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Debt Relief & Your Credit — The Skinny On How Debt Relief Plans, Credit Counseling, Debt Settlement and Bankruptcy Affect Your Credit

Filed under Bankruptcy, Credit Card Debt, Credit Counseling, Credit Help, Debt Consolidation, Debt Payoff Plans, Debt Settlement by Jesse Niesen on October 6, 2010 at 2:15 am {no comments}

Your credit will be affected no matter what you do.

Let’s learn how…

First, let me ask you an interesting question:

What do you really need your credit score for, other than acquiring more high interest (bad) credit card debt?

How much is your credit score costing you each month, in real dollars?

(Dollars you could spend on food, shopping, vacation, retirement, your children, education, etc, instead of handing it over to your creditors in interest payments every month?)

Credit Importance Test

What’s most important to you?

1. To have the lowest monthly payment possible on your debts?
2. To get out of debt for the lowest amount possible?
3. To get out of debt as soon as possible?

In 2005 I conducted a “National Debt Relief Survey” while serving as COO of STARTOVERTODAY.COM, a nationwide financial solutions company I co-founded in 2002. I surveyed over 10,000 people who had asked us for help with their credit card debt online this question, “What is most important to you?”

Here are the results for the answers chosen:

Lowering your monthly payments 7.6%
Reducing the amount of debt you owe 12.7%
Getting out of debt ASAP 42.4%
Preserving perfect credit 4.2%
Restoring less-than-perfect credit 16.1%
Having only one monthly payment 4.2%
Stopping creditor calls 4.2%
Reducing or Eliminating Interest & Fees 3.4%
Other 5.1%

When I saw these results, all I could say was, “Wow!”

I was shocked, and so were the executives of several top debt management companies who I shared the results with, because we were all convinced up until then that most people just wanted the lowest monthly payment. As it turns out, most people just want to get out of debt ASAP!

Back to the question I asked you a minute ago, here it is again:

What’s most important to YOU?

1. To have the lowest monthly payment possible on your debts?
2. To get out of debt for the lowest amount possible?
3. To get out of debt as soon as possible?

Would you be willing to lower your credit “rating” in the short term in order to accomplish (Questions #1, #2, or #3 above) if it improved your credit “worthiness” long term?

* See Credit “Rating” vs. Credit “Worthiness” if you do not understand this question.

High Credit Scores

If keeping your credit score high (assuming it’s already high enough to matter) is more important to you than getting out of debt the fastest, cheapest or for the lowest payment, then the only options you have are either continuing to make your minimum payments or get out faster by paying even more per month and doing what’s called an “accelerated debt payoff plan“.

Still, we must ask ourselves, what do we want credit for?

…A quote I read in an article once said:

“worrying about your credit rating when you’re drowning in debt is like worrying about how your front yard looks when your house has just burned to the ground…”

“Less-Than-Perfect Credit”

If you have less than perfect credit, then you may not have much to lose at all, and a whole lot to gain. You’ll learn the specifics of how each option affects your credit and understand which option will eliminate your debt and credit problems, and be easiest to clean up after. Plus, you’ll learn how to repair and build your credit, no matter what you’ve been through.

Credit Myth Exposed

There’s a myth out there that you can lower your monthly payment, get out of debt for the lowest amount possible and/or get out of debt as soon as possible WITHOUT any negative effect on your credit.

Well, this is simply not true. The fastest ways to get out of debt all have some kind of negative affect, minimal or extreme.

The truth is, there is no option available for you to accomplish what you have in mind whether you want to lower your monthly payment, get out of debt for the lowest amount possible and/or get out of debt as soon as possible WITHOUT negatively affecting your credit in the short term.

So let’s take a look at the debt relief options available to lower payments, reduce balances and get out of debt ASAP, and how each negatively affects your credit…

Bankruptcy

Any bankruptcy is an extremely negative item on your credit report, often viewed as the worse mark you could ever have. Chapter 7 stays on your credit for 10 years. Chapter 13 stays on your credit report for 7 years AFTER it’s discharged, usually following a 5 year repayment plan, thus damaging your credit for a total of 12 years!

