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The Debt Phoenix - Rising From the Ashes of Debt and Bankruptcy to Financial Freedom

A step by step guide to dealing with the emotional and financial problems of debt and bankruptcy and using proven strategies to overcome them and rise to a future of financial freedom.

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Archives for March 2019

Which is Better, Debt Consolidation or Chapter 7 Bankruptcy?

March 28, 2019 by The Debt Phoenix Leave a Comment

Which is Better, Debt Consolidation or Chapter 7 Bankruptcy? 

Debt quickly becomes overwhelming when it’s too much for the person to easily pay back. The majority of people right now carry at least some debt. If you have a significant amount of debt and you’re having trouble repaying it, you may be considering debt consolidation loans or looking into Chapter 7 bankruptcy. Both provide a way for you to clear your debts and reset your finances, but both are very different. You’ll want to compare both to find out which one is best for you to use.


Look into Exactly How Much You Owe 


The first step is to figure out exactly how much money you owe. You’ll need to create a list of who you owe money to and how much money you owe to each of them. You’ll want to consider interest rates and your income to see how your current repayment plan is working and whether you really need extra help. If you’re finding it’s hard to pay all of your bills each month, it’s going to be a good idea to look into debt consolidation or bankruptcy.


What Bankruptcy Involves

Bankruptcy is one option everyone has heard of. Chapter 7 bankruptcy is for individuals who are having trouble repaying their debts. In this type of bankruptcy, any nonexempt assets will be liquidated to repay any creditors. This can help repay credit cards, personal loans, utility bills, medical bills, bills in collections, payday loans, money owed due to contracts, and promissory notes. Assets include most of what you own, but there are exemptions such as money in retirement accounts. Homes and vehicles may be protected, but this isn’t automatic. The bankruptcy will stay on your credit report for 10 years, but the impact will lower over time and the amount of the impact will vary.


What Debt Consolidation Involves


Debt consolidation involves obtaining a loan to be used to repay other types of debt. This does mean you’re borrowing money to repay your debts, but it can help by lowering the interest you’ll need to pay because you’re only paying one loan instead of each debt individually. This can be used for credit cards, utility bills, medical bills, student loans, taxes, any bills in collections, and more. This does not automatically result in a large drop in your credit score but can cause a small drop when you apply for the loan. Over time, your credit score may increase as you repay your debt. If you do not repay this loan, however, it can impact your credit score negatively.


Pros and Cons of Filing Bankruptcy


Bankruptcy can help you reset your finances because you can eliminate some or all of your current debt. This can make a significant difference in the debt amount you need to repay. With Chapter 7, the debt that is not covered by asset liquidation is typically discharged. You will be able to rebuild your credit in the long term, starting with small steps, and can come out ahead as far as your credit score once the bankruptcy is no longer on your credit history.


On the other hand, you could lose your property and your assets because any assets that can be liquidated will be used to pay your debts. There are some assets that are exempt, but you will need to speak with a lawyer to find out which assets are exempt. You will also need to pay lawyer and court fees for the bankruptcy and it might not completely eliminate the debt you owe. Some debts, like student loans, are difficult to discharge in bankruptcy. The bankruptcy will stay on your credit report for 10 years and can be seen by anyone as they’re a public record. Employers who check your credit history, for instance, will be able to see the bankruptcy.


Pros and Cons of Debt Consolidation


Debt consolidation allows you to put all of your debts together so you’re paying just one lender each month. This can lower the amount you’ll pay in interest. You may even be able to get a lower interest rate on the consolidation loan compared to your credit card rates, saving you more money. Since you use the loan to repay your credit cards, you will still be able to use them and your credit will not be impacted as much as with a bankruptcy.


On the other hand, although you can get rid of other debt with a debt consolidation loan, you’re taking on new debt. If you’re still spending with your credit cards, you’re building new debt before you’ve paid the consolidation loan and getting into a larger financial hole. It may also be difficult to get this type of loan if your credit score is already low, which is very possible if you owe a lot of money and are having trouble making your monthly payments. Many debt consolidation loans require a higher credit score.


How to Choose the Right Option


If you’re ready to start working on your finances and getting out of debt, you’ll need to think about whether you want to look into Chapter 7 bankruptcy or a debt consolidation loan. Which option is right will be different for everyone. A debt consolidation loan is better if you plan on buying a home or a vehicle within the next 10 years and will not want a bankruptcy in your credit history. It’s also the better option if your financial situation is improving and you’re sure it can be repaid. Bankruptcy might be the better option, on the other hand, if repaying the consolidation loan is going to be difficult. When the amount owed is simply too much, bankruptcy can help you get rid of the debt and start over.
If you owe a significant amount of debt and you’re trying to find the right solution, both debt consolidation and bankruptcy are options for you to consider. Start thinking about your current situation, then speak with a bankruptcy lawyer to learn more about which option might be better for your situation.

