People view bankruptcy as a wake up call and well they should because that means they hit the bottom of the barrel and are now scratching the bottom - for more cash! If you believe misery loves company, be secure in the knowledge that there are at least 1.5 million people in there with you, that's how many filed for bankruptcy in the last year. Anyone can over-extend themselves and many do for more reasons than I could count.
Filing for bankruptcy is not only used by the lower and middle class but the rich as well. Famous people have fallen into the hole and climbed out, people like:
Donald Trump, Filed in 1990 - Kim Basinger, in 1993 - Burt Reynolds, in 1996 Rembrandt, in 1656. I am not sure about the last one; he may still be trying to dig his way out!
In the old days they would send people to debtors prison or even put them to death (not in America though), treating them like criminals. In these more civilized times the government not only banned this kind of barbaric action but made into law rules to protect us.
The bankruptcy code, also known by title 2 of the United States code (11 U.S.C.,101-1330), has been put into place to protect the rights of the individual and corporations, giving them a fighting chance against dept collectors, bankruptcy courts having the final word. There are basically two kinds of dept, secured an unsecured. Secured is where the creditor has some kind of collateral, be it your car, boat, house, or any material thing of value that they can take possession of if the dept is not paid. Unsecured is simply just the opposite, where the creditor has no collateral at all. In this case if the dept is not paid all they can do is use a collection agency where they call you day and night. Also you have to watch out with an unsecured dept because if the balance is large enough the creditor can put a lean on your property by getting a court order. This will prevent anyone from selling their house and moving away in an attempt to hide from creditors.
If you or anyone you know is behind on payments there is something they should know. Since 1997 the government stepped in to stop dept collectors and collection agencies from harassing and threatening people in the middle of the night and using unethical collection practices. The Fair Dept Collection Practices Act (FDCPA) makes collections agencies follow certain guidelines. These are things collectors must do:
*Stop contacting you if the request is in writing and you dispute the dept in writing.
*Within 5 days of there first contact they must send you a letter stating the outstanding dept and creditor.
*If you want to dispute all or part of the dept the collection agency must stop contacting you until the creditor responds to your inquiry.
*If the collection agency wants to take you to court for the dept owed on behalf of the creditor it should summon you to the county where you now live or where you first singed the contract.
Now, don’t be alarmed just because a creditor threatens to sue you because most times it is just meant to scare people into paying on depts.
Under the act (FDCPA) there are many things collection agencies can't do, some of which are:
*No calling you at work
*Indicating they may be working with the federal government
*No calling your friends or family
*Implying that you may go to jail, garnish your paychecks unless the dept holder plans to do it
Our government, in its infinite wisdom reasoned a long time ago that if they send everyone to jail there is zero change of collecting on any dept on behalf of a creditor. You probably have heard of someone that has had there wages garnished, that is creditors who get a court order to take a piece of their check until the dept is paid. This is a common practice in states that allow wage garnishment and there is little you can do about it except for contacting an attorney. Did you know if you have an unpaid school loan or owe the IRS they don’t even need a court order to garnish wages, even in states that normally don’t allow this? You can bet on it, they can also take your tax refunds!
As for personal property, in cases like a store dept (store credit card, personal check or payment plan) on an item like major appliances or furniture you may have bought they still need a court order to take it back, unless you let them in anyway. That’s right! If you let them in without a court order they can come and get it back! Many times if is just not worth it for them to re-possess items because they have to go the process of getting a court order and pay someone to carry it out. Also it may be harder to sell a used item that may be stained or damaged. One final word on this point, remember on secured loans and cars there is a definite risk of repossession if the loan (mortgage or car finance) is not paid. There is usually too much money involved here for creditors to loose so these payments should be on top of your ‘to pay’ list!
If you find collectors are not playing by the rules you should call an attorney or the Federal Trade Commission's response center at 1-877-382-4357 (FTC-HELP)
You can check out FDCPS's website at www.ftc.gov/os/statutes/fdcpa/dcpact.htm for more info.
Showing posts with label bankruptcy law. Show all posts
Showing posts with label bankruptcy law. Show all posts
Friday, April 29, 2011
Sunday, July 25, 2010
Bankruptcy: Tips To Avoid It
Although it may seem like an easy solution to major financial difficulties, it is best to avoid bankruptcy at all cost. There are many reasons for avoiding bankruptcy and many tips for helping those in financial difficulty avoid resorting to bankruptcy. Before beginning to consider bankruptcy, it is best to weigh the negative consequences.
Reasons for avoiding bankruptcy include:
Credit Record - Once a party has filed for bankruptcy, this will stay on their record for ten years. With the easy access to credit checks, having bankruptcy on a credit report will undoubtedly make it difficult for parties to receive loans and credit. Even if creditors will allow for limited credit with bankruptcy on the record, extensive explanations are required and, without a doubt, the debtor will be looking at high interest rates and credit fees.
Loss of property - Although not all types of bankruptcy call for liquidation of property, many of the eight types of bankruptcy in the United States will call for some type of repossession of assets. If the banks find that there is anything unnecessary for living, these items will most likely be seized in order to pay for debts and bankruptcy expenses. Chapter 7, or complete bankruptcy, will even require that major purchases, such as a home or excess cars be repossessed.
