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Bankruptcy by Location
Alongside the economic worries plaguing Delaware and most of America, a new concentration toward relief of accumulated credit card debts has marked our citizenry of late, and, much as it should be seen as vital for both household and national budgeting to minimize all unsecured burdens, tending toward debt relief is more complex than it may initially seem. A host of varied debt relief programs are now available for each borrower to consider, and, for ordinary debtors untrained in the intricacies of consumer finance, the wealth of options and incredible significance that a poorly chosen debt relief approach could have for a desperate household may prove dizzying. There are the debt consolidation programs eternally sold by everyone from telemarketers to tellers at every Delaware bank that, while they may truly lower interest rates, ravage home equity at a time of falling real estate property values. The advertising campaigns launched by the deeply controversial Consumer Credit Counseling companies have successfully popularized at least a superficial recognition of that debt relief approach within the minds of Delaware consumers. The relatively new and unheralded (but surprisingly effected) debt settlement negotiation solution continues to win admirers throughout Delaware and the rest of the nation. And, of course, there’s the grand daddy of all debt relief strategies: Chapter 7 debt elimination bankruptcy protection.
As it turns out, sadly, those Delaware borrowers who have spent the least time planning for debt relief strategies are the most likely to fall into the trap of Chapter 7 debt elimination bankruptcy. It’s the workers that have put off investigating potential forms debt relief in the vain hopes of finding some way to pay off their loan accounts who’ll, that soul searing moment when they realize that they must employ other solutions, suddenly jump toward Chapter 7 bankruptcy as an avenue toward debt relief without ever checking around to look at the other options now available. Much as the worst off borrowers in the state may indeed find some benefit to bankruptcy declaration – presuming they’re not deemed eligible to enter debt settlement or another, better alternative – recent changes to the federal bankruptcy code have severely diminished the protections formerly available. The clean slate of our fathers’ generation no longer, for most Delaware residents, truly exists. Beyond credit card accounts and hospital bills, few other debts will even be considered viable for debt elimination. Read back that last part again. While you would probably guess that past tax liens are beyond the bounds of liquidation, all student loans, government fines, charges arising from past penalties, and overdue familial support (like child support or alimony) should also be thought of as external to the bankruptcy process. Furthermore, for consumers around Delaware who have the majority of their debt balances held up in automobile or boat loans, home mortgages, or even tangible investments, those will be essentially ignored by the Chapter 7 trustees.
After all, in Delaware or across America, bankruptcies do not erase any secured loans such as mortgages or car loans. As long as the creditor maintains the advantage of repossessing or foreclosing upon property, there’s no reason that they should worry over liquidation of their debts. Honestly, for most secured obligations, especially given the current economic conditions, there’s not much reason to worry about any attempts toward collection through legal action so long as the borrowers continue relations with their creditors. Considering the costs involved with lawsuits and the depressed real estate values throughout Delaware (and the depreciation of vehicles everywhere in America), there’s virtually no likelihood that any such proceedings will genuinely take place. More to the point, it’s almost always in the lender’s best interest to let the loans continue. The creditors earn their money from the slow accumulation of interest rates, not property sales or automobile auctions, and they want to accrue compound interest – not discarded assets. Even during the course of Chapter 7 bankruptcy proceedings, borrowers will have to reaffirm their secured loans within forty five days or risk default, and, while such reaffirmations are almost always inevitably agreed to with a minimum of fuss on the part of their lenders, it’s still an important part of the bankruptcy debt relief process.
That reaffirmation – often in person with the representatives of the credit card companies – as well as the traditional meetings with the trustee chosen at random by the Delaware judicial system takes no end of time, but the obligations do not end there. The 2005 alterations of the federal bankruptcy laws now force each and every consumer in Delaware and across the nation to take a series of debt relief courses (common sense practicalities especially humiliating to those borrowers who’ve only fallen to bankruptcy from genuine calamities that disrupted upstanding households) at their own expense before filing the bankruptcy petition and again before credit accounts will be discharged. Not only is there the serious expense of the debt relief courses to be considered, but, since only a relatively few number of instructors are licensed by the federal government to give such classes, borrowers in the more rural areas of Delaware may have to drive quite some ways to even be given the opportunity to skip work and hire babysitters for the very opportunity. Add to that the three hundred dollars in administrative fees and the sizeable expense of bankruptcy attorney – and, given the ever escalating paperwork and ever more complicated state and federal statutes, experienced law firms are a virtual necessity – bankruptcy could actually be considered too expensive for some of the most desperate Delaware borrowers.