Mortgage guidelines will not allow you to get a mortgage loan or refinance for at least 24 months after discharging a chapter 7 bankruptcy filing, and up to 48 months after discharging a chapter 13 bankruptcy.

Still, if you cannot afford any other option, then you may need to consider bankruptcy.

Credit Counseling

“Credit Counseling” is also known as CCCS, Consumer Credit Counseling Services, Debt Consolidation and Debt Management Programs.

Credit Counseling no longer affects your credit “score”, BUT enrolling in this type of program DOES have a major negative impact to your credit “worthiness”. Lenders view this just as negatively, or worse, than bankruptcy. In fact, seeing enrollment in Consumer Credit Counseling on a credit report is often called a “walking bankruptcy”. This negative affect lasts about 30 days longer than the debt management program lasts, which is usually 5-7 years. If you cannot afford an accelerated payoff plan and do not qualify for debt settlement, then you need to consider credit counseling.

Just make sure you understand what you’re getting involved in: Credit Counseling Lies Exposed – The Truth Non-Profit Credit Counselors Don’t Want You to Know

Debt Settlement

Debt settlement has minimal to serious damage to your credit rating due to late payments and charge offs, depending mostly on how good your credit rating is in the first place. Debt settlement may significantly affect someone with perfect credit but may not have much negative affect at all on someone who’s already fallen behind. In fact, debt settlement may significantly improve credit rating and worthiness for such individuals rapidly.

NOTE: Debt settlement is not reported on credit report as a bankruptcy and credit counseling are.

If you cannot afford an accelerated debt relief plan, then you may want to consider debt settlement.

Debt Relief Options

Let’s take a closer look into your options to get out of debt:

Here To Be An Asset To You,

Jesse Niesen
DebtGoToGuy.com

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Debt Settlement vs. Bankrutpcy — Is Debt Settlement Really Better?

Filed under Bankruptcy, Debt Settlement by Jesse Niesen on January 16, 2010 at 10:03 pm {no comments}

I’m often asked, “Is debt settlement a better choice than bankruptcy?”

That’s a good question.

Bankruptcy may allow you to eliminate most of your debts quickly, and this is typically referred to as a Chapter 7 bankruptcy.

In other cases, you may be required to pay back a percentage of your debts over time. This is typically referred to as a Chapter 13 bankruptcy.

Bankruptcy also offers legal protection under the court so that you don’t have to worry about being sued or harassed by creditors while completing the bankruptcy process.

While most reputable debt settlement firms will work to drastically and effectively minimize creditor’s calls, debt settlement does not provide the guaranteed legal protection that bankruptcy does.

However, chapter 7 bankruptcy is not an option for everyone, and it has gone through some changes since the bankruptcy reforms of 2005. It has become more difficult to qualify for full liquidation or in others words, full forgiveness of your unsecured debts. Chapter 13 bankruptcies typically require five years of court ordered payments to a trustee and may require you to surrender some of your assets.

Knowing all of your options will help you make a more informed decision, and speaking to a bankruptcy attorney may be a worthwhile decision. Most reputable debt settlement firms can refer you to a trusted bankruptcy attorney in case you have detailed questions or if they determine that you might be better served by speaking to them.

Typically, if you are in such a financial state of hardship that it is determined you can’t even make your minimum payments into a debt settlement program, then speaking with a bankruptcy attorney is highly recommended.

Subscribe to the Debt Relief Guide Online to learn more about debt settlement and bankruptcy. Plus, you’ll receive a free legal evaluation from a bankruptcy attorney in your state ($200 value) to determine if you qualify as well as a free savings quote from a fully accredited and professional debt settlement law firm upon your request.

