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Bankruptcy Alternatives Blog
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Saturday, October 31, 2009
Bankruptcy Alternatives: An Expert's Advice
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The editors of the Bankruptcy Alternatives Information web site are constantly researching ways to avoid bankruptcy. In the past we have discussed debt consolidation loans, credit counseling, Chapter 13 Wage Earner Plans, and Consumer Proposals.
Today we are pleased to report on a new research report from Dave Clark, a U.S. attorney with many years experience helping people in financial trouble. Here is his story:
I graduated with a BS degree in Economics and a minor in Finance. I worked as bank examiner for several years before going to law school. Once graduating law school with honors in 1984, I accepted a job as an associate in large metropolitan law firm and represented some of the largest and wealthiest corporations in the U.S. But it wasn't satisfying. No, not at all.
I found my true calling and fell in love with practicing law again. I began working even harder, earning less at first, representing ordinary workaday consumers. I began thinking of large corporations as bloated whales, driven by arrogance and greed, as they systematically rolled over working moms and pops. I fell in love with the possibility of becoming the fastest barracuda in the ocean that could take a bite from whales anytime, anywhere and anyway I wished.
You see, I knew the attorneys representing large corporations. I had been one of them for 5 years. I knew their level of expertise and their tactics. I decided to up the ante and bring the fight to their front door. That was 20 years ago.
Today, there is no better reward for me than bringing in a verdict against arrogant bullies, unethical corporations, and wealthy despots. You and I together will see FOREVER from the top of a pristine mountain. My love for the law and this pure purpose still drive me. I smile often, daily, proudly, and remain more committed than ever before.
My life has purpose. I have destiny. There is nothing I would rather do.
I want to share it with you. Everyone coping with a financial problem has extraordinary options. Your options are almost unlimited. The best results do require a solution designed with the end game in mind. You may want to compromise in one area to maximize another, to achieve the best overall outcome. With one strategy supported by many complementary tactics, your best results can be virtually guaranteed. The best way to see your potential end results, in advance, is use a common measure. You may even want to mix and match the most profitable benefits and advantages of the following alternatives:
- Consumer Credit Counseling - the free course required as a condition of filing bankruptcy (certificate of completion required). They will try to create a monthly budget that pays all of your debts and bills.
- Debt Management Plans - a low cost service for renegotiating interest rates and penalties owed on unsecured debts.
- Debt Settlement Plans - a more aggressive service for settling unsecured debts for a percentage of the principal due, with payment spread out over several years.
- Debt Consolidation Loans - new loans requiring new approval to combine debts (Many dangers here).
- Home Equity Loans - new loans using your home as collateral to pay off other debts (Many dangers here).
- Chapter 7 - the complete discharge of most debts without payment of any kind. You can eliminate judgments, debts and contractual liability easily.
- Chapter 13 - the discharge of most debts after making partial payment over 3 to 5 years.
- Chapter 11 - both discharge and reorganization of debts in a plan of 5 years or more.
- Private Debt Negotiation - The individual settlement of debts yourself or with the assistance of an attorney.
- Litigation of Select Debts - Invalidating or settling debts through the legal system (without filing), with rights of discovery, deposition and jury trial to resolve disputes.