Of course, even for those consumers for whom the time and money necessary to successfully navigate through bankruptcy as a debt relief solution would not be an issue, they may find themselves actually unable to file for Chapter 7 bankruptcy in Delaware. After the 2005 legislation was pushed through the United States Congress, court trustees must now look towards the borrowers’ income in comparison to the earnings of the average borrowers within their state of residence. If the gross income of those filing is deemed to be more than the mean income of Delaware households, the courts will have no choice but to put the borrowers into the Chapter 13 debt restructure program which, though it does offer some temporary relief, means that the families of the filers will have to survive under a governmentally assessed budget according to the estimate of expenses determined by the Internal Revenue Service. As you should imagine, these cost of living valuations – while, perhaps, dimly relevant to the true expenses of Delaware residents – do not accurately reflects the varying needs of genuine households, and debt relief from Chapter 13 bankruptcy protection comes at quite a risk to most every family. Some borrowers have been forced to take on second jobs, remove their kids from private or religious schools, or even sell their houses and move to a less expensive region of Delaware to comply with the national regulations.
Things don’t get much better for Delaware residents that actually manage to be accepted within the Chapter 7 debt elimination bankruptcy program. The Chapter 7 bankruptcy, it’s true, does offer a complete and lasting (truly lasting, since the ruinous consequences of bankruptcy effectively sink the filer’s credit ratings for up to a decade and make future loans virtually impossible to garner) debt relief solution for unsecured bill: remembering, of course, that student loans and the previously mentioned exceptions are not to be affected. However, this sort of debt relief features the very real peril of asset forfeiture by the Delaware courts. All property not especially provided for by the federal or state bankruptcy code shall be at jeopardy of being sold at auction for minimal value. For previous generations, this was not nearly the same sort of hazard as borrowers were merely asked to list their possessions in term of resale value which, for virtually any used object, would be only a fraction of the actual cost. Now, however, the borrowers must compile an inventory of the family goods with eye toward their replacement value, and, clearly, this puts most any household at risk of liquidation of not only their debts but also everything that they own. To be sure, Delaware borrowers who have filed for bankruptcy are much better off than their brethren around the country. State exemptions shall vouchsafe the family library and family bible (as well as any book required for ongoing education), seats and pews for recognized places of worship, burial plots, and any clothing deemed necessary. Retirement packages, health benefits, life insurance benefits, and pension plans won’t be affected. Eighty five percent of salaries, wages, and commissions are yours to keep. Most personal residences shouldn’t be worried over, unless they are particularly opulent, and, depending upon equity, the family car or truck generally won’t be a concern. Tools of trade, with the dollar value depending upon the Delaware county of residence, shall be guaranteed, and each borrower is further allowed to keep five hundred dollars worth of their personal property.
Once again, compared to most states in the nation, this stable of exemptions actually is far more forgiving for those borrowers looking to Chapter 7 bankruptcies for debt relief, but take a moment to look around your home and think about just how little five hundred dollars of household furnishings will stretch when considering Chapter 7 protection. Is the immediate cessation of credit card bills truly worth the risk of forever surrendering the collected objects of a lifetime or family heirlooms of sentimental value beyond measure? Particularly considering that there’s no guarantee that Chapter 7 bankruptcy will even be possible? After all, for Chapter 13 debt relief programs, there will be little if any genuine reduction of burdens. While mortgages will be brought current and those loans unaffected by Chapter 7 (student loans, for example, and back taxes) will be eligible for more easily met payment schedules so as to avoid wage garnishment, the Chapter 13 program is in actuality not far different than a traditional form of debt relief. Still, while there are demonstrable uses to Chapter 13 bankruptcies, most Delaware borrowers who have utilized the program found the negatives suffered to be of far greater significance than any benefits received throughout. From credit report damage that lasts upon the reports of all three bureaus for at least seven years and potentially up to a full decade to the extravagant costs demanded from bankruptcy attorneys to the unnecessarily stringent costs of living expenses that Delaware court trustees, following the guidelines handed down from Internal Revenue Service estimates, most any borrower experiencing any sort of financial scenario would be better served by one of the other debt relief alternatives made more and more popular by consumers rightfully suspicious about what bankruptcy has come to represent for the average Delaware resident.