Make it easy on yourself to make your best choice because dealing with debt is hard enough as it is…

Here To Be An Asset To You,

Jesse Niesen
DebtGoToGuy.com
Debt Settlement (OVER $40k)(Complimentary Consultation & Quotes *with Jesse)

** Must have $40,000+ in Credit Card or Unsecured Debt to apply to this exclusive “Sword & Shield” Forensic Mitigation and Debt Restructuring Program. Top debt settlement results provided by A+ BBB Rated, Accredited, FTC Compliant Law Firm in business since 1999 with a national network of attorney’s legally settling debt at a 38-40% average with zero complaints to the Better Business Bureau. Attorneys (or anyone else) cannot guarantee outcomes and results may vary, but these pros are the very best in the business, and I pass along reduced fees to my personal clients.

Debt Settlement (UNDER $40k) (Free Consultation from Affiliate Law Firm)
** Must have $10k+ in Credit Card or Unsecured Debt – “A” Rating & Accredited with BBB, in business since 2003 with transparency and accountability through the largest online debt relief community.
NOTE: This consultation is NOT with Jesse, but will be with a debt counselor who’s held accountable.

Fair Debt Collection Representation (Complimentary Evaluation *with Jesse)

** Collectors calling? Feel like your rights are being violated?
Discover how FDCPA Representation from creditor-butt-kickin attorneys can help you get into a stronger and more profitable position quickly. When a third party collections agency fails to obey the law, they may be liable TO YOU for damages of $1,000 PER VIOLATION. My attorneys will protect your rights from scavenger debt collectors and bring illegal collection tactics to justice.

Bankruptcy (Complimentary Case Evaluation *with Jesse)
Attorney’s can be cold & scary. I’ll be the warm & real human that bridges the gap.
DON’T BE AFRAID OF BANKRUPTCY. Each and every case is unique. Don’t assume that bankruptcy can’t help you.
I will submit your case to a local bankruptcy attorney at no charge to you.

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Debt Settlement vs. Bankrutpcy — Which is Better For Fast Debt Relief?

Filed under Bankruptcy, Debt Settlement by Jesse Niesen on January 16, 2010 at 9:52 pm {no comments}

Debt Settlement or Bankruptcy; That Is The Question!

Debt settlement is the fastest way to experience debt relief and be debt free for the least amount of money while avoiding bankruptcy, and may be best for you if you cannot or do not want to file bankruptcy.

One type of personal bankruptcy is the fastest and cheapest way to find relief and get out of credit card debt that exists, period, while another type of personal bankruptcy may offer debt relief but takes many years, costs even more than debt settlement and seriously damages your credit for well over a decade.

So which is which??…And which is best for you?

Let’s start by clarifying what bankruptcy is, the differences between the two different types of personal bankruptcy filings and what you must whatch out for when considering bankruptcy (especially when speaking with bakruptcy attorney’s.

Chapter 7 Bankruptcy is a “liquidation”.

This is where you pay an attorney or law firm anywhere from $800 to over $3,000 to file, complete the substantial paperowrk and documentation required and then within a matter of months your debts are completely wiped out.

Chapter 7 Bankruptcy is the fastest way to get out of debt for the least total direct cost.

However, chapter 7 bankruptcy is reported on your credit report (listed with every account included in the bankruptcy) for TEN YEARS.

Chapter 13 Bankruptcy is a “repayment plan”.

This is a court-ordered repayment plan, usually lasting 60 months. Any missed payments cause you to lose the protection of the courts and your creditors can then go after you.

Chapter 13 stays on your credit report (listed with every account included in the bankruptcy) for SEVEN YEARS AFTER the date of discharge, which is usually FIVE YEARS after filing, severely damaging your credit for A TOTAL OF TWELVE YEARS. Chapter 13 is also public record for twenty years and carries most of the additional costs mentioned for Chapter 7 above.

Often, my clients tell me their estimates for repayment plans through Chapter 13 would require them to repay a higher percentage of debt over a longer period of time with a monthly higher payment than they could do otherwise through debt settlement.