In my Bankruptcy Strategies manual, I explain the advantages and disadvantages of each of these alternatives. In some cases, using 4 or 5 of these alternatives creatively will maximize your end result. I have included a series of worksheets and instructions intentionally designed to help you find your ultimate solution. You will see, in dollars and cents, how each of these alternatives could help you. You will complete worksheets in the privacy of your home to reveal your best option and potential savings. No more guessing. No more excuses. You will know how each option will change your life. You will create a side by side comparison of your expected results over 5 years. This should be your common measure when comparing your costs, benefits, advantages and disadvantages. Once you know what to do (using included instructions and examples) completing my worksheets is easy by design. There is no reason why most people cannot use all of these alternatives as they see fit. We are free to combine options and alternatives to design your beautiful solution. Timing is Critical Simply knowing that you have alternatives is not enough. You must use them at the proper time and in the proper sequence. Unfortunately, many people procrastinate with the best intentions. But as time slips away and they lose the ability to keep all of their exempt assets and discharge all debts. Start early. A few weeks or a few months can make all the difference. The best time to compare your options is when you first have problems paying your monthly bills. At this point, you may be able to avoid filing altogether, but also maintain all legal rights and benefits if filing later becomes necessary. Safe play. Highly profitable. You keep all property and assets and remain in control. If creditors and collection agents are calling, you have less time to plan and fewer options. If you need to bankruptcy to stop foreclosure, eviction or repossession, your options are needlessly limited. But you still have many powerful and highly valuable options. Success using an optimized bankruptcy strategy is not an accident. It takes planning. You must have time to first discover what you want, what makes the most sense for you, and have time to act. Then, your beautiful solution will unfold with uncanny precision and a full discharge of all debts will be quick and easy. Think of it as a game. First you have an idea and decide on a plan. Then you line up all of the dominoes. Then you file. Then with the slightest flick of a a finger, everything falls in place, at the proper time, in the proper sequence, with automatic precision. Your competition will be dumbfounded. No problems. You were first to act. You win. It is hard to find reputable information on your bankruptcy alternatives. For a credible review of your options, consult Mr. Clark's book, Bankruptcy Strategies: Claiming Maximum Benefits Under Chapter 7 & 13. Find Out How The Pros Use Their Options Wisely And Beat Creditors At Their Own Game.
You have options, but only you can take action to deal with your debt.Labels: bankruptcy alternatives, Chapter 13 Wage Earner Plan
Posted by Bankruptcy Alternatives Blog
@ 7:02 AM
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Wednesday, February 18, 2009
Bankruptcy Alternatives During an Economic Crisis
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The "credit crunch" of 2008 has lead to more government bailouts and a deeper recession in 2009; many experts are now even predicting a depression. What impact does this have on your bankruptcy alternatives?
Lots.
If your home equity continues to increase, and if you are getting lots of hours at work, you probably qualify for a debt consolidation loan. However, during a recession when your house is declining in value and foreclosures are on the rise, and when your income is going down, a debt consolidation loan is probably neither affordable or something you can qualify for until the economy bounces back.
If you have a good job and good income, Americans could file a Chapter 13 Wage Earner Plan, and Canadians could file a consumer proposal. Under these legal arrangements you repay a portion of your debts, and avoid having to file bankruptcy. However, to repay a portion of your debts you need an income, and if you are unemployed or working reduced hours, you may not have the income to do a Chapter 13 filing or a consumer proposal.
In other words, the recession has made it more difficult to take advantage of the bankruptcy alternatives that worked so well in the past.
What can you do? Cut your expenses, make a budget, find a part time job, sell any assets you have to raise cash, and ride out the storm. The economy will eventually improve; the trick is to keep your head above water long enough to allow you to benefit when the better times return.Labels: bankruptcy alternatives, Chapter 13 Wage Earner Plan, consumer proposal, debt consolidation
Posted by Bankruptcy Alternatives Blog
@ 3:52 PM
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Saturday, September 27, 2008
What are my bankruptcy alternatives?
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As the North American economy continues to weaken, and every day we read news of bailouts, we get even more worried about our own personal financial situation. What can we do? If you are experiencing money problems and you think that personal bankruptcy is your only alternative, start with our five step program to avoid bankruptcy.
First, make a family budget. If you don't know where your money is going, you can't decide what spending to cut to free up cash to repay your debts on your own. Read our special report on budgeting for more information, and for some free tools to help you budget.
If your budget shows that you can afford it, your next step may be to try to get a debt consolidation loan. With a debt consolidation loan you consolidate your debts and make one monthly payment, at a lower interest rate than you are paying now. You need good credit to qualify.
If you don't have good credit, your next option would be to consider credit counseling through a non-profit credit counsellor about a debt management plan. They may be able to work out a plan where you repay your debts over a longer period of time, at a reduced or zero interest rate.
If that isn't affordable, a legal procedure may be necessary. In the United States you could file a Chapter 13 Wage Earner Plan. In Canada you could consider a consumer proposal. Either way, it may be possible to negotiate a legal settlement where you pay less than the full amount owing.
