Bankruptcy Options For Broke People

Most people think that these three statements sum up a bankruptcy:

  • When you file bankruptcy protection you lose almost everything that you have including your home, your car and all of your property in order to pay off your debts.
  • The bankruptcy erases all of your debts.
  • The road following bankruptcy is a long and arduous one. You have to start from the bottom financially in order to re-establish your credit rating.

These statements are all true, to a point. Read on to learn more.

Two Types of Bankruptcy

There are two types of bankruptcies in the United States. There is the Chapter 7 bankruptcy and the Chapter 13 bankruptcy. The circumstances described above characterize a Chapter 7 bankruptcy for any given person. The U.S. Bankruptcy Code also includes provisions for a Chapter 13 bankruptcy for an individual as well as bankruptcies that are geared towards businesses.
Before deciding to file for bankruptcy you should consider your alternatives. These include:

  • Finding ways to earn more money and/or spend less to pay off debts
  • Applying for a debt consolidation loan
  • Obtaining a debt management plan by way of credit counselling

The Difference between a Chapter 7 and Chapter 13 Bankruptcy

When you file for a Chapter 7 bankruptcy practically all of your assets need to be sold in order for your debts to be repaid. On the other hand, a Chapter 13 bankruptcy is often referred to as an “Adjustment of Debts.” What this means is that a repayment arrangement is set over an extended period of time. What these two types of bankruptcies have in common is the ending- both come to a close with a bankruptcy discharge. At this point the debts are gone and the person must start on the road to financial recovery.

When a Chapter 7 bankruptcy is filed, the debtor must surrender all of his property to an attorney that has been assigned to the case. It is the attorney’s job to take the property and convert it into cash value in order to pay money to the creditors. There is sometimes property that is exempt from this procedure. These items are called “exempt assets.”

A Chapter 13 bankruptcy is geared towards those who want to pay back their creditors in full but need a more substantial period of time to do so. In this case the debtor is not expected to sell any of his assets. When it comes to this kind of bankruptcy, bi-weekly or monthly payments are made to the creditors. The amount of the payments is determined by how much the debtor can afford to pay after all necessary living expenses have been accounted for.

Be aware that a Chapter 7 bankruptcy is the best option for bankruptcy for an individual who has little if any assets and a modest income. When there are no assets involved, filing is a very basic procedure. However if a person is making an above average income and is able to repay a portion (if not all) of his debts, then he may have to file for Chapter 13 bankruptcy instead. In this case, a Wage Earner Repayment Plan will be put into play.

Filing Chapter 7 Bankruptcy

When faced with bankruptcy, most people prefer to file a Chapter 7 bankruptcy as opposed to a Chapter 13. There are a variety of reasons for this. First of all, a Chapter 7 bankruptcy is effective; it takes very little time and involves a simple filing process. As well, payments are not required over an extended period of time.

In most cases, a Chapter 7 bankruptcy takes place within a period of three to six months. In this way it is not long and dragged out over months or years. The debtor comes out of the bankruptcy virtually free of debt. There are certain debts however that are not a part of the bankruptcy process and need to be paid. These include mortgages or rent payments, car payments, child support payments, student loans and money owed to the IRS.

While it is possible to lose assets such as property when you file for a Chapter 7 bankruptcy, this is the exception as opposed to the rule. A Chapter 7 bankruptcy allows the debtor to keep most of everything he owns. The less a person has the better off it is for them when it comes to a Chapter 7 bankruptcy. One of the exceptions to this is if you use property of yours as collateral for any loans you have outstanding.

Before more is said about the Chapter 7 bankruptcy it is important to note that not everyone qualifies for a Chapter 7 bankruptcy. Chapter 7 bankruptcies are best for those with few assets and modest to low incomes.

If the court deems that your income is high enough to warrant paying all or a portion of your debts then you may have to forego the Chapter 7 bankruptcy and instead file for a Chapter 13 bankruptcy. The court will subtract the amount of money that you need to spend on living expenses and other bills (such as a mortgage, car loan, child support, income tax, utilities, etc.) from the money you earn and determine whether you make too much to qualify for a Chapter 7 bankruptcy.

