Whenever there is a downturn in the world economy, or we ourselves start to have some financial difficulties, the temptation to not pay our important bills becomes overwhelming. However, the one thing above all else that we should protect that is the investments that we have made. When we find ourselves with creditors at the door threatening legal action, it may be wise to contact a bankruptcy attorney to show the way to get out of the problem. Try entering 'bankruptcy' into any search engine to see the array of specialists that are available.
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One of the mistakes that many people do is to pay off credit card bills with other credit cards. This is wrong on several fronts since the interest rates charged on these cards are usually astronomical. By using one to pay off another, the interest rate is increased two fold which can only bring problems to those already suffering from financial problems.
It may be better then to talk to the credit card companies and see if they can help out a little. Explain the circumstances that have occurred, perhaps there is a job loss or something similar, and then ask to pay lower payments every month. They may even suspend the interest being charged to allow the person to get back on their feet depending on how long the card was in use and the history of the payments.
If all else fails and the creditors are not able or willing to come up with a solution, then it may be wise to contact the professional to advise what to do next. Of course, it may be that the creditors are out for blood in which case this poor debtor may have to be taken to court to declare himself with more debts than he has assets. This can hurt his future so it may be better for the professional to file for Chapter 7 or Chapter 13 which offers some protection at least.
If the debt is mainly on credit cards, Chapter 7 is filed in the court. The debtor will have to undergo some stringent means testing to see if there is any excess income over outgoings every month. Certain essential bills will all be taken into consideration, like medical fees or mortgage payments etc but some other, less important bills, will be considered as luxuries that the family can well live without.
If the income is less than the outgoings, the credit card debt will be cancelled there and then and the creditors will just have to live with that bad debt. The debtor will no longer owe the money but it is unlikely that he will ever get credit again in the future.
Chapter 13 works the other way so if there is excess income over expenditure, then all the debts are amalgamated and a new payment plan is worked out for the debtor. The benefit here is that he will not be charged interest anymore or late payment fees either.
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