If even that is not affordable then, and only then, should you consider personal bankruptcy. Bankruptcy is a last resort, only to be considered if all other bankruptcy alternatives have been considered. You have options, so consider them wisely, do your research, and then make the decision that is best for you and your family.Labels: bankruptcy alternatives, Chapter 13 Wage Earner Plan, consumer proposal, credit counseling, debt consolidation, debt management plan
Posted by Bankruptcy Alternatives Blog
@ 5:40 AM
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Friday, August 01, 2008
Chapter 13 Wage Earner Plan: A great Chapter 7 bankruptcy alternative
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A Chapter 13 Wage Earner Plan is one of the best alternatives to bankruptcy for resident of the United States. It is similar to a consumer proposal which can be filed by people who live in Canada. How Does a Chapter 13 Wage Earner Plan Work?
When you file a Chapter 13 wage earner plan, you are making a deal with your creditors to pay back all or some of what you owe them under a payment plan that you can afford. It is meant for people who earn regular wages but just can't quite make the payments on their debts each month. The Chapter 13 bankruptcy can last up to five years. Once you file a Chapter 13 petition with the court, an impartial trustee will be appointed to administer the case. They will evaluate your situation and help develop your plan and present it to your creditors who will then decide whether they will accept it or not. Typically, if you have taken the time with the trustee to be well-prepared, there will not be a problem with your proposed plan. Now, instead of making multiple monthly payments on your many debts, you will make just one to the trustee either monthly or bi-weekly, who will then distribute it among your creditors as has been agreed upon. Who is Eligible for a Chapter 13 Wage Earner Plan? Any individual person (not a corporation or partnership) is eligible for Chapter 13 relief as long as the amount of their debts does not go above $307, 675 for unsecured debts (those with no collateral) and $922, 975 for secured debt and they are earning wages that cover more than their reasonable living expenses. The person must also have received credit counselling from an approved agency within the 180 days prior to filing and had not been dismissed from another type of bankruptcy filing in this time period. Why is it a Chapter 13 Wage Earner Plan a good idea? The best thing about a Chapter 13 is that it helps avoid filing for Chapter 7 bankruptcy. By extending the length of time you will take to pay off your debts, your monthly payments will be smaller making it easier for you to get out of debt. Chapter 13 also offers the convenience of consolidation because you only make one monthly payment to the trustee who will deal with all your creditors for you. Once you have filed the petition, the creditors are no longer allowed to take any action against you in order to collect their payments. The process of filing a Chapter 13 Wage Earner Plan is complicated and the rules change frequently. For example, the maximum amount of debt allowed to qualify is adjusted to reflect changes in the consumer price index. You should seek help from a professional to make sure you have all the information you need about a Chapter 13 before you file the petition with the court. Labels: Chapter 13 Wage Earner Plan
Posted by Bankruptcy Alternatives Blog
@ 11:40 AM
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Monday, April 07, 2008
What if I Just Stop Paying My Debts? Is Not Paying a Good Bankruptcy Alternative?
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At some point in almost everyone's life we get to the point where we just through up our hands and say "Enough: My debts are too high, so I'm just going to stop paying!"
For some people that may be the correct option, but it does have one significant danger: If you stop paying, it is possible that your creditors will take you to court, sue you, and attempt to garnishee your wages. If you own property, like a car or a house, they could attempt to put a lien on your property, seize it, and sell it to repay your debt.
If you currently own no property or have no wages, you are "creditor proof", so doing nothing may be an option. If you get a pension or welfare, it is unlikely that those payments can be garnisheed, so there may be little risk of a garnishment. You could open a new bank account at a new bank that is not known to your creditors, and continue on until your situation changes.
However, if you do have a job, doing nothing is probably not the correct option for you. You need to take action. Try contacting your creditors and working out a repayment plan. If you need help, a credit counselor can meet with to determine if a debt management plan is the correct solution for you. If you still have good credit, a debt consolidation loan is another possible option.
If you live in the United States, a Chapter 13 Wage Earner Plan is a good personal bankruptcy alternative. In Canada, a consumer proposal is an excellent solution in many cases.
