CLEVER, LEGAL METHODS TO REDUCE & ELIMINATE DEBTS
Consider the predicament of a typical Mr. Smith - and the hundreds of thousands of others like him. He is making payments on his home, car, furniture and other credit purchases. Credit, which by the way, was so, so easy to get. He may be up to his neck in bills but up to now is able to keep his head above the deep waters of debt.
But what happened? Unexpectedly he was faced with additional expenses - rood repair, a major appliance had to be replaced, medical bills came up. Perhaps his income suffered due to a strike, layoff or sickness. Bill payments became more difficult to meet; eventually he began to slip further and further behind. Phone calls and threatening letters harassed him daily. Then creditors notified him they would garnishee his salary.
An unusual situation? No, not at all. It is happening to many thousands every day. Hopefully, you will never be faced with this serious problem. But, if you are, you can stop harassment and threats of creditors cold - and legally protect yourself and your credit standing.
A salary garnishee is probably the most certain way to ruin one's credit standing. Worst of all, it might cause the person to lose his job. Very few employers will tarnish garnishees. They do not want to bother with the extra bookkeeping and details it involves. It is a situation you definitely want to avoid. There is a way out - a legal solution to this problem.
Few people realize that our government recognizes serious personal debt problems and provides a method to solve this problem. It does not involve any "hidden-law" tricks, dishonesty or bankruptcy proceedings. Quite to the contrary, this plan enables debtors to ease this problem, yet be fair and honest with all creditors.
The law covering this situation is Chapter XIII of the Bankruptcy Act and is called the "Wage Earner's Plan."
This plan, as the title indicates, applies only to persons who earn salary or commission, regardless of how much or how little they earn. This law will put a stop to your creditors immediately.
Your first step is to go to the nearest United States District Court and ask to see the official or referee in charge of such proceedings. In your petition you will fill out Form 58, "Original Petition in Proceedings under Chapter 13."
This petition notifies the Court that you are unable to meet current payments. You will request an extension or time of readjustment to enable you to handle your debts without undue hardship from future earnings.
This petition requires two statements. The first, titled "Schedule A" must list every debt you have incurred - the amount you owe and to whom - and their addresses. The second, "schedule B", must list all of your assets. A $20.00 fee is required to file this petition.
When your petition is filed you get immediate relief. The Court will issue a restraining order to all your creditors, usually within 24 hours. This order prevents ALL CREDITORS from taking any action against you.
This restraining order will:
a. Prohibit creditors or collection agents from harassing or threatening you.
b. Immediately cease all interest and late payments.
c. Terminate any and all legal action which might have been brought against you.
Another benefit of this plan is that you are granted a three month "grace" period between the date of filing and your court date in which no payments at all are required of you. Other advantage is that your credit standing remains unblemished.
In effect, this plan is a debt consolidation under the court protection. The court protects you from wage garnishment and other seizures.
The amount of money you pay to the court is determined by your wages and the amount of money left over after normal expenses needed for food, utilities, transportation, medical, clothing, entertainment and other necessary living expenses. The court is usually quite generous in such matters and will allow you to retain enough money to provide for your usual standard of living
The court will normally spread payments over a 36 month period. In any case, they will set up a payment schedule which will not cause any undue financial hardship to a person who cannot handle his current debts. You will also have a choice in the time your payments will be made - whether weekly, bi-monthly or monthly.
The only situation to effect this plan is that the majority of your creditors must approve the plan. This is a situation, however, that creditors will almost always approve. They prefer this arrangement rather than the possibility of getting very little through bankruptcy.
Every creditor must file his claim against you within six months. If a creditor fails to file claim for payments under the Wage Earner's Plan, he is barred from filing ever again and the debtor will be fully discharged from his obligation.
You are now aware of the procedure and benefits of filing under the Wage Earner's Plan if circumstances make it necessary. It provides legal protection and certainly a peace of mind attitude should unfavorable credit situations ever occur.
Bankruptcy should be the last resort to get out of debt, and only if the terms of the Earner's Plan make it impossible to discharge your debts as demanded.
In Bankruptcy, creditors are allowed to share in the debtor's assets. After filing for bankruptcy, all your possessions, your assets, your debts, are in effect the property of the court.
Most of your property is exempt in bankruptcy proceedings in virtually all states, such as clothing, furniture and articles you need to maintain a standard of living. The court is usually quite considerate in exempting possessions you need to live in your accustomed manner.
Some debts are not dischargeable under bankruptcy such as taxes, alimony, child support, intentional injury claims, damages to property and debts obtained through fraud.
Bankruptcy filing is quite simple. Obtain forms from a stationery store. List all your assets and debts. Take the completed papers to the official in your local bankruptcy court to file. A nominal fee is charged to file and fees vary from state to state.
In about 60 days you will be called to a hearing. You do not need a lawyer; explain that you cannot afford legal counsel. If your affairs are very complicated or involve a great deal of money, you may prefer to have a lawyer represent you. After this short hearing, bankruptcy will be legally affirmed.
After filing bankruptcy, life can go on as before - just as you don't owe a penny to anyone. You can still get credit. However, another bankruptcy cannot be filed for six years. Again, as a reminder, few people lose all their possessions as a result of bankruptcy proceedings.
After you have been granted bankruptcy, do not let a former creditor trick you into reaffirming the debt. You are cleared of his intervention. But, make sure you have been completely honest in listing your debts. Any debts obtained through fraud or deceit are not dischargeable under the bankruptcy law.
These are the two main options for people who are hopelessly in debt and would experience extreme hardship to fulfill these obligations. The Wage Earner's Plan, of course, is recommended in preference to the possible loss of possessions through bankruptcy.
The best advice, of course, is to advise you to limit your credit purchases so that you never encounter this problem. While the laws protect you generously, it does require some time, trouble and expense to file under the Wage Earner's Plan or the bankruptcy act.