Eliminate Debt Without Bankruptcy Protection
If your in debt, you must devise some plan to get out of the red. You can declare bankruptcy (Chapter 13 or Chapter 7), but that will tarnish your credit and financial records. An alternative is the wage earner plan — which allows you to meet your debts methodically without bankruptcy.
Remember, creditors hate “Bankruptcy” because they may be left with no payment. To them, 20 percent of what you owe is better than nothing at all but if you can get on the wage earner plan, there is another solution.
Sit down with your creditors and negotiate a payment plan. Tell them how much you can pay. Believe me, they will settle for less than the actual amount owed. For more information on negotiating with creditors, refer to the section titled “Take Over An On-Going Business For Zero Down.”
In 1938, federal law established the wage earner plan, now administered by the same branch of our judicial system that handles bankruptcy.
To take advantage of the plan, you must be a wage earner and most of your income come from wages, regardless of how much you make. You can discharge any amount of your debt under this law.
Here’s How it Works
- Call the nearest U.S. District Court and find out the name of the trustee who administers the wage-earner plan; and make an appointment to see him.
- Bring to your appointment all relevant financial records, such as payment books, contracts, etc.
- The trustee will examines your finances and set up a plan by which portion of your debts is paid over a three-year period.
- You then make your monthly payments to the trustee who, in turn, pays each of your creditors.
A possible side effect of the wage earner plan is the reduction of much of your debts, because a provision of your filing requires your creditors to appear in court.
Statistics show that 40 percent of creditors fail to appear in court — in this case, you owe only 60 percent of your creditors their claims. In some cases, none of your creditors will appear. If this happens, all your debts are wiped out, without the pain of bankruptcy. If some of your creditors do appear in court, the court allows you to divide your payment into smaller amounts to be paid over a three-year period. Once you file, you will stop bill collectors, law suits, judgments, assignments, seized bank accounts, and other actions against you.
Indeed, in many cases, your credit rating may improve because you have made an honest effort to work with the lending parties to pay off your debts.
Your debt may be wiped out entirely if a creditor used deceptive trade practices to induce your purchase, as defined by the Uniform Commercial Code.
You should also be aware that, that under the Homestead Act, your residence may be exempted from levy to the extent determined by local law. Check with a lawyer or your local courthouse for more details.
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