Bankruptcy May Not Be Your Best Option

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					                                                  Presented by Daniel Toriola

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                                            Bankruptcy May Not Be Your Best Option
                                                               By Robert Zangrilli

    (The following is not legal advice. For legal counsel regarding your situation, please consult an
attorney licensed in your state).

The most widely held misconception about bankruptcy is that it’s the debtor’s version of the “get out of
jail free” card in Monopoly. While most people know that bankruptcy affects your credit for 7 to 10
years, very few people know that it’s possible that you’ll have to pay back the debt anyway, even if you
file a Chapter 7 “straight” bankruptcy. The formal definition of bankruptcy is “a proceeding in federal
court in which an insolvent debtor’s assets are liquidated and the debtor is relieved of further liability.”
On the other hand, the commonplace definition of bankruptcy is probably “the process of completely
wiping out your debts for free.” In the majority of cases, the latter definition may be appropriate, but in
some scenarios, it’s likely that even with bankruptcy, you’ll still have to pay back at least a portion of
the debt.

So when is it likely that you’ll have to pay back your debts? Here are the most common scenarios
when you’ll get all the negatives of filing bankruptcy (severe credit impact for 7 to 10 years), but none
of the benefits (you’ll still have to pay back at least part of the debt:

1) You make more than the average person in your state. If this is the case, then it’s likely that you’ll be
forced into a Chapter 13 bankruptcy plan. In a Chapter 13 bankruptcy, the court orders that you pay all
your disposable income to a court appointed trustee, who in turn disburses payments to your creditors.
Keep in mind that the court determines your disposable income by national and county statistics on
average necessary expenses, not what you’re paying. So just because you’re paying a lot for a car
doesn’t mean the court will approve it. There are numerous cases when a judge ordered families to
stop sending their children to private schools so they can have more money to pay back their creditors.
In Illinois, here are the latest statistics on the Illinois median income by size of household:

1 - person families41,650 2 - person families52,891 3 - person families62,176 4 - person

2) You have assets. If you own a home or car, then it’s possible that the bankruptcy court will force you
to sell them to generate sufficient cash to pay back your creditors. Chances are if have a good chunk
of change invested (unless it’s in an exempt account like an IRA) then you’ll also be forced to liquidate

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it. If you have a second home or another vehicle (assuming you own both completely), then you’re
really out of luck. Fortunately, there are some safeguards to protect consumers from bankruptcy hell. In
Illinois, every resident is entitled to at least $7,500 of the value of their home, $1200 of the value of
their vehicle, and $2,000 for anything that they want (known as the wild card exemption). Also, these
values double if you’re married (assuming the property is in both of your names).

What does this actually mean? Consider the following example.

Let’s say you have a house that’s worth $250,000, and it’s in both yours and your wife’s name. You still
owe about $200,000 on your mortgage, and you decided to file Chapter 7 bankruptcy. In this example,
you would be forced to sell your home, and with the proceeds you would pay back the mortgage
company what you owe on the outstanding balance of the loan ($200,000), you’d pay yourself the
Illinois real estate exemption ($15,000), and then you’d pay back your other creditors whatever was left

Let say your house was only worth $215,000, but everything else in the above example remained the
same. In this case, you wouldn’t be forced to sell your home because the proceeds from the sale
wouldn’t amount to anything after you paid back the mortgage company and then paid back yourself
the Illinois real estate exemption.

3) The creditors can prove that you were fraudulent and never had any intention of paying them back.

For those of us that fall in the aforementioned 3 categories, it usually means that unless a) you don’t
have a lot of equity in any of your property, b) you don’t have any investments like stocks, real estate,
ect., c) you don’t care about having to sell anything mentioned in points a and b, or d) you don’t care
about having to give up your disposable for 5 years in a Chapter 13, then bankruptcy may not be your
best option.

Robert Zangrilli is the CEO of Franklin Debt Relief---experts at using to help consumers

How To Avoid Common Bankruptcy Mistakes
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                                                                                                        Page 2
                                              Presented by Daniel Toriola

                                             Bankruptcy Alternatives Explained
                                                            By Tim Renolds

 There are many steps you can take in efforts to improve your credit, eliminate your debt, and avoid
bankruptcy. Which should be the ultimate goal of all people, while bankruptcy is an excellent method of
helping you clear up your debt, it should only be used as a last resort. Bankruptcy remains on your
credit for up to ten years and it could result in the inability to retain any other type of credit until it has
been removed or several years has passed.

On thing that a debtor can do, this is especially true if they have no income or assets, is to do nothing.
Yes that is right nothing, if you have no assets or income that can be garnished bankruptcy would not
benefit you in any way, your financial situation would not change as a result. It is likely that without
anything of high value, credits would not attempt to take any court action against you because there
would be nothing they could collect.

Another step you could take is to undergo credit counseling, you would learn how to manage your
money to reduce the debt. You could create a budget that contains your monthly income and
expenses, thus reducing expenses. By doing this, any extra money you have could go towards
reducing the debt you owe to creditors.

You could also begin negotiation with your creditors, most of them realize that bankruptcy is a viable
option for those who have more debt than they can handle. For this reason, most will be willing to “take
what they can get” rather than get nothing if the debtor files bankruptcy. This option requires that the
debtor has income or assets that can be used in efforts to raise money to apply towards the debt you
owe. Additionally, this can allow you to rebuild your credit instead of applying a negative bankruptcy on

Debt consolidation is another bankruptcy alternative that many could consider, by consolidating your
debts into one low monthly payment you could easily reduce the amount of your debt, get the creditors
off your back and avoid bankruptcy.

Finally, another option of avoiding bankruptcy is to make a formal proposal directly to your creditors.
This proposal or also knows as a deal, will allow you to create a payment plan. It is all dependent upon
what area of the world you live in and the laws surrounding the area of debt compromise.

Tim Renolds is the owner of a website providing Uk homeowners with a
free loan quote service. Visit us today for a free no obligation quote.

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Related eBooks:

Bankruptcy Alternatives Explained
5 Things You Should Know Before Considering Bankruptcy
Declaring Personal Bankruptcy: Chapter Seven Bankruptcy Is The Preferred Option
Bankruptcy is not the Only Solution
The Basics: Declaring Personal Bankruptcy:

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