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Bankruptcy Alternatives Blog
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Monday, April 07, 2008
What if I Just Stop Paying My Debts? Is Not Paying a Good Bankruptcy Alternative?
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At some point in almost everyone's life we get to the point where we just through up our hands and say "Enough: My debts are too high, so I'm just going to stop paying!"
For some people that may be the correct option, but it does have one significant danger: If you stop paying, it is possible that your creditors will take you to court, sue you, and attempt to garnishee your wages. If you own property, like a car or a house, they could attempt to put a lien on your property, seize it, and sell it to repay your debt.
If you currently own no property or have no wages, you are "creditor proof", so doing nothing may be an option. If you get a pension or welfare, it is unlikely that those payments can be garnisheed, so there may be little risk of a garnishment. You could open a new bank account at a new bank that is not known to your creditors, and continue on until your situation changes.
However, if you do have a job, doing nothing is probably not the correct option for you. You need to take action. Try contacting your creditors and working out a repayment plan. If you need help, a credit counselor can meet with to determine if a debt management plan is the correct solution for you. If you still have good credit, a debt consolidation loan is another possible option.
If you live in the United States, a Chapter 13 Wage Earner Plan is a good personal bankruptcy alternative. In Canada, a consumer proposal is an excellent solution in many cases.
The point to remember is that doing nothing may be an option, but there are many other bankruptcy alternatives, so research your options and decide on the option that's best for you.Labels: bankruptcy alternatives, Chapter 13 Wage Earner Plan, consumer proposal, credit counseling, debt consolidation, debt management plan
Posted by Bankruptcy Alternatives Blog
@ 7:37 AM
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Monday, January 28, 2008
Debt Management Plans and Consumer Proposals: Which is the Better Bankruptcy Alternative?
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Note: a consumer proposal can only be filed in Canada. Americans can consider a similar procedure called a Chapter 13 Wage Earner Plan.
At first glance a debt management plan and a consumer proposal appear to be very similar. In both cases you make payments each month that are distributed to your creditors, so they are both a good bankruptcy alternative. There are, however, some significant differences.
A debt management plan is administered by a credit counsellor, while a consumer proposal is administered by a bankruptcy trustee. A bankruptcy trustee is an officer of the court, and therefore has the power to force creditors to accept the proposal. Here is how it works:
In a consumer proposal, each creditor gets one vote for every dollar they owe. If more than half of the dollar value of creditors votes yes, all creditors must accept the proposal. In a debt management plan, even if eight out of nine creditors vote yes, there is no way to force the final creditor to accept the plan. For that reason in most cases a consumer proposal is the preferred bankruptcy alternative.
In addition, in a debt management plan the creditors generally must be paid in full. In a consumer proposal it is often possible to get the creditors to agree to accept 50 cents on the dollar, or even less.
To file a consumer proposal you must be insolvent (owing more than you own, and being unable to pay your debts). Insolvency is not a requirement for a debt management plan, so that may be a reason to select the debt management plan option.
Which bankruptcy alternative is right for you? Contact a proposal administrator or a credit counsellor for more information.Labels: Chapter 13 Wage Earner Plan, consumer proposal, debt management plan
Posted by Bankruptcy Alternatives Blog
@ 10:24 AM
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Saturday, October 27, 2007
Wage Earner Plan: How Can a Chapter 13 Wage Earner Plan Help Me?
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Chapter 13 of the federal bankruptcy laws gives individuals the right to propose a plan to their creditors to repay their debts. Chapter 13 is also known as a Wage Earner Plan, because it is usually filed by people who earn wages, and they use some of their wages each month to repay the creditors. (Under current law the owner of an unincorporated business can also file a Chapter 13 Wage Earner Plan). Chapter 13 is a great alternative to bankruptcy.
Wage Earner Plans are only available to residents of the United States. Residents of Canada should consider a consumer proposal, which is a very similar procedure.
To qualify under Chapter 13, an individual must have unsecured debts (those not backed by collateral to guarantee their repayment) of less than $100,000 and secured debts (debts backed by collateral, such as a house mortgage) of less than $350,000. A debtor files a Chapter 13 petition listing all debts. Upon the filing, the debtor's creditors must stop their collection activity while the creditors vote on the plan.
