In this tough economy, so many people are struggling to pay all their bills, and there is a lot of fear about losing homes among those who have lost employment or had hours cut back. It seems that almost everywhere you turn, there are advertisements about "eliminating your debt." It's time to sort out the fact from fiction regarding debt relief and filing bankruptcy. The option you choose can impact your life for years to come.
It's important to realize that bankruptcy laws are state specific. There are some laws that will be almost the same, and certainly very similar from state to state. But if you are contemplating filing any form of bankruptcy proceedings, it is important to consult with a local attorney. Bankruptcy attorneys are the recognized experts who can help you determine what options are available to you, and which option makes the most sense for your unique situation.
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One piece of fiction that many people in need of debt relief worry about, and needlessly procrastinate over, is the possible social stigma of the debt relief proceedings. In the case of celebrities and public figures publicity is almost inevitable, so it is a legitimate concern for them. But the vast number of filings becomes known only to the affected creditors in the process.
If you go through some form of bankruptcy, will this eliminate all your debts? Your attorney can determine whether your financial circumstances meet the current means test for making debt repayments through Chapter 13, a wage earners plan, or if a Chapter 7 filing is more appropriate for you. Both the Chapter 7 and Chapter 13 filings contain many types of debt elimination exclusions such as child support, criminal restitution, and tax liens.
Another area that is rife with fiction is that you will lose your house. Both Chapter 7 and Chapter 13 forms of bankruptcy often allow you to keep your current home. In fact, a Chapter 13 filing, in some instances, is initiated specifically to help homeowners prevent foreclosure. This is an area where you want an experienced bankruptcy lawyer handling your Chapter 7 and Chapter 13 filings and advising on your case in order to protect your assets to the full extent of the law.
For some debtors, the question of filing in a state in which they don't reside comes up when they are contemplating a move, or where the debt might have been incurred out of state. Residency requirements before you are eligible to use a state's exemptions have now stretched out to two years so it is important to consult with an attorney in the state in which your debts were incurred before changing jurisdictions.
Regardless of the claims you hear on TV, radio, or on the internet, debt relief, whether settling your debts with creditors through negotiating down the balances, or filing for some form of bankruptcy, will impact your credit score. It is fiction that after filing a bankruptcy, your reduction in debt will improve your credit score. The credit bureaus maintain records of all your credit transactions, some for 7 years, some for as long as 10 years. Your credit score will drop, perhaps significantly, after a bankruptcy is filed, and most creditors will show negotiated credit payoffs as "PAID SETTLED" which will also lower your scores.
This doesn't mean that any future credit opportunities are doomed after bankruptcy. It isn't unusual that shortly after discharging your debts you will receive new offers for credit cards again. You can expect it to be much more difficult, if even possible to qualify for property and automobile purchases. If you do qualify, it is likely your rates and terms will be less favorable. However, if some form of debt relief or restructuring is a requirement for you, be sure to work with an attorney to help you understand your options. Your credit will improve over time.
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