Licensed Bankruptcy Counselor or Attorney
Bankruptcy is never an easy decision but it’s definitely a decision a licensed Bankruptcy Counselor or Bankruptcy Attorney should be contacted to help you with.
Many times Bankruptcy can be avoided following a complete financial evaluation and contact with creditors.
People who go through Bankruptcy are typically a loss of income for creditors. This is why it is better for creditors to engage in debt settlement or offer other debt consolidation options rather than risk someone going to bankruptcy where they will receive nothing or very little for the amount they are owed.
Bankruptcy should be a logical, informed decision for someone who is best off filing a Bankruptcy petition. It is not something to do to avoid paying someone you don’t want to pay.
When considering these options difficult decisions are likely unavoidable and we recommend performing a risk/reward analysis.
In a situation where someone is considering Bankruptcy there are debts considered to be excessive. These debts should be considered to answer the questions:
How much would I have to pay (And When would I have to pay it) to settle this debt?
Life-Cycle of a Debt
Creditors can require 100% of the money owed to settle a debt but as time goes on they may accept a portion of the total amount to completely satisfy the bill and as even more time goes on they may require much more.
For Example: A $10,000 credit card debt
Phase 1: If you are current on your account and request completely paying it off you will likely receive a pay-off figure of 100% or $10,000. This is because someone who is owed money normally wants as much as they are legally owed.
Phase 2: Something changes when someone goes delinquent and that is Risk. This “Risk” of future non-payment or filing for bankruptcy may motivate your creditor to accept a debt settlement of $3,000 rather than risk losing all or most of the money owed.
The likelihood of default or the amount likely to be collected on a debt is frequently calculated by complex algorithms and credit scoring models. It should not be confused with a simple “bluff” to file bankruptcy and you will receive a discount. Creditors have access to personal information about you and are permitted to use that in evaluating your ability to re-pay. This is similar to the financial evaluation that should be performed by a Bankruptcy Counselor or Bankruptcy Attorney. * Be mindful of someone that recommends Bankruptcy without a financial evaluation. Everyone “Can” file for Bankruptcy protection but due to the costs involved it is not suited for everyone.
Phase 3: Serious collection efforts commence including legal fees, interest, and penalties resulting in a balance that easily exceeds $15,000
Phase 4: Back to the drawing board. Now try to enter into Debt settlement on $15,000 or more instead of $10,000.
Some people unfortunately think they are in the same situation in Phase 4 as Phase 2 because… “Since a Creditor determines the amount of money they are likely to collect in a debt settlement based on algorithms and credit-scoring models – It doesn’t matter how much I owe, they are only going to get what I can afford!
Unfortunately Phase 1 to Phase 4 can take years. Someone who filed Bankruptcy after a complete evaluation in Phase 1 can be building positive credit 6 months later. Consequently, can be buying a car or a home while someone in Phase 4 is still trying ways to avoid garnishment or seizure, while adding to what will be necessary to rebuild the life they had. Time is money.
Bankruptcy should be a logical, informed decision for achieving debt relief by someone who is best off filing for Bankruptcy. It is not something to do to avoid paying someone you don’t want to pay.