Although the interest in bankruptcies among Delaware consumers has exponentially increased over recent years alongside the problems facing the American economy, we’ve found that a good number of the most curious borrowers honestly do not know much about the program beyond that it is supposed to provide a fresh start. More troubling, the debtors who know the least about the current realities regarding
bankruptcy protection – those formerly responsible consumers who never imagined they wouldn’t be able to repay their bills – are the ones who stand to lose the most from not fully understanding the changes to the bankruptcy code passed through the federal legislature in the past few years. Within this article, we would like to merely explain a bit more about the process of bankruptcy (particularly Chapter 7) as it now applies to Delaware residents and also to give a little more information regarding the different alternatives that have sprung up following the difficulties the 2005 BAPCA act presented for ordinary debtors who purely want a bit more help taking care of mounting bills and escalating interest rates. A variety of debt relief options – debt settlement, chief among them – can now offer much of the benefits Chapter 7 bankruptcy protection formerly provided with virtually none of the disadvantages that currently exist. We will admit, for some of the poorest and most debt stricken Delaware borrowers, there may be no better solution to credit card burdens than the Chapter 7 bankruptcy program, but, considering all of the potentially disastrous repercussions regarding credit reports and personal property seizure, we could not over stress the importance of education when thinking over financial household decisions of this magnitude.
As most borrowers already know, the most common form of bankruptcy protection, whether in Delaware or around the nation, remains the Chapter 7 debt relief bankruptcy offered to both individuals and households. Though we do not wish to downplay the ever increasing complexities of the program, Chapter 7 bankruptcies are by far the easiest ones and the most rapidly discharged. However, there are new restrictions built into the Chapter 7 program that definitively confound the success stories of past generations. For instance, the majority of the Chapter 7 bankruptcies were formerly considered ‘asset free’ bankruptcies. In other words, the trustee chosen by the state of Delaware would decide that the borrower or borrowers filing for protection would not have any assets sufficiently large that the courts need think about seizing them for potential auction to repay lenders. As we shall soon explain, this is no longer precisely the case, and, in fact, Delaware consumers wondering over bankruptcy must be thoroughly aware of all of the potential problems which could threaten their personal property and most valued possessions. Even more troubling, the admittance to Chapter 7 debt elimination bankruptcy is not even a guarantee despite the best efforts of borrowers that genuinely believe the program would be the most sensible solution to their credit card problems.
Under the new legislation, borrowers must now pass ever more stringent qualifications merely to be found eligible for Chapter 7 bankruptcy protection. This ‘means test’ sets up a formal series of evaluations by the trustee – a Delaware court official randomly chosen for this purpose – that analyzes Delaware consumers’ eligibility based upon the criteria laid down by congressional legislators in 2005 with the help of the Internal Revenue Service. The primary qualification that the court trustee will be looking at revolves around the amount of income earned by the filers in a previously determined period. Unfortunately – and, for some Delaware families, bitterly unfairly – if households earn more than the median income of residents of their state, they’ll have little chance of ever being deemed eligible for the Chapter 7 debt elimination program. These income levels are based upon the most recent census figures, and, though this shall soon be adjusted, this means that in 2008 a single head of household shall have to make less than forty five thousand dollars; a family of two shall have to make less than fifty five thousand dollars; for three, the income must be less than sixty seven thousand; with four members, it will have to be less than eighty thousand. Delaware borrowers with households larger than four members should add an additional seven thousand for each additional one. Since the proof of earning levels are largely dependant upon tax records, borrowers shall for this reason have to submit any past due income tax returns at the time of filing their Chapter 7 bankruptcy petitions.
