A New Year Gives New Reason to Cheer
Happy New Year to one and all. Many people have been dreading the coming of the New Year, however, because of their inability to pay their mortgages and other house payments. Large banks like Cit and Bank of America announced that they would postpone foreclosing on people’s homes until AFTER the New Year so that people would at least be able to stay in their homes for the holidays. Unfortunately, this good-natured gesture has little to do with the banks heart during this time of year. This is simply a tax strategy so that they will be able to carry over losses on their books for 2010 making their first quarter taxable dollars nil or close to nil. So what do people in this situation have to cheer about? What is their motivation to keep on keepin’ on?
Everyone thinks that if you file bankruptcy, the bank comes and takes all of your stuff leaving you penniless and without any possessions except the cloths on your back. This is entirely false. You have to remember how banks make money. They make money off of the interest you pay on your loans. They don’t want your stuff. They want your monthly payment. If there is a way to get even a small portion of that monthly payment, they will negotiate with you. This is also true of credit card companies. This form of bankruptcy is called a chapter 13 bankruptcy and allows you to renegotiate all of your rates so that you can slowly pay back your back due bills. In order to qualify for chapter 13 bankruptcy, YOU NEED TO HAVE A FULL TIME JOB! If you have a part time job, go get another part time job. As long as the hours worked adds up to 40 hours per week, this option is viable.
Here are the pros of chapter 13 bankruptcy:
1) You can keep your house, your stuff in your house, and your monthly payments are simply adjusted to meet your current income paying ability.
2) Your high interest credit cards will generally go to a rate 50% of less than the current rate on your cards. Sometimes, a lump sum payoff option is available.
3) Your mental health through all of this is important also. This will take a lot of stress off of you and let you get your life back on track.
4) You will be forced by your bank to keep diligent records of all of your transactions over the next 2 to 5 years, which will make you a finance expert. This will be challenging, but you will understand how to keep track of your expenses once and for all.
5) You will be given the opportunity to pay back taxes over several years and the interest penalties are often dropped.
Here are the cons of chapter 13 bankruptcy:
1) You can’t get a loan for at least 2 years.
2) Your credit will be ruined for 2 to 5 years.
3) You will have to hire a lawyer or spend a great deal of time to file the necessary paperwork. This paperwork is confusing and lengthy.
4) It can be an embarrassing process. People will judge you even though they do not know your situation. This is the hardest thing for most people, but you just have to suck up your pride and do what you need to do.
There are of course many bankruptcy options. This is my favorite though because everyone involved is a winner. The bank still gets their money, you still get to keep your house and your stuff, and you will pay off your debt over time making your payments manageable again.
So cheer this New Year if the bank is threaten you and creditors are calling. Call a lawyer and discuss your bankruptcy options. If this information gets you and your family through the year and helps you pay off your debt, then you have fought hard and well and deserve the break of making this your first step toward financial freedom.