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Whether you are just concerned and want more information, feel like your finances are heading for trouble, or you have a true financial emergency, you’ve come to the right place.
Since 1986, over 30,000 families have trusted Richard West Law Office to help them wipe out debt, keep their property, and rebuild their credit.
The number one most dangerous mistakes to avoid before filing bankruptcy is making preferential transfers. “What the heck is a preferential transfer?” you ask. This is “legalease” for paying money to, or for the benefit of “insiders.”
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Concerned & Looking for Information
Most people have more options than they know. And when they learn that they have more options, they get confused about which one to choose.
But, it’s not that difficult. Here’s how to do it.
1. Identify all options that could apply to your situation. Not all will, but you will normally have several that you could choose from.
2. Evaluate the ones that you could use. Compare against each other.
3. Chose the top one or two that make sense, and seek a free consultation for more info.
This simple, 1 – 2 – 3 approach breaks down the complicated problem in to easy to do steps.
Most people have more than they are aware of. In fact, there are at least SIX options you need to know about.
Six Options (and even more!)
There are 6 main options for debt relief, and advanced strategies that combine several of them for a highly customized solution. Knowing these options helps you understand what you can do, so you can figure out what you should do.
Three Non-Bankruptcy Options:
1. Credit Counseling
Credit counseling is probably the most common (and least powerful) debt relief program. It can be effective if your debts are not seriously out of control, and you just need some help creating a budget, or controlling your spending.
Credit counselor review your income and expenses with you, and look for ways to cut out your non-essential expenses. It’s not really debt reduction and it is expense reduction. But, for some folks, this is all that is needed.
2. Debt Management Plans
This is the program you see plastered all over television and the internet. DMPs promise to get you out of debt in a short time without filing bankruptcy. These programs can be effective, depending on the amount and kinds of debt you have. They are not for everyone, and can get you sued.
DMPs will attempt to negotiate a lower interest rate, better payment terms, or even possibly (but rarely) get the creditor to forgive some of the debt. You end up paying taxes on any debt forgiven, so the “amount saved” is less than it appears.
DMPs are entirely voluntary – creditors sometimes refuse to participate. These plans will lower your credit score, because you are “not paying as agreed” but if you have the right kind of debts, and if you don’t owe too much, a DMP may work for you.
IMPORTANT! Many DMPs are just scams. They take your money and do little or nothing. Then you get sued. Be extremely cautious when hiring one of these companies.
3. Debt Settlement
The debt settlement model is more extreme (and dangerous) than a DMP. In a debt settlement program, you hire a company and start paying them, not your creditors. Your credit score drops like a rock, as you get further and further behind in your payments
Your debts will go to collections, and that’s when the debt settlement process begins. The money you have paid to the company is used to attempt to negotiate lump sum settlements with your creditors. You pay tax on any debt that is forgiven.
Some creditors won’t settle. They sue instead. The debt settlement company can’t help you when you are sued, and will refer you to an attorney. I see a lot of bankruptcy cases result from failed attempts at debt settlement.
Two Bankruptcy Options
Bankruptcy is a powerful and effective debt relief tool. More people should file bankruptcy than do because they don’t understand how it works, and how quickly they can rebuild their credit after discharging their debts in bankruptcy.
4. Chapter 7
More people file chapter 7 than any other kind of bankruptcy. Although it is referred to as a “liquidation bankruptcy” most of my clients keep everything they want to keep, and get rid of what they want to get rid of, including all their credit card bills, medical bills and other unsecured debt. They pay for what they want to keep, like their house and vehicles.
Some debts cannot be discharged in chapter 7, like child support, student loans and most taxes (although older taxes are frequently dischargable!).
Chapter 7 cases are short, about 5 months from beginning to end. You have to list all your creditors, list all your debts and provide a detailed financial history. You do not appear before a Judge. There is a brief trustee meeting where you confirm that the information you put in your bankruptcy petition is complete and correct.
