Debt Settlement and Chapter 7 – Part 1
When debtors find it difficult to redeem their noticeable dues, they generally try to find various ways and method to repay their debt. However, in many situations, this does not work out properly owing to various reasons, and debtors start thinking in terms of Chapter 7 and filing for bankruptcy. Availing the facilities offered by the statute can solve some of your immediate debt problems, but a certain amount of debt will keep already after discharging Chapter 7, and your credit ratings will carry a “flag” for at the minimum seven years. Needless to say, it becomes almost impossible to avail large credit facilities in the future. Many companies offer debt settlement facilities in the form of debt settlement programs. One of the most shared kind of debt is credit card debt, in which situations the companies offer credit card debt settlement programs so the debtors can redeem their dues.
Generally, credit debt settlement companies work to provide customized solutions for individuals who have low monthly incomes and delinquency problems. The extent of debt settlement sets vary from company to company. However, all companies provide certain features which keep shared, and ease credit card settlement. A debt settlement company can provide options to redeem, and it is advisable to avail the facilities instead of file for Chapter 7 and bankruptcy. It is important to know exactly what Chapter 7 is, and what issues are associated with engaging in bankruptcy. The knowledge can be useful in deciding whether to file for Chapter 7, or avail debt settlement program to repay.
What does Chapter 7 signify?
Chapter 7 of the Title 11 of the United States Code, dealing chiefly with the bankruptcy code, fundamentally governs the time of action of liquidation under the bankruptcy laws of the United States government. Chapter 7 is associated with liquidation and bankruptcy issues. It offers the simplest and quickest way to file for bankruptcy – and the statute is obtainable to all U.S. individuals, corporations, and partnerships. As per the statute, a trustee is appointed by the court to gather and sell all non-exempt character, and use the proceeds availed from the sale to pay off the noticeable dues to the creditors.
According to the law “Exempt character” is the character that the debtor is allowed to keep or retain on his or her own name. The facility is given to the debtors, so it becomes possible to “save” something for the sustenance and livelihood of the debtor’s family, in addition as the debtor. The character and kind of character exempted depends upon the state jurisdiction and its bankruptcy laws. It is advisable to consult a good attorney to have a clear understanding regarding exempted similarities. According to the new law, it is mandatory to keep residence in a particular state for certain duration before availing the statute benefits and facilities. The new updation was enforced to prevent a debtor from “moving” to another state offering more generous exemptions, just prior to filing for bankruptcy.
Who is eligible to file for bankruptcy under Chapter 7?
From October 17, 2005 onwards, as per the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, it is required for the debtor to undergo a “method test” to qualify for Chapter 7, and afterward file for bankruptcy. The “method test” determines how the Internal Revenue Service will estimate the debt position and decide whether the debtor can avail Chapter 7. In the evaluation, the income and expenses are examined in thoroughness, and compared to the debt redemption standards set by the IRS.
As per the standards, if the debtor earns less than the “required” income indicated by the guidelines for a family consisting of a specific number of individuals, it becomes possible to automatically file for Chapter 7 and bankruptcy. But if the debtor’s income in the last six months is greater than the “required” income, and it is possible to redeem at the minimum $6,000 over a period of five years, or alternately $100 a month towards your debt, it is not possible to file for Chapter 7. In such situations it is recommended to avail Chapter 13 instead. Also as per the method test, it is required to file any overdue tax returns within a specific duration of filing for Chapter 7. According to the updation of the past statute, as per the new law, while filing for bankruptcy, the applicant should receive approved credit counseling and a budget examination. The fees for the counseling are borne by the applicant.
Advantages of availing debt settlement in lieu of filing for bankruptcy under Chapter 7
Debt settlement programs offer various features which suggest that it is more advantageous in the long run to avail credit card debt settlement sets and let a specialized company “settle” your debts, instead of file for bankruptcy under chapter 7. The following benefits can help you redeem without any long term “unhealthy” effects:
- Stop wage garnishments and attachments
Wage garnishments are generally imposed by the IRS, but creditors too can enforce the option by a court decree to retrieve their dues. Garnishments create unhealthy conditions for the debtor, since the creditor holds the prerogative to “fix” the recovery amount. Debt settlement companies can prevent creditors from garnishing your income.
- Fill out forms and dealing with creditor harmonies
Credit card debt settlement companies take care of all paperwork. The filing and submission course of action gets deleted and the debtor saves time, since all harmonies is carried out by the company on debtor’s behalf.
- Cancel possible debt
Debt elimination is a part of debt settlement. Debt elimination programs help to reduce the net payable noticeable amount, so the total payable interest also decreases. The debtor benefits from paying less noticeable dues.
- Deal with secured debts
Secured debts have a guarantee attached with the credit facility, and when delinquency occurs, the security offered is exposed to “possession” activity by the creditor. Debt settlement programs deal directly with the creditors to settle your issues, so your “secured” assets are not exposed to any risks.
- Preserve your home
Mortgage loans often include the title of the character as a guarantee against the credit offered. When defaults occur, the character is exposed to recovery procedures, and there are good chances the debtor may end up losing the most important asset in his or her life, the abodes. Settlement companies attempt the security on behalf of the debtor, so personal character is not exposed to litigations and recovery processes.
- Rebuild credit after bankruptcy
Settlement processes help in paying your creditors in a timely manner, and this results in an improvement of your FICO scores. Better scores average better credit facilities.