How Bankruptcy Protects You And Stops Creditor Harassment
A recent divorce, work slow-down, or illness — whatever the initial cause of your financial problems, you are likely in a state of high stress because of debt. Unfortunately, not many consumers understand they have options when they are facing overwhelming debt. Our goal is to make sure you understand every option available to you and help you make the best decision based on your situation.
When you are in debt, bankruptcy is usually considered a last option. This is primarily because consumers believe if they file for bankruptcy protection they will lose their home, automobiles, and everything they have worked so hard for. This is not the case; however, it is one of the tactics bill collectors use to force you into unmanageable payment agreements.
Why We Focus on Debt Relief
Sometimes we have clients ask why we focus our practice on helping consumers in debt. There's a simple answer to this — Orson once lost everything he had. Before we established this practice, he was in the same place you are today. Wrestling with debt, trying to catch his breath, and struggling financially. This is why he now helps clients across South Georgia overcome their struggle with debt through bankruptcy.
Learning More About the Bankruptcy Process
We know firsthand that the decision to file bankruptcy isn't an easy one. Debtors often shop around for the right attorney, and in some cases, they are trying to find the courage to contact someone for help. The fact is, we know it's important for you to know what options you have, and to understand what bankruptcy is and what it means for you and your family.
Even if you aren't ready to schedule a consultation, we have a Q & A book called Bankruptcy in Georgia: The Truth which is free and can be downloaded right here. While we understand you may be under a great deal of stress and you are embarrassed about the constant creditor harassment you are facing, you should understand an attorney can help you learn about the rights you have and what options are available to you. Bankruptcy can stop annoying creditor calls, letters, and other types of harassment. Do not believe the age-old myth that filing bankruptcy smears your character, changes your moral worth, or defines you as a failure.
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Creditor Phone Calls
Creditor phone calls bring no peace of mind and difficult decisions. Knowledge, tools you need, and peace of mind — that is our primary goal. We feel the more information you have, the better decisions you can make. Initially, we will listen to your concerns, take the time to understand your current financial situation, and help you decide which option is right for you and your family. Whether you are drowning in debt, have old medical bills that continue to go unpaid, or you are in constant fear of the repo man, you need to take the first step towards financing a solution. We have developed this short questionnaire to help decide if you qualify. Once you have done this, check us out and see how we can help you get back on a better financial footing.
Car Loans and Repossession
Filing bankruptcy can help you if you are being threatened with repossession of your car. Remember, without your car, your earnings capacity decreases which can impact your finances negatively.
Some of the common questions we are asked about car loans and bankruptcy include:
- Can bankruptcy eliminate a car loan deficiency? Provided the lender has not already been awarded a judgment, a deficiency may be eliminated in a Chapter 7 filing and may be significantly reduced or eliminated under Chapter 13.
- Can I renegotiate my car loan? In many cases, the court will allow what is known as a "cram down." This is the process the court uses to reduce the amount of debt you have by tying your debt to the current value of the vehicle.
- What happens to my car loan if I file bankruptcy? If you qualify for Chapter 7, your loan will have to be reaffirmed meaning you will continue to make regular payments. Any past-due payments can be worked out with the lender, usually by paying an additional amount or extending your loan term. If you file for Chapter 13, your car payments will be made as usual under the terms of your plan but may be lower than your current payments.
- How does my loan payment factor into my bankruptcy plan? A typical Chapter 13 plan usually lasts up to five years. This means your car payments may be tailored to be more affordable during the repayment period. Your attorney can explain more.
- What if my car breaks down and I cannot afford repairs after filing? You should not have to drive an unreliable vehicle just because you are paying on a Chapter 13 plan. Your attorney can help you petition the bankruptcy court to allow you to get another vehicle. Within reason, the court does allow this, the exception would be a restriction on owning a luxury vehicle.
- I'm being threatened with repossession, now what? If you file bankruptcy, repossession efforts will stop immediately. Another little-known fact is if it has been fewer than 10 days since your vehicle was repossessed, we may be able to get your car back.
Bankruptcy and Medical Debt
There are few things we can do when one of our loved ones falls ill. Whether it's a sudden illness, an accident, or a long-term health problem like diabetes, medical bills can spiral out of control and leave you feeling helpless.
One of the scariest statistics we found is that nearly 2/3 of all households face challenges paying medical bills. This includes families who have some form of health insurance. Remember, medical debt can be fully discharged in Chapter 7 since it's an unsecured debt. Should you file Chapter 13, your creditors cannot force you to enter into a repayment agreement, and they cannot pursue collection. Oftentimes the debt can be fully discharged without you having to pay a single penny.
Credit Card Debt
No one applies for a credit card with the plan of defaulting. Unfortunately, when other day-to-day expenses require more to pay, credit card debt often falls to the bottom of the "what do I pay this month" list. Total credit card debt has reached its highest point ever, surpassing $1 trillion in 2017. According to Experian, Georgia residents have an average of 2.97 credit cards. Georgians are carrying credit card balances of approximately $6,675 each. Unfortunately, Georgia also ranks in the lowest 10 states for credit scores.
