Law Office of James Keenan
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Beware of debt consolidation scams. Not exactly Shakespearean advice, but it is a worthwhile tip. Those in debt are also in need. They are in need of getting out of debt. When you can't afford the debt you have, there are few options available. This is particularly so for those on a fixed income That's most of us. Elderly are commonly considered th...
Are you in credit card debt? If so, you are not alone. Credit card debt is on the rise, and it is growing. Take a look at this CNBC story to see the rise. Credit card debt forgiveness is also increasing. But how? Why? Credit card debt that cannot be repaid is a problem. If you can't pay it you have limited options. One of them, however, is to ask for the debt to be forgiven. Even if only part of it.
Credit card debt forgiveness is available directly through creditors. Asking a credit card company to forgive your debt is a simple ask. Getting the debt actually forgiven, though, is a different issue. This recent US News article elaborates the varied aspects of asking your credit card debt to be eliminated or reduced.
If credit card debt forgiveness is offered, there is a catch. The IRS. Whatever credit card debt is eliminated is deemed income by the IRS. You will receive a 1099 for whatever amount of credit card debt you can be reduce or eliminate.
Beware, too, of all debt consolidators. They are often scams. Credit card debt forgiveness in this manner, as such, is rarely worthwhile. The cons outweigh the pros.
Bankruptcy, therefore, may be a better option for credit card debt forgiveness. Bankruptcy is a negative on your credit. It can, however, eliminate your debt, and that is a positive. It's tax-free, too. Forgiveness of debt through bankruptcy is not a taxable event. If you discharge debt in bankruptcy there is no tax to pay. It's also not a scam like many debt consolidators. It is a reliable option for those unable to pay their debt.
Debt or discharge, that is the question. But what does it mean? Simply put, its a decision. It's a decision whether to live with debt or without it. Discharge is the end result of a bankruptcy. When you file bankruptcy, here in Sacramento or elsewhere, you have debt. Likely a lot of it. Enough debt to prompt you to file for bankruptcy. But, again, why?
Bankruptcy is a legal process that can eliminate your debt. The end result of a bankruptcy filing is a discharge. Here is an explanation of it from the Sacramento bankruptcy court. A discharge is a legal order from the bankruptcy court. It orders your debts no more. Hence the title of this blog being debt or discharge.
Before you get the discharge, you must complete the bankruptcy filing process. It's not too difficult to do with legal guidance. But it must be done right. Otherwise, no discharge. Then your debt or discharge question is answered for you. Some of the basic components of a bankruptcy filing are listing your creditors and assets. You have to put down everyone you owe money. Even if is Aunt Edna or Uncle Charlie. Everyone must go onto the list, or schedules in bankruptcy. Including your assets is an obvious one. Bankruptcy law allows you to protect, or exempt, your property. But you have to list it.
When the bankruptcy filing process is done, the judge orders orders a discharge. Poof, no more debt or discharge dilemma. Maybe this is an oversimplification. But maybe it's not. The point is you have a choice choice. There are several facts that lead to debt. And there are several factors that can lead to a discharge. Each debtor is different. But all have options.
Contact my office for a free consultation to evaluate your options.
Sacramento bankruptcy basics is a primer post for those considering filing for bankruptcy. Bankruptcy can be a hard decision. A really hard one. But bankruptcy can bring relief. Lots of it. The most basic equation for those thinking of bankruptcy is debt. More debt than income. That is the common denominator for bankruptcy filers. So, if you have more debt than you can afford, bankruptcy should be considered. Not because you want to. Since you have to.
But bankruptcy is not that bad. What many fail to consider is the benefits of bankruptcy. Namely, it eliminates debt. Many in Sacramento are living with debt they cannot pay. Something needs to be done. But what? The first Sacramento bankruptcy basics evaluation should be whether your debt is growing. If it is, that's a sure sign you have more debt than you can afford. And it's also a sign your debt is likely to get even bigger. Borrowing to pay off borrowed money is a common phenomenon. It is unsustainable, though. Something will eventually have to give.