Provided that, according to these figures, you believe your household would not qualify for Chapter 7 protection compared to the Delaware median income, there’s still one chance. Trustees, if asked, will also analyze the family’s past six months of demonstrable gross income alongside their various monthly obligations – mortgage payments, car loans, familiar support, tax liens, and payments for education up to a set limit. Added to these will be the monthly living expenses that the Internal Revenue Service has previously outlined in rigid guidelines that have little, if anything, to do with the greatly wavering practicalities of American lives. Nevertheless, once all of these costs have been verified and looked over, if the Delaware court officials find that your income would still allow for payments of six thousand dollars over a period of five years (or one hundred dollars a month) to repay lenders, there will be no opportunity for Chapter 7 debt elimination. Instead, the Delaware court trustee – even if he or she is sympathetic to your plight – will not have any choice but to force the filing borrowers into the Chapter 13 debt restructuring program.
If you and the courts do both still decide that a Chapter 7 bankruptcy is warranted (and, for that matter, wanted), there’s still more work to do: and more money to be spent. Before the trustee can even start examining your case, you will have to file an extremely detailed petition with the courts as well as a financial matrix that lists the names and addresses of each and every lender – even the creditors that you know will not be able to be satisfied by the constraints of the Chapter 7 bankruptcy code – and then write down the amounts owed, the type of loan, the minimum payments requested and their due dates. The initial administrative costs for the petition will be just under three hundred dollars and that must be delivered along with the paperwork to your Delaware county clerk; remember to get a money order, the Delaware courts don’t take checks and, of course, credit won’t be offered. Once the declaration has been accepted, even before the trustee has a chance to look through the petition, borrowers will receive the benefits of what has been known as an automatic stay which prevents under Delaware law the lenders or any collection agencies from efforts to contact their clients.
For all debtors previously harassed by telemarketers or buried under past due notices, there’s an obvious freedom from stress this automatic stay allows, but, further, once Delaware borrowers properly submit their bankruptcy petition, the creditors are also stopped from attempts at legal seizure of possession of legal actions intended at garnishment of wages or similar attempts at collection. After the papers have been filed, all lenders are forcibly refrained from all collections unless they can convince a bankruptcy trustee during the course of a hearing that depreciation or conscious malfeasance will hurt the attached assets. Considering the cost of a trial, this is extremely rare, and, for unsecured lenders, there’s virtually nothing that they can successfully argue.
Unfortunately, even if the borrower should be granted access to Chapter 7 debt elimination, the threats to borrowers’ property will only be beginning. Essentially, aside from those objects explicitly protected by either federal exemption or the rather more sympathetic ones handed down by the Delaware legislature, all property’s subject to the caprice of court officers. If something’s considered unnecessary under law, it will be taken and sold at auction to repay the lenders for, generally, far less than actual value. Again, the citizens of Delaware that have landed in this predicament should consider themselves lucky that their state of residence allows for a good deal more protection than otherwise vouchsafed by the federal exemptions. In Delaware, those requesting Chapter 7 bankruptcy debt elimination, can guarantee the safety of their family bible, pictures, library, or burial plot; a reserved space in any officially registered place of worship; clothes as well as sewing machines not intended for commercial purposes; leased musical equipment; tools of trade whose value depends upon the county of residence; personal property up to five hundred dollars regardless of county. As well, eighty five percent of earned but unpaid wages and commissions, all retirement plans, all insurance proceeds and workers’ comp payments, and any unemployment or public assistance benefits shall be guaranteed by Delaware statutes.
As we have said, compared to borrowers filing for Chapter 7 bankruptcy around much of the country, these exemptions are incredibly generous yet, no matter the current comparisons available, borrowers have to seriously consider whether they want the majority of their possessions – presuming they own more than five hundred dollars of goods – subject to seizure from the authorities. Unlike in previous years, when the bankruptcy code assessed property value by resale value (which has an obviously limited purview), following the 2005 legislation borrowers must now list their collected possessions as according to replacement value. This allows far less retention of property and must be noted by any consumers even thinking about declaring bankruptcy in the state of Delaware. Under the homestead provision, primary residences should be shielded. Also, depending upon the equity available, Delaware will protect the household vehicles, but, keep in mind, secured loans will not be effectively touched by bankruptcy. Indeed, the courts will force borrowers to reaffirm these loans within a few weeks of declaring for Chapter 7 or Chapter 13 protections. Given the dim prospects for resale of assets foreclosed or repossessed – especially under current economic conditions around Delaware – there’s little chance that the secure lenders will not agree to a reaffirmation of past agreements, but borrowers nevertheless have to take the possible threat into consideration.
