For the last decade, escalating credit card bills and similarly unsecured debt balances have been disabling the potential of most every household living within the District of Columbia as well as the nation at large. Much as these debt loads have always presented a certain threat to household financial stability, so many consumers enjoying the fruits of our national economic expansion seemingly assumed the good times would continue on for ever more and indulged the new availability of credit through unchecked spending that landed the average Washington D.C. family with, according to recent studies, more than fourteen thousand dollars of consumer debt. For that matter, in 2005, when congressional legislation permanently altered the parameters of the United States bankruptcy code and thoroughly weakened the protections once believed to be the rights of every American, few D.C. borrowers seemed to care. The media, for their part, certainly didn’t make much of what would soon become a disastrous mistake. Unfortunately, given the current state of the American economy and that of Washington D.C. in particular, debt management has assumed a central role in the lives of a sadly significant portion of D.C. families just as they discover bankruptcy – or, at least, bankruptcy as they thought they knew the program – may no longer be an active escape for their ever increasing debt burdens. After the Bankruptcy Abuse Protection and Consumer Protection Act passed through the U.S. congress four years ago, Chapter 7 debt elimination programs have been far more restrictive in allowing access to borrowers wishing to file for bankruptcy protection, and, even once D.C. residents chance their way inside this version of bankruptcy, potentially catastrophic during the period before discharge.
When ordinary Chapter 7 debtors throughout the District of Columbia speak of bankruptcy, they are likely talking about the Chapter 7 program. Within Chapter 7 bankruptcies, Washington D.C. borrowers deemed eligible for governmental assistance would see all of their credit card debts and other unsecured obligations legally invalidated three months after submitting their petition for bankruptcy protection from unsecured debts. Seems like a fine notion, to be sure, and there are certainly D.C. borrowers who will have no other alternative than to file for the Chapter 7 debt elimination strategy. Indeed, many of the proudest and hardest working heads of households within the District of Columbia depend upon the vaguest notion of bankruptcy as that veritable last chance for a fresh start previous generations truly counted on. Those stalwart men and women taking second jobs and tightening family budgets and struggling against the tide of consumer debts so that they could remove the yoke of financial obligations don’t spent their days looking through the various debt relief alternatives to bankruptcy in D.C.. They would prefer to pay their bills in full even if (as with those borrowers who’ve suddenly lost their jobs and their families’ health insurance only to face medical emergencies that quickly rise to five or six figures following hospitalization) the bills are demonstrably not to have been anticipated nor in any way their own fault. Unfortunately, these borrowers are exactly the sort to never investigate the current state of bankruptcy protection nor look into other strategies that may reduce their collected debts until things are too late. Modern bankruptcy as it stands will simply not be the answer for most Washington D.C. families, and, distasteful as it sounds, any resident of the District of Columbia holding unsecured credit balances that threaten to overtake household finances must take the time to see what else could be done.
First, though, we should provide some greater illustration of what
bankruptcy proceedings shall mean for Washington D.C. residents this millennium. Chapter 7 bankruptcy protection, as we have already written, remains the most popular sort of bankruptcy among borrowers residing in the District of Columbia by a gigantic degree. Indeed, the average D.C. consumer already understands (or, at least, believes that he or she understands) much about the utilitarian practicalities of the program. Interested parties must fill out a surprisingly thorough petition – and accompanying debt matrix listing the identities, addresses, and holdings of each lender – and hand it in, alongside money order for three hundred dollars, to the District of Columbia bankruptcy court at 333 Constitution Avenue, NW room #4400 Washington D.C. 20001. A formal trustee will then be chosen arbitrarily by the Washington D.C. courts to evaluate the filers’ household debt loads with an eye toward ideally liquidating their credit card debts and other unsecured burdens. Borrowers that have any salable assets should be aware of the potential for property seizure by the District of Columbia courts, of course, and the negative credit ramifications should go without saying. There are also serious out of pocket costs. Adding together the additional administrative fees paid to the state and federal government, the costs of debt counseling courses each Washington D.C. borrower will be required to pass before filing their bankruptcy petition and pass again before the official discharge of their debts could be completed (all course instruction paid by the borrower, of course), and the continually escalating costs of trustworthy and well regarded bankruptcy attorneys within the District of Columbia, the sad truth of bankruptcy protection this very moment of our nation’s history means that – ridiculous as it may sound – the people who most deserve public assistance in the settling of their debts will be least likely to be able to afford that assistance.
