The Best Plan For Debt Elimination
If you qualify, Chapter 7 Bankruptcy gives you the right to eliminate most of the common types of unsecured debts, like credit card debt, medical bills, bank loans, finance company loans, and credit union loans. It can also eliminate unsecured debts left over from a divorce, a failed business, personal guarantees, and trade creditors. Chapter 7 Bankruptcy even allows you to eliminate certain income taxes over 3 years old.
We have clients who routinely eliminate anywhere between $5,000 and $150,000 worth of unsecured debt – permanently, with no obligation to ever pay it back. Every day of the year, we have clients who eliminate $20,000, $30,000, $40,000, or more in unsecured debts.
Don’t forget about the interest you owe. When you eliminate debt, you also eliminate the obligation to pay interest on that debt. You know, from your own experience, how much of your payments go into just paying interest… and more interest. With Chapter 7 Bankruptcy, not only do you eliminate the debt, you eliminate all the interest.
Most importantly, this can translate into hundreds of dollars per month in lower payments.
Eliminate Stress and Worry
Chapter 7 Bankruptcy eliminates certain types of unsecured debts, but more importantly, it helps you get rid of the stress and worry that comes with having to deal with crippling amounts of debt – and the collection calls that never stop.
In our experience, most people do not file bankruptcy to eliminate debt – they file bankruptcy to eliminate the stress.
Keep and Protect Your Property
Most of our clients keep everything they own – and lose nothing. Every state adopts certain state or federal “exemptions,” which are basically lists of things a person can keep and still file bankruptcy. In Texas, the exemptions are such that most of the people who file a Chapter 7 Bankruptcy do not lose anything. Their home is protected , their personal property is protected, and even their retirement plans are protected. In the occasional case where it looks like a client has too much “stuff” to cover with exemptions, Chapter 13 is another option. In Chapter 13, people can keep all their stuff; they just have to pay in some extra money.
Filing bankruptcy does NOT mean you get to keep all your property for free. If there is a lien against the property, the creditor holding the lien still needs to be paid. If you own a home, while the equity is protected, you must continue to make payments on the mortgage in order to protect the home.
The same applies for a car loan. Generally, when you get a car loan, you give the lender a lien against your car title. In most cases, this lien is not affected by filing a bankruptcy under Chapter 7. Assuming there is an exemption to cover whatever equity there is in the car, the client would still have to keep current on the car loan to keep the car. If the car loan is not kept current, filing under Chapter 7 will not keep the lender from eventually repossessing the car.
Get out from under debt on property you’re willing to say “goodbye” to
Chapter 7 can help you eliminate debt associated with a certain piece of property that you: (i) have lost control of, (ii) no longer want, or (iii) can no longer afford.
Example 1 – Property you have lost control of: Many times in a divorce, one spouse will receive the house with the understanding that he or she will refinance the mortgage and remove the other spouse from the mortgage – but it never happens. If your spouse falls behind on the mortgage, the lender can still come after you for the money. By filing bankruptcy, you can remove your name from the mortgage, at least in terms of having to worry about the mortgage lender ever coming after you.
Example 2 – Property you no longer want: Let’s say you own a mobile home that is worth $15,000, but you owe $25,000 on it. Unless you can figure out a way to get rid of the mobile home and the debt owed on it, you are stuck. Filing bankruptcy under either Chapter 7 or 13 can help. As part of your bankruptcy, let’s say you decide to “surrender” the mobile home to the person or company that holds the lien against it. This person or company would then come get the mobile home and put it up for sale. If this happened outside of bankruptcy, they would come back at you to collect any money they did not get from the sale. In Chapter 7, after you surrender property back to a lender, all that’s left is an “unsecured” claim against you – and unsecured claims are what bankruptcy eliminates.
Example 3 – Property you can no longer afford: Let’s say you own a home, but you can no longer afford to make the mortgage payment. What do you do? By filing bankruptcy, and by agreeing to give up the home, you can get out from under the mortgage payment. If this happened outside of bankruptcy, the house would get foreclosed on and then the mortgage lender would sue you for whatever money it did not get out of the house. By filing bankruptcy under Chapter 7, you are discharged from the whole debt – the mortgage lender is forever barred from coming after you for the unpaid part.
Stop Lawsuits and Creditor Harassment
One of the most powerful things about bankruptcy is the “automatic stay.” When you file bankruptcy, you immediately get bankruptcy protection. The Court immediately sends a Court Order to all creditors, demanding that they leave you alone.
If a creditor does NOT comply with this order, the Bankruptcy Court has the power to punish the creditor severely. Most creditors know this and will immediately comply with the Order. The creditor must stop all collection calls – at home and at work – stop writing collection letters, stop all lawsuits, and stop all garnishments
At the end of your Chapter 7, creditors with “non-dischargeable” debts like alimony, child support, student loans, and certain taxes can take up where they left off. The good news is that if you eliminated enough other debt in your bankruptcy case, you will now have more income and be in a better position to deal with these residual “non-dischargeable” debts.