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The Road Out of Debt: Bankruptcy and Other Solutions to Your Financial Problems

Book Description

A practical guide to getting out of debt and understanding the option of personal bankruptcy

The current credit and financial crises have prompted Joan Feeney, a preeminent Massachusetts Bankruptcy Judge, and Theodore Connolly, a Finance and Bankruptcy Attorney, to write a book that will help people handle their financial troubles. The Road Out of Debt seeks to assist those considering bankruptcy by demystifying the bankruptcy process and explaining what you can expect to gain (or lose) from it.

With the insights of both a bankruptcy judge and a bankruptcy lawyer, you'll be able to determine when it's best to avoid bankruptcy, when you should seek bankruptcy protection, and, most importantly, how best to work through the bankruptcy process, if you so choose. With millions of Americans personally facing dire financial situations, job losses, home foreclosures, and other major financial challenges, no book could be more timely.

  • An exceptional resource for anyone contemplating bankruptcy or otherwise trying to figure out how to handle their debt

  • Puts the bankruptcy process in perspective and reveals specific steps to follow

  • Discusses how to decide whether or not bankruptcy is the right path for you

  • Written by a well-respected bankruptcy judge and bankruptcy attorney

As more people find themselves entering financial difficulties, an increasing number of them will need information to help them through these problems. The Road Out of Debt provides you with the serious solutions needed to overcome a personal financial crisis.