The number one reason that a Chapter 7 bankruptcy is most preferable is that debts do not have to be repaid, in full or in part. On the other hand, in a Chapter 13 bankruptcy involves a three to five year plan of repayment. The debtor will not be discharged until the debts have all been paid. In some cases if the individual has sufficient income, the debt must be paid in full. In other cases the arrangement may be worked out that only a portion of the debt need to be repaid.

Consider A Consolidation Loan

If you are constantly hearing about the concept of consolidation and want to learn more then you have come to the right place! A consolidation loan is when you take a variety of debts you have (be they large or small) and turn them all into one loan. Instead of having five creditors to pay individual sums of money to, you end up with one loan that constitutes one monthly payment to one financial institution. Consolidation helps to ease the financial burden of owing money to lots of different people. It sometimes (but not always) nets you a better interest rate as well.

Why is consolidation a good idea?

Consolidation is sometimes undertaken when a person is refinancing their home and decides to include their other debts in with their mortgage. Yet others choose to apply for a consolidation loan if their debts have become too much for them to handle. It is important to note that if your credit is good and you have a stable income then being accepted for a consolidated loan should not prove to be a problem. If on the other hand your income is low and not very stable according to the standards set by the lending institution, or if your credit is poor you may find that in order to be approved for consolidation, you will require a co-signer.

Consolidation Loan for Credit Card Debt

If you owe money on a selection of credit cards and are considering consolidation then look at the situation from every angle. In some instances, that one consolidated payment may actually mean that you are paying more money every month on your debt, as opposed to less.

Take a very scrutinizing look at the creditors that you owe money to as well as the interest you pay on a monthly basis. It also is important when you are considering consolidation that you figure out what fees you will be charged if you decide to place all of your credit card debt under one loan.

Consolidation can be a wonderful thing to do but it is not advantageous to everyone. Some consolidations loans are not geared to work for you the borrower but are geared towards helping the creditor. That is why you have to look carefully at the situation before you make a final decision. This is the case for example, in the instance of a loan that offers zero percent down or else a low interest rate to start out with that you then find out will be raised to a higher interest rate at a specified point in time.

Consider all aspects of a consolidation loan before you decide that it is the right thing to do. Remember that if you have gotten yourself into debt, consolidation is one option but not the only one.

Being Bankrupt Is Not the End of the World

Nobody willing chooses to be bankrupt. Even the sound of the word bankrupt is not music to anybody’s ears. The state of being bankrupt is sometimes compared to financial suicide. This only makes those who become bankrupt feel all the more anxious and upset about their predicament.

Being bankrupt will impact your credit rating but this does not mean that you are doomed in a financial sense. The bankruptcy will remain on your record for a period of anywhere from seven to 10 years. This is standard procedure.

One of the most promising things that many people do not know about being bankrupt is that practically from the day that you are discharged from bankruptcy your credit score is able to start looking better. That is something to smile about for sure!

Being bankrupt is no fun but it does not mean that you are a bad person nor does it mean that your financial picture will always look glum.

Make Contact with the Credit Bureau

One of the first things you should do after being bankrupt is to get in touch with the credit bureau and have them mail you a copy of your credit report. This will probably cost you a small fee. While there are three credit bureaus that operate in the United States- Equifax, Experion and Trans Union- you need only contact one as they all communicate information with each other. They have separate files on you but each is privy to the information that the other one has.

One thing you must learn from your experience of being bankrupt is to be as careful with your money as possible and to peruse everything with a fine tooth comb. Once you have the report in hand look it over as if you were holding a magnifying glass. If you find an error then report it to the credit bureau immediately so something can be done about it.

Start to Rebuild

In order to begin rebuilding your credit you need to have a credit starting point. If you were bankrupt then you are not likely to be issued an unsecured credit card so opt for a secured credit card instead. A secured credit card is comparable to a checking account. You establish the credit limit by using your own money and then you borrow and repay the money according to the limit. For example, after you have been bankrupt you might decide to establish a small limit of $500, $800 or $1000 or you might decide to start larger and have a limit of $1500, $2000 or $2500. Choose an amount that you can afford and are comfortable with.

