                               
|
Why Debt Relief Counseling Option Is Worst Than Bankruptcy
Dangers Debt Counseling Services & Tax Liability. Welcome to: Chapter7ElCajon.Com Did you know The IRS treats debts that are forgiven or reduced outside of bankruptcy as taxable income?Debt Counseling Services & Tax Liability. Learn Why Chapter 13 Is Better..
Serving El Cajon and San Diego County in Consumer Debt Bankruptcy Is Debt Counseling Worst Than Bankruptcy? David A. Casey, Attorney Attorney for over 20 + years 365 Broadway, Suite 203 El Cajon, California (619) 447-6780 Chapter 7 - Chapter 13 Bankruptcy Map to Bankruptcy Law office Click here Chapter 13 - Chapter 7 Bankruptcy We are a debt relief agency. We help people file for relief under the Bankruptcy Code.
Read why you should you stay away from those who offer "pay first services". Find out if they are using your financial hardship to get your money by giving you hope only to end up owing more than you did.This is a "Must Read" Article!Dangers Of Debt Counseling Services
As a consumer in debt you must be aware of debt counseling or debt management programs and bankruptcy through Chapter 7 and Chapter 13.The truth is many so-called consumer counselors are just out to make a buck off of you. It is an unfortunate truth that not everyone offering to help you actually gets your finances under control. They don't really have your best interest in mind. Consider ALL debt consolidation loans carefully. In the end you will discover that most of the them are NOT in your best interest.
The purpose of a consolidation loan is to consolidate all of your debts into one monthly obligation. This is appealing to most since the interest rates are much lower than the credit card's interest rates. The problem is, if you become unable to repay it, you may be stuck with the whole debt as a secured loan. If you are not sure that you can really repay that amount this is not an option for you. |
If you can not pay this amount each and every month this is something I would not recommend to you. Hoping that your income will improve or that you or your spouse might get employed after being laid off is a gamble at best. El Cajon 92019, El Cajon 92020, El Cajon 92021, El Cajon 92022, El Cajon 92022, El Cajon 92090,If you don't understand what is in the contract, you should not even consider signing the loan documents either. Understand the terms and conditions that they are offering. Many times they will request that you give them a lien on both your real and personal property. Interest rates and fees associated with the loan are very high. It may be that even lowering the interest rate does not make your present debts manageable, it just postpones the day of reckoning, then your stuck with a debt that you may not be able to discharge. Find out if the consolidation will pay off over the life of the loan, or whether you will owe a "balloon" payment at the end. For most borrowers, balloon payments can lead to foreclosure if you are unable to pay it off or get a new loan. If you are like most consumers, you probably will have credit card debts again and you never get free of this debt! Home Equity Loans May Put Your Home in JeopardyIf you can't pay your present unsecured debts, all your creditor can do is sue you and try to collect any judgment they are awarded. If you can't pay your home equity loan, you may lose your house in foreclosure or you may have to file a Chapter 13. If there is still equity in the home you may be stuck with that payment. If you would have discharged the unsecured debt in the past, you would not have a second you can't pay. Home equity loans may sound great but it could lead to your losing your house. Most states including California, provide an exemption that protects a given amount of equity in your home and puts that equity beyond the reach of your creditors. If you voluntarily pledge that equity to a home equity lender, the exemption no longer protects the pledged portion of your home's value in most cases. IMPORTANT! The deal you have agreed to is not a protected agreement. The plan you make under the bankruptcy codes is! If you file a Chapter 13 plan, after it is approved by the judge, it is a court order, and the credit card companies cannot break it.IMPORTANT! BE VERY CAREFUL --- There are many so-called companies promising that they can save up to 70% on credit card debt and will charge you a fee (monthly) and a management fee. During the time they are collecting the funds, none of it is applied to the credit card or other unsecured debts at the time of collecting fees from you. Also, if you fail to make just one payment and with most just late in making the payment to them, they can keep all of the fees you paid to them. On top of that, the unsecured debt holder will continue to charge you high interest and late fees. So if the debt doubles due to the interest and fees even with 50% off you are paying what you originally owed when you started their plan. Remember if it sounds too good to be true, it probably is. Just because they make a promise or have some office space, it does not make them honest. IMPORTANT! Never authorize any collection service to gain access to your checking account and direct withdrawal. I have seen too many of these kinds of businesses take your money. The debtor then comes into my office after paying many thousands of dollars asking me to get them out of debt. Most of them who had utilized these collection negotiation services had direct withdrawal. Under the bankruptcy code the two major types of businesses are considered debt relief agencies are attorneys & bankruptcy petition preparers. Under the new bankruptcy law of 2005 any person, business or otherwise who are compensated to help with your bankruptcy are now considered a debt relief agency and must identify itself as such. That is why you'll see the following statement on each of our web pages: "We are a debt relief agency. We help people file for relief under the Bankruptcy Code." Non-profit credit help agency: If you sign up with non-profit credit help agency that offers a program where their service negotiates with your creditors or makes payments on your debts for you, you should understand whether the service promises to lower the total you owe or the interest rate you pay, or just promises to lower the payments you make every month, without significantly changing your obligation. Know what happens if a creditor won't negotiate. Many of these