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Finding
The Right Answer For Your Debt Problems
by James H. Dimmitt
As credit card bills begin to stuff our mailboxes, many
consumers are faced with the hard reality that they went overboard with their
holiday shopping. And for those who don't pay the balance due in full, you'll
also wind up paying interest charges. For some people this can be the beginning
of the end as they can't see a way to manage the burden of their credit card and
other debts.
"Wipe the slate clean", "escape the pressure of credit card
debt", "call our bankruptcy hotline for an easy way out" the bankruptcy lawyers
proclaim in their slick television commercials. Last year 1.6 million people
filed for bankruptcy in the U.S. Is bankruptcy the right answer for your debt
problems? Make sure you have the facts before making a decision that has
lingering effects.
A bankruptcy stays on your credit report for 10 years. You'll be
able to get credit in the future, but at higher interest rates, even after your
bankruptcy is completed.
A bankruptcy does not "wipe the slate clean" nor does it mean
you are totally debt-free. Alimony, child support, back taxes and most student
loans are not exempt from bankruptcy proceedings.
There are two basic types of personal bankruptcy: Chapter 7 and
Chapter 13. Both must be filed in a federal bankruptcy court. You will have to
pay about $160.00 in court fees. Attorney fees are additional.
Chapter 7 bankruptcy involves the liquidation of all your assets
that are not exempt from the bankruptcy settlement. Exempt property may include
automobiles, some household furnishings, and property needed for work-related
use; for example if you were a mechanic the tools you use to perform your work
would be exempt from the bankruptcy settlement. Exemption dollar amounts vary
from state to state.
Under this plan the court appoints a trustee to handle the
liquidation of your nonexempt property. The trustee can sell or turn over your
property to your creditors if you have more than the allowed equity.
A Chapter 13 bankruptcy allows you to keep property, like a
mortgaged house (provided there are no liens on it) or a car, as long as you
have a steady income. A Chapter 13 bankruptcy is a court-ordered and approved
repayment plan to your creditors, usually over a 3-to-5 year period without
surrendering any property. However, any earned income over the budgeted amount
for basic maintenance will be distributed to your creditors.
Financial experts agree that a bankruptcy should always be the
last resort used for managing your debts. An alternative to bankruptcy is
personal credit counseling. Call the Consumer Credit Counseling Services at
800-388-2227 to find an office near you. A professional counselor can help you
decide the best way to handle your debt problems.
©
http://www.yourfreecreditreportnow.com
Author: James H. Dimmitt James is editor of "TO YOUR CREDIT", a free weekly
newsletter offering money management news and tips. Subscribe to the
newsletter by visiting
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