The Tactical Bankruptcy Manual, © 2007 Nick C. Thompson. All Rights Reserved.
Financial advisers will often advise you to cut expenses, sell assets or refinance a home to pay debt.If you are in financial trouble there are other choices other than bankruptcy but these choices may beworse than filing bankruptcy. If you have more monthly debt than income you will eventually loseyour home or car unless you increase income or decrease expenses. Mortgaging your home orcashing in your retirement when you have a negative cash flow is only a temporary fix and aguaranteed loss of that asset which you will need later unless you also change your budget. Withinweeks or months you will be desperate and broke again. All you will do is lose your home orretirement funds if you don’t restructure and live on a budget. You have to adjust your budget andlive within that budget. Bankruptcy is an opportunity to do just that.Debt Management will do just as much damage to your credit scores as bankruptcy. Also it isn’tthe bargain that they claim it is. Here are some problems with Debt Management counseling.1.
First about 90 percent of people never complete Debt Management counseling. If youcomplete most of the plan in bankruptcy you can get an early hardship discharge2.
Second many Debt Management companies file bankruptcy themselves within 4 yearsafter starting up and your money is just lost. Ameridebt and other agencies have filedbankruptcy themselves after paying millions to the corporate officers that ran the agency.3.
Third your credit is trashed both ways. You need to sweep your credit file afterwards.4.
Fourth you can’t force a creditor to accept partial payments through Debt counseling.Creditors have to accept a court approved bankruptcy plan. Bankruptcy has the power of a federal judge behind it and the advantage of court orders that can order things like aredemption which allows you to buy your car and personal property from the bank. Onlybankruptcy has the power to destroy debts and allow you to restructure5.
Fifth I often file Chapter 13 plans that pay back only 10%. A Chapter 13 plan requiresyou to pay all of your disposable income. There may not be any. Most DebtManagement counseling plans require 50% repayments plans. In most Chapter Sevencases 0% is repaid. Debt Management normally requires you to repay at least 50%.6.
Sixth If you do Debt Management you will be taxed for the amount of the debt you are“forgiven” by banks which turn in a 1099 to the IRS. If a bank agrees to charge off $100,000 you will repay about $40,000 in taxes for the $100,000 of debt forgiveness justas if you earned the $100,000. Bankruptcy normally doesn’t cause a tax problem. Ask H&R Block.Do I need to keep going on about credit counseling or is this enough????? It does work, if you canmake the payments over the course of the plan. It is better for smaller amounts of debt. Howeverif your situation is serious, bankruptcy is the answer.
A QUICK OVERVIEW OF THIS MANUAL
This manual covers the law for a bankruptcy cases filed in Kentucky. However bankruptcy law isgenerally the same for all of the other states. The major difference from state to state is that theproperty that can be kept in each state is different. Kentucky uses the Federal exemptions. Moststates use the Federal exemptions. In Texas and Florida you can presently keep 125,000 in equityin a home and file. However in Kentucky and under the Federal exemptions, you can only keep