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Debt got you
down? You're not alone. Consumer debt is at an all-time high.
What's more, record numbers of consumers -- nearly 1.5 million
in 2001 -- are filing for bankruptcy. Bankruptcy is one option
to deal with financial problems, it's generally considered the
option of last resort. If you're having trouble paying your bills,
consider these possibilities before considering filing for bankruptcy:
- Contact
a credit counseling service. These organizations work
with you and your creditors to develop debt repayment plans.
There are many reputable credit counseling organizations that
will work with you to solve your financial problems. Some of
the top companies include Debt
Advocates
 ,
American
Consumer Credit Counseling ,
and American
Debt Resources, Inc.
- Carefully
consider a second mortgage or home equity line of credit.
While these loans may allow you to consolidate your debt, they
also require your home as collateral. Refinancing a home is
much easier today than in the past: often, refinancing your
home is just a few clicks away. There are
a variety of reputable lenders for both debt consolidation,
home equity loans and home equity lines of credit. For your
reference:
- If
none of these options is possible, bankruptcy may be the likely
alternative. There are two primary types of personal
bankruptcy: Chapter 13 and Chapter 7. Each must be filed in
federal bankruptcy court. The current filing fees are $185 for
Chapter 13 and $200 for Chapter 7. Attorney fees are additional
and can vary widely. The consequences of bankruptcy are significant
and require careful consideration.
Chapter
13 allows you, if you have a regular income and limited
debt, to keep property, such as a mortgaged house or car, that
you otherwise might lose. In Chapter 13, the court approves a
repayment plan that allows you to pay off a default during a period
of three to five years, rather than surrender any property.
Chapter
7, known as straight bankruptcy, involves liquidating
all assets that are not exempt. Exempt property may include cars,
work-related tools and basic household furnishings. Some property
may be sold by a court-appointed official-a trustee-or turned
over to creditors. You can receive a discharge of your debts under
Chapter 7 only once every six years.
Both types
of bankruptcy may get rid of unsecured debts and stop foreclosures,
repossessions, garnishments, utility shut-offs, and debt collection
activities. Both also provide exemptions that allow you to keep
certain assets, although exemption amounts vary. Personal bankruptcy
usually does not erase child support, alimony, fines, taxes, and
some student loan obligations. Also, unless you have an acceptable
plan to catch up on your debt under Chapter 13, bankruptcy usually
does not allow you to keep property when your creditor has an
unpaid mortgage or lien on it.
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