy of your credit report from one or all three major credit reporting agencies in the U.S. The companies are TransUnion LLC, Equifax Credit Information Services, Inc., and Experian.
Step 2
Review your credit report and check for inaccuracies, such as incorrect personal information, accounts that do not belong to you and even accounts listed with balances that are actually paid in full. It’s also important to know your FICO score, which is a credit score system. The acronym ‘FICO’ is derived from the name of the software used to calculate the score. While FICO scores range from 300-850, the average score is somewhere in the high 500s.
Step 3
Determine how much debt you have by adding up the balances of all of your credit accounts, loans, both secured and unsecured, and even collection accounts.
Step 4
Use this information when making your decisions about filing for bankruptcy or employing a debt settlement agency to help alleviate your financial problems.

Examine Your Monthly Finances

Step 1
On a sheet of paper, list all of your monthly income including paychecks, alimony/spousal support, child support, bank, investment and rental interests or income. If you work overtime or receive bonuses, include that information, too. If you opt for filing bankruptcy, you will need to include your average monthly income from the six months prior to filing in your bankruptcy petition, so it’s important to get these numbers no matter which solution you opt for, bankruptcy or credit counseling.
Step 2
On another sheet of paper, list all of your mandatory monthly living expenses, such as for housing, transportation, insurance, prescriptions and doctor visits, utilities, groceries and education-related costs. Don’t include payments for credit card debts, entertainment, or other items that are not necessary for your day-to-day survival. Definitely do not list an expense twice. That means if you used your credit cards to buy prescriptions, include that cost in your mandatory expenses list. However, if you used your credit card to buy a shirt, do not list the purchase on your mandatory expenses list at all, unless it was necessary for say, work.
Step 3
Subtract the total of your monthly living expenses from your total monthly income. A balance indicates you have expendable income you could potentially use to pay down your debts. A zero or negative balance indicates you do not have expendable income that could be used to pay down your debt.
Step 4
These calcuations are important for helping you formulate your decisions about filing for bankruptcy or seeking the aid of a debt settlement agency.

Determining if Debt Settlement is Right For You

Step 1
Determine if you could pay down your debts with your current income. If your income does not exceed your housing expenses, utilities, gas, groceries, and basic financial needs for the month, debt settlement is not a viable solution for you. However, if your monthly income exceeds your basic living expenses, debt settlement may help you resolve your financial crisis.
Step 2
Determine if your debt situation qualifies for debt settlement services by examining the total amount of unsecured debt you owe. To qualify, you will usually need to owe at least $7,500 in unsecured debt. However, the qualifying balance will vary by debt settlement company. Make sure you ask each debt settlement company about their unsecured debt balance requirements to determine which debt settlement company is right for your situation.
Step 3
Look for reputable debt settlement companies. Companies that charge huge fees up-front are companies to be avoided. Opt for debt settlement companies endorsed by the Better Business Bureau, or some other reputable pro-consumer group. Make sure to check that their fees are reasonable for the services rendered.
Step 4
Compare the services each company offers. Look for companies with a sound history of effectively negotiating with creditors. Ask for references or case studies you can examine that prove the company’s track record. If company representatives are hesitant to provide you with that information, walk, don’t run, out their door.
Step 5
Examine the pros and cons of committing to a debt settlement program. Ask the debt settlement company if by hiring them to represent you to negotiate your debts will your various creditors how your life might be impacted. Will those harrassing creditor calls stop? (possible, but no guarantees. Creditors can still contact you for the collection of debts they are owed unless or until you file bankruptcy). Also, inquire how a debt settlement program will impact your credit in the future and what the long-term side effects to your credit might be.
Step 6
Make sure you are prepared for the drawbacks of debt settlement programs such as the potential for increased creditor calls, possible collection lawsuits initiated by creditors, damaged credit and tax problems. If you don’t think you can handle these possibilities, then you should probably look for another debt solution.