non-profit groups can work out a non-binding agreement with the unsecured debt holder. They will get your interest rate cut and many times have success in lowering in the credit card balance. The debt settlement model in which you set aside money with a third party who will attempt to negotiate a reduced payoff seldom solves your debt problems. Creditors seldom accommodate such approach which is why the debt settlement company pays themselves first. In our opinion, these kinds of business should be banned since they almost never work out to your benefit. Their plans are bound to fail this is why they get paid first! Make sure the program deals with all your debt!Some debt counselors confine themselves to dealing with your unsecured commercial creditors (charge cards), and fail to address your non-dischargeable child support, unpaid taxes, or the crushing car loan. In effect, they ignore the debts that you have to pay and in doing so channel your money away from the creditor debts you can discharge in bankruptcy. Don't overpay!Most of the businesses who collect money then pay themselves first should not be used. There are some management programs who only charge a small fee and many of them are non-profit. Your should use caution with fee-based approach services. Make sure that the service is worth what it costs. Many debt counseling programs advertise themselves as "non-profit" but they may be just a front for profit making entities who are more interested in getting your money than helping you get out of debt. Chapter 13 is a more reliable alternative and it is court approved. The creditors don't have to agree to it. The court will approve a plan that distribute the funds equitably even if it is only ten cents on the dollar. Important Consideration: Beware of tax consequences!The IRS treats debts that are forgiven or reduced, outside of bankruptcy, as taxable income. That means that if your creditor agrees to settle the debt for 50% of what you owe, the other 50% will be reported to the IRS as income, just as if they had written you a check for that amount! Under some circumstances, you can avoid cancellation of debt income, but it raises a complicating factor when you compromise debts outside of bankruptcy. Let's say you are in a 28% tax bracket of the cancellation or the cancellation puts you in the 28% bracket. On cancellation of $20,000 x .28 = $5,600 in taxes you will have to pay the IRS. If you cancel a loan of $100,000 you could be responsible for $28,000 or more in taxes. Certainly, filing a chapter 13 is well worth it at that point. Conclusion:Far too often, debtors make things worse trying to do what they feel is the right thing. Most of the time the money problems only get worse by enlisting others to help with pre-paid debt management that is not court approved and you have a court order to back you up. While it may seem comforting to have someone who promises to get you out of debt by paying them money to negotiate on your behalf with the creditors, most of the time they end up in my bankruptcy office or some other. Remember that Chapter 13 is a repayment plan in which you, the debtor, proposes the percentage that you can repay creditors. As long as you can show it is reasonable and you have the ability to pay under the plan at a confirmation hearing, the court makes it binding on creditors. Chapter 13 : Is really a court sponsored debt management repayment program.There are hundreds of ads advertising "debt management", "debt consolidation", "credit counseling", all playing to the stress you are under and the financially problems you are having. Most sound very sincere in their desire to get you a good deal however, you should be informed about using chapter 13 and how you can get a court ordered plan not based on the creditor's terms but one that is approved by the bankruptcy court. In a Chapter 13 the debt repayment does not have to be negotiated with your creditors nor in most cases will you have to pay off the entire amount. Many times, payments are very low, ten to twenty cents on the dollar. It comes without the pitfalls of out-of-court programs and is enforced by a federal judge. It only cost is the court's reasonable filing fee plus attorneys fees that are set forth as allowed by the judge; and the trustee's commission. Chapter 13 requires creditors:
Plus, the creditor can not refuse to go along with a confirmed plan. In other words, they can not back out of the deal. However, when necessary in the future, you can convert a chapter 13 into a chapter 7 when needed. The payments on a Chapter 13 plan are based on what funds are available in the debtor's budget after reasonable living expenses. Some of the ads you hear on radio or see on TV talk about "debt consolidation" and are based on one-half of the debtor's take home income going to the consolidator. Right now with so many people in debt many of the so-called debt relief programs are just outright scams. So be sure to do your research before giving up your money. Most of the time our pre-bankruptcy fees for a Chapter 13 is between $500 and $750. All of these fees will be allocated to your bankruptcy cost if you proceed with a chapter 7 or chapter 13. Sometimes after a debtor sees that they can qualify for a chapter 7, they will proceed with a chapter 7 instead. The fees already paid for the pre-bankruptcy will be credited to the chapter 13. The "set up fee" in bankruptcy, if you will, is the court's filing fee of $274. In a chapter 13 there is a ongoing cost which is a commission of the trustee, calculated at a percentage determined by the local bankruptcy court. At the end of the three year or five year plan, the debt that would have been dischargeable is no longer enforceable even when there is thousands yet to be paid. There are no tax consequences to the cancellation of debt in bankruptcy under the bankruptcy laws and the IRS code. Chapter 13 is a great way to become debt free or to at least to get rid of all of the dischargeable debts. There are assets that you may even be able to keep such as your house, toys, car, ATV, boat, coin collection and even an airplane. Chapter 13 is probably the best debt management tool you can use to get a fresh start for debts that are weighing you down. Debt Counseling Services & Tax Liability. Why Chapter 13 Is Much Better Option. Dangers Of Debt Counseling Services. You could end up paying taxes. How Chapter 13 Debt Management works. Don’t use a “pay first services" Read why |
|
