Debt Cures - Debt Kit

Thanks.

RESPONSE TO "SECRETS OF CREDIT CARD DEBT TERMINATION"

I am an attorney. I represent debtors. I know what I am talking about. Here's the truth.

There is no such thing as a magic letter with magic words which will terminate (discharge) credit card debt.

Any claim to the contrary is simply not true.

A debtor can pay a debt and "discharge" it ("terminate it").

A debtor can enter into a new contract with the creditor (if the creditor agrees) and "modify", "reduce" or deem the debt "satisfied" (effectively "paid" or "forgiven"). But, this rarely occurs.

But other than paying the debt, there is nothing a debtor can unilaterally (by himself) do to terminate credit card debt except file for a "discharge" in bankruptcy (or threaten to file for a "discharge" in bankruptcy). And, even that does not work for every person. See below.

HISTORICAL BANKRUPTCY BASICS IN CHAPTER 7 BANKRUPTCY:

1). WHETHER YOU QUALIFY TO FILE BANKRUPTCY:
If a person's debts exceed the value of that person's assets, that person is "insolvent" and is qualified to file for protection under federal bankruptcy laws.

2). THE BANKRUPTCY ESTATE:
When a debtor files bankruptcy, all the debtor's assets (property & money) and liabilities (debts and potential debts) go into an imaginary "pot" called a "bankruptcy estate".

3). SALE OF ASSETS AND PAYMENT OF DEBTS:
Then, the assets are sold to raise money to pay towards the debts owed by bankruptcy estate. The debts are paid using the funds in the bankruptcy estate until all of the money in the bankruptcy estate is spent.

4). DISCHARGE OF ALL REMAINING UNPAID DEBTS:
When all of the money in the bankruptcy estate is used up paying debts, all remaining unpaid debts are legally "discharged" (terminated) and the debtor starts his/her life over without any debt whatsoever.

5). PROPERTY EXEMPT UNDER BANKRUPTCY LAWS (PROPERTY THAT YOU CAN KEEP DESPITE FILING BANKRUPTCY):
Some of the debtor's property may not go into the bankruptcy estate to be sold off to pay towards bankruptcy debts. Certain property may be deemed "exempt" from the claims of creditors, including bankruptcy creditors. In Florida, for example, a "homestead" (a residence where the debtor actually lives) and which is paid off is "exempt" from the claims of creditors and never goes into the "bankruptcy estate" to be sold off to pay creditors. The same is true of "tools of trade" (like a carpenter's woodworking tools) and a certain amount of other personal property (like clothing & furniture), etc. That means a debtor can file for bankruptcy, obtain a 'discharge" of all remaining, unpaid debts and still keep all property that is "exempt" from bankruptcy and judgment creditors (because it never went into the bankruptcy estate to be sold off to pay creditors in the first place).

6). HOW CREDITORS ARE PAID FROM THE BANKRUPTCY ESTATE:
But, all creditors are not simply paid a pro-rata share (or equal share) of the money in the "bankruptcy estate". Instead, court costs, legal fees and taxes are paid out the bankruptcy estate first. Then, the "secured creditors" are paid out of the bankruptcy estate until the money runs out. (Secured creditors are those creditors with "liens" against the debtor's property, like a mortgage company with a mortgage on the debtor's real estate or a auto finance company with a lien on the debtor's car.).

7). ABOUT UNSECURED CREDITORS (LIKE CREDIT CARD COMPANIES):
The last creditors to get paid out of the bankruptcy estate (if any money is left after paying the "secured creditors" first) ARE THE "UNSECURED CREDITORS", SUCH AS CREDIT CARD COMPANIES! And, as a practical matter, there IS NEVER any money left in the bankruptcy estate to pay them anything (because the "secured creditors" usually get all of the money in the bankruptcy estate first). Translation: "Unsecured creditors" (like credit card companies) usually get nothing in bankruptcy and the debt that was once owed to them is legally "discharged" (terminated) forever. This is why a debtor filing bankruptcy HORRIFIES credit card companies (because they get paid last and even then, only if there is money is left over after paying all secured creditors in full first).

8). THE AUTOMATIC STAY:
But, there is more. Once a debtor files bankruptcy, it is ILLEGAL for any creditor (secured or unsecured) to make any contact with the debtor for 90 days and all court proceedings against the creditor and all collection efforts are ceased ("stayed") for 90 days. This is called an "automatic stay". That "stay" can even be renewed and extended for additional time for good cause. Such "stays" can theoretically be renewed for years for good cause.

9). TWO DIFFERENT TYPES OF BANKRUPCTY:
For people (as opposed to businesses), bankruptcy comes in two flavors. One flavor is Chapter 7. That is the best form of bankruptcy for a debtor. This is the only chapter where the debtor is granted a complete, unconditional "discharge" of all debts forever once the money in the bankruptcy estate is spent to pay creditors (as described above).

