Stopping Collection Calls With A Federal Debt Consolidation Plan/Chapter 13

Once you have fallen seriously behind on your payment obligations to a finance creditor, it may be almost impossible to bring yourself current, especially if you have a limited income or are surviving on a single paycheck. One unfortunate event in your life can drastically complicate the money you have available to meet your monthly living expenses. Once this occurs, for many households it can spell irreversible anxiety and an endless financial freefall. Debt consolidation can promise you the traction you seek to bring things back to normal but unless you have good credit, there simply is no such debt consolidation program available for you.

By this time, you are being inundated with phone calls from creditors, which only add to the anxiety. A creditor may have already garnished your paycheck reducing your income to a fraction of what it was when you were barely paying all your bills. But perhaps most humiliating, you’re hiding your car while at work and after you’re home because the finance company has sent a “Repo Man” to repossess the car. If they get the car how will you get to work? That’s not their concern as much it is yours, but you hope you can work something out while you still have your car.

Many in a similar situation are not aware that there is a Federal Repayment & Debt Consolidation Plan that allows you to consolidate your debt and protect you from collection activity such as the iconic “Repo Man”. The Federal Repayment Plan & Debt Consolidation Plan is otherwise known as Chapter 13 and even many that have heard of Chapter 13 may also make the presumption that an attorney is required for the preparation and filing of the plan in Court.

Steep attorney fees may keep someone from seeking protection under the repayment plan since an attorney will likely charge much more for a Chapter 13 filing than for the more common Straight Bankruptcy Chapter 7. The difference in attorney fees between the two bankruptcy “chapters” is probably due to the greater potential for additional work such as discussions with creditors when filing a Chapter 13 plan. In either event, paying an attorney for something that you can effectively do yourself is simply not sensible.

Successfully completing your own repayment plan and filing it in your local Bankruptcy Court will immediately stop your creditor(s) from calling you and attempting to repossess your property. Chapter 13 is a bankruptcy plan specifically designed for people in situations such as described above with an income and regular consumer debt.

Chapter 13 protects your property from all collection activity such as repossession, foreclosure, wage garnishment, collection calls, and any other attempt by creditors to collect a debt against you. If you have a car that has already been repossessed, then filing for protection under Chapter 13 will stop the sale of your car before it is sold at the auction.

Upon filing for protection under Chapter 13, you must agree to repay your creditors in part or in full in Bankruptcy Court with your future earnings. The monthly plan payments are made to a Bankruptcy Court Trustee who ultimately approves your repayment plan over the term of 3 to 5 years.

Chapter 13 is not to be confused with “Straight Bankruptcy” Chapter 7, which is not a plan to repay your creditors and not designed to safeguard your property. Instead Chapter 7 eliminates or discharges all allowable debts but in some rare instances, compels you to liquidate (sell) your assets and property to repay your creditors.

Upon filing for protection under Chapter 13, the bankruptcy Court orders an immediate stop to all collection activity against you. This immediate stop or safeguard is known as an Automatic Stay, which is the legal mechanism that protects your property from repossession and is instantaneously imposed upon your creditors once you file. Your creditors must obey the Automatic Stay and can only dispute it with the Court’s permission. The Automatic Stay means that any one of the following collection activities must immediately stop:

· ATTEMPT TO REPOSSESS YOUR VEHICLE
· FORECLOSURE PROCEEDINGS
· ATTEMPT TO SELL YOUR VEHICLE OR HOME AT AUCTION
· WAGE GARNISHMENT
· FREEZE OF YOUR BANK ACCOUNT
· COLLECTION CALLS FROM CREDITORS
· ANY ATTEMPT TO COLLECT A DEBT FROM YOU

The Automatic Stay will stay in effect as long as you comply with the terms of your payment plan, but if you fail to maintain your agreement the Court may dismiss your case and the creditor can once again freely come after your property. So you may revert to once again hiding your car. If this happens, it will be increasingly difficult to file another Chapter 13 plan approvable by the Court and in fact the new bankruptcy laws otherwise known as BAPCPA, discussed ahead in more detail, do limit the amount of times you can file for bankruptcy protection within a certain period of time. So before you file your plan, you should be certain that the payment you introduce to the Trustee is one that you can show proof of and also one that you can reasonably afford.

If you’ve never heard of the Chapter 13 repayment & debt consolidation plan, it’s probably because “Straight Bankruptcy” Chapter 7 has been the more popular choice for debt relief. It is also a much more marketable debt relief product and debt relief agencies such as bankruptcy attorneys do pump more money into marketing and advertising for Chapter 7 business than they would Chapter 13 perhaps due to the perceived more attractive benefit of debt elimination over debt repayment. However, although you are repaying your creditors in a restructured payment plan, Chapter 13 is still in fact a bankruptcy and should be considered as carefully as Straight Bankruptcy. Any bankruptcy consideration should be a last resort and not an option you take as a matter of convenience. In fact, the Court will require a surcharge payable to your Trustee, which is factored into your plan payment as to discourage a plan filed simply for mere convenience.

