If You Find That You Are In Financial Trouble, Look At Debt Settlement As Your First Option

Jon Noble

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Read the entire article to understand why.

For over 8 years, congressional backers, banks and credit card companies pushed to get bankruptcy reform on the books. Who has this really helped?

Last year the new law went into effect. The pushers of this law said it was needed to help curb the massive abuse of people who filed for Chapter 7 bankruptcy as a way to simply walk away from their debt. Opponents said the changes would be especially hard on low-income working people, single mothers, minorities and the elderly and would remove a safety net for those who have lost their jobs or face mounting medical bills.

The law bars those with above-average income from Chapter 7 - where debts can be wiped out entirely - except under special circumstances. Those deemed by a new “means test" to have at least $100 a month left over after paying certain debts and expenses must file instead a 5-year repayment plan under the more restrictive Chapter 13.

In addition to this “means test", an individual wishing to file for relief under Chapter 7 must first seek credit counseling services and receive a certificate of insolvency.

Basically, anyone seeking to file a Chapter 7 bankruptcy has to go to a credit counseling service that interviews the individual and conducts an analysis of their overall financial situation to determine if they truly can’t afford to pay back their debts.

As you well know, the credit counseling industry is funded by the credit card companies. How convenient. Fortunately, in order for a credit counseling company to provide this service, they must become certified by the United States Trustees office and there are certain guidelines that they must follow.

So, let’s take a look at all the abusers they have been able to quash from filing their Chapter 7 Bankruptcy and prove us all wrong.

The National Association of Consumer Bankruptcy Attorneys released a study that concluded that forcing consumers into credit counseling – a key provision of the reform Act, was a waste of money and did little to weed out the deadbeats trying to use bankruptcy to avoid paying their debts.

There were six major credit counseling firms surveyed that dealt with 61,335 bankruptcy filers since Oct. 17. Out of those 63,335 people, only 3.3 percent of people in the study were eligible for a debt management plan and could avoid filing bankruptcy.

Additionally, 79 percent of those surveyed were seeking bankruptcy due to circumstances beyond their control, defined as emergency medical expenses, loss of employment, higher minimum payments on credit cards, change in marital status or other unexpected events.

The lawyers’ group said the other 21 percent of filers included people who did not “deliberately seek to accumulate excessive debt" but fell prey to finance charges and their own lack of financial sophistication over time.

So who has this law really helped? Well, remember that anyone wanting to file a Chapter 7 must first seek credit counseling. Did we mention that this was not a free service? Sorry, they charge anywhere from $50 to $100. So, 63,335 people go in and are forced to pay an average of $75 each. That equals $4,750,125 in fees to stop 2,000 people from abusing the system.

I guess the other 61,000 people just had to get it stuck to them one more time before they actually got the relief they deserved……

If you find that you are in financial trouble, look at debt settlement as your first option. From there, if you don’t qualify you can look at either qualifying for credit counseling or dropping $100 at their door on the way to your Bankruptcy attorneys office.

I never really did answer the question of who the new law has actually helped but I trust that you have figured that out.

If you want to learn more about your financial options, log onto www.debtreliefoptions.com

Jon Noble Staff writer Debt Relief Options asktheexperts@debtreliefoptions.com


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