The point to remember is that doing nothing may be an option, but there are many other bankruptcy alternatives, so research your options and decide on the option that's best for you.Labels: bankruptcy alternatives, Chapter 13 Wage Earner Plan, consumer proposal, credit counseling, debt consolidation, debt management plan
Posted by Bankruptcy Alternatives Blog
@ 7:37 AM
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Monday, January 28, 2008
Debt Management Plans and Consumer Proposals: Which is the Better Bankruptcy Alternative?
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Note: a consumer proposal can only be filed in Canada. Americans can consider a similar procedure called a Chapter 13 Wage Earner Plan.
At first glance a debt management plan and a consumer proposal appear to be very similar. In both cases you make payments each month that are distributed to your creditors, so they are both a good bankruptcy alternative. There are, however, some significant differences.
A debt management plan is administered by a credit counsellor, while a consumer proposal is administered by a bankruptcy trustee. A bankruptcy trustee is an officer of the court, and therefore has the power to force creditors to accept the proposal. Here is how it works:
In a consumer proposal, each creditor gets one vote for every dollar they owe. If more than half of the dollar value of creditors votes yes, all creditors must accept the proposal. In a debt management plan, even if eight out of nine creditors vote yes, there is no way to force the final creditor to accept the plan. For that reason in most cases a consumer proposal is the preferred bankruptcy alternative.
In addition, in a debt management plan the creditors generally must be paid in full. In a consumer proposal it is often possible to get the creditors to agree to accept 50 cents on the dollar, or even less.
To file a consumer proposal you must be insolvent (owing more than you own, and being unable to pay your debts). Insolvency is not a requirement for a debt management plan, so that may be a reason to select the debt management plan option.
Which bankruptcy alternative is right for you? Contact a proposal administrator or a credit counsellor for more information.Labels: Chapter 13 Wage Earner Plan, consumer proposal, debt management plan
Posted by Bankruptcy Alternatives Blog
@ 10:24 AM
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Saturday, October 27, 2007
Wage Earner Plan: How Can a Chapter 13 Wage Earner Plan Help Me?
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Chapter 13 of the federal bankruptcy laws gives individuals the right to propose a plan to their creditors to repay their debts. Chapter 13 is also known as a Wage Earner Plan, because it is usually filed by people who earn wages, and they use some of their wages each month to repay the creditors. (Under current law the owner of an unincorporated business can also file a Chapter 13 Wage Earner Plan). Chapter 13 is a great alternative to bankruptcy.
Wage Earner Plans are only available to residents of the United States. Residents of Canada should consider a consumer proposal, which is a very similar procedure.
To qualify under Chapter 13, an individual must have unsecured debts (those not backed by collateral to guarantee their repayment) of less than $100,000 and secured debts (debts backed by collateral, such as a house mortgage) of less than $350,000. A debtor files a Chapter 13 petition listing all debts. Upon the filing, the debtor's creditors must stop their collection activity while the creditors vote on the plan.
A typical Chapter Thirteen petition would include a repayment plan that lasts up to five years, and is funded by both the debtor’s wages, and by the sale of property of the debtor if applicable. The plan is supervised by a bankruptcy trustee, and must treat all creditors fairly, meaning each unsecured creditor will receive the same number of cents on the dollar.
The repayment plan may require the debtor to pay off only a portion of each debt, or the debtor may receive extra time to repay their debts, or they may receive both lesser payments and an extension of time.
It is these reduced payments that are the big advantage of a Chapter 13 Wage Earner Plan. If you can’t afford to make the full minimum payments of say $1,000 per month on your debts, but you could afford to pay $500 per month, a Chapter 13 Wage Earner Plan may be a great solution.
Even better, the Chapter 13 plan can be approved only by the court; the creditors can object, but the final decision is left to the court. After you have completed all of the payments, you are discharged from all of your debts, except for debts relating to alimony and child support, federal student loans, and taxes.