Table of Contents

  1. Copyright
  2. Acknowledgments
  3. Preface
  4. Introduction
    1. A Short History of Debt
    2. United States of Debt
    3. The Credit Trap
    4. Owing Money Is Not a Crime
    5. You Are Not Alone
    6. Greater Things to Come
  5. I. A ROAD MAP TO DEBT RELIEF
    1. 1. Getting Started
      1. 1.1. How Debt Happens: An American Story
      2. 1.2. Getting Started on the Road
        1. 1.2.1. Stop the Harassment
        2. 1.2.2. Know Your Options
      3. 1.3. Evaluate Your Situation: Do You Need to File for Bankruptcy?
        1. 1.3.1. Green Level: No Need for Bankruptcy
        2. 1.3.2. Blue Level: You Might Need to Consider Financial Changes
        3. 1.3.3. Yellow Level: Consider Bankruptcy
        4. 1.3.4. Orange Level: Strongly Consider Bankruptcy
        5. 1.3.5. Red Level: File for Bankruptcy Immediately
      4. 1.4. It Can Get Better
    2. 2. Negotiating Your Way Out of Debt
      1. 2.1. Learn from Donald Trump
      2. 2.2. 20 Keys to Successful Negotiations
        1. 2.2.1. Key #1: Get Prepared: The More You Know, the Better
        2. 2.2.2. Key #2: Be on Guard When Dealing with Creditors
        3. 2.2.3. Key #3: Remember That No Two Creditors Are the Same
        4. 2.2.4. Key #4: Communicate
        5. 2.2.5. Key #5: Make Collectors Stop Calling and Writing
        6. 2.2.6. Key #6: Make Offers to Your Creditors
        7. 2.2.7. Key #7: Remain in Control
        8. 2.2.8. Key #8: Be Patient and Persistent
        9. 2.2.9. Key #9: Have No Fear
        10. 2.2.10. Key #10: Threaten to File for Bankruptcy
        11. 2.2.11. Key #11: Call Once, Then Use Certified Mail
        12. 2.2.12. Key #12: Get It in Writing
        13. 2.2.13. Key #13: Only Agree to Terms You Can Afford
        14. 2.2.14. Key #14: Never Agree to Pay a Debt You Don't Owe
        15. 2.2.15. Key #15: Use Time to Your Advantage
        16. 2.2.16. Key #16: Uncover Your Creditor's Bottom Line
        17. 2.2.17. Key #17: Don't Let Legal Jargon Trip You Up
        18. 2.2.18. Key #18: Be Honest in Your Dealings
        19. 2.2.19. Key #19: Never Assume Another Person's Debt
        20. 2.2.20. Key #20: Use Honey, Not Vinegar
    3. 3. Fighting Back
      1. 3.1. Nina: An American Tragedy
      2. 3.2. You Can Fight Back
      3. 3.3. The Law Is on Your Side
        1. 3.3.1. Ask Them to Stop
        2. 3.3.2. Write Down Any Violations
        3. 3.3.3. File a Complaint with the Attorney General's Office
        4. 3.3.4. Hire a Lawyer, Then Sue
      4. 3.4. Don't Give Up! Keep Fighting
    4. 4. Budgeting Your Way Out of Debt
      1. 4.1. Understand Your Situation
      2. 4.2. Recognize the Warning Signs
      3. 4.3. Set a Budget
        1. 4.3.1. Monthly Take Home
        2. 4.3.2. Essential Fixed Expenses
        3. 4.3.3. Other Expenses
      4. 4.4. Fix a Broken Budget
        1. 4.4.1. Earn Extra Income
        2. 4.4.2. Reduce Your Expenses
      5. 4.5. Stick to Your Budget
      6. 4.6. Start Saving: Pay Yourself First
      7. 4.7. Beware of Unsolicited Advice
    5. 5. The Danger of Quick Fixes
      1. 5.1. Katie's Lesson
      2. 5.2. How They Draw You In
        1. 5.2.1. Payday Loans
        2. 5.2.2. Vehicle Title Loans
        3. 5.2.3. Hard Money Lenders
        4. 5.2.4. Pawn Shop Loans
        5. 5.2.5. Tax Refund Anticipation Loans
        6. 5.2.6. "Work at Home" Scams
      3. 5.3. Safer Loan Options (but Tread Carefully!)
        1. 5.3.1. Family and Friends
        2. 5.3.2. Your 401(k) or Pension
        3. 5.3.3. Home Equity Lines and Second Mortgages
        4. 5.3.4. Reverse Mortgages
        5. 5.3.5. Lower Interest Rate Credit Card
      4. 5.4. Beware of Bad Advice
    6. 6. Debt Counselors: How to Tell the Bad from the Good
      1. 6.1. Don't Fall for the Slick Talker
      2. 6.2. Credit Counselors
      3. 6.3. Debt Management Plans
      4. 6.4. Debt Negotiators
  6. II. FINDING YOUR WAY USING NONBANKRUPTCY SOLUTIONS
    1. 7. The Way Out of Credit Card, Medical, and Student Loan Debt
      1. 7.1. The Credit Card Trap
      2. 7.2. Negotiate
        1. 7.2.1. Credit Card Debt
        2. 7.2.2. Medical Debt
        3. 7.2.3. Student Loan Debt
      3. 7.3. Evaluate and Plan
      4. 7.4. Discover New Ways to Pay
