Debt Consolidation

Chapter 13 Bankruptcy

A  Chapter 13 Bankruptcy is also called a Debt Reorganization or Debt Consolidation.  In a Chapter 13,  the Bankruptcy Court also assigns a Trustee, called a Chapter 13 Trustee.   However, in a Chapter 13, unlike a Chapter 7, the Trustee’s role is very different.  In a Chapter 13 the Debtor is offering to Consolidate and repay her Debts but with generally reduced Principal and Interest.  The Bankruptcy Laws governing Chapter 13 DO NOT permit the Liquidation of Assets like in a Chapter 7 Bankruptcy.  Therefore, the question for the Chapter 13 Trustee then is what is a fair repayment of Debt in the interest of both the Debtor and the Creditor based upon the Debtor’s Income and Assets.  The Chapter 13 Trustee acts as a middleman between the Creditor and the Debtor and her Attorney in arranging a fair repayment of that Debt.

The Debtor in a Chapter 13 makes a monthly payment to the Chapter 13 Trustee.  The Trustee then pays all the Debtor’s Creditors as those Creditors are determined to be paid by the Debtors Chapter 13 Plan.  The monthly payment also includes the Trustee’s fee of approximately five to ten percent of the monthly payment.

Chapter 13 Bankruptcy is an efficient device for reorganizing  and consolidating debt.  Chapter 13 is often used by Debtors to pay not only Credit Card and Medical Bills but also Tax Debts to the Internal Revenue Service.  Chapter 13  can also be used to lower Motor Vehicle Payments and Interest   and sometimes can be used to Value the Automobile wherein the Debtor only pays what the true Value of the Automobile through the Chapter 13 Plan.

Chapter 13 Bankruptcy historically has been often used to stop Foreclosures on Homes or Homesteads.  If a Debtor is behind on their Mortgage payments then the Debtor can file a Chapter 13 to stop the Foreclosure and allow the Debtor to catch up the Arrearages or missed payments over 36 to 60 months.  In addition, the Debtor must make her regular Mortgage payment.  Unfortunately, the Bankruptcy Laws do not allow the Debtor to reduce her Mortgage payments through a Chapter 13.

However, if a Debtor has a Second Mortgage on her Homestead and that Second Mortgage is Unsecured, meaning the Homesteads Fair Market Value is less than the Balance of the First Mortgage, then the Debtor can often completely eliminate the Second Mortgage through a Chapter 13.   This process is called Lien Stripping and we have successfully eliminated Second Mortgages for hundreds of our Clients.

Although Chapter 13 is often used to permanently stop Foreclosures, with the recent Real Estate Crisis in Florida, many of our Clients are using Chapter 13 to temporarily stop the Foreclosure to give themselves additional time to marshal their resources before they eventually have to leave their Homes.  By eliminating the Debt owed on the Mortgage and consolidating their remaining Debts in a reduced monthly payment, our Clients can be given an opportunity to correct their Finances and save money for their security or towards the purchase of a Homestead in the future.

Credit Counseling

Credit  Counseling is a Non-Bankruptcy Program where we can Consolidate your Debts, usually Credit Cards and other Unsecured Debts into ONE REDUCED monthly payment with reduced Interest.  Our Credit Counseling Program has been in existence for over 10 years and is fully Licensed and Accredited by the Internal Revenue Service as a Non-Profit 501(c)(3) Tax Exempt Credit Counseling Organization.

Because of our special status, we are able to reduce Interest Rates on average to about 6% and  monthly payments 25-50%.  We are also able to re-age your Accounts or bring them current provided you make three to six on-time payments through our Program.  Most of our Clients complete this Program in 36-60 months and save thousands of Dollars.   For example, if  you owed $20,000.00 in Credit Cards demanding 18% Interest and were paying 3% of the Credit Card Balance monthly on your Credit Cards, it would take  24 years and six months to pay of the Balances and $39,698.45.  If you pay 2% of the Credit Card Balance monthly, it would take 62 years and 5 months and $78,397.00 to pay all your Balances.

As a Non-Profit Organization, in addition to counseling persons on Debt issues and our Credit Counseling, we also have various Charities to help the Community such as our support  and Contributions  to numerous Veterans and Childrens Organizations.

Settlements

Another Non-Bankruptcy Program is Settlements.  A Settlement of Credit Card Debt or other

Unsecured Debt such as Medical Bills or Signature Loans involves a “lump-sum” payment to a Creditor that entails the complete forgiveness or Satisfaction of the Obligation.  Usually, we can Settle our Clients Debts for approximately 40% to 60% of the outstanding Balance.  For example, if you owed $30,000 in Credit Card Balances and we are able to arrange a 40% Settlement, then a one-time payment of $12,000.00 will Settle or Satisfy the entire $30,0000.00 in Debt.

Settlements, like Credit Counseling, are Programs designed to help Clients get out of Debt and avoid Bankruptcy.  Beware the many “Debt Settlement Companies” that have appeared  in the last few years.  Many of these Companies will require you to make monthly payments into an account.  After the account has sufficient revenue, the Company  promises to pay you Credit Cards in Settlement.  The problem is many of these Companies are either outright scams or are legitimate but their manner of Settlement is flawed.  Generally, when you attempt to Settle Credit Cards in a “Payment Method”, by the time there is sufficient funds in the account,  the Debtor is so far behind on her Credit Cards, she is past  the opportunity for Settlement and is being sued by a Attorney.  Once an Attorney has been assigned a Case, it is usually past the time for Settlement.

The correct way to Settle Credit Card Debt is a One-Time payment in Full Satisfaction of all your Credit Cards.  Unless you have the Funds to Satisfy ALL your Creditor in ONE payment by paying 40% to 60% of the Balances, DO NOT do a Settlement.  Look to another Program to help you.