[COLUMN] You can reduce your debt under federal law

ARE you struggling to pay your debts every month, especially your credit cards? Do you barely have anything left to pay your mortgage, rent, food, and other basic living expenses after you make your monthly debt payments?  Do you want to lower your payments and make life a bit easier?

One type of relief under the law to people in debt comes from Chapter 13 of the Bankruptcy Code.  Commonly known as “Chapter 13 Debt Consolidation or Debt Adjustment”, it is generally available to individuals and small business owners. It is called a “consolidation” because it allows you to combine your debts into one monthly payment.  But it is also called “debt adjustment” because in a lot of cases, most debts can be “adjusted” down so you don’t need to pay them in full.

Let’s say you owe $25,000 in credit cards which require you to make minimum payments of anywhere from 3% to 4% of the outstanding balance. Thus, on the above amount, your payments are about $750- $1000 per month. Because of the high interest on your credit cards, 80-90% of your minimum monthly payments go to interest alone.  Very little is applied towards the principal. The banks are getting richer as they siphon the money out of your pocket.  You can’t even afford to buy new tires for your car and your bank account is always overdrawn. You feel like you’re playing a game you just can’t win.

So, in our example above, paying $750-1000 feels like getting a tooth pulled every month. To some people, this could be the equivalent of one paycheck or more.  So, if they get paid twice a month, one paycheck goes to paying credit cards while the other paycheck goes to paying “everything else”.  And that’s where the problem is.  There never seems to be enough money to pay “everything else.”

If you are in this situation, you may want to consider the benefits of Chapter 13.  Although individual situations vary, in Chapter 13, generally, you only pay based on what you can afford each month.  The court reviews your income and all monthly living expenses and determines if there is a surplus.  For example, if the Court determines that you have $200 left over after all your living expenses are paid, this is all you need to pay.  Depending on your income, you may be asked to pay for 3 to 5 years but 3 years is typical.  Now you may wonder: “If I am only paying $200 per month for 3 years, that means I won’t be able to pay all my debts in full, correct?  What happens to the unpaid balance after 3 years?”

Well, that is exactly one of the greatest benefits of Chapter 13.  Besides paying 0% interest on credit cards and most debts, you are NOT required to pay all debts in full if you cannot afford to do so. After you have made all your Chapter 13 payments, the rest of your debts are wiped out completely. This sounds amazing but it’s true. You can consolidate all types of debts in Chapter 13: credit cards, personal loans, late mortgage or car payments, property taxes, income and other taxes, student loans, back child support, etc.

Compare the benefits of Chapter 13 (0% interest on credit cards and most debts, lower payments, reduced debt amounts, pay off debts in as little as 3 years) vs. trying to pay your debts on your own and paying the outrageous interest rates being charged by the banks and the credit card companies.  You will be shocked to see how much easier paying debts with Chapter 13 can become as opposed to doing it on your own.  Do you need to rebuild credit and start saving again?  Or do you dream of buying a home someday but need to get out of debt before anything else? If your debts have become unmanageable and you need legal help, find out whether Chapter 13 may be beneficial to you. Call my office at 866-477-7772 and schedule a free initial consultation with me so that we can talk about your specific situation.

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NOTE: Due to pandemic safety concerns, I am offering free consultations BY PHONE to anyone who needs help in dealing with their debt problems. 

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None of the information herein is intended to give legal advice for any specific situation.  Atty. Ray Bulaon has successfully helped over 6,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call RJB Law Offices at TOLL FREE  1-866-477-7772.

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