Internet's first get-out-of-debt community - 140,000 members

Posted: Thu Feb 23, 2006 5:24 pm Subject: How the new bankruptcy law is working!

According to National Association of Consumer Bankruptcy Attorneys the new bankruptcy law could not meet the expectation. Credit card companies and banks spoke for this new law as they thought the changes will catch deadbeats red handed. That is the reason credit counseling was made mandatory prior to filing bankruptcy.

But bankruptcy attorneys are of opinion that the new law has made it harder for those who have no other door open to avoid bankruptcy. It is true that bankruptcy ruins credit, but circumstances often impel consumers file bankruptcy. People who have unexpected medical bills, have lost jobs often qualify for bankruptcy and the compulsory credit counseling process is just delaying the case.

A report from National Association of Consumer Bankruptcy Attorneys has revealed that about 97% people who applied for bankruptcy cannot avoid it. So these people could be sent to bankruptcy court directly.

For general people, who wish to pay their bills (like Mary, Shirley and others in this forum) debt consolidation seems to be the ideal instrument. It does not hurt your credit rating as settlement does, not does this take you into a deeper debt like a consolidation loan. Hence debt consolidation seems to be most effective strategy for the coming days. That was all from me. Wish to know more from other members on this.

Collected info from San Francisco Chronicle.

Posted: Thu Feb 23, 2006 7:12 pm Subject:

I believe that I read the same article this morning, and I agree that debt consolidation is still the best route to take. I am looking forward to consolidating once I pay the smaller things that I can on my own. Thanks for your post, as always, Stan!

~Mary

Smile

There is, in some states, a little-known procedure similar to bankruptcy that may work better, now that the Chapter 7 laws have been crippled. That's called a "general assignment for the benefit of creditors". It's basically a tool governed by state law for taking whatever property one owns and transferring it to the creditors (by way of an assignee in trust), basically saying, "I give up, here's my stuff, take it and leave me alone." After having done so, one is generally immune from claims filed in that state.

Posted: Mon Feb 27, 2006 2:49 pm Subject:

It seems to be an alternative of bankruptcy; however, what is its effect on credit? Is it as bad as bankruptcy when it comes to credit reporting?

Posted: Mon Feb 27, 2006 3:22 pm Subject:

I don't really know about that. When the bankruptcy laws were liberalized in the late '30s and '40s, people stopped using state-specific alternatives, so it's become pretty rare. There will be a record generated in the local court of record, so that's something that will eventually find its way into a credit history, but I'm not sure the people checking on judgments in the courthouse would catch it. I suspect it will be increasingly popular given the changes in bankruptcy, so they'll probably be getting instructions on it fairly soon. I'd bet there's a sort of temporary window of opportunity there, though, until they catch on.

Posted: Thu Mar 16, 2006 3:41 am Subject:

Sounds like the general assignment for the benefit of creditors is a lot like the deed in lieu of foreclosure that people can do on their homes - what would be the tax liability if someone turns over their secured property (the washing machine they bought on credit, for example) if the value was less than what is owed? For example, when a credit writes off more than $600, that amount is considered taxable income to you. Would the same hold true for this? And would you be able to turn over stuff you bought on a major credit card to the bank? Inquiring minds want to know..... Thanks!

Posted: Wed Mar 22, 2006 12:21 pm Subject:

Forgive me if this has been discussed previously, but there is one major problem with the new bankruptcy law that I am seeing. The procedures for an agency to become certified to provide bankruptcy credit counseling are very lax. It seems nearly anyone can set up a nonprofit and begin to provide this service. This is a problem because bankruptcy attorneys are having "friendly" non profits set up to provide this service, which could pretty much destroy its effectiveness in screening out people who could avoid bankruptcy through alternatives such as debt consolidation.

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