This personal bankruptcy story was posted on the internet in July of 2010 as a comment in a discussion on bankruptcy: “The reason I choose chapter 13 is because I was told by my attorney that after 3 years I would be able to walk away from my secured (2nd) and unsecured debt. I took a slow spiral down after divorce and was living beyond my means. I did hold a second job for several years just to keep my head above water. I am now in a situation where I am making minimum payments and have pondered over this for months and months calling mortgage modifications, debt counselors, etc. During the first of the year, the interest rates on cards sky rocketed and I was sinking in this deep dark hole. I think about my situation and I have done some homework on chapter 13 and 7 and for me I know its not without consequences but at least I will be able to sleep at nite. I made this ugly situation for myself, and now I will have to face the music in the next couple of months. I think about it and I welcome what I hope will be a second chance….I am so grateful for that, Keep you all posted on my process!”
In 1980, the federal government passed a special law which allowed national banks to ignore state usury limits and peg the rate of interest at a certain number of points above the federal reserve discount rate. In addition, specially chartered organizations like small loan companies and installment plan sellers like car financing companies have their own rules. That means the laws in most states do not have enough teeth to regulate credit card debt. When a credit card company increases your interest to the maximum allowed APR of 24% or higher and encourages you to pay only the minimum, the act becomes a recipe for disaster for many people. If you have $30,000 in credit card debt and are making the 2% minimum payments allowed with the maximum APR, that means you can pay $600 a month to the credit card company the rest of your life and NEVER put a dent in the original $30,000 you will still owe. As a result in many cases, about the only way a person can relieve exorbitant debt from various banking institutions is through filing for bankruptcy protection.
The moment you file a bankruptcy, a judge will order all collecting actions to cease, an important feature called the automatic stay. The automatic stay, applicable to all types of bankruptcy filings, means that the mere request for bankruptcy protection automatically stops and brings to a cessation certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment. That means all creditors will have to go through a US Bankruptcy Court trustee in order to deal with their debtors including credit card companies.
As a society, we have come a long way since the days of debtor prisons and states. The Constitution provided for our protection against those antiquated ways when it gave Congress the power to legislate bankruptcy law making the primary laws governing bankruptcy federal. State laws supplement the federal laws by clarifying the necessary details. The laws have been designed to protect both creditor and debtor making bankruptcy a legal proceeding designed to allow the honest person or business to work their way out of a bad financial situation, or in some cases, to start fresh.
If like our debtor in the illustration you need a fresh start over, you too can consider filing for bankruptcy protection. Bankruptcy laws are complicated, and common sense indicates you will need a bankruptcy lawyer in order to properly understand how these complex laws may apply in your situation. If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan area of Phoenix, Arizona, contact us today and we will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.
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