Protecting Your Rights And Your Future

The math makes Chapter 7 a powerful option for unsecured debt

| May 12, 2015 | Chapter 7

The trouble with much of the conventional wisdom about debt overload is that it often asks for virtually superhuman financial sacrifice by, in one way or another, paying off essentially all of the debt that is owed. Programs such as consolidation plans, paying one debt at a time, or even negotiated “reduced” settlements with each creditor are all treacherous and exhausting pathways that often fail or provide no long-term benefit to the debtor. When one does the math and makes relevant comparisons, no remedy works better in Arkansas or nationwide than a Chapter 7 bankruptcy.

The Chapter 7 is not appropriate for someone with a secured debt problem, such as keeping a home when the mortgage is in arrears or retaining a vehicle that is behind. In those events, a Chapter 13 consult should be arranged. However, for unsecured debt, such as credit cards, medical debt and deficiency judgments claimed due on repossessed or foreclosed property, there is no smarter or more powerful remedy than a Chapter 7.

This remedy, by the way, is provided under law passed by the federal government, through the U.S. Bankruptcy Code. By following federal law, a qualified person or couple are not taking an immoral or irresponsible path, but rather a perfectly legal option mapped out by the government.  Congress has determined, after much study and debate, that this remedy is in every one’s best interests by adding jobs, purchasing power and more economic stability. Furthermore, consolidation plans are costly and counter-productive.

The same funds could have been put into a retirement benefit to provide future financial security. Thus, a 30-year-old debtor, paying 418 monthly for five years in a consolidation plan has paid $25,000 and cleared out his or her unsecured debts. However, it was a costly mistake. Instead, the same funds invested in a retirement fund over five years of monthly payments, would accrue at a 9.74 interest rate, and would total $590,000 upon reaching age 65. Residents of Arkansas and elsewhere may be pleasantly surprised after discussing all of the facts, options and potential outcomes with an experienced Chapter 7 bankruptcy attorney.

Source: The Huffington Post, “Why a Chapter 7 Bankruptcy Should Be Your First Option and Not a Last Resort“, Steve Rhode, May 7, 2015