FHA: A Cool-In After A Subprime Mortgage Meltdown

FHA has emerged as the home loan solution of choice after the implosion of a once ballooning sub-prime housing market. Ending with it, in one failed gasp, was the life span of a multitude of mortgage lenders who had almost exclusively sold sub-prime's troubled Adjustable Rate Mortgages (ARMs) and "No Documentation" type loans.

The FHA Gov't Loan Program is no sub-prime, but its common sense approach to home lending promises to help millions of homeowners that due to the tightening of the credit markets, find themselves unable to refinance out of their temporarily fixed-rate sub-prime loan because of less than perfect credit or very little equity.

FHA is a saving grace of sort for homeowners that otherwise cannot qualify for a new fixed mortgage because of stricter credit requirements or low home values. The demise of sub-prime shifted home lending conventions toward traditional "good credit" and "good equity" guidelines. Better credit profile borrowers continued to see the availability of loan programs while the sub-prime borrower witnessed a sobering elimination of better suited and alternate loan programs.

FHA may be as significant in scope today as it was when it was first created in 1934 to remedy housing concerns after The Great Depression. Unlike 75 years ago, this housing crisis is arguably a result of lending practices rather than an uncontrollable economic downturn.

Today's homeowner contends with the stronghold of the Adjustable Rate Mortgage (ARM), the staple product of the gone by the wayside sub-prime movement. ARMs were difficult to resist and easy to sell because of introductory "teaser" type interest rates and low interest only payments that in many instances cured only a fraction of the interest due for the monthly payment. The magnitude of the potential consequence that came with these dangerous loans was a short afterthought for the borrowers and lenders alike.

Adjustable rate mortgages now weigh in heavily on the bottomless free fall of home values across the country due to its ties to foreclosure. Homeowners are unable to stay current on their mortgage payments after the rate increases on their ARMs. In contrast, an FHA Gov't loan is a low-interest 30-year fixed rate loan backed by the strength and credit of the U.S. Government. FHA interest rates can range as low as 4.5%.

So far, FHA does not have a foreclosure program, but it is very promising in curtailing the already exorbitant rate of foreclosure by giving income-qualifying homeowners a realistic grip before foreclosure occurs. In the widespread turbulent waters of America's housing market many homeowners can use the assistance of a life-wrath, if help is to be rendered in time.

Is That You Hiding Your Car From the Repo-Man?

Ok, so you missed a few car payments and your car finance company has assigned your car to be repossessed. You tried talking to them but all they want is payment for the 3 months you missed plus 3 more future payments to keep you honest. You obviously don't have 6 month of payments and you definitely can't afford to loose your car. How will you get to work right? That's not their problem as much as it is yours, so you hide your car...everyday.

Did you know you can file your own federal repayment plan? It's called Chapter 13. Chapter 13 is not "straight bankruptcy" like the more popular chapter 7. Chapter 13 is a repayment plan that you file in your district bankruptcy court and forces your creditors to accept your payment plan as long as you can afford it. Once you file, the repo-man must leave your car alone. If your car was already repossessed, filing chapter 13 will keep your car from being sold at the auction.

A bankruptcy attorney will charge you a lot of money to file this in court for you, but the court will recognize your chapter 13 petition if you filed it on your own. You must income-qualify for the repayment plan you file. Keep an eye out for a guidebook I'll be posting on this.

Mortgage Payment Woes??

I spoke to a woman in California today seeking Gov't help with her mortgage. She was in an adjustable rate mortgage (ARM) but her payment had not yet increased. Her interest rate was 5.625% and she was paying interest only.

She complained that her mortgage principle balance had not gone down and that her payment was too high. She wanted the Gov't to lower her payment and she wanted a fair share of her payment to be applied to principle. Her mortgage balance was approximately $325,000 and she earned about $45,000 annually. Mortgage help? Her lender, Bank of America told her that she did not qualify for a loan modification due to her income. I tried to help her see her real dilemna.

She didn't realize that she had an awsome interest rate and a ridiculously low payment. (Interest only). Notwithstanding none of her payment was being applied to principle, but she could voluntarily send extra money to that end. Sending more mortgage payment is not exactly the kind of mortgage relief she sought. She didn't realize that her two complaints were somewhat diametrically opposed to each other. Paying principle & interest with her mortgage payment does not necessari ly equate to a smaller payment.

I did some calculating for her and even if I gave her a rate of 4.5% on a 30 year fixed, her payment would still be higher than what her current payment was. She didn't quite understand. She simply was given the wrong mortgage. Someone qualified her for a mortgage she simply couldn't afford. Unfortunately, she will eventually loose her home.