It's hard to rein in your spending when you have credit cards. While some credit card debt may help your credit score, we recommend the following: use only two or three secured credit cards, limit yourself to 30 percent of your credit limit, and buy only when you can pay cash whenever possible. Another important thing to keep in mind — never borrow money to pay off your debts. Taking out another loan usually solves nothing, it just puts you further in debt.
If you file for Chapter 7 your credit card debt will be eliminated upon discharge. If you enter into a repayment plan under Chapter 13, you will likely repay a portion of your credit card debt, but chances are, substantially less than if you try to go it alone.
In Store Financing Debt
In store financing is commonly thought of as buy now, pay later. This type of financing is often used for furniture, jewelry, and appliances. The lure of this type of financing is high, particularly since many stores offer low payments, or zero percent interest rates for long periods of time. A store grants you certain rights to credit, particularly if you have bad credit. The predicament is the store almost always retains rights to the property you are purchasing. Because the lender has a "security interest" it may be considered a secured debt; you should speak with your attorney about any debt of this type. In most cases, under Chapter 7, you would reaffirm this debt and under a Chapter 13 plan, you would be repaying all the debt or a portion of the debt.
Few things are more terrifying than the prospect of losing your home. This type of disruption merely adds to your stress. Remember, if you get a foreclosure notice from your mortgage holder, you should act immediately. The mortgage holder is not going to make idle threats. Georgia is a non-judicial foreclosure state which means the mortgage company does not have to get court approval to foreclose. By statute, your creditor only must notify you 30 days before a foreclosure sale so it's imperative to contact an attorney quickly — once a sale is done, they may be unable to help.
When you file for bankruptcy protection, foreclosure actions will stop. You will have to reaffirm the mortgage debt to keep your home. In many cases, the amount you owe may be reduced by the court if you are filing Chapter 7. In Chapter 13 proceedings, all arrears will be included with monthly payments and repaid over a period of 60 months.
Taxes and Bankruptcy
One of the more complicated aspects of bankruptcy is taxes. Many taxpayers believe no taxes may be waived during bankruptcy proceedings, but this is not accurate. Provided you have not committed tax fraud, have filed your taxes and have tax debt older than three years old, you may be able to have those taxes discharged. There are other requirements, but this is a good rule of thumb to follow.
Taxpayers who have not filed taxes should let their bankruptcy attorney know immediately. Once you have filed a bankruptcy petition, you must file all taxes on time or face the potential of having the bankruptcy discharged, even if you are making all payments under a Chapter 13 plan. Any results which are not filed may be filed by the IRS using a substitute filing which could be very costly.
Student Loan Debt
One question we at Woodall & Woodall get on a regular basis from our southern Georgia clients pertains to student loan debt. According to Forbes, 44.2 million U.S. residents have student loan debt and nearly 11 percent are in arrears. Except in very rare circumstances, student loan debt cannot be discharged in bankruptcy, but you may be able to reduce the amount of your payments or in some cases, have payments waived for up to five years.
You work hard all week only to take home a paycheck which is 25 percent lower than what you should earn for a full-week of work. This is because your wages have been garnished by a bill collector. Unfortunately, this is becoming a common practice among creditors when monies are owed to them. We have good news; however, if you file for bankruptcy protection, the garnishments will stop, and your wages will not be garnished further for your debts. Once you file for protection, you gain federal protections from creditors and you cannot be pursued for the underlying debt.
Life After Bankruptcy
Bankruptcy does not mean you will be financially bereft for the rest of your life. Instead of thinking about bankruptcy as an end, think of it as a new beginning. After bankruptcy you may feel frustrated because you are aware your credit history will reflect the filing for a long time. The fact is, you now have a chance to take control of your financial future.
Instead of thinking you are a failure, recognize what you have done — you have found peace of mind, and given yourself a second chance. Everyone deserves a second chance, it's up to you to make the most of it.
We want to empower you to enjoy your newfound financial freedom. This means making sure you have the information you need to make the most of post-bankruptcy. The first step in recovering after bankruptcy is setting a family budget that you can stick to. This means managing expenses, but it also means addressing debts such as car payments and mortgage payments wisely.
You will have to work hard to rebuild your credit after bankruptcy. For those who have a car and home loan, this is typically easier. You can benefit from using secured credit cards during this time. Secured cards generally involve having a corresponding savings account but, they also report to the credit bureaus regularly giving you a leg up on building your credit. Remember, you can't rebuild your credit overnight so do not try to rush this process.
The best way to protect yourself is knowing the facts. As a debt relief agency, our goal is to empower you with facts and knowledge to make sure you understand what options are available to you to get out from under debt. Not everyone who comes to us winds up filing for protection under the bankruptcy code.
Woodall & Woodall is a debt-relief organization. We have helped more than 22,000 clients in the 35 counties in Georgia get a fresh financial start. You have nothing to lose by contacting us to learn more about what options are available to you. Let us put our more than three decades of experience to work and help you get a fresh financial start. Contact us today for a free consultation and see what we can do to help you get started on a better financial path.