A typical Chapter Thirteen petition would include a repayment plan that lasts up to five years, and is funded by both the debtor’s wages, and by the sale of property of the debtor if applicable. The plan is supervised by a bankruptcy trustee, and must treat all creditors fairly, meaning each unsecured creditor will receive the same number of cents on the dollar.
The repayment plan may require the debtor to pay off only a portion of each debt, or the debtor may receive extra time to repay their debts, or they may receive both lesser payments and an extension of time.
It is these reduced payments that are the big advantage of a Chapter 13 Wage Earner Plan. If you can’t afford to make the full minimum payments of say $1,000 per month on your debts, but you could afford to pay $500 per month, a Chapter 13 Wage Earner Plan may be a great solution.
Even better, the Chapter 13 plan can be approved only by the court; the creditors can object, but the final decision is left to the court. After you have completed all of the payments, you are discharged from all of your debts, except for debts relating to alimony and child support, federal student loans, and taxes.
If you need a break, a research how a Chapter 13 Wage Earner Plan may be the correct bankruptcy alternative for you and your family.Labels: Chapter 13 Wage Earner Plan, consumer proposal
Posted by Bankruptcy Alternatives Blog
@ 6:14 AM
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Monday, July 02, 2007
Chapter 13 Wage Earner Plans, Financial Counseling, and Consumer Proposals – Which is a better bankruptcy alternative as far as my credit report is co
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It is a common misconception that financial counseling, or consumer credit counseling, is much better than a Chapter 13 Wage Earner Plan (in the United States) or a consumer proposal (in Canada) as far as your credit score is concerned.
In fact, they are all about the same. Each of these options will have a negative impact on your credit report.
To prove this point, we went to the web site for Equifax, the largest credit reporting agency in the world. Equifax explains that information in the Public Records section of your credit report remains on your credit report for 7 years.
What is a public record? Here is the definition of a public record from Equifax:
The 'Public Records' section reports the presence of several types of items on your credit report, including accounts that have been turned over to a collection agency, matters of public record, bankruptcies, and similar items. …The different types of items that may appear in the 'Public Records' section of your Equifax Credit Report™ are:
Bankruptcy A legal agreement in which a consumer is declared fully or partially unable to repay debts. In return for full or partial release from those debts, the consumer may sacrifice some property or agree to a payment plan. There are two different types of bankruptcy for consumers: Chapter 7 and Chapter 13.
Financial Counseling
A voluntary method of debt restructuring in which a person makes a lump sum payment to a financial counseling agency who distributes the funds to creditors. Consumers in financial counseling may have an arrangement to pay all or part of their consolidated debt.
Equifax goes on to state that:
Chapters 7, 11, and non-discharged or dismissed chapters 12 and 13 remain on file for 10 years from the date filed
Accounts paid as agreed remain on file for up to 10 years from the date of last activity (DLA)
In other words, whether you do consumer credit counseling or a Chapter 13 Wage Earner Plan the note on your credit report stating that you have filed the procedure is likely to remain on your credit report for up to 10 years. So which option should you choose?
Since your credit report is likely to be the same in either case, you should use other factors to decide on the correct option for you. In most cases a Chapter 13 Wage Earner Plan results in you paying less than the full amount of your debts owing, and so that may be the preferable option. However, professional advice is recommended, so consult a bankruptcy attorney or credit counselor to help you decide which bankruptcy alternative is right for you. Labels: Chapter 13 Wage Earner Plan, Chapter 7 bankruptcy, consumer proposal, credit counseling
Posted by Bankruptcy Alternatives Blog
@ 6:54 AM
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Monday, May 21, 2007
Chapter 13 Wage Earner Plans: A Great Bankruptcy Alternative, or a Trap?
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A Chapter 13 Wage Earner Plan is a great alternative to Chapter 7 bankruptcy, but only for certain people.
First, you must be a resident of the United States to file under Chapter 13. Canadian residents should consider a consumer proposal.
Next, you must determine if you qualify for Chapter 13. (Because a Chapter 13 bankruptcy is paid for out of the wages you earn each month, Chapter 13 is also known as a Wage Earner Plan).
