Bankruptcy

Bankruptcy may make it possible for you to:

• Eliminate the legal obligation to pay most or all of your debts. This is called a “discharge” of debts. It is designed to give you a fresh financial start.
• Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)
• Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
• Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
• Restore or prevent termination of utility service.
• Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.

Bankruptcy can not, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:

• Eliminate certain rights of “secured” creditors. A “secured” creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally can not keep the collateral unless you continue to pay the debt.
• Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, most student loans, court restitution orders, criminal fines, and some taxes.
• Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.
• Discharge debts that arise after bankruptcy has been filed.

Hiring a lawyer to file your bankruptcy can help.

1. Once your hire a lawyer, creditors must stop calling you.
2. Your lawyer will help identify consumer protection claims and other rights to which you might be entitled.
3. Your lawyer will be sure you list all your assets and liabilities.
4. Your lawyer can explain the different Bankruptcy chapters and decide which is best for you.
5. Your lawyer can prevent you from making mistakes which could cause you thousands of dollars or loss of assets.
6. Your lawyer can help redeem personal property, like a car, from secured debts at a fraction of your original debt.
7. Your lawyer will make sure you don’t loose your discharge for failure to take a financial management course.

Loan Modifications

For the most part, banks do not want to own your home, or to kick you out of it by way of a sheriff’s sale.  I know that may be hard to believe based on the way many banks treat customers who fall behind on the payments.

The truth is that there has never been a better time to be in the driver’s seat when it comes to negotiating with a bank.  Many banks are desperate to turn non-performing loans into paying assets again.  It may be possible to stretch out the term in which to pay back the loan, or to lower the interest rate on the loan.  You can forget about the bank reducing the amount of principal you owe on the loan.  Despite the claims of some loan modification companies, it just does not happen.

A loan modification is not for everyone.  For many people, they are a bad deal.  Many people owe more on the house than it is worth.  A loan modification merely delays the inevitable conclusion – that the house needs to go back to the bank, and that the homeowner should walk away from a lifetime money pit.

For others, a loan modification is a smart choice.  A loan modification may allow the borrower enough time to get the children through school, or to get back on his or her feet. Having an attorney who can explain the pluses and minuses in your particular situation is the best way to go.

Offer in Compromise with the IRS

Some people owe the IRS more taxes than they will ever be able to pay.  For those people, making an offer to the IRS may provide long-term relief.  It is almost a necessity to engage the services of an attorney or CPA with experience in negotiating with the IRS.  This is an area where the fees charged by the professional may be money very well spent.

Negotiation

Believe it or not, some creditors and law firms are reasonable when it comes to hearing your side of the story.  Many companies realize that they can not “get blood out of a turnip.”  If a debtor makes a payment offer or settlement offer in good faith, many times law suits and garnishments can be resolved.  An experienced attorney can advise you of your options, and help you to negotiate a workable plan.

Debt Settlement Companies

Very rarely does a debt settlement attempt using the services of a debt settlement company have a happy ending.  Most of these companies will have you send them a monthly payment instead of sending payments to the credit card companies.  The idea is to build up a pool of money (minus their fees) with which to make cash settlement offers to the credit card companies.  The problem with this strategy is that the credit card companies file suit against you after a few months of not getting their money.  Now you are stuck answering a lawsuit, which you will ultimately lose, and being faced with judgments against your property, bank account or wages.  Most of the time, a debt settlement company will accelerate your financial problems to the point where bankruptcy may be your only option.