Determining if Bankruptcy is Right For You

Step 1
Determine if you have any other options for resolving your financial crisis short of filing bankruptcy. Look online for other solutions to your debt problems such as debt settlement, debt management and nonprofit assistance. In addition, attorneys who practice bankruptcy law have begun to offer debt settlement services to clients who might have filed a bankruptcy before the Bankruptcy Code was overhauled in October, 2005, and find the new laws too onerous.
Step 2
Determine if you qualify for bankruptcy by reading the most current version of the U.S. Bankruptcy Code, found in Title 11 of the U.S. Code. However, the revamped Bankruptcy Code is extremely complex to understand, so don’t be surprised if you aren’t able to comprehend much of what you are reading. The Bankruptcy Code can be found online. Many books attempting to explain the Code in plain English have been written, so check out your local library or bookstore for some helpful titles. Even if you discuss your financial problems with an attorney who specializes in bankruptcies, you might still want to read up on the law for yourself.
Step 3
Determine which bankruptcy chapter you qualify for by reading the descriptions of each type of bankruptcy, as well as by reading the rules and regulations associated with each. This information can be found at your local library, bookstore, online, or by talking with an attorney who handles bankruptcies in their everyday practice.
Step 4
Court costs for filing bankruptcy are different depending on which chapter you file. Currently, a Chapter 7 bankruptcy costs $299 in filing fees while a Chapter 13 costs $274, although Congress can change those fees at any time. It will also be important to learn how much an attorney will charge you to represent you in your bankruptcy. If you meet with a bankruptcy attorney, they will likely give you a written fee quote for their services either at your first meeting or perhaps in the mail. Do not expect to be able to email a bankruptcy attorney for a price quote on what they would charge for their services. Bankruptcy is an extremely complex area of law and an attorney well familiar with the law’s complexity wouldn’t likely give you a fee quote over the phone or in an email without knowing your entire financial picture. Would you call a doctor to ask how much it would cost to set your broken arm? Do you think the doctor would even come to the phone, and secondly, do you think they should or would give you an answer? They don’t know how broken your arm is by talking to you on the phone and a bankruptcy attorney doesn’t know how bad your financial situation is until they meet with you to discuss it.
Step 5
Another important consideration is deciding whether filing for bankruptcy will resolve your credit problems. Depending on the types and amounts of your debts, a bankruptcy filing won’t necessarily rid you of your duty to pay some of your bills, even though you filed for bankruptcy. Keep in mind that a bankruptcy filing remains on your credit record for ten years but a bad debt is only supposed to stay on a credit report for seven.

Read more: How to Compare Debt Settlement vs. Bankruptcy | eHow.com http://www.ehow.com/how_2002283_debt-bankruptcy-settlement.html#ixzz0tURSWGS0


Bankruptcy, what is it and how to avoid it
Thursday, March 4th, 2010

In this economy, many people find themselves facing difficult financial situations.   Certain circumstances such as unexpected medical bills, credit card bills, and divorces can surely present further challenges.  When the burden of debt becomes overwhelming, many believe filing bankruptcy is their only option.  Bankruptcy can be broken up into two categories:

Chapter 13 Bankruptcy– In this type, the debtor proposes a plan to repay creditors over a three to five year period during which the debtor can make up overdue payments on any assets and pay into the plan the equivalent value of any assets not covered by exemptions.  Exemptions refer to properties that the law allows for the debtor to keep.  The debtor will then make regular payments to creditors through a trustee and will not be discharged of the debt until the payments are complete.  The debtor is, however, protected from wage garnishments, lawsuits, and other creditor action while making the payments.

Chapter 7 Bankruptcy-This type requires the collection of the debtor’s assets by a trustee who then distributes the cash obtained from those properties to creditors.  In order for creditors to receive any money from the assets, they need to file a claim with the bankruptcy court which will deem their claim justified as it sees fit.

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