Since new federal bankruptcy rules became law in October, 2005, anyone who has gross income higher than the median income for their state is required to file bankruptcy under Chapter 13, instead of under Chapter 7. Do not fall into the trap of thinking you can file under Chapter 7; Chapter 13 may be your only option.
Before deciding on a Chapter 13 Wage Earner Plan, consider your other options.
Since a Chapter 13 plan will typically last for five years, you should explore any options that can be completed in less than five years. For example, if you can get a debt consolidation loan and repay it in three years, a debt consolidation loan is probably a better option for you than a five year Chapter 13 Wage Earner Plan.
If you don't qualify for a debt consolidation loan, but you want to avoid the court process, and can afford to pay your debts in full over a three to five year period, credit counseling credit counseling may also be an option.
Finally, you may be able to cut your expenses and pay off your debts on your own.
A Chapter 13 Wage Earner Plan is designed to give you a fresh start, but remember, it's a five year plan, and that can be a trap. Only agree to a five year repayment plan if you are confident that you can afford to make the payments.Labels: bankruptcy alternatives, Chapter 13, Chapter 13 Wage Earner Plan, Chapter 7 bankruptcy, Wage Earner Plan
Posted by Bankruptcy Alternatives Blog
@ 11:12 AM
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Monday, February 26, 2007
To avoid bankruptcy, talk to a bankruptcy trustee or bankruptcy attorney
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Remember that TV commercial where four out of five dentists recommended a certain toothpaste? It may seem strange that a dentist would advise you on how NOT to get cavities, but it makes sense: a dentist is the best source of information on how to avoid cavities, since they see cavities every day.
The same is true when it comes to bankruptcy alternatives. It may seem strange, but often the best source for information about how to avoid bankruptcy are the people who do bankruptcies: bankruptcy trustees in Canada, and bankruptcy attorneys in the United States.
To help you research your options we have assembled a list of the following bankruptcy resources to help you evaluate your bankruptcy alternatives:
If you live in the United States, a great resource is Bankruptcy America; they even provide a free personal bankruptcy evaluation form to help you decide if personal bankruptcy is right for you.
Residents of Canada can get similar help at Bankruptcy Canada; be sure to check out the largest bankruptcy blog in Canada.
If you live in Ontario, Canada, you can find information on the Bankruptcy Ontario web site. Information is also available for individual cities in Ontario, including bankruptcy Kitchener, bankruptcy Cambridge, bankruptcy Guelph, bankruptcy Toronto, bankruptcy Windsor, bankruptcy London, and bankruptcy Hamilton.
You have options, so contact an expert and decide if bankruptcy, or a bankruptcy alternative, is right for you.Labels: bankruptcy America, bankruptcy Cambridge, bankruptcy Canada, bankruptcy Guelph, bankruptcy Hamilton, bankruptcy Kitchener, bankruptcy London, bankruptcy Ontario, bankruptcy Toronto, bankruptcy Windsor
Posted by Bankruptcy Alternatives Blog
@ 9:03 AM
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Saturday, January 27, 2007
I am behind on my mortgage. Do I have any alternatives to bankruptcy?
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If you get behind on your mortgage payments, your mortgage company will eventually want to seize your home and sell it to recover their money. If there is a shortfall when they do this, you will be responsible for the shortfall.
For example, if you owe $200,000, and they sell the house and get $190,000, they will pursue you for the $10,000 shortfall. If that happens, is it necessary to declare personal bankruptcy, or do you have other bankruptcy alternatives?
First, you should take all reasonable actions to stay current with your mortgage, and to prevent the bank from taking your house. This would include negotiating with the bank to defer mortgage payments until you can get back to paying regularly.
Second, you could attempt to switch to a different mortgage lender, perhaps through a mortgage loan debt consolidation or other type of mortgage refinancing.
Third, you could attempt to borrow from family or friends until you are back on track.
If those alternatives don’t work, and the bank does seize your house, you can still negotiate with the bank to repay the shortfall. Ask them to convert the shortfall to a loan that you can repay over time.
Only if these bankruptcy alternatives are not successful should you consider personal bankruptcy as a way to deal with a shortfall on a mortgageLabels: bankruptcy alternatives, mortgage, personal bankruptcy
Posted by Bankruptcy Alternatives Blog
@ 4:08 PM
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