Bankruptcy rules have changed, Its not as good a deal as it used to be. Even with a chapter seven, the trustee has the prerogative to require a reduced payment plan for credit cards, vendors, and other debts. it may not be a clean sweep losing all your debt.
But the real problem is with tax issues. There is no relief in bankruptcy for IRS or State taxes…If you owe taxes you will be required to pay your debt…bankruptcy will not work to relieve these issues.
Under such circumstances you must consider other options which are more effective for reducing tax debt.
Another issue of importance which may not work out as well as you hope is your home. The problem being tha with the current reduced value of homes, because of the real estate decline, many people live in homes that carry more debt then the home is worth. This may be an acceptable situation for the home owner, but in bankruptcy proceedings the bank can make a motion for relief from the stay based on the collateral, the home, being worth less then the mortgage and there is a distinct possibility the court will allow the liquidation of the house because there is not enough value to cover the banks secured party position, inadequate collateral it is argued.
There is a place when bankruptcy is appropriate and works just not everywhere.
In bankruptcy there are occasions you will be allowed to keep the house even if the collateral is not worth as much as the debt but upon the first late payment, you will be facing foreclosure.
So what is an acceptable alternative to bankruptcy that will do a better job in such situations?
Of course a workout as follows:
1. The house can be refinanced with a short payoff, in other words, workout the debt, reducing it, so the house is worth more then the debt, there is a double win, payments are reduced, equity restored and you are not in jeopardy of losing it to the bank. A much better conclusion.
2. Do an offer in compromise for the tax debt and have it reduced to an affordable payoff,
Both plans can be initiated privately without a courts intervention and without lawyers as they are both business strategies not legal strategies.
There are other reasons bankruptcy should be avoided but these are the two issues you want to be aware of.
If you find yourself in this situation and are considering bankruptcy as an option, consider the above workout strategies as well. Discuss your bankruptcy plan with a lawyer and ask him about the above issues regarding taxes and your home, then discuss the issues with a workout specialist and then make your mind up.
It may be that a workout will deliver a better conclusion then bankruptcy. call for help 413 -549-2966 Norm will arrange a no obligation teleconference.
