With America seeing one of the worst recessions since the Great Depression, it's no surprise that over 1 million individuals will file for bankruptcy this year. Many people have been putting off filing bankruptcy over the last couple years hoping that things were going to get better. According to the data, it seems to be getting much worse.
Unemployment is standing at 9.2% nationwide without taking into consideration the number of individuals that are partially employed or have just given up going back to work completely. These people fall off the radar and are no longer recorded as a statistic.
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Prior to filing bankruptcy, many Americans in debt will run to their family to borrow money. If the debtor pays their family back before filing bankruptcy, there is a big problem with this. If they are considering filing for bankruptcy it could be a big mistake if it is done within a year of the filing. The bankruptcy trustee can ask the family member or friend who loaned the money and was paid back to return the money because it belongs to the bankruptcy estate. Many people think that they can transfer property or cash prior to filing bankruptcy to family member to protect it and hide it, but if it gets found out it could cost the filer the dismissal of the bankruptcy and possibly even being charged with fraud by the bankruptcy court. There are many ways in a bankruptcy that a debtor can get caught.
Past relationships that went south or jealous neighbors who found out about the bankruptcy filing decide to put in their two cents. And in our high-tech electronic world it's easy for the bankruptcy court to find out a transfer of funds. In a bankruptcy filing the debtor is responsible to produce up to two years of bank records which show a lot about a person's life. It's best to throw it all out there on the table of the bankruptcy attorney and let them figure out how to protect it.
Many people in financial ruins have tried all the different programs to avoid filing bankruptcy. There has been a huge marketing push for debt consolidation and debt settlement. Thinking they are doing the right thing many debtors have signed up for debt settlement programs and not had the results they were promised. While, debt settlement companies offered to be a liaison between the debtor and creditor and negotiate the balance down as much as a 75%. They initially begin taking money from the debtor to build up a sufficient amount to attempt to settle the debt with the creditors. First of all, if the debtor wants to settle a debt and get a creditor to charge it off they don't need a middleman to do so. There are many things that can go wrong in the debt settlement process.
The debt settlement company is not regulated by anyone and the creditor does not have to abide by any actions the settlement company is offering. If the debtor is no longer paying their credit card because of negotiating to settle the debt, there is nothing stopping the creditor from filing a lawsuit to get a judgment against the debtor. Another problem that has arisen from these deals is many creditors will file a 1099C with the IRS making the debtor responsible to pay taxes on the amount the creditor wrote off. The bottom line is, the debt settlement company ends up with the gold mine and the debtor gets the shaft.
That's why bankruptcy is the only legal form of debt resolution that works. Although there are no guarantees when filing bankruptcy, if the debtor uses a bankruptcy attorney to do the filing, the attorney will probably know what the outcome is because of their past experience.
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