This article is written in response to the myriad of questions I have been asked by hundreds of clients who have come to my office over the past 30 years seeking debt relief of their financial matters. In an earlier article I addressed the concerns of clients who believed that some sort of compromised monthly payment to private debt management companies in full satisfaction of unmanageable debt might be the answer to their financial concerns as opposed to filing a chapter in bankruptcy. To briefly summarize that article: private debt management companies limit their scope to unsecured debt such as credit cards and medical bills; their monthly payments are expensive as clients are paying on the debt not eliminating it; and, generally speaking, very few clients with private debt management companies complete their plan. Hence, they remain in unmanageable debt.

Bankruptcy is the only alternative in the free-world to absolutely manage and/or eliminate debt. It seems that most clients on initial interview have heard of the bankruptcy numbers, 7 and 13. These numbers are in reference to the consumer bankruptcy chapters in the bankruptcy code, the basic difference between the two is that there are no payments in Chapter 7 and a payment scenario to a Chapter 13 Trustee in regard to some debt, but generally, no payments to credit card or medical bill debt.

Bankruptcy has many advantages that private debt management companies cannot provide. When a Chapter 7 or 13 bankruptcy case is filed, all telephone calls by debt collectors, pending lawsuits, garnishment of wages or bank accounts, mortgage foreclosures, IRS collections, or any action to collect a debt in a state court must cease immediately. A flagrant disregard of this prohibition by the creditor/collector is punishable by fine, attorney fees, or other action by the Bankruptcy Court. Additionally, at the time of filing, interest, late charges, and other collection fees on debt are stopped. Hence, the balance due on the account is the balance of the debt on the date of filing.

Clients are aware that a new bankruptcy law was passed and many believe that they either cannot file or they would not qualify to file a bankruptcy, or that the filing procedure is too burdensome. In regard to the new bankruptcy law, the filing qualification remains the same as before, you need only to be financially insolvent, that is, you cannot pay your bills. There are essentially three

3. (3) procedural changes: 1) you must have filed all tax returns you were required to file for the past four

4. (4) years prior to filing; 2) you must take, online or by phone, a 35-45 minute counseling course prior to filing; and 3) if you are employed during the six (6) period prior to filing, you must furnish those pay

stubs. All in all, filing a chapter in bankruptcy has not changed that much other than taking a bit long to file because of the procedural changes.

Perhaps the single major advantage of filing bankruptcy over the promises and results that private debt management companies cannot possibly provide is that, in bankruptcy, there is light at the end of the tunnel. Whether you file a Chapter 7 or Chapter 13 bankruptcy, when you complete your case you are guaranteed a financial fresh start. Since private debt management companies must provide for some partial payment of the debt, interest, and other charges, they can only guarantee that there will be payments and usually an indeterminate amount of additional payments. There is no light at the end of the private debt management tunnel.

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