Filed Under: Bankruptcy, Debt Recovery

Everything You Need to Know About the 341 Meeting for Chapter 7 Bankruptcy

March 28, 2019 by The Debt Phoenix Leave a Comment

Filing for bankruptcy, in and of itself, can be intimidating. You’re asking people to help you manage your debts or to erase your debts so you can have a fresh start moving forward. If you are filing for bankruptcy, you will need to go through a 341 meeting, also known as a Meeting of Creditors. This is something everyone must go through when they file for bankruptcy and is nothing to be worried about. Below is all of the information you need about the meeting so you can avoid feeling overwhelmed during the days leading to it.


What is the Meeting of Creditors?


The meeting of creditors is a brief meeting, usually around 10 minutes long, where you provide proof of who you are and answer a few basic questions about your bankruptcy. This meeting is mandatory for you to attend and will likely take place between many other meetings held on the same day. You’ll be provided with a time to appear, then speak with the bankruptcy trustee about your bankruptcy. This meeting is not done in front of a judge and, while you will be under oath to speak the truth, it is not anything to be fearful of because it’s just a basic, routine hearing. The main goal is to make sure everything is in order and to check to see if there is any fraud suspected.


Who Appears at the Meeting?


While it’s called a meeting of creditors, your creditors typically won’t appear at the meeting. In general, the meeting consists of you, your lawyer, and the bankruptcy trustee. Creditors are provided notice of the meeting and can appear if they would like. If they do appear, it’s typically to ask basic questions about what you plan to do, for instance, if you have secured property, or to make sure the information provided matches what you’ve put on a credit application. Creditors will not pressure you in any way and are not there to embarrass you or make you feel bad. It’s simply to get more information about your bankruptcy.

Also, if your debts are large or of a certain type, you may have a U.S. Trustee also involved in your case. In my case, both the Bankruptcy Trustee and the U.S. Trustee were involved and both asked me questions. The U.S. Trustee audits bankruptcy cases to ensure everything is being followed properly. Again, large or unusual debts may cause this additional person to become actively involved in your case. I suspect it may have been because of listing an SBA loan in my documents of a large amount that triggered a review. My U.S. Trustee was friendly and asked a few questions related to my case. I answered and we moved on.


What Does the Trustee Do?


The bankruptcy trustee is responsible for conducting the 341 meeting and making sure everything is accurate. They’ll verify your identity, make sure there is no potential bankruptcy fraud, determine if your case does apply for Chapter 7, and prepare for the final steps of the bankruptcy. They will need to prepare for the meeting by reviewing your bankruptcy paperwork, paychecks, and tax returns. They are there to make sure your creditors are paid as much as possible and to ensure accuracy for every part of the bankruptcy proceeding.


Preparing for the 341 Meeting


Before the meeting, you’ll want to carefully read over your bankruptcy paperwork to make sure it’s as accurate as possible. If you do notice any errors, file an amendment before the hearing. If you do not have time for this, make sure you let the trustee know about the issue when the meeting begins. Make sure you have your photo ID, social security card, bankruptcy papers, recent bank statements, and any other documents your trustee requests. All of these should be in a file so you can bring them with you to the meeting and have them available when they’re requested. Other than that, there is not much you will need to do to prepare for the meeting itself. Plan on arriving for the meeting a few minutes early and understand that you may need to wait a little bit for your meeting to be called.


What Happens During the Meeting


When your meeting is called, the trustee will make sure everyone necessary is there and will explain how everything will work. It’s important to be calm during the meeting so you will understand everything that’s happening. You’ll sit with your attorney, present your ID documents, and take an oath to answer all questions truthfully and as accurately as possible. The trustee assigned to your bankruptcy will then ask a series of questions about your finances and the bankruptcy. Some of these are routine questions such as whether anything has changed since you filed for bankruptcy and whether you have listed everything that you own.


If any of your creditors appear at the meeting, they are then allowed to ask questions. They can ask about your finances or your property. The creditor is trying to determine if you fraudulently purchased luxury goods just before filing for bankruptcy or if they have any reason to dispute the discharge of the debt. This is typically not something to be worried about, but it is something to be aware of if any creditors do appear at your meeting.


After the trustee and creditors have asked their questions, the trustee will end the meeting. At this point, you do not have to attend other hearings and you will receive the discharge of your debts once the trustee has finalized everything. If the trustee does have more questions or requires more documents to be filed, it’s possible you may need to attend another meeting before the bankruptcy is finalized.


No Need to be Afraid of the Meeting


Any legal proceeding can easily be intimidating, including the meeting of creditors. However, there is typically no reason to be afraid of this meeting. Make sure you’re prepared and that your bankruptcy paperwork is accurate before the meeting, then relax. Your attorney will be there with you to help you with any questions. The meeting is only a few minutes long, typically only includes routine questions, and then it will be over. Most meetings take 10 minutes or less and many people say they felt that the meeting wasn’t as bad as they imagined once it was over.
If you’ve filed for Chapter 7 bankruptcy, you will have a 341 meeting. This meeting is nothing to be worried about and, in fact, is typically over with quickly. If you do have any concerns, speak with your attorney before the meeting so you can enter the meeting relaxed and ready to answer any questions.

Filed Under: Bankruptcy

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