For even those fortunate District of Columbia residents who believe that they have sufficient income or savings to pull through the expenses that bankruptcy shall demand, there’s another shock in store. In the age of BAPCA, Washington D.C. court trustees will analyze the past year’s income of every borrower and only allow Chapter 7 debt elimination bankruptcy protection – the only bankruptcy protection, as we have said, that should reasonably make sense for virtually any D.C. consumer – to those borrowers that demonstrably make less than the median earnings of the ordinary Washington D.C. head of household regardless of actual debt balance. The revamped bankruptcy code features a separate means test supposedly designed to alleviate potential discrepancies for incomes greater than average D.C. households, but, since the families’ eligibility shall be determined by their potential to pay one hundred dollars a month to creditors after satisfying all utilities and secured lenders and ordinary cost of living expenses (and since those expenses are calculated not by the families’ actual budget but instead artificially constructed paradigms of Washington D.C. household needs cooked up by the Internal Revenue Service), most every borrower with a decent job in this economic climate shall be nudged toward a very different form of bankruptcy.
Within Chapter 13 debt restructuring, the Washington D.C. borrower will essentially agree to repay the majority of their unsecured debt obligations in less than five years or sixty months. While this measure may well protect D.C. home owners from foreclosure (for the time being, at least; much depends upon individual equity situations), there are rather more negative consequences that should also be understood by any debtor contemplating the procedure. The admitted advantages of Chapter 13 bankruptcy protection – interest shall not accrue on any debts, even those debts resulting from Washington D.C. taxes, and most assets will be safe guarded from the courts – pale when compared to the Chapter 7 debt liquidation bankruptcy, and residents of the District of Columbia that have reason to believe that they would not qualify for the Chapter 7 program should seriously think about whether the effort and significant cost that bankruptcy petitions now entail are worth their while. For borrowers’ families, so very much depends upon the choices made during this time, and, even if Washington D.C. consumers are bound and determined to attempt bankruptcy because they’ve always held tight to that shining beacon of potential debt elimination, everyone should do all necessary research before they put their household at risk. Even the most desperate D.C. borrowers who genuinely have nowhere else to go are often times led astray by the lure of personal bankruptcy when, gross family income be damned, the debts threatening their survival couldn’t be affected through bankruptcy proceedings no matter what.
Secured debts, those debts that are integrally tied to collateral (largely vehicles and real estate), should definitely be included as part of the initial bankruptcy petition so that the Washington D.C. trustee assigned the borrower’s case would be able to make a realistic analysis of the household budget and the potential expenses going forward so as to render an informed decision about how much of their debt balance the family could afford to repay. As long as lenders could simply repossess or foreclose upon the borrowers’ property as part of the original loan agreement, there’s no reason for D.C. borrowers to assume that bankruptcy protection would have any meaning in any such. It’s true, however, that borrowers finding themselves in particularly dire straights who have already seen their assets be reclaimed by the lenders but owed more on their loans than the assets were worth in today’s market – especially with the plummeting property values around the Washington D.C. area and the number of home owners who sadly found that they possessed negative equity on their most prized investment – may be able to discharge those debts through Chapter 7 bankruptcy liquidation. Nevertheless, this aspect of bankruptcy protection shall only apply to a small minority of borrowers.
Also, in virtually every instance, bankruptcy protection will not be able to liquidate any Washington D.C. borrower’s debts that have been incurred because familial support – child support, alimony, palimony, and the like – was not paid on time or in full. Any state or federal income tax liens (also, except under extremely unlikely circumstances, property tax liens) assessed will be invalid for Chapter 7 debt elimination, and, as well, those debts that were the aftermath of fraud or malicious action as found by a court of law. For that matter, though this may sound obvious, only those debts listed on the original credit matrix that every Washington D.C. resident will hand in alongside their bankruptcy petition will be potentially eliminated through the Chapter 7 program: yet another reason why the accuracy of the initial paperwork documents is so very crucial to success in any sort of bankruptcy declaration. In a similar sense, all of the debts that the District of Columbia court trustee adjudicates to have only been first approved by the lender underwriters because the lenders received deliberately falsified information will be immediately thrown out as a matter of due course. Any loans that the trustee honestly believe to be the result of misapplied data shan’t be allowed any governmental protection and may indeed only lead to greater difficulties for the D.C. consumer that first brought the issue to the courts’ attention.
