Unfortunately, the Chapter 7 bankruptcy program that helped so many Americans pay off credit card bills and other consumer debts over the last century has been to a very real degree ruined by governmental tinkering (helped along, have no doubt, by the political wing of the mammoth commercial banking industry who had their own clear reasons to prevent desperate borrowers from utilizing bankruptcy discharge to pay off credit card lenders.
It’s simply far more difficult for professionals or families where both spouses work to qualify for Chapter 7 bankruptcy protection regardless of their demonstrable need, and, for borrowers that earned just that slightest bit more than a similarly sized household in their state, that could be the difference between bread winners able to pay off credit card accounts and start over or those snake bit families never quite able to get over the hump.
Without Chapter 7 bankruptcy protection offering hope that every American could pay off credit card bills one way or another, the lucky consumers who’d been refused the debt liquidation alternative had no choice (after they had already paid for the initial court fees, funded the pre-hearing consumer counseling course, and, in all likelihood, handed a retainer over to a local attorney specializing in bankruptcy law and earning top dollar for that expertise) but to at least examine the parameters of Chapter 13 protection.
Unlike Chapter 7, the Chapter 13 program works with both lenders and borrowers to come to a theoretically equitable agreement about the amount of money the debtors would be able to come up with each month for the next few years after estimating planned income and examining the consumer burden (generally, the court trustee shall quickly and unilaterally decide that, say, the borrower shall be liable for six thousand dollars during a credit card pay off).
While far from the simple and effective protection that Chapter 7 bankruptcy once offered – five years ago, the judge would’ve given the order to pay off credit card accounts and medical bills in a matter of moments – the Chapter 13 system at least seems at first glance to be fair and coherent.
It’s not the outpatient economic absolution of Chapter 7, but the Chapter 13 plan could be comfortably utilized for de facto arbitrations among consumers worried over foreclosure proceedings or similar creditor suits but who maintain sufficient assets and property that they dare not try Chapter 7 debt liquidation
Chapter 7 may pay off credit card balances but the program will also risk potential property seizure. However, since the court selected trustee is under strict instructions to utterly ignore the actual expenses of the family petitioning for bankruptcy protection in favor of arbitrary figures averaged for the state by the U.S. Census Department, few citizens manage to stay with the program after the original automatic stay.
Considering the aforementioned difficulties now sadly an unmistakable part of bankruptcy protection, borrowers may want to think about another type of debt assistance. Often convincing the representatives of the credit cards to lower their clients’ balances by as much as two thirds after a series of involved discussions (and promises that the debtor shall pay off the rest of the credit card balance in only a matter of years), debt settlement negotiation’s actually far better for the borrowers’ FICO scores, and, by forcing borrowers to pay off at least a portion of the credit card accounts, they’ll be that much more likely to guard against such troubles in the future.