A Look At Debt Relief

The true meaning of debt relief is the partial or complete forgiveness of a debt. Debt relief can apply to individuals, companies or even nations. Debt relief in the way it is described here is rarely a reality.

Debt relief can be looked at in the broader spectrum and in this way it is a method of getting yourself out of murky financial waters and helping you reach a point where you can manage your debts adequately. Debt relief is relief that comes from getting out from under the burden of debts that is weighing you down.

Exploring the Options in Debt Relief

What forms can debt relief take? Debt relief can involve creating a budget that works for you; or it can be about communicating effectively with your creditors. Debt relief can also involve consolidating your debts. As a last resort, debt relief can involve making the decision to file for bankruptcy.

If you realize that debt relief is something that you need then there is more than one way to go about repairing the situation. If the money problems you are having are temporary then your best course of action for debt relief is to get in touch with your creditors and explain to them what is going on in your life. As long as your account is in good standing it is likely that an adequate payment arrangement will be able to be worked out. Some creditors might allow for the temporary suspension of monthly payment obligations until you are back on better financial footing.

The downside to this is that once you go back to making regular payments you are likely to be required to make larger payments than you did before. If this helps bring you debt relief then the higher monthly payments were probably worth it.

If you tend to be a spender and have a difficult time getting yourself into the groove of paying your bills on time, then debt relief for you might take the form of an appropriate budget. This might be something that you can do for yourself or else you might want to enlist the help of a person who is qualified in the area of money management.

Debt relief in this way involves taking a careful look at your monthly income and then setting aside the required amount for each bill. It is also important to set aside some money for savings and in case of an emergency. Whatever you have left over is for you to do with as you please. In other words, your fun money.

If you are in a great deal of debt then be aware that you have options. Seek out a form of debt relief that will be of the greatest benefit to you right away. Do not delay.

Debt Free Christian Companies: How Do They Help You Get Out Of Debt?

Debt free Christian is a common term that people come across while searching for debt relief solutions to solve their financial problems. People fall into debt since they take out loans that they can’t afford. Moreover, they spend more than they earn due to the easy availability of plastic money or credit cards. When they understand that they have accumulated a huge debt burden, it’s too late. If you’re in similar circumstances, then you should look for a way out to eliminate your debt burden.

How can debt free Christian organizations help you?

Currently, many people who’re struggling with their dues are resorting to debt free Christian organizations that offer a range of services to get out of debt. Their services are based on biblical education and principles and their fees are also cheaper than other non-Christian debt relief organizations. Their goal is to make you debt free in a simple way. Various services offered by them usually include the following:

  • Credit counseling
  • Debt settlement
  • Debt consolidation
  • Debt management

These organizations can offer priceless services that you can use to pay off unsecured debts like credit cards, payday loans, personal loans, utility bills and so on. Though their services aren’t available for free and they would charge a nominal amount against their services, they mostly work as non-profit agencies. The interest of their clients is their top priority. They can truly show you the path towards financial independence if you follow their instructions sincerely.

How can you gain from a debt free Christian organization?

A debt free Christian organization can benefit you in the following ways:

  • Rather than multiple payments, you just need to make a single payment to them
  • They help you simplify your budget
  • They can reduce your interest rates and monthly payments through negotiations with your creditors
  • They can set up a well-devised repayment plan that you can easily manage
  • Making timely payments under this plan can help you boost your credit score
  • They would pay off your creditors on your behalf
  • They can eliminate your late fees and over limit fees
  • They can prevent embarrassing calls from your creditors
  • They would apprise you of the advancement you’re making
  • They can provide credit education and tips on money management skills
  • A debt free Christian organization can really help you achieve peace of mind.

However, you should check their background with the BBB since there are some scam for-profit companies that pretend to be Christian debt relief companies.

Should You Consider Debt Settlement

Most who consider debt settlement are looking for an alternative to bankruptcy. Usually because of excessive debt that can’t be paid back. Debt settlement is when you negotiated the amount you owe with your creditors to pay a lower amount. There are a number of debt settlement companies out there, but you can also do it on your own. Some debt settlement companies can charge huge fees for their services so be careful if you decide to work with one.