There are also the grim consequences regarding credit ratings. Most every borrower within the District of Columbia – even their children, truth be told – realizes that a declaration of Chapter 7 or Chapter 13 bankruptcy shall play utter havoc with the household’s associated credit scores. These FICO scores (the abbreviation refers to the Fair-Isaacs Corporation which initially built the trademarked algorithms now used by every credit bureau in western civilization) were originally intended to be a safeguard against the long standing prejudices of previous lending policies by forcing the stores and banks and lending institutions to utilize a mathematically based protocol that calculated scores purely upon applicants’ credit availability and payment history. Unfortunately, as the economy of Washington D.C. and America as a whole grew exponentially and restrictions to unsecured credit dropped, FICO scores and the larger credit ratings became ever more necessary for ordinary consumers’ mere survival. When our forefathers first designed the blueprint for modern bankruptcy, they had no idea that every potential employer would be able to scan in a moment for some trace of an applicant’s financial unsteadiness, and, far from a fresh start, consumers that now attempt to employ Chapter 7 bankruptcy to wipe clean their debts may find that the lingering stigma of debt liquidation prevents them not only future credit opportunities but also from work and family shelter. Bankruptcy declaration has become a grave threat to household economic stability for the years following successful loan discharge, and, though some Washington D.C. residents may legitimately have no choice but to sign on to the bankruptcy program, we urge every resident that cares about the future of their family to think twice before surrendering FICO scores and all potential of proper credit for up to a decade.
In the same way, the grand majority of Washington D.C. consumers we’ve met know – on some level, at least – that they should expect the court trustee to look through any property of worth and potentially collect whatever they deem to be assets for eventual auction so that creditors could at least be partially repaid. Since most D.C. consumers already in this predicament have likely stripped their financial holdings bare in an attempt to lower the mounting debt load before bankruptcy became necessary, this stipulation doesn’t seem to overly bother the debtors we have spoken with, but, make no mistake, households in the District of Columbia who’ve humbly presumed their meager assets well below the government’s notice have been absolutely decimated through the whims of court accounting procedures and the forcibly restrained judgment of Washington D.C. trustees. So many borrowers, ignoring the actual value of their goods after (a perfectly reasonable) familiarity midst rising tensions and the loss of heart brought on by collector harassment, simply forget to count their wife’s ring or their grandfather’s lake cabin as assets because, no matter what, they would never be sold. The United States bankruptcy code – despite, as we shall explain, the best efforts of Washington D.C. law makers – holds no special care for sentimental value, and family heirlooms shall be sold for pennies on the dollar just the same as stock brokers’ platinum money clips. Allowing dispassionate (formally dispassionate, now that the BAPCA legislation effectively hamstringed the empathy and wisdom of the District of Columbia court trustee chosen to oversee any D.C. resident’s bankruptcy proceedings) governmental officials into family economic troubles may well liquidate some bills, but, by so doing, the declaration of bankruptcy could too easily liquidate the household in the process.
There are federal exemptions to the court’s bankruptcy asset forfeiture, of course, but those have been stripped to the bone as well in recent years. This is particularly troubling for lower income families – the only Washington D.C. families that could absolutely guarantee their entrance to the Chapter 7 debt elimination bankruptcy program, remember – who wished nothing more than to find a new and unfettered beginning for their household only to realize the loss of property has severely dampened their ease of living and general economic prospects. Fortunately, each state legislature offers its own specific set of exemptions, and the statutes of Washington D.C. are no different. For borrowers filing for Chapter 7 bankruptcy protection who can successfully establish the District of Columbia as their home, they won’t have to worry about their permanent residence even if it is jointly owned. Furthermore, they will be able to keep any motor vehicle as long as the assessed value is less than two thousand and five hundred dollars. The Washington D.C. exemption also covers the equity of additional properties to the tune of eight thousand dollars provided the original homestead exemption was not utilized. Personal property – furniture, hobby equipment, wardrobe, musical instruments, home electronics – are exempted up to four hundred a twenty five dollars a piece or eighty six hundred dollars for the lot. The family library has a special exemption at around four hundred dollars of value, and the household will be able to keep sufficient money for their food budget according to stipulations dreamed up by the Internal Revenue Service which may or may not actually fit the realities of the Washington D.C. consumers’ needs and desires.