An “Inside-Joke” of Bankruptcy Attorneys that ISN’T So Funny…

Some Bankruptcy Attorney friends of mine shared a story with me about how a Chapter 13 Bankruptcy is like a “turkey dinner”…

You see, everyone is sitting at the dinner table; the judge, the attorney’s, your creditors… Each with a bib on, double-fisted with fork and knife in hand, drooling and licking their chops…

And guess who’s the turkey?

In a Chapter 13, YOU are the turkey!

Serious Consequences for ANY Type of Bankruptcy FIling…

Any personaly bankruptcy filing is public record for 20 years. This may have detrimental affects on obtaining financing as well as employment opportunities.

You are usually required to include all unsecured debts in the bankruptcy.

Bankruptcy may have additional costs including limiting your credit worthiness (currently there are no mortgage loans available until 2 years after discharge), increased interest rates and fees, higher deposits required, disqualifying you for certain types of employment and more.

Typically, creditors will see an entry like this below each account on your credit report:

THIS ACCOUNT INCLUDED IN CHAPTER 7/13 BANKRUPTCY

There are many reasons to avoid bankruptcy at all costs. Significant social, emotional and psychological risk is also involved in filing bankruptcy. Each of us must decide for ourselves where we stand on these levels.

What To Do If You Don’t Qualify For Chapter 7 Bankruptcy?

The short answer is, “Run away from the bankruptcy attorneys BEFORE they talk you into becoming a turkey dinner!”

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) passed in October 2005 made sweeping changes to American bankruptcy laws. Many of the bill’s provisions were explicitly designed to make it “more difficult for people to file for bankruptcy”, especially Chapter 7.

These new laws have proven to be very “creditor friendly,” disqualifying many Americans from filing chapter 7 and leaving them with chapter 13 (being a turkey) as their only option for filing bankruptcy. If you find yourself in this situation, then typically debt settlement is a better option to get out of debt faster, with less credit damage, for a lower cost.

When Is Debt Settlement A Better Choice?

Debt settlement is the fastest way to be debt free for the least amount of money while avoiding bankruptcy. Debt settlement is a moral, legal and ethical option for people with serious debt in financial hardship. It’s honorable. It is agreed to by your creditors to “forgive” your debt.

If you do not qualify for chapter 7 or simply to do not want to file bankruptcy for moral, pride or ethical reasons, then debt settlement may be the best choice you can make.

Be very careful when selecting a debt settlement plan or program

What If I Can’t Afford Debt Settlement?

If you cannot afford the minimum payments for a debt settlement program, then you should be able to qualify for a chapter 7 bankruptcy. You should seriously reconsider any moral objections against bakruptcy and realize these laws are in place for a reason.

If you qualify, then it may be much better for you and your future to “bite the bullet” now and get out of debt instead of remaining in the financial stress and strain of carrying high amounts of high interest credit card debt working against you night and day.

Do You Need Expert Guidance to Choose between Bankruptcy or Debt Settlement to get Out of Debt, or Help Finding a Trusted & Proven Bankruptcy or Debt Settlement Firm for Debt Relief?

Make it easy on yourself to make your best choice because dealing with debt is hard enough as it is…

Here To Be An Asset To You,

Jesse Niesen
DebtGoToGuy.com
Debt Settlement (OVER $40k)(Complimentary Consultation & Quotes *with Jesse)

Fair Debt Collection Representation (Complimentary Evaluation *with Jesse)

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Debt Settlement EXAMPLE: $55k in Credit Card Debt (Avoids Bankruptcy)

Filed under Bankruptcy, Credit Counseling, Debt Consolidation, Debt Settlement by Jesse Niesen on December 15, 2009 at 9:16 am {no comments}

Could debt settlement be “the light at the end of the tunnel” for you?

If you’re deep in debt and feel like you’re running on the treadmill of life, carrying a heavy backpack full of bricks with no end in sight, let me show you a better way. Let’s peel back the curtain and show you the light at the end of the tunnel. You’re about to learn how to turn the tables, like Nicole was able to do.