If you need a break, a research how a Chapter 13 Wage Earner Plan may be the correct bankruptcy alternative for you and your family.Labels: Chapter 13 Wage Earner Plan, consumer proposal
Posted by Bankruptcy Alternatives Blog
@ 6:14 AM
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Monday, July 02, 2007
Chapter 13 Wage Earner Plans, Financial Counseling, and Consumer Proposals – Which is a better bankruptcy alternative as far as my credit report is co
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It is a common misconception that financial counseling, or consumer credit counseling, is much better than a Chapter 13 Wage Earner Plan (in the United States) or a consumer proposal (in Canada) as far as your credit score is concerned.
In fact, they are all about the same. Each of these options will have a negative impact on your credit report.
To prove this point, we went to the web site for Equifax, the largest credit reporting agency in the world. Equifax explains that information in the Public Records section of your credit report remains on your credit report for 7 years.
What is a public record? Here is the definition of a public record from Equifax:
The 'Public Records' section reports the presence of several types of items on your credit report, including accounts that have been turned over to a collection agency, matters of public record, bankruptcies, and similar items. …The different types of items that may appear in the 'Public Records' section of your Equifax Credit Report™ are:
Bankruptcy A legal agreement in which a consumer is declared fully or partially unable to repay debts. In return for full or partial release from those debts, the consumer may sacrifice some property or agree to a payment plan. There are two different types of bankruptcy for consumers: Chapter 7 and Chapter 13.
Financial Counseling
A voluntary method of debt restructuring in which a person makes a lump sum payment to a financial counseling agency who distributes the funds to creditors. Consumers in financial counseling may have an arrangement to pay all or part of their consolidated debt.
Equifax goes on to state that:
Chapters 7, 11, and non-discharged or dismissed chapters 12 and 13 remain on file for 10 years from the date filed
Accounts paid as agreed remain on file for up to 10 years from the date of last activity (DLA)
In other words, whether you do consumer credit counseling or a Chapter 13 Wage Earner Plan the note on your credit report stating that you have filed the procedure is likely to remain on your credit report for up to 10 years. So which option should you choose?
Since your credit report is likely to be the same in either case, you should use other factors to decide on the correct option for you. In most cases a Chapter 13 Wage Earner Plan results in you paying less than the full amount of your debts owing, and so that may be the preferable option. However, professional advice is recommended, so consult a bankruptcy attorney or credit counselor to help you decide which bankruptcy alternative is right for you. Labels: Chapter 13 Wage Earner Plan, Chapter 7 bankruptcy, consumer proposal, credit counseling
Posted by Bankruptcy Alternatives Blog
@ 6:54 AM
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Monday, May 21, 2007
Chapter 13 Wage Earner Plans: A Great Bankruptcy Alternative, or a Trap?
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A Chapter 13 Wage Earner Plan is a great alternative to Chapter 7 bankruptcy, but only for certain people.
First, you must be a resident of the United States to file under Chapter 13. Canadian residents should consider a consumer proposal.
Next, you must determine if you qualify for Chapter 13. (Because a Chapter 13 bankruptcy is paid for out of the wages you earn each month, Chapter 13 is also known as a Wage Earner Plan).
Since new federal bankruptcy rules became law in October, 2005, anyone who has gross income higher than the median income for their state is required to file bankruptcy under Chapter 13, instead of under Chapter 7. Do not fall into the trap of thinking you can file under Chapter 7; Chapter 13 may be your only option.
Before deciding on a Chapter 13 Wage Earner Plan, consider your other options.
Since a Chapter 13 plan will typically last for five years, you should explore any options that can be completed in less than five years. For example, if you can get a debt consolidation loan and repay it in three years, a debt consolidation loan is probably a better option for you than a five year Chapter 13 Wage Earner Plan.
If you don't qualify for a debt consolidation loan, but you want to avoid the court process, and can afford to pay your debts in full over a three to five year period, credit counseling credit counseling may also be an option.
Finally, you may be able to cut your expenses and pay off your debts on your own.
A Chapter 13 Wage Earner Plan is designed to give you a fresh start, but remember, it's a five year plan, and that can be a trap. Only agree to a five year repayment plan if you are confident that you can afford to make the payments.Labels: bankruptcy alternatives, Chapter 13, Chapter 13 Wage Earner Plan, Chapter 7 bankruptcy, Wage Earner Plan
Posted by Bankruptcy Alternatives Blog
@ 11:12 AM
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