There’s better news regarding D.C. bankruptcy exemptions for some applicable heads of household. Assistance given to blind or differently abled Washington D.C. residents will be expressly avoided. Benefits that come from fraternal societies are also not to be touched. All family portraits as well as burial plots and money specially designated for burial shall be protected, and, should anyone declaring bankruptcy in the District of Columbia be able to demonstrate that they had saved money for their children’s future college education, those funds too will be let alone. Exemptions for tools of trade depend upon the specific career of the individual who has originally petitioned for bankruptcy. A mechanic shall be granted two hundred dollars value while an artist will enjoy three hundred dollars and other industries may have exceptions up to sixteen hundred dollars; notary publics, alone, are reserved the complete ownership of all necessary materials. The pensions of public school teachers and judges are fully exempt, and all Washington D.C. residents undergoing Chapter 7 bankruptcy won’t have to worry about social security, unemployment compensation, life insurance and disability benefits, or damages resulting from wrongful death or uninsured motorists. There are literally dozens more specific exemptions within the Washington D.C. bankruptcy statute, but we hope this cursory glimpse, at least, gives some idea of what D.C. consumers imagining Chapter 7 liquidation of consumer debts would be able to keep … and what they would be forced to give up.
Compared to the relatively paltry exemptions offered by most state legislatures, the consumers attempting Chapter 7 debt elimination bankruptcy in Washington D.C. should consider themselves quite lucky indeed, but that does not mean the Chapter 7 program will be easy. Eight thousand dollars may seem to protect a healthy amount of household furnishings at first glance, but, once borrowers look around the family home and add up in their minds just what the couch and television and fishing pole and personal computer may be worth, they’ll realize just how much they would stand to lose by filing for Chapter 7 debt elimination bankruptcy protection. Even worse, while previous generations of District of Columbia residents risking asset seizure through bankruptcy could at least depend upon their damaged or aging or otherwise unpalatable property being overlooked by the government because of clearly negligible worth, the current law asks all D.C consumers filing for bankruptcy protection to list their assets (meaning, essentially, everything that the family could reasonably claim that they own) by potential replacement value rather than, as before, potential resale value. This means that the fire damaged dinghy or scarred coffee table worth exactly nothing on the open market but still prized by our theoretical Washington D.C. family must be valued at the price such an item would garner had the item have been new. It’s no longer merely the wealthiest D.C. families that need fear court agents ransacking their household. Every single borrower in the District of Columbia who considers bankruptcy must seriously consider the loss of every single possession that they cherish.
Much as the relentless drive toward quick profits has led America (and Washington D.C. in particular) toward the edge of financial apocalypse, capitalism – in the absence of any proper governmental form of bankruptcy protection – has unearthed loopholes within the seemingly inescapable creditor snare. Debt consolidation, which only ever merited consideration through equity loans and second mortgages, has been dealt fatal blows by the collapse of the sub prime lending industry and the collapse or Washington D.C. real estate markets. The high prices and minimal potential savings of the Consumer Credit Counseling solution had never appealed to most learned analysts of unsecured personal debt, and, after recent findings that the industry accepted funds from the very credit card companies the CCC professionals were theoretically working against, Consumer Credit Counseling should soon be revealed as little more than a debt juggling scam preying upon the most desperate members of our society. A growing number of District of Columbia residents, though, have found no small value in the services of debt settlement negotiation firms. Under the settlement plan, negotiation specialists utilize the threat of Chapter 7 bankruptcy (however weakened, this very minute) and the promise of a speedy satisfaction of whatever funds remain to cut credit card bills and other unsecured loan accounts by as much as sixty percent. Every Washington D.C. debtor even thinking about bankruptcy owes it to themselves to at least investigate the debt settlement program and see if their own financial burdens may apply. There will be a cost, credit scores may suffer, but, compared to what bankruptcy means to District of Columbia debtors at present, debt settlement just may provide that fresh start they’ve hoped for.
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?