Why are so many people turning to debt settlement these days?

According to a National Debt Relief Survey I conducted in 2006 with over 10,000 people who had requested help with their credit card debt online after searching Google, most people carrying significant debt said they were interested in debt settlement because they could finally get out of debt as fast as possible (and stay out), live debt free, save more money, invest for retirement, go on a nice “paid-in-cash” vacation, afford a college education for their children and many other reasons unique to their own situations…

What are your reasons?
Why is it important for you to be debt free?
Is “debt settlement” right for you?

Maybe, maybe not…

Let’s take a closer look to discover if debt settlement is the best option for you…

I’m about to tell you a short story to illuminate how debt settlement can be the best choice for certain people. It’s important to discover for yourself if debt settlement is right for you, BEFORE you talk to a pushy sales person trying to enroll everyone and their mother, including you, into debt settlement programs these days.

This story will help you see clearly if debt settlement can truly “save your day”, as well as avoid the common mistakes most people make.

Onward.

Nicole was a wife and mother of a 20-month-old baby girl, living in Virginia, making $27,000 a year as a school teacher and renting her home.

Nicole had financial problems; carrying over $53,000.00 in high interest credit card debt. Her husband Steve had lost his job. The couple charged up the credit cards to survive on Nicole’s small salary alone while Steve looked for work. Before Steve began working again, they fell behind on the credit card payments.

All the debt was in Nicole’s name.

Of course, the credit card companies were quick to jack up Nicole’s interest rates to 20-30%, with most accounts at 29.99% interest (pure insanity). This also caused the monthly payments to jump up to an amount the couple could no longer afford, even when Steve began working again.

What did Nicole do?

Fortunately, she AVOIDED bankruptcy, and got on the affordable fast-track to freedom from serious amounts of overwhelming debt.

I’ll share the details of “how” she did it below, but first let’s look at a bit of interesting history…

You see, Nicole had previously enrolled in a Credit Counseling program, making monthly payments of $1,425.00, which she couldn’t afford.

The credit counselor who enrolled her after going through her budget actually said to Nicole, with a straight face, “Can you live on negative-$80 a month?”

What a joke!

But it wasn’t funny…

Nicole dropped out of the program 2 months later, deeper in debt with even further damage to her credit.

Since dropping out of Credit Counseling (very common), Nicole had been saving up her money to pay an attorney $1,800 to file Chapter 13 Bankruptcy, because she did not qualify for a Chapter 7 Bankruptcy under the new “creditor friendly” Bankruptcy Reform Act passed in October of 2005.

Can you imagine?

Remember, she only made $27k a year as a school teacher, rented her home and had fallen behind on $53k of high interest credit card debt due to her husband’s job loss… but she still didn’t qualify for Chapter 7 Bankruptcy (where the debt is wiped out), only for Chapter 13 Bankruptcy (where she must repay a portion of the debt).

Wait until you see the “portion” of the debt she would have had to pay back if she had filed bankruptcy, but first you’ve gotta hear this…

Nicole was scheduled to meet with her bankruptcy attorney on a Thursday evening, but by chance she happened to see a certain “debt guru” on a TV Talk Show earlier that same day discussing options for getting out of debt, including debt settlement. On a whim, she called for a free debt relief guide.

After learning how credit works and about all of her options to get out of debt, Nicole canceled her appointment with the attorney to file bankruptcy and instead she faxed in all of her current credit card statements and budgeting worksheet to see if she qualified for a debt settlement program.

Guess what happened?

Nicole found a better way!

I’ll show you the details in a moment, but first let’s look at what she avoided…

Nicole nearly filed Chapter 13 Bankruptcy (public record). She would have paid $800-$1,000 A MONTH for 60 months, on top of $1,800 in fees for filing bankruptcy. That’s a total cost of nearly $50k-$62k to eliminate her $53k of credit card debt on a 5 YEAR, court-ordered repayment plan. (As quoted by her bankruptcy attorney)

Ouch!