Rebuilding credit after chapter 7 is not hard if you know how. As a certified credit counselor, I have created a very effective program to help my clients recovery their credit quickly after discharging their debt in chapter 7. Typically, my clients get credit scores of 650 – 700 within one year of their discharge.
5. Chapter 13
Chapter 13 is the most powerful, and most misunderstood debt relief program we have. Many attorneys do not fully understand what can be achieved with chapter 13.
As a result, chatper 13 is underutilized, and I see many people who file chapter 7
“leave money on the table” because they should have been advised about their options in chapter 13.
Chapter 13 is a payment program, but seldom does anyone pay all their debt. In most of my chapter 13 cases, we only pay a single penny on the dollar to unsecured creditors. We catch up on missed payments for property we want to keep, like cars and houses, and wipe out everything else.
Most people who qualify for chapter 7 also qualify for chapter 13, and should insist that both options be fully explored and evaluated by any professional they visit, so they can make a fully informed decision when comparing the two types of bankruptcy options.
6. A Final Option
A final option – deliberately decide to refrain from any of the above options.
Either permanently, or for the time being. You deliberately decide to “not do” something. This is a choice. This is an often overlooked option.
Consider this example. Imagine that you’re on Social Security. You have a fixed income, barely enough to get by. Certainly not enough to pay any of your bills.
Most creditors cannot garnish your Social Security check. And, if you don’t have any property they can attach, you are “uncollectible.” Even if they sue you and get a judgment against you.
Now, this option is not without its price. Creditors can be ruthless and wear you down.
- They are permitted, by law, to attempt to collect their debt.
- They can sue you.
- They can call you. And call you. And call you.
- They can send you nasty letters.
- They can make your life miserable.
But they can’t take what you don’t have (you want to discuss this with an attorney, though, so you will be sure what is protected and what is not).
And they can’t take income that is protected by law.
More Advanced Strategies
Because I’ve been helping people solve debt problems for over 35 years, I’ve learned that sometimes it is best to combine one or more strategies to get the best results.
For example, you might lose your job and become uncollectible for a period of time.
When you become reemployed and we might pursue a debt settlement program or a debt management program. If that works – then the problem is solved.
Depending on circumstances, the amount of debt that you owe, etc., you might try a non-bankruptcy option for a period of time and later realize that it is not getting you out of debt fast enough. At that point in time you’d want to consider pursuing one of the bankruptcy options that might be available to you.
There are even “strategies within strategies” I use to preserve even MORE options for my clients.
For example, let’s imagine you have an aging parent who you are caring for in your home. Perhaps the parent will be passing away soon, or, perhaps you still have children living with you, struggling to get out on their own and they are just not able to move out yet.
In these situations, you may need to keep the home you have for a few more years. We might consider keeping the home in a chapter 13 for 3 or 4 years, and then converting the chapter 13 to a chapter 7, and discharging the entire debt, and you emerge free of that huge mortgage on the upside-down house.
This is an advanced strategy which solves multiple problems.
As you can see, to get the best results, you have to have the best coach. You need someone who is trained and certified and has years of experience in all of the different debt relief strategies in order to be sure that you have the right formula for getting out of debt.
And, there’s even more…
Once you are achieving your goal of getting out of debt, there are two additional and very important aspects of your financial health that you need to address.
One, you need to rebuild your credit.
You may think it’s premature to think about rebuilding credit while you’re in the middle of the debt crisis. However, if you get the right expert on your side you will soon be on your way out of debt. While you are getting out of debt, you need to be rebuilding your credit. Yes, you can do both at the same time, if you know how.
Finally, your credit report needs to be professionally reviewed.
I teach my clients what to do to rebuild their credit and also how to quickly and effectively review their credit report for errors that affect their score. Some errors do, and some don’t, so it’s important to know the difference.
Help For Your Situation
Bankruptcy is a difficult and stressful event in your life to go through. Here are some helpful resources that can guide you through considering your options.
Get Your Free Consultation And Review All Your Options
Start the bankruptcy recovery process now with a free consultation after completing our online evaluation form.
Here are two helpful calculators for managing your debt repayments and Chapter 13 commitments.