        1. 7.4.1. The Excavation Method
        2. 7.4.2. Additional Payment Methods
      5. 7.5. Make Changes to Your Budget
      6. 7.6. Seek Professional Help
        1. 7.6.1. Remedies to Avoid with Unsecured Debt
      7. 7.7. Consider Bankruptcy
    2. 8. Foreclosure Basics and Rescue Scams
      1. 8.1. What Is Foreclosure?
      2. 8.2. Snatched from Under Her Feet
      3. 8.3. Common Rescue Scams
        1. 8.3.1. Refinance Rescue Scams
        2. 8.3.2. "Government" Modification Programs Scams
        3. 8.3.3. Leaseback/Rent-to-Own Scams
        4. 8.3.4. Fake-Sale Scams
        5. 8.3.5. Bankruptcy Scams
        6. 8.3.6. Partial Interest Bankruptcy Scams
        7. 8.3.7. Debt-Elimination Scams
        8. 8.3.8. Bait-and-Switch Scams
      4. 8.4. Red Flags of a Foreclosure Scam
      5. 8.5. Protect Yourself
    3. 9. Sizing Up Your Mortgage Debt
      1. 9.1. Don't Despair, Prepare
      2. 9.2. Know What You Owe
      3. 9.3. Appraise Your Home's Value
      4. 9.4. Know Your Mortgage Type
      5. 9.5. Are You "Underwater"?
      6. 9.6. Brush Up on Your Negotiating Skills
      7. 9.7. Seek Professional Help
    4. 10. The Way Out of Mortgage Debt
      1. 10.1. Modify Your Loan
        1. 10.1.1. Forbearance
        2. 10.1.2. Loan Reinstatement
        3. 10.1.3. Loan Restructuring
        4. 10.1.4. Making Homes Affordable Program
        5. 10.1.5. Partial Claims and Insurance Funds
      2. 10.2. Refinance Your Loan
        1. 10.2.1. Home Affordable Refinance Program
        2. 10.2.2. FHA Refinance
        3. 10.2.3. HOPE for Homeowners
      3. 10.3. Sell or Give Up Your Home
        1. 10.3.1. The Home Affordable Foreclosure Alternatives Program
        2. 10.3.2. Walk Away
      4. 10.4. Consider Bankruptcy
    5. 11. The Way Out of Auto Debt
      1. 11.1. Ripped from Her Car
      2. 11.2. How Repossession Works
        1. 11.2.1. No Breach of Peace
        2. 11.2.2. After Your Lender Repossesses
        3. 11.2.3. Leased Vehicles
      3. 11.3. Bring Your Loan Current
      4. 11.4. Contact Your Lender and Negotiate
      5. 11.5. Sell Your Car
      6. 11.6. Surrender Your Car on Your Terms
      7. 11.7. Resist Repossession Reasonably
      8. 11.8. Consider Bankruptcy
        1. 11.8.1. Redemption
        2. 11.8.2. Reaffirmation
        3. 11.8.3. Treatment of Vehicle Loans in Chapter 13
        4. 11.8.4. Vehicle Leases in Bankruptcy
    6. 12. The Way Out of Tax Debt
      1. 12.1. Always File a Tax Return
        1. 12.1.1. Filing an Extension
        2. 12.1.2. Criminal Penalties
      2. 12.2. Talk to the IRS
      3. 12.3. IRS Enforcement Action
        1. 12.3.1. Liens
        2. 12.3.2. Levies
        3. 12.3.3. Summonses
      4. 12.4. Find a Way to Pay
        1. 12.4.1. Enter into an Installment Agreement
        2. 12.4.2. Qualify for an Offer in Compromise
        3. 12.4.3. Qualify as a Hardship Case
      5. 12.5. Consider Bankruptcy
  7. III. WHEN TO TAKE THE BANKRUPTCY ROUTE
    1. 13. Is Bankruptcy Right for You?
      1. 13.1. Bankruptcy Basics
      2. 13.2. Should You File?
        1. 13.2.1. Advantages
        2. 13.2.2. Disadvantages
        3. 13.2.3. Stigma
      3. 13.3. Consider the Alternatives
        1. 13.3.1. Doing Nothing
        2. 13.3.2. Credit Counseling
        3. 13.3.3. Workouts
        4. 13.3.4. Mortgage Loan Modifications
        5. 13.3.5. Refinancing
        6. 13.3.6. Foreclosure Rescue
      4. 13.4. Seek Professional Help
    2. 14. 21 Bankruptcy Myths
      1. 14.1. Myth #1: Bankruptcy Is Expensive
      2. 14.2. Myth #2: Saying "I Declare Bankruptcy" in a Public Place Is the Same as Filing for Bankruptcy
      3. 14.3. Myth #3: Proceedings Can Last for Years
      4. 14.4. Myth #4: You Can File Only Once
      5. 14.5. Myth #5: Another Person Will Make All of Your Financial Decisions
      6. 14.6. Myth #6: It's the Most Trying and Heart-Wrenching Experience
      7. 14.7. Myth #7: You're a Failure and a Bad Person
      8. 14.8. Myth #8: Bankruptcy Hurts America
      9. 14.9. Myth #9: Avoid Bankruptcy at All Costs
      10. 14.10. Myth #10: Your Spouse Must Also File for Bankruptcy
      11. 14.11. Myth #11: It Often Causes Family Strife and Divorce
      12. 14.12. Myth #12: Everyone Will Know