Plus, the crippling affect of a bankruptcy would have remained on her credit report for another 7 years AFTER the date of her discharge… for a total of 12 years of major credit damage.

Double-Ouch!!

Instead, Nicole learned how she could eliminate her $53,000.00 of credit card debt for a total cost of about $34,280 in just 36 months with payments she could afford of only $995 a month.

You may want to READ that AGAIN!

Nicole discovered she could avoid the shame and long-term damage of bankruptcy, save more money for her and her family than any other option available (including bankruptcy or credit counseling) and debt free in just 36 months (no longer be a slave to credit card debt).

She no longer had to throw thousands of dollars a year down the toilet on interest charges.

Nicole eliminated the extreme stress she had been feeling when she didn’t know what to do or how she would ever afford to get out from under an overwhelming amount of debt and out-of-control monthly minimum payments she simply couldn’t afford.

Best of all, “Seeing the light at the end of the tunnel” and waking up every day feeling relief from heavy debt stress helped Nicole and Steve have a better marriage, be better parents to their young daughter and focus on their income and budgeting to get out of debt ASAP, saving as much money as possible in the process.

These results are nothing special and are typical of what can be done through debt settlement. In fact, many debt settlement clients are debt free even faster, averaging just 28 months. People with lump sums and high debt amounts usually experience the best results.

If you’re in financial hardship like Nicole was, then take a look at ALL of your options to get out of debt, including debt settlement, but BEWARE of anyone offering only one solution: Just like the bankruptcy attorney Nicole spoke with, or the credit counselor who enrolled her in a program she couldn’t afford, also watch out for anyone offering only debt settlement.

Work with a professional who offers all options to get your out of debt, who will look out for your best interests instead of trying to sell you their solution.

Subscribe to the Debt Relief Guide Online and learn which option is best for you.

I will help you get out of debt and choose what’s best for you. I offer ALL options and only work with proven professionals who are accountable to me and take great care of my clients. If bankruptcy is best for you, I’ll tell you, and help you. If credit counseling is best for , I’ll tell you, and help you. If debt settlement is best for you, I’ll tell you, and help you. If you just need to get serious about budgeting and get on track with an accelerated debt payoff plan, I’ll tell you, and help you. No matter what, I’ll tell you the truth about your unique situation and what’s best for YOU.

I promise you’ll love my “tough love” style because it’s what you need to hear to avoid mistakes and get this area of your life handled.

Let’s talk soon!

Here To Be An Asset To You,

Jesse Niesen
DebtGoToGuy.com

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Debt Relief Options: Bankruptcy

Filed under Bankruptcy by Jesse Niesen on January 3, 2009 at 8:01 pm {one comment}

Traditionally, if you’re not able to make minimum payments, you’re in a hardship, or you just find yourself in too much debt, what you do is file bankruptcy.

You file bankruptcy and you pay zero. The creditors get nothing and it’s the ultimate move, the ultimate trump card that you’ve got as a citizen. Unfortunately, about a year-and-a-half ago Congress passed new laws, which made it extremely difficult to file for what’s called Chapter 7 bankruptcy.

Let’s talk about the difference real quick.

There are two types of bankruptcy for personal bankruptcy filing. I’m not a bankruptcy attorney, I’m not an attorney at all, so this is purely educational information. This is not any kind of legal advice. (If you want to talk to a bankruptcy attorney, I do have a close network of bankruptcy attorneys nationwide. I would be more than happy to refer you to somebody in your state/area. Just contact me, and I’ll get you in touch with them. They can answer any specific questions.)

As a basic overview, Chapter 7 bankruptcy is called liquidation, where they wipe out the debt completely. Chapter 7 is the type of bankruptcy these new laws affected and they have made it much more difficult to qualify. Chapter 13 bankruptcies, on the other hand, are called a repayment plan. This is where you pay back a portion of the debt, usually over about 60 months. During that time, you are making court-ordered payments and you have to go before the judge.

