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Bankruptcy, Consolidation
and Home Equity Loans: The Myths
There are alternatives.
(PRWEB) February 17, 2005 -- Before you choose bankruptcy
there are some facts you need to consider. When you
petition the bankruptcy court you are putting your
financial future in the hands of a judge. A judge
who turns over the negotiations to a “bankruptcy
trustee” who's solution is usually accepted by
the judge and who, by the way, works for the creditors,
not you. In addition, you are putting all your debts
and all your assets on the table. You can't pick and
choose what debts and which assets are to be considered.
There are other alternatives
that may serve a debtor's interest better than bankruptcy,
consolidation, or loans.
I received an email a few months ago from a very distraught
lady who had chosen bankrptcy. The trustee had advised,
and the judge had agreed, to have her sell her home
and use the proceeds to pay off her creditors. Something
she was told by her attorney would not happen. But,
the law is or has been changed to make it harder to
simply discharge your debts. They now want to force
you into a payment program or complete liquidation
of assets.
If you watch any TV you have seen a few thousand ads
for debt consolidation. But what's the bottom line?
I have heard from at least one person that hasn't
been to happy with the results of his “debt consolidation.”
He went through the whole process and made his payments
as required for a year. At the end of the year he
owed more than when he started. How could that happen?
Consider. You have an agreement with the debt consolidation
company, not your creditors. The debt consolidatio
company gets the creditors to agree to a reduced payment
and in exchange they agree to pay the debt consolidation
company a fee and not to harass you. This doesn't
mean the bank is reducing the interest rate on the
debt, waiving the underpayment fees, or waiving the
late payment fees, etc. What it does mean for the
bank, they now have a performing asset that they don't
need to write off. The debt consolodation company
and the banks are happy, at your expense.
The dumbest idea I think being promoted today is a
home equity loan to payoff unsecured debt. Why would
any reasonably intelligent person put the equity of
their home up as collateral for unsecured debt? It's
a great idea for the mortgage companies and credit
card banks; but, is it really in the best interest
of the home owner?
The alternatives? There are many. Most, if not all,
use the fact that the banks don't really lend money.
At least not to you. This is not some wild off the
wall fantasy. It is a simple fact stated by the various
federal reserve banks in their publications. The most
often quoted is from the Federal Reserve Bank of Chicago
in its publication called Modern Money Mechanics:
“Of course, they do not really pay out loans
from the money they receive as deposits. If they did
this, no additional money would be created. What they
do when they make loans is to accept promissory notes
in exchange for credits to the borrowers' transaction
accounts.”
One of the great benefits of alternative debt elimination
is your ability to pick and choose which debts to
eliminate. You can do this without putting your home
or any other assets at risk.
Like all things financial, you should do your due
diligence before using any alternative method. The
most important thing to look for? Will the people
behind the process stay with you even if everything
goes wrong? Will they stick with you and give you
all the information and support you need should one
of your accounts end up in court? Something no one
can guarantee against, no matter which of the above
processes they offer.
• Burdened with Debt
• Reducing Credit Card Debt
The American public has been brainwashed into believing
there are only three acceptable ways to eliminate
or discharge their unsecured debts. Hire an attorney
and file for bankruptcy. Find a non-profit outfit
that will consolidate their payments into one low
monthly payment. Take out a home equity loan and pay
off all those high interest credit cards. There are
other alternatives. Many times, these alternatives
serve a debtor's interest better than bankruptcy,
consolidatio, or home equity loans.
For more information: http://howtogetridof.com/
• Alabama unclaimed assets
• California unclaimed property
• Florida unclaimed assets
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