If you are able to pay your expenses, you should. Typically, the only reason we continue to make these minimum payments is to maintain our credit score. At some point, you must determine how much your credit is worth in actual dollars. For the majority of individuals, it is not very much. Sometimes it is best to just let it go, such as when paying your minimum credit card payments would prevent you from putting food on the table.
If you have no assets that you dread losing and earn less than the median income for a family of your size, Chapter 7 is often a quick and simple solution to your debts and problems. We will always attempt to explore non-bankruptcy alternatives with you, but for many individuals I encounter, the choice is clear.
If you are behind on payments for your house or car and want to retain them, Chapter 7 will not assist you. If you are behind on your payments, Chapter 7 can protect you from your debts, but the lender will still get the house or vehicle back. Not always is that what you want. You can instead file Chapter 13, which involves establishing a payment plan to repay a portion of your debts. You can make up your delayed payments over time and pay a nominal sum to your remaining creditors. Chapter 13 is also appropriate for individuals who earn too much money or have too many assets to qualify for Chapter 7 with relative ease.
We only discuss Chapter 12 because we are required to do so as part of our explanation of bankruptcy. Chapter 12 is dedicated to family producers. I have never encountered a family farmer who had to file for bankruptcy in my 13 years of practice, and I have only heard of one such case.
Chapter 11 is frequently utilized by individuals and businesses that need to restructure their debt, businesses, or lifestyles. It is extremely costly, but offers tremendous adaptability. Typically, Chapter 11 candidates have too much debt to qualify for Chapter 13, are behind on mortgage payments on a property they wish to retain, and Chapter 7 is not an option.
I frequently discuss bankruptcy because it is the best option for many of the people I encounter. However, you should remember that you are not required to file for bankruptcy. You could save your nickels and pay or resolve your debts instead. I have negotiated favorable debt settlements for my clients with success. While it is possible to resolve your own debts, you may find that hiring an attorney to act as your advocate is worthwhile due to the money he can save you. If you decide to resolve your debts, you should NEVER propose a payment plan to a creditor. I always recommend that clients either disregard a creditor or offer a lump-sum settlement. If you do not have a lump quantity, you should save up and then call. If conserving money is impossible, you should likely consider filing for bankruptcy. Remember that the lender wants you to enroll in a payment plan because the longer you pay on a debt you have no chance of repaying, the more money they make and the more television advertisements they can air.
You should also be aware that if you resolve a debt, you must pay income tax on the amount your creditor deducts. In other words, if you resolve a $40,000 debt for $10,000, you can anticipate an increase of $30,000 on your Form 1040 for the following year. Once they hear about the tax burden of debt settlement, a significant number of people who initially intend to settle their debts immediately switch gears and consider bankruptcy.
Not intended as legal advice. If you believe it is necessary, consult a local attorney for a fact-specific analysis of your situation.""
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