Let me break it down for you this way: Chapter 7 bankruptcies are a pretty good deal, if you need to do it, it’s a good way to go if you can qualify. I don’t see Chapter 13 bankruptcies really being in the best interests of anyone.

Unfortunately, some people have been tricked or fooled into filing Chapter 13 bankruptcies. So far, I haven’t seen it come out as the best option for most. This is why:

the payments are usually as high or higher than other types of programs, and
you pay back as much or more than other types of programs,
it’s more stressful,
it’s more official
it’s a court ordered payment.

If you don’t make it, you’re done! There’s no forgiveness, there’s no helping. You go through tough times! If you don’t make that payment, the Chapter 13 bankruptcy is over.

It’s also going to stick on your credit for seven years as a bankruptcy, which is one of the worst things you can possibly have on your credit report. It stays around for seven years after your payment plan is over. If it’s a five year payment plan, you’ve got 12 years of bad credit from that bankruptcy.

A Chapter 7 bankruptcy shows on your credit for ten years, but its usually completed within a few months. You’ve now got ten years that the Chapter 7 is going to be on your report, which is going to hurt your payment history. It will however, improve the other areas of your credit by wiping out your debt and optimizing your debt-to-income ratio and your debt to credit limit ratio. It eliminates those problems, whereas a Chapter 13 bankruptcy really cripples your payment history. Plus, with Chapter 13, you still owe a good portion of your original debt with payments over a long period of time so your debt-to-income ratio is not much better than before the bankruptcy.

You have to make the payment the judge sets, and it’s the maximum amount you can possibly pay, which is usually quite high. You’re not left with much to live on, and you don’t really have any say in the matter. Of course, it’s also not wiping out the utilization fees until it’s all over years and years from now.

If you can qualify for Chapter 7, it might be a good choice for you if it’s the way you want to go. If you can only qualify for Chapter 13, my advice is to run! Give me a call. We can talk, see if there’s another option. I haven’t seen Chapter 13 work out well for most people. Usually, they make the decision to enter into it out of ignorance or bad advice.

Let’s look at Nicole, a client I worked with in Virginia. She’s in her early thirties and has a 20-month-old daughter. She had $53,000 in credit card debt. She and her husband had some challenges over the past few years with employment and steady income, so they fell behind. She used to have perfect credit. All the debt is in her name and once she fell behind the interest rates jumped up, the payments jumped up.

It started snowballing, she couldn’t keep up and so she went to see a credit counselor. Credit counselors put together a plan and gave her a payment. It was approximately $1,400 dollars a month for five years, and they said with a straight face: “Can you afford to live on negative 87 dollars a month?” And they were serious.

They actually started that program with credit counseling and dropped out after a couple of months because they simply couldn’t afford the payments. If you can’t afford your current minimum payments, it’s kind of tough to afford something as much or more which is usually the case with credit counseling. But, once she dropped out she went to go see a bankruptcy attorney, and she asked if she would qualify for Chapter 7. The bankruptcy attorney said: “Well, we will get you qualified for bankruptcy, no problem.”

She didn’t qualify for Chapter 7 bankruptcy. So here is a woman who has a job, makes $27,000 a year income, does not own a home, has $53,000 in credit card debt, and she still doesn’t qualify for Chapter 7 bankruptcy.

Very few people qualify for Chapter 7 bankruptcy since these new laws were passed. You’ve got to be in a pretty tough situation. The best phrase I’ve heard to describe the new laws are that they are “very creditor friendly.” It’s too bad, because it really hurts the people that need the bankruptcy protection from Chapter 7. Unfortunately, a lot of people are getting dropped into the Chapter 13 category instead. There is usually a better option available. They just don’t know about it.

Was this valuable to you? Feedback? Question(s)?

Please share your thoughts and ideas below. I respond to any questions posted as a comment in detail by email.

Thank you for the opportunity to serve you!

Here To Be An Asset To You,

Jesse Niesen

DebtGoToGuy.com

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