Bankruptcy Options for When You Can't Raise Your Debt Ceiling

by John Skiba
Contact

It is an interesting comparison to watch what is going on Washington with their attempts to raise the debt ceiling and comparing that to your own debt issues. The government has bills to pay, no money, and so it wants its credit line increased to be able to make ends meet. Things don't work that with you and me. When we have bills to pay and no money, credit cards work for a while, but eventually the credit card must be paid. And as you may have experienced, asking the credit card company to raise your debt ceiling often results in the opposite - a reduction in your credit line.

When your debt ceiling is maxed out and you can no longer deal with the debt issues, bankruptcy is an option. Bankruptcy is very effective at dealing with credit card debt, medical bills, car loans, and even helping you deal with your mortgage.

Credit Card Debt

Bankruptcy was invented for handling credit card debt. At least it seems like it was. If your main financial problem is large amounts of unpaid credit card debt a Chapter 7 bankruptcy filing will generally eliminate it completely. There is no payment plan and the credit card company will not be able to pursue you for this debt down the road. Chapter 13 bankruptcy can also help you eliminate your credit card debt, however in a Chapter 13 bankruptcy you will be required to pay back a portion of this debt over a 3 to 5 year period. For most people in a Chapter 13 case the pay back on credit card debt is minimal.

Medical Bills

Like credit card debt, medical bills are eliminated through a Chapter 7 bankruptcy filing. Those that have gone through serious medical issues often have large amounts of debt - even those with health insurance. This is an area where I see people go through the most conflict as to whether to file bankruptcy or not. It is often easy to file bankruptcy on the credit card companies due to their constant collection calls, but with medical bills the services received were usually very helpful and needed. There does come a time when reality sets in that despite your appreciation for what was done to help you in your time of need, the bills are simply too large and there is no realistic way for you to pay them.

At that point bankruptcy is a good option as they will be completely eliminated. As with credit card debt, if you end up filing a Chapter 13 bankruptcy there will be some pay back to these creditors.

Lawsuits

If you are being sued the bankruptcy filing will eliminate the lawsuit and discharge the debt that you are being sued on. This will help you avoid having a judgment entered against you and eliminate possible garnishment of your wages.

Car Loans

Sometimes it is a bad car loan that pushes people into bankruptcy. Or more often a bad car loan that has already been repossessed and now the bank is coming after you for the balance. If you still have your car and can continue to make the monthly payment you can keep your car both in a Chapter 7 bankruptcy as well as a Chapter 13 bankruptcy case. In a Chapter 7 you may be able to reduce the amount you pay on your car through a process called redemption. Redeeming your vehicle means that you pay your bank the value of your car, not what you actually owe on it (assuming you owe more than the car is worth). For instance, if you owe $15,000 on your car, but it is only worth $7,000, in a Chapter 7 bankruptcy you could redeem your car by paying the $7,000 to the bank and the remaining balance would be discharged. You have to pay it all at once, and usually people have to get new financing to do this. I can give you direction on how to obtain this financing.

In a Chapter 13 bankruptcy you can reduce your interest rate and often pay much less for your car. The Chapter 13 bankruptcy has a tool known as a "cram-down". The Cram Down is where you pay, through your Chapter 13 plan, the value of your car, not what is owed. This is paid through your monthly Chapter 13 plan payment. The only catch here is you must have purchased your car at least 910 days (about 2 1/2 years) prior to your bankruptcy case being filed.

Mortgage Loans

If you can't afford your home or if you are so far behind on your payments that you are having difficulty getting caught up, bankruptcy can help. Chapter 7 bankruptcy is a good tool if you are looking to walk away from your home. You can surrender your home through the Chapter 7 bankruptcy process and have no future liability on the home.

If you are behind on your payments, Chapter 13 bankruptcy is set up to provide you up to 5 years to get caught up on payments. You may even be able to eliminate your second mortgage or home equity line of credit through a Chapter 13 bankruptcy.

Debt wouldn't be as big of a problem if every time we needed to loan more money we could simply raise our credit limits. But that is not how the world works for you and me. We can't raise our personal debt ceilings. If you are dealing with the stress of debt, give me a call. I offer a free bankruptcy consultation. Learn what your options are. Having information on what is available will help you in regaining control over your financial life and help you sleep at night. I can be reached at (480) 420-4028 or via email at john@skibalaw.com .

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© John Skiba, Arizona Consumer Law Group, PLC | Attorney Advertising

Written by:

John Skiba
Contact
more
less

Arizona Consumer Law Group, PLC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!