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First things first. If you are facing a layoff and are thinking of not paying some bills talk to your creditors. Many have specific programs that allow you to conserve money and reduce your fixed payments in the near term. Many creditors will allow you to skip payments or delay payments and have them added to the end of the loan. This gives you some time to perhaps get another job and maintain a good credit rating. Talk to your creditors and find out what programs they may have available.
At the current time, due to Covid-19, many creditors are granting grace periods for debtors with regard to their mortgage loans or credit card debts. Nonetheless, all of these creditors will expect that payment in full will be made eventually and may not suspend the accrual of additional interest fees. If you are faced with a choice of paying credit card bills or paying your mortgage or car loan or lease, you should consider filing for relief under the bankruptcy laws.
There are two kinds of bankruptcy for individuals. The first is referred to as “Chapter 7”. The other is “Chapter 13”. In a Chapter 7 case a debtor is able to gain permanent relief from virtually all of his or her debts. There are considerable exemptions which can protect the property of most middle class and working-class families.
Warning: Be careful to follow advice that you hear on the news or read in someone's social media. Although creditors do have programs you have to apply for them and receive confirmation (ask for it in writing). This is doubly true for Mortgage payments.
401k accounts are protected up to $1,362,800. Most pension funds are totally exempt. There is a Homestead Exemption to cover equity which a debtor might have in a home of over $25,000 per person. This means that for a husband and wife, over $50,000 of equity can be protected. Mortgages, leases and car loans, if up to date, can be reaffirmed so that you can keep your current home or vehicle. There are numerous other exemptions. Any portion of the $25,000 Homestead Exemption which is not applied to real estate can be used to protect other property. Overdue taxes, student loans and certain other debts are ineligible for discharge under Chapter 7.
Many people are concerned about what will happen to their credit rating if they file for bankruptcy. Most credit card companies will close your accounts even if you owe no debt to them. However, you should consider what your credit rating is now when facing a mountain of unpayable debt, late payments and harassment from creditors. Most people are able to rebuild their credit over a short period of time. There are credit card companies which specialize in giving credit to people who have just gone through bankruptcy.
Chapter Thirteen is designed for people who have substantial assets above the exemption amounts and don’t want to lose them. Essentially, Chapter Thirteen is a rescheduling of debt so that lesser payments can be made. In certain cases the amount of debt can be reduced. There is an income limit to Chapter 7 cases such that if your income is too high you would not be eligible for Chapter 7, but would be required to file under Chapter 13. Most families would fit under the ‘cap’.
Often the claims of a voracious creditor can be settled or adjusted. Al will negotiate on your behalf to settle those claims or, if necessary, force the creditor to prove its case in court.
If you believe that you could benefit by the wiping out of almost all of your debt, please contact the Office of Al Gellene to make an appointment for a consultation.
Once you have a good idea what creditors will help and programs you qualify for you can then develop a strategy. If you do not have enough funds to cover all your payments, then plan on deferring payments. It’s a good idea when talking with creditors think of an amount of funds you can save. In other words, add a savings amount to the calculation of what you can afford to pay.
You are basically buying time to see how things play out. If your situation is short-term then you can catch up with the saved payments. If it is more permanent and you have to file for bankruptcy you won't have wasted cash on debts that will be discharged.
As mentioned above at the current time, many creditors are granting grace periods for debtors with regard to their loans or credit card debts. Nonetheless, all of these creditors will expect that eventually payment in full be made and may not suspend additional interest due. If you are faced with a choice of paying credit card bills or paying your mortgage or car loan or lease, you should consider filing for relief under the bankruptcy laws.
There are two kinds of bankruptcy for individuals. The first is referred to as “Chapter 7”. The other is “Chapter 13”. In a Chapter 7 case a debtor is able to gain permanent relief from virtually all of his or her debts. There are considerable exemptions which can protect the property of most middle class and working class families. 401k accounts are protected up to $1,362,800. Most pension funds are totally exempt. There is a Homestead Exemption to cover equity which a debtor might have in a home of over $25,000 per person. This means that for a husband and wife, over $50,000 of equity can be protected. Leases and car loans, if up to date, can be reaffirmed so that you can keep your current vehicle. There are numerous other exemptions. Any portion of the $25,000 Homestead Exemption which is not applied to real estate can be used to protect other property. Overdue taxes, student loans and certain other debts are ineligible for discharge under Chapter 7.
Many people are concerned about what will happen to their credit rating if they file for bankruptcy. Most credit card companies will close your accounts even if you owe no debt to them. However, you should consider what your credit rating is now when facing a mountain of unpayable debt, late payments and harassment from creditors. Most people are able to rebuild their credit over a short period of time. There are credit card companies which specialize in giving credit to people who have just gone through bankruptcy.
Chapter Thirteen is designed for people who have substantial assets above the exemption amounts and don’t want to lose them. Essentially, Chapter Thirteen is a rescheduling of debt so that lesser payments can be made. In certain cases the amount of debt can be reduced. There is an income limit to Chapter 7 cases such that if your income is too high you would not be eligible for Chapter 7, but would be required to file under Chapter 13.
If you believe that you could benefit by the wiping out of almost all of your debt, please contact the Office of Al Gellene to make an appointment for a consultation.