BK 7 and 13 vs. Credit Card Counseling vs. Debt Settlement

When would I consider debt Settlement?

Debt Settlement: Credit Cards bills cannot be paid down within an acceptable time frame or you are unable to make your minimum payments then a debt settlement plan might be for you. Debt settlement will reduce your monthly payment and we will settle with your creditors with the funds you have built up in your escrow account.

This will negatively impact your credit but not as bad and as long as bankruptcy.
The debt settlement payment may be less then the state appointed BK payment.
You can miss payments and pull money back if needed, unlike BK.
You can avoid the stigma related to filling bankruptcy.

Credit Counseling CCC: Though we do offer credit counseling, we DO NOT believe in it. Credit Counseling will lower your interest rate on your credit cards and not the balance. During the time period the interest rate is lower clients will try and pay down the principle. This does negatively impact your credit and does not have much value in our opinion.

When would I consider Bankruptcy?

• Sale Date: You have a sale date on your home that the lender is unwilling to extend for a modification. Filling bankruptcy will stop this process.
• Lien Stripping: Removing the 2nd or 3rd mortgage from the title of your home via bankruptcy to have an affordable mortgage.
• Business Debt: Filing business debt and bankrupting you company.

What are the consequences of bankruptcy?

• Reporting on Credit: BK will report on your credit for up to 7 yrs. This will have a negative impact on your FICO scores.
• Credit Cards and Loans: You may not qualify for new types of credit, like mortgage loans or credit cards.

DEFINITIONS:

Chapter 7
Chapter 7 bankruptcy is preferable for people who do not want to be “locked down” to a stringent budget for up to five years, or who don’t have a consistent income stream that is sufficient to pay all monthly bills as they come due. Chapter 7 is a “liquidation” procedure, which actually works best for most people. The typical timeline for Chapter 7 is only 90 days start to finish and it works like this:

You (and your attorney) prepare the “bankruptcy petition package” and file it with the Bankruptcy Court. The “bankruptcy petition package” is a bunch of forms and information needed by the court. The purpose of the “bankruptcy petition package” is, in essence, to create three categories of information.

You list all of your “assets.” Assets are the things that you own: cars, house, clothing, household furnishings, money in the bank, etc.

You list all of your debts: credit cards, loans, medical bills, car payments, mortgage, judgments, liens, unpaid taxes, etc.
You list your monthly income and your monthly expense budget: Monthly income for bankruptcy purposes is wages from your job and any other money that you regularly receive, e.g. unemployment, disability, social security, alimony, etc. Monthly expenses are all of your normal monthly bills that you have to pay to support you and your dependents like rent, house payments, utilities, car payments, insurance, food for you and your family, taxes, basic necessities, medical and dental expenses, support for children and elders that you care for, and all the other bills that you have to pay in order to live.

Chapter 13
Chapter 13 bankruptcy is a “debt repayment plan” that is designed to allow people to “catch up” on missed house or car payments by making up the missed payments over a period of time.

It works well for people with regular income and who can pay their normal expenses but have missed house payments due to a temporary interruption in income, such as an illness, a period of unemployment, or other temporary circumstance.

The benefits of Chapter 13
It allows you make up missed house payments over time, but you must have a consistent and provable source of income and be able to make all your regular payments every month, and pay a little extra toward any delinquency.

The down side is that Chapter 13 requires you to live on a specific budget for a period of three to five years. Chapter 13 does not work for people who have a mortgage payment that has “reset” to a higher amount that they cannot afford, or are facing a large debt load that cannot be paid off over a three to five year period.

 For more information on debt and how to control it please go to this website.  Contact me if you have any questions regarding the above information

http://jerrykays.xodus.com

jkays@jerrykays.com