The following is Part 1 of a 6 Part Series on
Getting Out of Debt
Presented by the Consumer Defense Corporation
Which is best for me?
Most people seem to think they understand bankruptcy. But do they? Maybe they had a clue prior to 2005.That’s when there was an “out” – a once every ten years slap on the hand forgiveness of debt. That was Chapter 7 Bankruptcy. For over a decade the commercial banking lobby fought to get rid of it. Finally, on April 15, 2005, President George W. Bush signed the Bankruptcy Reform Act which became effective 6 months later. That Act effectively wiped out Chapter 7.
In its place is Chapter 13. And it is a monster. To qualify for Chapter 7 now, you must be either indigent, have little or no money, have no job or job prospects, or – and this is interesting – you must have more than a few hundred thousand in unsecured debt or three quarters of a million in secured debt. It makes me wonder what lobbying group got THAT portion pushed through.
Everyone else – only Chapter 13.
So what is Chapter 13 Bankruptcy? First, to qualify for it you must go through “Credit Counseling”. That can cost from a few hundred dollars up to $1000 or more depending on what state you are in. Part of that is the so-called “Means Test” which thoroughly examines your assets, income, and income abilities.
Out of that comes a percentage figure. This percentage determines what percentage of your total outstanding debt you must continue to pay. It can range from zero percent up to 100%. Most tests fall in between 20% and 60%. That means if you have, say, a $40,000 unsecured debt load, you could still be facing paying between $8000 and up to as much as $24,000 for the debt, plus the cost of the credit counseling, plus the court fees, the attorneys fees (which must be paid in cash prior to the court date) plus the bankruptcy referee fees… you’re better off paying it all off and not going through the hassle and cost.
Oh, by the way, under Chapter 13 the court appointed officer gets your pay check, doles out the money, and gives you an allowance. You are a slave to the court for about 5 years. No kidding.
That’s serious stuff.
If anyone understands that fact, they simply won’t go through bankruptcy. It is a terrible decision.
So what else is available?