Debt settlement negotiation, at first glance, is not heads and tails different from the Chapter 13 bankruptcy program as a means of debt relief. However, according to the testimonials provided from a large swath of Delaware residents worried about their consumer credit accounts that have grown unwieldy, the debt settlement approach can carve off a significant chunk of existing debt balances while keeping the clients’ credit reports and FICO scores – a three digit number calculated according to secretive and little understood logarithms formulated by the Fair-Isaacs corporation which every credit bureau employs to tabulate borrowers payment histories and overall credit availability – relatively safe from harm. In modern society, there are few things more important to an individual (or, indeed, a couple since the credit of married partners reflect upon one another) than credit reports and FICO scores. Delaware consumers searching for debt relief may find that, after suffering through the rigors of bankruptcy to ostensibly wash away the burdens of past years, the remaining negative associations that come along with Chapter 7 or Chapter 13 bankruptcy in point of fact preclude them from future car loans, mortgages, charge accounts, or even, with increasing frequency, employment opportunities. Consumer Credit Counseling, though this superficially may seem a more responsible maneuver for debt relief – since, after all, the borrower will be forced to repay the grand majority of their unsecured debts and all of those loans attached to property – actually has a similar effect upon credit reports.
You won’t notice this claim on the many advertisements and commercials propagated around Delaware by the Consumer Credit Counseling industry. CCC firms prey upon the fears and guilt of right minded Delaware consumers interested in debt relief strategies who yet find something slightly distasteful about the process of Chapter 7 or Chapter 13 bankruptcy protection, and the firms are well subsidized by the credit card firms to encourage such theories. Consumer Credit Counseling companies often present themselves as non profit and, indeed may be genuinely non profit: the distinction purely means that the company does not earn any more than they pay to their employees and successful Consumer Credit Counseling employees in Delaware are paid very well indeed. However, much as they may offer more reasonable payment schedules which would lower monthly obligations and provide some breathing room for Delaware households otherwise under the gun of their lenders and suffering through hourly harassment from collection agencies, the Consumer Credit Counseling approach was created and sustained through the efforts of credit card lenders that wanted nothing more than to create an avenue which would sustain regular payments from their clients – and the continuance of compound interest – while successfully preventing their attempts to file for bankruptcy or make use of another form of debt relief.
Indulging in the Consumer Credit Counseling vibrantly announces to the lenders as well as any potential court trustee that the Delaware borrowers who’ve signed on for the CCC method believe themselves able and willing to repay their accumulated financial burdens without other assistance. This is potentially dire not only for those borrowers who must inevitably call upon Chapter 7 or Chapter 13 bankruptcy protection once they realize they could not make the payment schedule insisted upon by the Consumer Credit Counseling adviser but those that decide they may want to try debt settlement as a solution. Under debt settlement, trained and licensed negotiators talk to representatives of the lenders so as to cut away the debt balances and reduce interest rates on the balances remaining. It is a form a debt relief rather than debt elimination, bills will still have to be paid and paid on time, but, since balances technically remain in the debtors’ name (the payment processes are rather more complicated as shall soon be explained), the repercussions as to credit scores will be far more beneficial to the ordinary Delaware resident. For that matter, successful debt settlement counselors will work with their borrowers’ clients to explain the credit report process and show techniques with which the borrowers shall be able to improve their scores once the period of settlement has been completed. There will be a payment schedule firmly instituted by the debt settlement counselor which shall still require much discipline from the affected household – the debt settlement negotiator promises the lender that whatever balances remain shall be thoroughly satisfied within five years or sixty months – but, considering the cuts possible from a successful debt settlement program, a relatively brief period of deprivation should be well worth the potential savings.
As we have written, unlike Consumer Credit Counseling or more traditional forms of debt relief employed around Delaware, the debt settlement company saves the genuine responsibility for the credit card accounts in the hands of the original borrowers. The settlement company merely negotiates on the Delaware consumers behalf – essentially arguing that Chapter 7 debt elimination bankruptcies would be a real alternative were something drastic not done immediately – and, through a mixture of threats and promises (once again, the borrowers shall have to pay all that remains within five years), managed to reduce the total balances owed by around fifty percent. There’s some damage to credit reports, to be sure, the lenders certainly report their losses as a form or discharge, but, since the borrowers retain liability for the loans, they have the opportunity to start raising their scores from the start of the settlement process. Within debt settlement, the company works as a sort of clearing house – taking money from the borrowers each month and sending it along to the lenders – while leaving the ultimate obligation with the borrowers. For this reason, to protect their reputation, experienced debt settlement firms around Delaware shall only take on the clients they deem suitable and likely to fulfill the payments each month. Unfortunately, not all Delaware residents will be approved for debt settlement, and many will have no choice but to investigate other forms of debt relief including, alas, Chapter 7 bankruptcy. There are as many different forms of debt relief as there are debtors, and, much as your authors dearly suggest at least speaking with a debt settlement representative, it’s up to you and your family to decide which approach would make the most sense.
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