Chapter 13 is the other flavor of bankruptcy for a person. Under this form of bankruptcy, a debtor is forced to enter into a "payment plan" to pay his/her debts over time. The amounts of these payments are determined by the debtor's income and the amount of other debts. Obviously, unsecured creditors (like credit card companies) prefer a Chapter 13 bankruptcy. This is because they at least get something, however small. And, unlike a chapter 7 bankruptcy (where creditors are paid in full, in the order they became creditors), in a chapter 13 bankruptcy, creditors receive a "pro-rata" share of the debtors periodic payments based on the amount each is owed).

A personal bankruptcy can start out as a chapter 13 bankruptcy and then be converted to a chapter 7 bankruptcy under some circumstances (and the debtor can still obtain a Chapter 7 discharge, even though the bankruptcy started out as a chapter 13 proceeding).

HERE'S THE PROBLEM.

RECENT CHANGES IN BANKRUPTCY LAW (WHICH RESULTED FROM HEAVY CREDITOR LOBBYING):
Under current bankruptcy law, when an individual debtor files bankruptcy, he/she IS REQUIRED TO START OUT under chapter 13 first. So today, all personal bankruptcies start out with the debtor making (or attempting to make) payments to the creditors first. The bankruptcy can then be converted to a chapter 7 bankruptcy under some circumstances and the debtor can still obtain a chapter 7 discharge of all unpaid debts (except as explained below).

Exception: But, if the debtor is in the top half of income earners in his/her state, then he/she may never be eligible for a chapter 7 discharge.. So, high income earners will have to make payments on their debts and may never be eligible for a chapter 7 discharge. Complicated rules apply.

Finally, under current law, "student loan debt" is not dischargeable in bankruptcy in most cases. (Even before the new law went into effect, certain debts like taxes, child support and alimony obligations were not dischargeable in bankruptcy either.).

If Democrats are successful in the next Congressional and Presidential elections, some or all of these recent changes will be repealed (starting with the changes on student loan debt above).

Other technical rules apply.

HOW I USE THE FORGOING LAW TO GET MY CLIENTS OUT OF DEBT WITH CREDIT CARD COMPANIES:
I write a letter to the credit card company and tell them (truthfully) that I have advised my client to file bankruptcy. I tell the credit card company that my client is in the bottom 50% of income earners for his/her state, so that he/she will be eligible for a chapter 7 discharge (after a brief period in chapter 13 bankruptcy). I remind the credit card company that it is an "unsecured creditor" and is unlikely to receive a dime in chapter 7 bankruptcy and the debt of my client will be forever discharged in a chapter 7 bankruptcy.

Then, I tell the credit card company (truthfully) that my client has authorized me to make a one-time-only offer to settle the entire debt allegedly owed for 10 cents on the dollar (or a similar token amount) and that if the credit card company does not accept the offer within 48 hours, the offer will be deemed rejected and my client will file bankruptcy, in which case, the credit card company is unlikely to receive a dime.

While this approach will not work with "secured" creditors, it works marvelously with "unsecured" creditors like credit card companies (because they are the last in line to get paid).

If you have any questions or concerns, just ask.

I am always happy to help.

All The Best,

Snoop

Hello Nibs,

Thank you for your timely comments.

My responses are below.

YOUR COMMENT: There certainly are a lot of silly legal notions peddled by some. Sad.

MY RESPONSE: Agreed. In my experience, any legal advice appearing online that does not come from a lawyer is complete hogwash. Those who follow such advice ALWAYS lose their cases, their money, years of their lives and often their liberty and freedom to boot.

YOUR COMMENT: Is it true that lobbyists are trying to get medical debts exempted as qualifiers for bankruptcy?

MY RESPONSE: In bankruptcy, the term "exempt" or "exemption" is a term that applies to assets (like property), not debts (like medical debts). Creditors do like "exemptions" because they want ALL (not some) of the debtor's assets to go into the bankruptcy estate to be sold off to pay their debts.

If you are asking me whether lobbyists the hospital industry would like to make medical debts (an unsecured debt, like credit card debt) non-dischargeable in bankruptcy, the answer is yes.

Remember, lobbyists for lenders of student loans have already made student loan debt (an unsecured debt, like credit card debt) non-dischargeable in bankruptcy in most cases.

Let's face it, if creditors had their way, no debt would be dischargeable in bankruptcy.

And, a high percentage of the bankruptcies filed in the United States are filed because of medical debt. https://www.cnbc.com/2019/02/11/this-is-the-real-reason-most-americans-f....

So, this is a big issue.

YOUR COMMENT: If they get away with that, then the USA will become a nation of debt slaves.

MY RESPONSE: That all depends on who we put into elected office. If we keep electing people who put profits over people, then medical debt will likely become non-dischargeable in bankruptcy. If we start electing people who put people over profits, then medical debts will remain dischargeable in bankruptcy.

Further, if Democrats take control of Congress and the Presidency, then we may receive a "Medicare For All" health care system, in which case, medical debt will no longer be an issue in bankruptcy or otherwise.

YOUR COMMENT: (assuming it isn't already).

MY RESPONSE: I would argue that we are already largely debt slaves to corporations, particularly banks.

Excellent comments.

Thanks and all the best,

Snoop