Finding The Right Answer For Your Debt Problems
by James H. Dimmitt
As credit card bills begin to stuff our mailboxes, many
consumers are faced with the hard reality that they went overboard with
their holiday shopping. And for those who don't pay the balance due
in full, you'll also wind up paying interest charges. For some people
this can be the beginning of the end as they can't see a way to manage
the burden of their credit card and other debts.
"Wipe the slate clean", "escape the pressure of credit
card debt", "call our bankruptcy hotline for an easy way out"
the bankruptcy lawyers proclaim in their slick television commercials.
Last year 1.6 million people filed for bankruptcy in the U.S. Is bankruptcy
the right answer for your debt problems? Make sure you have the facts
before making a decision that has lingering effects.
A bankruptcy stays on your credit report for 10 years. You'll be able
to get credit in the future, but at higher interest rates, even after
your bankruptcy is completed.
A bankruptcy does not "wipe the slate clean" nor does it
mean you are totally debt-free. Alimony, child support, back taxes and
most student loans are not exempt from bankruptcy proceedings.
There are two basic types of personal bankruptcy: Chapter 7 and Chapter
13. Both must be filed in a federal bankruptcy court. You will have
to pay about $160.00 in court fees. Attorney fees are additional.
Chapter 7 bankruptcy involves the liquidation of all your assets that
are not exempt from the bankruptcy settlement. Exempt property may include
automobiles, some household furnishings, and property needed for work-related
use; for example if you were a mechanic the tools you use to perform
your work would be exempt from the bankruptcy settlement. Exemption
dollar amounts vary from state to state.
Under this plan the court appoints a trustee to handle the liquidation
of your nonexempt property. The trustee can sell or turn over your property
to your creditors if you have more than the allowed equity.
A Chapter 13 bankruptcy allows you to keep property, like a mortgaged
house (provided there are no liens on it) or a car, as long as you have
a steady income. A Chapter 13 bankruptcy is a court-ordered and approved
repayment plan to your creditors, usually over a 3-to-5 year period
without surrendering any property. However, any earned income over the
budgeted amount for basic maintenance will be distributed to your creditors.
Financial experts agree that a bankruptcy should always be the last
resort used for managing your debts. An alternative to bankruptcy is
personal credit counseling. Call the Consumer Credit Counseling Services
at 800-388-2227 to find an office near you. A professional counselor
can help you decide the best way to handle your debt problems.
© http://www.yourfreecreditreportnow.com
Author: James H. Dimmitt
James is editor of "TO YOUR CREDIT", a free weekly newsletter
offering money management news and tips. Subscribe to the newsletter
by visiting http://www.yourfreecreditreportnow.com.
He is also author of "Identity Theft - How to Avoid Becoming the
Next Victim!"
Details available at http://tinyurl.com/bc45
