Saving Your Assets Part 6 – Filing for Bankruptcy

by Gary on December 10, 2012

In this series of posts, we’ve been talking about ways to protect assets rather than liquidate or borrow against those assets to pay credit card debts.

After all these years as a bankruptcy and consumer lawyer, it still surprises me when I learn that clients have bowed to the pressure of creditors by taking out home equity loans or cashing in 401k accounts to pay off unsecured debts. Those same clients wonder how bankruptcy could possibly be better than using assets to pay debts. The bottom line is that bankruptcy is often a faster and less expensive route to financial stability, and in most cases, bankruptcy debtors will not have to give up assets like home equity or retirement savings to get relief from credit card debt.

The “B” Question:

Generally in Chapter 7 straight bankruptcy cases, an individual or a couple can discharge (eliminate) most of their unsecured debt in four to six months without having to sell or turnover any assets.  For more information about Chapter 7, click here.

For those who cannot qualify for Chapter 7, a Chapter 13 plan might be the answer. A Chapter 13 case protects the filer from harassment by creditors while he makes monthly payments to a trustee who distributes the money to creditors that have filed documents to prove that the money is actually owed.  If you complete your plan — which usually takes 36 to 60 months — your unsecured debt is generally discharged even if the creditors received less than their balances.  A Chapter 13 case can also provide an orderly and affordable method for catching up on house or car payments, something that a credit counseling service cannot do.  Click here for more information about Chapter 13.

As it happens, many people spend years stressing over debts and bill collectors, paying thousands of dollars to stave off the phone calls and other harassment.  They think, “I’ll be able to get a handle on this after after the holidays,” or “I’ll use my tax refund (or bonus or I’ll get a second job) to get caught up.”  As we’ve seen, some people take out home equity loans to pay old credit card debt.  Often, those people are eventually in our office talking bankruptcy, wishing they had done it a long time ago and spared themselves years of stress.

Asset protection isn’t just for the rich.  Don’t pay your credit cards with the equity in your house or jeopardize your retirement until you’ve contacted with Armstrong Kellett Bartholow P.C. We welcome the opportunity to review your financial situation and help you make decisions on the course of action that works for you and your family.

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