Continued financial difficulty - Despite societal beliefs that bankruptcy will get you on the right track, bankruptcy can actually add to financial difficulty for years to come. This may include closure of bank and credit accounts, loss of a job or closing of a business, and inability to continue acquiring credit. Keep in mind while bankruptcy may seem to suggest a "clean slate", there are often debts that will still have to be paid, such as alimony, child support or court judgment costs.
With these negative consequences in mind, it is then necessary to consider possible ways that an individual or business can avoid bankruptcy in the near future:
Debt Consolidation - With rising bankruptcy proceedings in the United States, more debt consolidation companies have come to light. These companies can help debtors to examine current loans and credit debt against available income and will come up with a reasonable monthly payment that incorporates all of these debts. This helps the debtor, who usually feels overwhelmed having to make choices about which debt to pay each month. The debt consolidation company will also help the debtor set up a reasonable time frame to pay off these debts, giving the debtor something to look forward to in the long run.
Get rid of potential debt problems-With the easy access to credit cards and credit accounts at department stores, it is easy to become swallowed up by overwhelming credit. Especially when money runs low, it is easy to pay cash for the bills due now and then continue racking up the credit card bills for later. One of the first steps in avoiding bankruptcy is to get rid of that credit yourself. Cut up the credit card and call the credit card company to cancel that account. If you can’t afford it out of the bank account, then you can’t have it to spend! This is better than having nothing at all by having things repossessed through bankruptcy.
Speak with debt companies - The first instinct when unable to pay bills on time is to simply hide from the debt companies who continue to call or send bills. Unfortunately, many in debt do not recognize that these companies can actually help with different payment plans! As well, many student loan corporations, mortgage companies and credit card companies will allow for forbearances of loans. Forbearances are a deferment or reduction of the loan because of financial hardship and allows for an individual to get back on their feet.
Plan a budget - A simple step that many debtors forget to try is a weekly or monthly budget that calculates debt ratio to income. This is one of the steps that many debt consolidation companies will do for you, but it can easily be done by yourself with pen and paper or with a Microsoft Excel spreadsheet. Take time to sit down, write out all of the bills that come in each month and remember to include all expenditures such as gas and groceries. From here you can determine how much money you have that needs to go to bill companies and how much is left for other spending.
Reasons for avoiding bankruptcy include:
Credit Record - Once a party has filed for bankruptcy, this will stay on their record for ten years. With the easy access to credit checks, having bankruptcy on a credit report will undoubtedly make it difficult for parties to receive loans and credit. Even if creditors will allow for limited credit with bankruptcy on the record, extensive explanations are required and, without a doubt, the debtor will be looking at high interest rates and credit fees.
Loss of property - Although not all types of bankruptcy call for liquidation of property, many of the eight types of bankruptcy in the United States will call for some type of repossession of assets. If the banks find that there is anything unnecessary for living, these items will most likely be seized in order to pay for debts and bankruptcy expenses. Chapter 7, or complete bankruptcy, will even require that major purchases, such as a home or excess cars be repossessed.
Continued financial difficulty - Despite societal beliefs that bankruptcy will get you on the right track, bankruptcy can actually add to financial difficulty for years to come. This may include closure of bank and credit accounts, loss of a job or closing of a business, and inability to continue acquiring credit. Keep in mind while bankruptcy may seem to suggest a "clean slate", there are often debts that will still have to be paid, such as alimony, child support or court judgment costs.
With these negative consequences in mind, it is then necessary to consider possible ways that an individual or business can avoid bankruptcy in the near future:
Debt Consolidation - With rising bankruptcy proceedings in the United States, more debt consolidation companies have come to light. These companies can help debtors to examine current loans and credit debt against available income and will come up with a reasonable monthly payment that incorporates all of these debts. This helps the debtor, who usually feels overwhelmed having to make choices about which debt to pay each month. The debt consolidation company will also help the debtor set up a reasonable time frame to pay off these debts, giving the debtor something to look forward to in the long run.
Get rid of potential debt problems-With the easy access to credit cards and credit accounts at department stores, it is easy to become swallowed up by overwhelming credit. Especially when money runs low, it is easy to pay cash for the bills due now and then continue racking up the credit card bills for later. One of the first steps in avoiding bankruptcy is to get rid of that credit yourself. Cut up the credit card and call the credit card company to cancel that account. If you can’t afford it out of the bank account, then you can’t have it to spend! This is better than having nothing at all by having things repossessed through bankruptcy.
Speak with debt companies - The first instinct when unable to pay bills on time is to simply hide from the debt companies who continue to call or send bills. Unfortunately, many in debt do not recognize that these companies can actually help with different payment plans! As well, many student loan corporations, mortgage companies and credit card companies will allow for forbearances of loans. Forbearances are a deferment or reduction of the loan because of financial hardship and allows for an individual to get back on their feet.
Plan a budget - A simple step that many debtors forget to try is a weekly or monthly budget that calculates debt ratio to income. This is one of the steps that many debt consolidation companies will do for you, but it can easily be done by yourself with pen and paper or with a Microsoft Excel spreadsheet. Take time to sit down, write out all of the bills that come in each month and remember to include all expenditures such as gas and groceries. From here you can determine how much money you have that needs to go to bill companies and how much is left for other spending.
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