You’re broke, you can’t pay your bills, and you can barely put a hot meal on the table. You’re seriously thinking of moving back home with your parents, and your FICO score is so low it doesn’t even register on their charts. Should you file for bankruptcy?
Actually, the answer might surprise you. Bankruptcy laws took a drastic change in October 2005 when the courts decided that bankruptcy was just too darn easy. Individuals would run up bills, spend like crazy, max out credit cards, then hire an attorney for a few hundred dollars to help them file for Chapter 7 and have all their debts discharged.
Those days are over! Individual filings for Chapter 7 have almost become a thing of the past. No longer can you just assume that your creditors or the courts will listen to your sob story and forgive your debts.
Now, courts demand that you not only pay back a good portion of your debts, but you for all intents and purposes lose control over how you spend your future income. A large percentage is allocated to payment schedules. Miss a payment, and you answer to the court.
Before these new laws were enacted, you were supposed to declare all assets -property, furs, jewels, artwork, and even that Rolex you inherited from your grandfather. Anything that the courts could sell to repay your creditors would be taken away. Of course, there was the assumption that all the paperwork you signed had all your assets listed.
Aside from the obvious humiliation and ruined credit history, this was a fairly simply process all around. But – changes were made to this scenario! Your attorney is now held liable for the accuracy of all the assets you list, or don’t. The courts are authorized to pull ad hoc inspections at various residences, much like having a search warrant, but without one. If perhaps that Rolex, or a mink, is found that wasn’t listed on your asset sheet, you and the attorney can be held in contempt.
So, now with all these rules and regulations and heightened levels of liability have been implemented, bankruptcy doesn’t sound like the nirvana like panacea it was before. Now, it can cause more problems that it fixes.
This is not welcome news for those who have filed for bankruptcy since the past few months as things will go from bad to worse in the current scenario as this is considered the last resort in banking terminology and there comes a time when you have no choice but to wait for the opportune moment when you need to seek out the attorneys to help you out but are you Looking For Bankruptcy & Family Law? If so, then you need to look it up online and study in detail about it.
What are your options?
Check out some reputable non profit agencies that specialize in credit counseling. Do not agree to have anyone pay your bills. Just find out if they can negotiate lower amounts for you with each creditor. If they promise to do this, ask for paperwork provided by your creditors clearly outlining your obligations going forward. Keep in mind that consumers undergoing this type of credit counseling are frequently asked to freeze all credit card purchases for the duration of the payment period needed to pay off your agreed to amounts. This could mean years in advance. In other words, if you do need to use credit cards, this may not be a real option for you.
Allow your creditors to sue you. Yes, sue you! This is becoming more common than ever. Of course, creditors have always brought negligent accounts to court to force them to cough up some money. When a debt is satisfied in this manner it is called a “charge back”. During your negotiations either before your court date or during it, you and/or your attorney will agree to a sum you can pay back, and work out a payment plan.
These cases are heard in a local district court, not a federal bankruptcy court. These judges, at least for the time being, are much more sympathetic towards your plight. As far as they are concerned you are only late on one account. The judge will probably ask what you can afford to pay. You can say “$5.00 a week”. These judges are working for your benefit, not the big credit card companies. You have an excellent opportunity to agree to a final payoff – maybe even less than any credit agency could arrive at for you – and explain your side of the story. And you have a say in how and when you can pay them back.
All in all, a charge back is certainly more in line with your future goals than a bankruptcy or even a credit counseling agency. You don’t need to forfeit assets that are sold off at pennies on the dollar. You don’t have your credit cards frozen while you pay off your bills (although you might seriously think about giving up whatever credit cards still work before you get into any more trouble). And you don’t give up complete control over your future income, which is essentially what happens in a bankruptcy.