You may wonder why a creditor would agree to a debt settlement; surely they want their money. This is true, but not in every case. Many creditors would rather accept a lower amount than spend the time sending you dozens of collection notices to get the full amount. They would rather accept a debt settlement of 20-75% of the amount owed as a one-time payment and forget about the rest of the debt. The creditor then reports on your credit report that the debt has been settled. Most of the time a creditor will only accept a debt settlement if you are at least three months behind on payments. No one can guarantee that a creditor will accept a debt settlement but it’s always worth a try.

Debt settlement companies are becoming more prevalent every day. In the current weak economy, these debt settlement companies are looking to take advantage of the large number of Americans in debt. The problem is when these companies know they can charge excessive amounts for debt settlement services. These companies are supposed to help you negotiate with creditors. Sometimes these companies cannot negotiate debt settlement with all your creditors yet still charge you fees every month. Be careful and fully investigate any debt settlement company you work with.

Debt settlement is only a good option if you are looking at imminent bankruptcy. It also isn’t the best option if you qualify for Chapter 7 bankruptcy. With a chapter 7 bankruptcy most of your unsecured debts are written off so debt settlement is unnecessary. And also if you qualify for chapter 7 you most likely don’t have the cash flow that debt settlement would require. Under these circumstances another option, like debt management, may be better for you.

Some consumers decide to purposefully allow their account to get three to six months delinquent in order to negotiate a debt settlement. If you are good with making your payments this would be a huge mistake. Debt settlement in these circumstances would only ruin your credit rating and your reputation with your creditors. However, if you have a legitimate financial hardship that is making it increasingly difficult to make payments on time, then this might be a good option and is a bankruptcy alternative. Creditors will be more like to accept a debt settlement if you had at least been attempting to pay the debt back. There are many other options when debt settlement may be right for you, the decision is yours to make.

The Truth About Debt And Creditors

Millions of Americans are finding themselves in debt and getting out of debt is never easy. It is important that you build for your future, and that means finding a method to get yourself out of debt as soon as possible. That is the hard part for many people. Getting into debt generally happens much more quickly than getting out of debt.

You must have a basic understanding of what it is and how it works. It is the ambition of many creditors to keep consumers in debt. The longer that you are making payments, the better it is for your creditors. The opposite is true for your own financial situation.

Not everyone who has debts needs to get out of debt. If you are currently making your mortgage payments, car payments, and are able to pay off your credit cards in full each month, you may not need to get out of debt.

If you are unable to make monthly payments, or are only able to make minimum payments on your credit card debt, you are on the threshold of debt becoming a focal point in your family’s financial scenario. As stated this is the ideal scenario for creditors. The weight and stress of that debt will eventually catch up with any borrower.

Most debt generally fits into two categories or types. There is non-consumer debt and consumer debt. Non consumer debts are debts that are generally attached to an asset that tend to appreciate in value, such as your home or other real estate. The more common non-consumer debt is your mortgage or home-equity loan.

Consumer debts on the other hand are often incurred from everyday spending on goods and services. These would apply to your credit cards, auto loans, personal loans, and loans made for general purposes such as appliances and other consumer debt.

While it will not feel like it for the person who is in debt debts are classified as good debt or bad debt. The non-consumer debts are defined as good debt because of their low interest rates, tax advantages, and of course the collateral that tends to appreciate in value.

There is no debate about what type of bad debt is the worst debt. That would be credit card debt. Credit cards require you to make a minimum monthly payment equal to about 3% of your balance in order to keep using your card.

Remember what we said about creditors, this is where they want to keep their customers. If your credit card balances $2500 is likely that your payment at the end of each month is $50. It will be years and years before this debt is ever satisfied, and that’s assuming you don’t add to $2500 balance.

To the consumer or the credit card holder this is a good deal because it allows them to spend money without having to pay for goods or services in full. The reality of the situation is this is the main culprit in consumers that.

