Secret 3
Bankruptcy, settlement and lawyer sponsored debt assistance or relief programs are brands, not a solution. These systems are nothing but a payment plan, without regard to your individual level of risk; these systems are based only on what all your creditors command you pay. The reality about bankruptcy is that because of the new legislation from October 2005, the only people that qualify for a discharge in bankruptcy are those that have nothing to lose anyway. Bankruptcy is a system formed by creditors that will allow all of your creditors to sue you at the same time once you file. Bankruptcy attorneys won’t tell you these facts since they spend their whole career getting educated on how to file bankruptcy and that is all they know how to do. The frightening truth about filing bankruptcy is that it is the same as being sued by all of your creditors at the same time. It is mandatory that you list all creditors, even your uncle from whom you borrowed $300 last year and then you are required to inform them in writing of your bankruptcy filing. Each of your creditors will then file a verification or proof of claim (another word for a lawsuit) against you and the trustee will require you divulge all of your earnings, income, possessions, and real property, assets and then they come to a decision on what to sell and who will be paid first, all without your authorization and all in a very public fashion. It is degrading and humiliating and last for ten years! Envision standing at the front of an open court with complete strangers, often hundreds of strangers, and reviewing your financial restructuring plan by going through what you have and how you propose to pay all of your creditors! All that you discuss and everything you have on file as required by the rules of the court will be public information and open for all people to review for generations to come.

Furthermore, you will pay $3,000 to $5,000 dollars in legal and filing fees and be forced into a 3 to 5 year monthly pay back schedule. If you fail to make your all your monthly payments, all your debts will be converted into to due in full and must be paid at once, you’ll be unable to finish your bankruptcy filing and have to pay taxes on the remaining balances to creditors and will have the judgments on file from the proof of claims that were filed.

You probably had thought before reading this blog post that paying to settle your credit card debt was a way out. Settlement companies are the opposite. Instead, the truth is that you are heading right into a corner where you will be trapped by the very monster you’re trying to stay away from. The settlement scheme was created by the banking system to persuade people to pay more than they would without it. It will drain your savings and cash streams and your delicate personal credit will be destroyed. Settlement also creates additional tax burdens for unpaid balances, depending on whether or not you make it to the finish of the three or five year program. Settlement companies also slap you with hidden charges of a massive 15% of your total debt. To make things worse they conveniently avoid explaining to you that some creditors like Citibank and Amex will not settle with anybody. Also, they avoid telling you that they hold your money for over a year prior to considering a first settlement offer to any creditor. Because of this you will have to deal with the bill collectors calls, harassing letters and any lawsuits.

Is it any wonder that debt settlement is outlawed in at least seven states? In fact debt settlements fees have recently been regulated and are now governed by the Federal Trade Commission. Still though in a typical example; imagine someone with $60,000 of credit card debt who is promised by a settlement service that she can eliminate half of it. If she stays with the three year payment commitment, she could perhaps pay her way debt free, in addition to losing her cash reserves. However, along with the service she is charged 15% of his total debt ($9,000)! So if she pays her way out of debt with her cash savings, she pays $30,000 plus $9,000. But wait that is not the end of it. You might think $39,000 free yourself of $60,000 of debt is a good deal, but wait until you get a 1099 and have to pay a tax on the unpaid balances. You’d be left with a tax bill on $21,000 the next year!

What is more frustrating is that no creditor has any legal responsibility to stop calling (without the proper notification), just because you are working with a settlement company. Creditors will continue to harass you by phone, and your credit history will continue to suffer. Yes, don’t believe or presume that paying off your debts will fix your credit. There is one more fact you must consider, a large growing number of creditors actually have written company policies stating that they must decline to accept settlements from anyone, Citibank and American Express are just two examples. Other examples include Capital One and Discover, and the list seems to be growing.

Bankruptcy is nothing more than a mechanism that allows huge corporations to unload their risk and debt liabilities onto the working class people, consumers, who can never file a Chapter 13, and never qualify for a Chapter 7 discharge unless they have nothing in the first place.

Settlement is just another way to be trapped in a payback plan; you’re left with bad credit, no cash or savings and more taxes burdens and it will cost you 15% of your total debt to get into this poorer situation.