The “B-word” is tossed around today so carelessly. But filing Bankruptcy is not something to do just because some radio ad makes it sound easy or your sister’s best friend’s uncle said it was a good idea.
Anyone who is in the business of filing bankruptcies for people is going to be biased because THEY MAKE MONEY when you file bankruptcy! Of course they will make it sound like the fast and easy way out of debt they pretend it is.
But, they don’t care about YOU at all. They have one goal – sell more bankruptcy filings. So, they sugar coat the truth and hide the risks.
The truth – the REAL truth – is that a bankruptcy has adverse effects on your credit and finances for years. Buying a house, getting a new job, and applying for any kind of credit becomes virtually impossible, at least for a while. And when you do get approved, you’ll pay obscene interest rates and need to come up with big security deposits.
Before you even consider filing for bankruptcy, consider these important facts:
1. How Old Is The Debt In Question?
All debts are subject to a statute of limitation. This sets the time limit for how long a creditor has to file suit against you to collect a debt. Different types of debt carry different time limits in different states. For example, the statute of limitation on credit card debt in Alabama is three years, versus up to 15 years in Kentucky. Written contact debts (like medical and cell phone) are “good” for 4 years in California but 10 years in Rhode Island. Take a look at this complete chart from Bankrate to see where your state falls in line.
Why does the statute of limitation matter? Well, once it has expired, the creditor or collection company trying to collect it has no legal standing to take you to court.
That means no judgment… no garnishment… they can’t get a penny.
Does this mean you no longer owe the money… no, of course not. But think about it. The whole time this debt was in collections, your credit score suffered. You paid higher interest rates and had limited opportunities for new credit. In other words, you already “did your time”. You’ve already been paying the penalty for years, both financially and emotionally.
The statute of limitation is America’s “debt forgiveness” program. And it is backed by the Fair Debt Collection Practices Act (FDCPA). Lawmakers know that as debts approach the statute of limitation, debt collectors get more aggressive and abusive. So the FDCPA has put protections in place to protect consumers. Read more about the FDCPA here.
Two VERY IMPORTANT cautions when you are speaking to a debt collector…
NEVER make a so-called “good faith payment”. They’ll tell you it is to prove you are a “good candidate” for a new payment plan, imply that the collection calls will stop after you do, or even threaten to take you to court if you don’t make a little payment. The ugly truth is that all they are trying to do is reset the statute of limitation on the debt. That’s right… the statute of limitation is calculated from the DATE OF LAST ACCOUNT ACTIVITY. So, that little $20 “good faith” payment will revive an old debt and set the clock back to zero – giving them 3, 6, even 15 more years to hound you.
NEVER sign any documents provided by a debt collector. Hidden in the fine print is probably a statement saying that you agree to “renew” the debt. This also resets the statute of limitation to zero. In fact, you shouldn’t ever have to sign anything from a debt collection company unless you are agreeing to a repayment plan to legally settle the debt (read more about that below).
Bottom line… know how old your debt is. There’s a good chance the debts making you consider bankruptcy in the first place are not even legally collectible any longer! One round of professional credit restoration can get these off your credit report and boost your credit score accordingly.
I’m ready to restore my credit! Schedule my free consultation today.
2. Can You Settle The Debt (With The Original Creditor)?
Most consumers never consider contacting the original creditor to ask for a settlement agreement. But, it’s usually a really smart idea. Creditors are often happy to settle delinquent accounts for ten to fifteen cents on the dollar!
Why? Because collections and repossessions are an expensive pain-in-the-neck for them. They know that once the debt is in collections, they will probably never see any of the money, so it’s better for them to settle with you directly.
We recently coached a client through a settlement of an old credit card debt totaling nearly $14,000. She was able to arrange a settlement plan of $125 a month for a year. And they even REOPENED the account for her after the year! That means she paid $1500 to settle a $14,000 debt… and got to use her credit card after it was all said and done.
Bankruptcy is expensive… like $5,000 expensive. Sure, many of the bankruptcy-hucksters will offer you an “affordable payment plan”, but think about it for a second. You could take that same 5-Grand and settle $30,000 of debt (or more), making those SAME monthly payments.
Your accounts would be reclassified as “paid as agreed” (because you are making the settlement payments as agreed) and your credit score will probably go UP!
Compare that to a bankruptcy that tanks your credit score and stays on there for 7-10 years!
It’s a real no-brainer!
After you determine which debts are close to or already past the statute of limitation, and arrange settlements for those that you can, you should consider professional credit restoration to clean up your credit report and challenge any remaining accounts.
Because of the nature of the debt collection industry, most debt collectors do not have the documentation they need to legally collect the debts in the first place. The verification letters we send them call them out on this – and they often can’t produce. So, the debt is considered “unverifiable” and has to be dropped from your credit file.
The NCES credit restoration program can help you challenge collections, medical debt, garnishments, judgments, utility bills, cell phone bills, liens, and credit card debts. Better yet, we negotiate with your creditors to reverse your negative accounts to “paid as agreed”, lowering your interest rates and reducing your payments – giving you much needed breathing room to get back on your feet.
You DON’T have to be a slave to your debt anymore. It’s time to rewrite your past and recreate your future. Call NCES today. You’ll have your first results in as little as 45 days!
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If you have any questions, please give us a call at 770-952-5168 or contact us online.
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This information is intended for informational and educational purposes only and not as legal advice. If you have concerns about your credit report, harassment, identity theft, illegal collections activity, garnishments, or property liens, you should consult an attorney who specializes in consumer rights and defense.