If you have bought into this principle, you are not alone. If you desire to escape the madness of credit card debt and debt in general you must implement a plan to do so.
Do not get caught in the thinking that you are making your minimum monthly payments, so you are doing good. Making minimum monthly payments only insures that you will be making minimum monthly payments for a long time, and that’s where creditors want you to stay.

Consolidating Your Debts With A Debt Reduction Loan

Many consumers have heard of consolidation loans or debt reduction loans. These are quite basically the same thing and both can help you get out of debt. However, they will only assist you with your debt if they are the right solution for you and if you use it the correct way. Using a debt reduction loan could put you in an even worse situation, so research carefully before deciding on taking action.

The way debt reduction loans work is a very simple and straightforward process. They loan takes all of your balance, usually the ones with very high interest rates, and roll all of those balances to a single loan. Then you are only concerned with repaying one loan and worrying about a single interest rate.

In many cases the consolidation loan that you get will have a lower interest rate that the other individual debts. Because the interest rate is lower the payment on the single consolidation loan will often be lower than the previous payments combined as well. So on these few things alone getting a debt reduction loan seems like a win-win situation for your debt. It just might be but there are a few things to keep an eye out for that can make a debt consolidation loan work out very badly.

When you start making payments on your new consolidation loan you should notice that the payments are lower. The best way to handle your loan is to try and put some of the money you were previously using for your individual balances to pay more than the minimum payment on the debt reduction loan. Paying more than required means that your balance will get paid off sooner and you’ll be paying less in interest overall. Paying just the minimum would mean that you end up in debt for just as long as you would have without the loan.

The thing that mostly typically goes wrong with debt consolidation loans is that the temptation to use those newly balance free credit cards on your next shopping trip. This will only put you back in even worse trouble than you started with because you will have to pay the consolidation loan and a brand new balance. Statistics show that a large majority of consumers who employ a debt consolidation loan will have a new credit card in about half a year. But if those cards are closed and not available then it may be easier to not pull out the plastic for anything.

It is vital to look closely at your spending habits before the consolidation loan or else it might not be helpful. Credit cards are not inherently bad news but you have to address how to use them properly and how you got yourself into trouble or a consolidation loan won’t help.

Handling a Bankruptcy and Divorce

If you are in the position that you and your spouse are quickly headed toward a divorce but also have a mountain of debt between the two of you, you might be wondering what your choices are going to be.

That mountain of debt is likely to get even harder to handle when you divorce, so it might be better to file for bankruptcy before you file the divorce papers. By filing bankruptcy first it will allow your divorce to proceed more smoothly and some of the debt to be handled for a cleaner break for the two of you.
Even if you can’t be rid of all your debts with the bankruptcy, you will have a better idea of how to handle the remaining debts. It will also mean that if your ex-partner files for bankruptcy again later on, you are protected because your joint debts have already been taken care of before the divorce.
Here is how the process will work. When one or both partners in a marriage file for bankruptcy all of the property that is shared between the two will become part of an estate that is used to pay off the debt.

Filing a bankruptcy also grants you an automatic stay, meaning that creditors cannot call you and ask for money anymore because the court is handling it. Also remember that this stay does not mean that during the divorce any child or spousal support that is ordered doesn’t have to be paid, it still does.

The next step is that the court decides which property is exempt from bankruptcy, so it cannot be sold to pay off your debts. Once this step has been done then you can safely file your divorce papers and the exempted property will be divided between you in arbitration.

Keep in mind that if you are in the middle of a bankruptcy but also trying to negotiate property settlements, that is a lot of complicated issues to handle at once. Some debts related to property settlement may not ultimately be paid under the bankruptcy, so you need to make sure that those debts still get paid.

If you cannot afford to pay the debt they may still be able to be wiped out, but only if you can prove that you cannot pay the debt and still take care of yourself or your family. You can also get a debt wiped out if you can show that it would be less harmful to you for the debt to be wiped out than the harm done to the creditors if it is not paid.

One final thing to keep in mind, if you believe that your spouse might consider filing for bankruptcy after a divorce is finalized, you have to be sure that your finances are in order or you may end up paying even more debts then.