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The Truth About Debt!

Debt and financial problems are very real and a serious situation for most Americans. A bad economy, job loss, medical claims, evictions, foreclosures, collection lawsuits, wage garnishments and other mounting bills and lingering debt are crushing us all. People are forced to choose between paying bills and affording the basic necessities of life. Everyone deserves a fresh start and an opportunity to get ahead in life.

If something happens to your financial structure and job security, then you can end up in real financial straits. Quite honestly, most people are just a paycheck or two away from homelessness. Fortunately, for most people in debt, there are options. Some are bad options but others offer real relief to people who are drowning in debt.

Human nature drives many of us to try numerous “work-out” methods pushed and sold by late night hucksters, playing on your desire to juggle and hopefully payoff your bills. Unfortunately, these “quick-fix” schemes ignore the fact that it can take decades to pay off a relatively small amount of debt. Ultimately, these scams won’t help you pay off your bills or get out of debt and you are still subject to lawsuits, garnishments, bank levies and asset seizure.

These feel-good proposals ignore the fact that credit cards and other debt collectors do not want you to pay off your debt. Instead, they make their money by stringing you along and “consolidating” your debt and ultimately leave you with yet another monthly payment you cannot afford. They “extend and pretend” that you can pay off your unmanageable debt while the collection companies make money as you struggle to pay.

The credit card company’s minimum payment schedule ensures that you will never pay more than the interest on your debt. Realistically, you can never get out of debt by only making minimum payments. Most of us cannot make more than minimum payments and need something more definite, a final solution that deals with our debt.

Bankruptcy offers an option to either wipe out your debt entirely or pay off a portion of your debt at a low monthly payment over a period of time. A great benefit of bankruptcy is that you are protected from creditor collections, harassment and wage garnishments. The bankruptcy laws protect you from the creditors and we enforce those laws to your benefit.

Rebuilding Your Credit
You can start rebuilding your credit immediately after your bankruptcy is over. We recommend baby steps to re-establish your credit so that you can buy a house, car and get additional credit as you need it. One of the best ways to do this is to go to a bank or credit union and apply for a major credit card. Your bank or credit union may ask you to open a savings account and deposit an amount equal to the card limit. This is called a secured card. Additionally, there are many websites that allow you to compare credit card offers. Watch out, the annual fees and interest associated with the card may be high so shop around. If you do your homework you will be able to find a banking institution that will issue you a credit card that has reasonable fees.

When you use your card, make small purchases that you would normally pay in cash such as for food or clothing and then set the money aside so that you can pay off the balance in full each month. Do NOT go over your credit limit. It is very important to make your payment on time. Mail it several days before it is due. Keep up this pattern of responsible credit card use and you will be surprised to see how much your credit score will improve in just a few months.

Most car dealers will have no problem finding a credit solution that will allow you to purchase a vehicle. They understand that after a bankruptcy your former creditors can no longer sue or try in any way to collect from you. Be careful, understand exactly what your payments will be and be sure that you will be able to afford them. As with the credit card example above it is very important to make your payments on time.

Monitoring your credit is another aspect of rebuilding. There is no need to purchase a subscription to get your Experian, Equifax or TransUnion credit reports. You are entitled to a free annual credit report from each of these three major credit reporting agencies (click the link to the left). Order a report from one of the three companies, review it and report any errors or disputed information back to them. Each reporting agency will have instructions on how to report errors and disputes attached to the credit report itself. You will want to do this in writing and keep a copy of what you wrote for yourself. The credit reporting agencies are required to provide you with an updated report after they have contacted the creditor in question. A good suggestion is to order a free credit report from one of the three credit reporting agencies, wait four months and order a free report from the next agency and so on. That way you get a new credit report every four months without subscribing to a service or spending money unnecessarily. No one can monitor your credit better than you!

As you can see, the big three concerns for people after a bankruptcy case are buying a house, purchasing a car, and establishing additional lines of credit after their discharge. Each of these financial goals are relatively easy to establish after a bankruptcy case. In most cases, the completion of a bankruptcy case increases someone’s credit (i.e. FICO) score because the amount of debt and bad credit is wiped out in the case, leaving the good information on the report.

Someone can qualify for the most common house loan two (2) years after a bankruptcy case is concluded. These are loans through the Federal Housing Authority (FHA) and its two (2) subsidiaries, Fannie Mae & Freddie Mac. Through the FHA program, someone who has filed for a bankruptcy case can qualify with as little as a 3% down payment on a house! However, as with any new credit, you should be careful that you can afford not only the down payment and the monthly payments but also the property taxes, insurance, home owners association fees and any other costs associated with owning a home.

Immediately after a bankruptcy case is filed, creditors begin sending offers of credit to people. These generally include credit card offers, unsecured lines of credit with banks and secured credit whereby you have to pledge money or property to get a specific line of credit. Again, accept only those offers that you think you can afford! Check your monthly budget and ensure that you can make at least a minimum payment on these lines of credit.

Securing an automobile after bankruptcy is usually a chief concern for people who file. Oftentimes, a bad car loan or repossession is what drives someone into bankruptcy in the first place. After a bankruptcy car dealerships and finance companies go out of their way to solicit auto loan purchases. Again, the deal boils down to simple math. Can you afford the down payment, the monthly payments AND, is the interest rate competitive?

Chapter 7 Bankruptcy
A Chapter 7 bankruptcy really is a “Fresh Start” bankruptcy. A Chapter 7 bankruptcy is filed when an individual or married couple can no longer pay their creditors including credit cards, medical bills, unsecured loans, repossessions, etc. Often times a life changing event occurs such as losing a job, unforeseen illness, the death of a spouse which make it impossible to pay off these debts. Filing a Chapter 7 Bankruptcy will wipe out debts and provide you with a fresh financial start. It sounds unbelievable but it is true! Bankruptcy laws were put in place to give people who are facing hard times relief from their debts and creditor collections. Bankruptcy “exemptions” allow most filers to keep their possessions, cars, bank accounts, retirement accounts, etc. Our experienced bankruptcy Attorneys ensure that the vast majority of people who file for a Chapter 7 bankruptcy lose nothing except their debts.

Chapter 13 Bankruptcy
Filing Chapter 13 bankruptcy can save your home, your car, get rid of your second mortgage, pay off credit cards, payoff old taxes and more. It can literally be a life saver! Chapter 13 bankruptcy stops a foreclosure immediately, lets you remain in your house and gets you into an affordable repayment plan to catch up on your mortgage payments. Another advantage is to include your vehicle payments in your Chapter 13 plan which often lowers your monthly car payment. Chapter 13 has consolidation power because you combine all of your debt including credit cards, property taxes, income taxes and medical bills into one set monthly payment.

Chapter 13 bankruptcy is very different from debt consolidation. Debt consolidation is not a legal process and there are no laws requiring your creditors to agree with your request to lower your payments. Most importantly, with Chapter 13 bankruptcy, you are given the benefit of the bankruptcy court overseeing your case and preventing your creditors from proceeding with collection, harassing phone calls, lawsuits, wage garnishments and repossessions. Chapter 13 bankruptcy combines all of your debt into one fixed, monthly payment so you can keep your home, your vehicles and get rid of unsecured debt. Chapter 13 bankruptcy forces your creditors to accept the bankruptcy court’s payment plan. You will no longer have to juggle bills and try to remember to make each of your monthly payments. Instead, you pay one monthly payment that is determined by how much you can afford, not by what your creditors demand from you.

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