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Eliminate debt without permanently damaging your credit

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Ask yourself this:

If you could eliminate your debt without permanently damaging your credit, why wouldn’t you?

paul allenThe stigma related to bankruptcy is not what it was 30 years ago. Just ask the millions of Americans who have taken this step to rebuild their futures. A clean slate is the ultimate tool of empowerment. Bankruptcy may not be the right decision for you, but you owe it to yourself to know your options.

The decision to pursue bankruptcy protection is not one that’s easy to make. Somehow, you want to save face and “do the right thing.” You continue to struggle along while your creditors turn up the heat. Pretty soon, with all the late fees, penalties and mounting interest, it becomes impossible to keep your head above water. You are drowning!

At this point, it’s time to take a good hard look at your financial situation. Taking a close look at the bottom line takes courage, but it’s a necessity. You can start the process yourself, but you can also seek legal counsel even in the early stages of experiencing mounting debt problems. An experienced attorney can help separate panic from reality and assist you in identifying all of your options. You may even find out that you are not is as bad a situation as you first thought!

Ask yourself the following:

  • Are you heavily in debt, with little prospect of getting out of that debt in the near future?
  • Have you had, or are your creditors threatening, a foreclosure on your home, a repossession of your car or other legal action to take your property?
  • Have you experienced a dramatic drop in income that you don’t anticipate replacing anytime soon?
  • Are you frequently late paying bills?
  • Do you only pay the minimum on your credit cards?
  • Are you unable to make even the minimum payments?
  • Do you have to sacrifice basic necessities just to make ends meet?
  • Are you paying more money than you make on just your monthly living expenses?
  • Are you losing sleep at night wondering how you’re going to make it?
  • Have you bounced more than one check in the last two months?
  • Are your wages currently, or in jeopardy of, being garnished?
  • Have you recently become sick, or partially or totally disabled?
  • Are you going through a divorce resulting in a decrease of income but an increase in expenses?

If you answered yes to some or a number of these questions, bankruptcy could be right for you. Your next step is to talk to a qualified bankruptcy attorney to assess your rights and determine if bankruptcy is right for you. Bankruptcy is not for everyone, but you need to be an informed consumer to make the right decision. Don’t wait until your wages are being garnished or your car is repossessed. Be proactive and resolve the situation now.

How can the U.S. Bankruptcy Code protect me?

The Bankruptcy Code is a set of federal laws with very broad powers that entitle you, and others with severe financial problems, to obtain relief from debt and rebuild your credit and your life. For individuals, the options are either Chapter 7 or Chapter 13. In a Chapter 7 case, most of your unsecured debts are discharged and assets beyond allowable exemptions are liquidated to pay some or all of your debt. Usually most of your assets are exempt-meaning they cannot be liquidated.

Exempt property usually includes:

Primary residence.

Vehicles.

Retirement funds.

Most personal property.

Tools and work equipment.

Numerous other categories of property.

After your case is completed and all dischargeable debts forgiven, the bankruptcy case is closed. You can make a new start with a commitment to avoid getting in this situation again.

In a Chapter 13 case, you can reorganize your debts and repay them in an affordable payment plan that lasts 36 to 60 months. How much you get to repay, depends on your disposable income, after acceptable living expenses. It’s not unusual for chapter 13 repayment plans, to be based on as little as 5% or so of the amount owed. Your creditors cannot take any action against you while you stay in compliance, and service the bankruptcy court approved plan.

An experienced bankruptcy attorney knows how to help you navigate the sometimes tricky waters of bankruptcy, eliminate the majority of your debts and help you keep as much of your property as possible. Your bankruptcy attorney can assist you in emerging from bankruptcy with a fresh start program, that includes practical information on rebuilding your credit.

So what happens, when your attorney files a Bankruptcy on your behalf?

Under the new Bankruptcy Reform Act, before you can file a bankruptcy petition, the law requires that you first receive a briefing from a certified credit-counseling agency to explain financial management to you, alternatives to bankruptcy, and how to do a budget analysis. Although there are some hardship exceptions to this rule, most debtors will have to get this briefing, usually as a short online session. You attorney will provide you with your online login information.

Then, your attorney prepares and files your petition in local bankruptcy court. When this occurs, the court appoints a bankruptcy trustee to your case and an “Automatic Stay” is entered. This is a court order that prohibits most of your creditors from taking any further action against you outside of bankruptcy court. This action is designed to:

Stop calls and bills from creditors

Protect your property from seizure

Prohibit or delay lawsuits against you

Prevent foreclosure of your home

Stop wage garnishments

Block the repossession of your automobile.

You must comply with all rules in order to receive your discharge. It is critical for you to follow your attorney’s counsel and refrain from:

Attempting to conceal your property

Destroying financial records

Violating a court order

Making enormous, last-minute charges on your credit cards

Also, please note that you can only file for Chapter 7 once in eight years.

Bankruptcy can help you eliminate most debts. If a debt is unsecured, that is a debt without security collateral, it can be discharged in a Chapter 7 bankruptcy. These would include:

Credit card debt

Medical bills

Most personal loans

Judgments resulting from car accidents

Deficiencies on repossessed vehicles

Some older tax debts

Payday loans

Garnishments

Bounced checks

Your attorney can help you eliminate unsecured debts in bankruptcy, but secured debts don’t go away. Your creditors hold a lien against your property until the debt is paid. If you do not pay for a secured debt, creditors can foreclose or repossess the secured collateral.

When you file bankruptcy, your attorney may be able to negotiate a reaffirmation agreement with secured creditors in which you agree to continue making payments in exchange for your right to keep the property. The United States Bankruptcy Code also has provisions that can reduce the outstanding balance on some of these loans.

A bankruptcy cannot eliminate all debt. You will still be liable for:

 Child support.

Taxes.

Student loans.

In the case of significant non-dischargeable debts, you might consider a Chapter 13 bankruptcy. If you initially file under Chapter 7, but you don’t satisfy the requirements, your case can be converted to a Chapter 13, and you will be compelled to file a debt repayment plan. However, you may only have to pay back a small percentage of what you owe on unsecured debt.

The Last Step:

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 imposes one last hurdle before you’re eligible for your discharge–the financial education requirement. This requires you to complete an instructional course concerning personal financial management. Again, this is usually accomplished through an online session. Your attorney will refer you to an approved online financial management class. So, get started today.

Call the Law Offices of Paul Mendoza Allen and get the relief you deserve. Consultations are free, but you must make an appointment. Two offices to serve you. Glendale: 818-334-5445, 818-552-4500 or Cerritos: 562-356-9931, 562-865-4480. Attorney Paul Allen – Honest Answers – Real Solutions.

(This article is for information purposes only, and does not necessary reflect the company’s opinions and views on general issues. We make no warranty, prediction nor representation, nor do we assume any legal liability for the completeness of any information and its effect on any case. Each case is different and results depend on the facts of each case. Consult with and retain counsel of your own choice if you need legal advice.)

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