Debt consolidators are commonplace. Their pitches are good. But their impact is bad. Consolidating your debt is a ding worse on your credit then bankruptcy. Plus it doesn't eliminate your debt. Here is a news story revealing the problems. Sacramento bankruptcy basics should always include avoiding these companies. This is not a scare tactic. It is a fact. Having third parties pay your debt, if that even happens, is worse than bankruptcy on your credit. And if some of you debt is eliminated, it is taxed. Debt discharged, or eliminated, in bankruptcy is not taxed.
As a final Sacramento bankruptcy basics point, I invite you to evaluate your bankruptcy options. You can go to the Sacramento Bankruptcy Court to gather information. Or you can contact my office for a free evaluation. All you have to lose is your debt!
Bankruptcy credit counseling is a requirement of the bankruptcy system. It mandates that someone who files bankruptcy must undergo credit counseling before filing bankruptcy and, again, after filing but before the bankruptcy is discharged. It is not difficult to do, nor is it expensive. But it must be done.
Unless bankruptcy credit counseling is obtained before filing, you are not eligible to file. And if you don’t get a second credit counseling session after you file, you won’t receive a discharge. It is a must in the bankruptcy filing process since Congress imposed it as a requirement in 2005.
The purpose of pre-filing bankruptcy credit counseling is to alert consumers to possible bankruptcy alternatives before they file. Almost never, though, are other options besides bankruptcy recommended in the counseling process. That’t because people filing bankruptcy cannot afford their debts, which is why they have begun the bankruptcy process. But if they could, bankruptcy credit counseling could reveal that possibility. Even if you know bankruptcy is your only option, you must still undertake pre-filing bankruptcy credit counseling.
After you have filed, but before your case can be concluded with a discharge, you must take a second credit counseling session commonly called debtor education. Debtor education does just what it says. It educates debtors on debt, financial considerations and budgeting. All this is an effort to counsel the consumer to avoid future financial failings. Though bankruptcy is not always brought on by financial fault, debtor education bankruptcy credit counseling seeks to avoid that future potential.
Cost for bankruptcy credit counseling varies. Typically credit counseling sessions cost less than $25. Upon completion of credit counseling, a certificate of completion is issued. I file these forms for you to reflect completion of your bankruptcy credit counseling requirement.
Bankruptcy is an option to eliminate or reorganize your debt. There are other alternatives besides bankruptcy, though. Debt relief companies and agencies can help, but be cautious taking this route.
Many debt relief companies and agencies promise to provide results, but don’t deliver. While there are certainly legitimate enterprises offering help for those in need of debt relief, many do not do as promised. Often payments are not made to creditors, there are hidden fees and no protection from lawsuits. Scams can sometimes occur as this story suggests. Sometimes the debt relief company or agency becomes yet another creditors piled on top of the rest of your debt.
The debt relief industry, not taking into account bankruptcy practitioners, is a multi-billion dollar industry. Many times, too, the debt relief companies and agencies are owned by the very creditors your are seeking to suppress. A common scenario is when you contact a creditor, say a credit card company, and convey a concern you have with your debt, interest rate, minimum payments or a host of other potential problems. They can refer you to a debt relief company or agency that, surprise, is owned by the same creditor. The purpose of the “debt relief” in this setting is not to manage or lower your debt; it is to funnel as much money as possible to the parent creditor company. This does not help you.
Debt relief organizations, even if effective at minimizing your debt, do not protect you from potential lawsuits. While a bankruptcy prevents a creditor from even contacting you, much less suing you, debt relief companies can’t do this.
Another pitfall to potential debt relief companies and agencies is that if they do arrange for a payoff of your debt over time, you are not paying your debt. Credit ratings and scores can be damaged more detrimentally than even a bankruptcy in such settings.