There are other worries that the Delaware borrowers must think about before they lower themselves into the depths of Chapter 7 bankruptcy protection. For one thing, above and beyond the potential loss of property from court seizure, there are the sheer costs of the bankruptcy procedure to consider. We have previously mentioned the administrative fees charged by the Delaware courts as a part of the petition process, but, before those money orders could even accepted by the county clerks, there’s the not so small matter of consumer credit classes that each borrower (or, in the case of a married couple filing jointly, borrowers) shall have to pass before they’re allowed to even submit their paperwork. These courses are yet another consequence of the 2005 legislation and, by the accounts of most leading economic pundits, were only ever intended to lead prospective bankruptcy candidates away from the protections of bankruptcy. Even forgetting about the time it would take for debtors to complete the apparently pointless coursework and class time – and, for those out lying Delaware residents who haven’t a certified course worker in their area, the travel time should not be over looked – there are considerable costs to each class and, of course, the borrower (who, proof positive, has no additional income to spare) will be expected to pay their own way.
These expenses, added to the ever escalating prices charged by experienced bankruptcy attorneys from the moment the client walks through the door, should make every Delaware consumer think twice about the supposed benefits of Chapter 7 bankruptcy. This is not the fresh start promised your grandparents. Indeed, once one remembers the damage done to credit reports and FICO scores (which barely existed two generations ago), bankruptcy could easily be seen as the direct opposite of a fresh start. All of these de facto penalties and obstacles have birthed the new debt relief industries and, much as we understand the tensions surrounding such potentially catastrophic financial choices for every Delaware household and their unwillingness to try something relatively innovative, better alternatives now available genuinely do exist through the private sector for consumers who have anything (including, as regards credit reports, their future employment opportunities) to lose. Some of the options we’re speaking of should be more than familiar to Delaware customers. Consumer Credit Counseling has unearthed no end of advertisements announcing their possibilities, but, much as the CCC program will lower interest rates and take charge of associated unsecured credit card burdens, they are also paid by the credit card companies to make sure that the clients are unable to file for bankruptcy. That’s right: once any consumer signs on the dotted line with a Consumer Credit Counseling company, the debtors essentially prove to any potential Delaware court trustee that they believe they could repay the obligations on their own accord and, in so doing, waive Chapter 7 debt elimination bankruptcy rights.
Debt settlement, while not nearly so well known as the Consumer Credit Counseling industry within Delaware, has risen head and tails above all rivals from Delaware customer satisfaction regarding debt management. Much as the Consumer Credit Counseling program actually damages credit scores on a level equitable with Chapter 7 bankruptcy discharge (because the associated credit card debts are taken over by the CCC company in return for minimal decreases in interest rates), debt settlement counselors only act on the behalf of the aggrieved borrowers in order to negotiate sudden and drastic reductions of the clients’ unsecured balances with Chapter 7 bankruptcy as the eventual threat. While, particularly after reading the aforementioned entries, each Delaware borrower should realize how horrible bankruptcy could be for their families’ well being, the very mention of the possibility still remains a real obstruction to the credit card companies’ hope of recompense. Because of such embedded warnings, unsecured lenders shall remain open to debt settlement negotiations and cede the clients’ legal obligations. It’s not a guarantee, but, alongside the recent legislative alterations that so weakened bankruptcy, debt settlement may well provide a new solution for Delaware borrowers that merely want to aid their household of credit card bills they can no longer easily pay. Even if there isn’t a debt settlement counselor readily available within your area of Delaware, why not take advantage of one of the specialists who makes their home on the internet? Education, as ever, should be the key, and the article you’ve just read should only be the start for every Delaware consumer who has thought about bankruptcy as debt relief and dearly wishes for a better solution.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
