Over the past couple of years I've been watching the credit markets continue to crumble. Creditors offer all kinds of options for debtors having trouble paying their bills. When it comes to a person who is behind on their mortgage, they can apply for a loan modification to reduce their balance to make their payment more manageable. On the other hand, credit card companies freely offer debt consolidation and charge-offs for individuals that they feel are close to filing bankruptcy.
After thinking about this, I came to realize that creditors are not your friend that they would like you to think they are. They are in the business to make money and if they feel that your finances are so bad that filing bankruptcy is your only way out they would rather get something than nothing. What's funny about the loan modifications in the mortgage industry is most people wait until they are in foreclosure to apply for one. Not realizing that the foreclosure is still being processed and there's a good chance they won't get the loan modification that was promised. Recently I saw on the news that only about 5% of loan mods were approved. Sure a lot of advertising for such a low return.
Creditors don't want debtors to know about the two very important statutes that throw a wrench in the lenders plans. The last statute they ever want to have come out of your mouth is mentioning the United States bankruptcy code. The other one is the FDCPA or in long form the Fair Debt Collections Practices Act. Both of these statutes individually or collectively have the power to clip the wings of any creditor. Just mentioning one of these two will get a rise out of a debt collection agency.
The first one mentioned is the US Bankruptcy code, which allows the debtor to discharge different types of debt. If you are a person that is suffering from being buried under a mountain of credit card debt, filing bankruptcy might just be the answer. There are two types of filings with Chapter 7 bankruptcy being the most common. Chapter 7 bankruptcy works best for individuals that have large amounts of unsecured debt to discharge. The next type is Chapter 13 bankruptcy. Chapter 13 bankruptcy is very popular for people who want to protect their property, such as their home. A Chapter 13 will allow the debtor to negotiate a doable payment plan that will last 3 to 5 years. So basically, there is a solution for almost everyone when it comes to filing bankruptcy. Before making the final decision to file, consult a bankruptcy attorney in your area to see what bankruptcy will do for you.
The second statute is the Fair Debt Collections Practices Act. Creditors hate the FDCPA because it regulates how they can collect their debts that they claim debtors owe. The FDCPA does not allow a debt collector to make any misleading statements while attempting to collect a debt. It also prohibits any harassment or abuse that is commonly seen in debt collection practices.
When a person is filing bankruptcy and the creditor continues to pursue them, the debtor can get a double whammy against the creditor. If the creditor continues to violate the regulations contact your bankruptcy attorney to document all the allegations. Depending on how flagrant violations are the creditors might have to pay damages and even legal fees to your bankruptcy attorney.
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