      13. 14.13. Myth #13: You Could Lose Your Job
      14. 14.14. Myth #14: You Must Report Your Bankruptcy on Job Applications
      15. 14.15. Myth #15: You'll Lose Everything ... So Say Good-bye to Your House and Car
      16. 14.16. Myth #16: Only U.S. Citizens Can File for Bankruptcy
      17. 14.17. Myth #17: You'll Never Be Able to Buy a House or a Car
      18. 14.18. Myth #18: You Won't Be Able to Get a Credit Card
      19. 14.19. Myth #19: Your Interest Rates Will Always Be High after Bankruptcy
      20. 14.20. Myth #20: Creditors Will Harass You Even after You File for Bankruptcy
      21. 14.21. Myth #21: It Doesn't Affect Your Medical Debts
      22. 14.22. Finding a Fresh Start
    3. 15. Overview of Bankruptcy Types
      1. 15.1. CHAPTER 7 Bankruptcy
      2. 15.2. Reorganization Chapters
      3. 15.3. Evaluate Your Situation
      4. 15.4. Timing It Right
    4. 16. Understanding the Bankruptcy Process
      1. 16.1. The Code, the Rules, and the Forms
      2. 16.2. Overview of the Process
        1. 16.2.1. The Automatic Stay
        2. 16.2.2. Property of the Estate and Exemptions
        3. 16.2.3. The Discharge
      3. 16.3. Filing Requirements
        1. 16.3.1. Credit Counseling Briefing
        2. 16.3.2. Filing Fees
        3. 16.3.3. Filing Documents
        4. 16.3.4. Payment Advices or Proof of Income
        5. 16.3.5. Tax Returns
        6. 16.3.6. Meeting of the Creditors
        7. 16.3.7. Personal Financial Management Course
      4. 16.4. Seeking Legal Advice
        1. 16.4.1. How Can I Afford an Attorney?
        2. 16.4.2. How Do I Find a Competent Lawyer?
  8. IV. ROAD TRIPS: SIX CASE STUDIES IN BANKRUPTCY
    1. 17. Two Trips through Chapter 7 Bankruptcy
      1. 17.1. CHAPTER 7 Basics
        1. 17.1.1. Eligibility Requirements
        2. 17.1.2. The Procedure
        3. 17.1.3. Pay Your Fees
        4. 17.1.4. Understand Your Exemptions
        5. 17.1.5. The Automatic Stay
        6. 17.1.6. Role of the Trustee
        7. 17.1.7. The Discharge
      2. 17.2. The Henri Family: Uninsured Medical Expenses
        1. 17.2.1. Sickness in the Family
        2. 17.2.2. Saddled by Enormous Debt
        3. 17.2.3. Ready to File Bankruptcy
        4. 17.2.4. Meeting of Creditors
        5. 17.2.5. After the Meeting of Creditors
        6. 17.2.6. Out of Bankruptcy
      3. 17.3. The Robinson Family: Job Loss, Credit Card Debt, and Real Estate Gone Bad
      4. 17.4. The Perfect Storm
        1. 17.4.1. Surrender the Condo
        2. 17.4.2. Bankruptcy Is a Must!
        3. 17.4.3. The Bankruptcy Filing
        4. 17.4.4. Bankruptcy Stops Collection Activity
        5. 17.4.5. Meeting of Creditors
        6. 17.4.6. After the Meeting of Creditors
      5. 17.5. Lessons Learned
    2. 18. Two Trips through Chapter 13 Bankruptcy
      1. 18.1. CHAPTER 13 Basics
        1. 18.1.1. Advantages and Disadvantages
        2. 18.1.2. Eligibility Requirements
        3. 18.1.3. The Procedure
        4. 18.1.4. The Plan and Plan Confirmation
        5. 18.1.5. The Discharge
        6. 18.1.6. A Note of Caution
      2. 18.2. The Delgado Family: Spending Freely, Saving Nothing
        1. 18.2.1. The Family Business Suffers
        2. 18.2.2. Answering Tough Questions
        3. 18.2.3. Put to the Test
      3. 18.3. Ann Wolfe: Divorce, Business, and Real Estate Woes
        1. 18.3.1. A Change
        2. 18.3.2. A Tough Economy Hits Hard
        3. 18.3.3. Turning to a Lawyer for Help
      4. 18.4. Lessons Learned
    3. 19. A Trip through Chapter 11 Bankruptcy
      1. 19.1. Chapter 11 Basics
      2. 19.2. Juan and Maria Morales: Measure Twice, File Once
        1. 19.2.1. Picking Up Business ... and Mortgages
        2. 19.2.2. Complaining Customers and Tenants
        3. 19.2.3. A Turning Point
        4. 19.2.4. An Emergency Request for Cash
        5. 19.2.5. Lien Avoidance: Free the Home from Debt
        6. 19.2.6. On the Way to Plan Confirmation
    4. 20. A Trip through Chapter 12 Bankruptcy
      1. 20.1. Chapter 12 Basics
      2. 20.2. The Jensens: Making a Silk Purse Out of a Sow's Ear
  9. Conclusion: The Road Worth Taking
  10. A. Helpful Resources
    1. A.1. Auto Debt
    2. A.2. Bankruptcy and Debt Basics
    3. A.3. Bankruptcy Forms
    4. A.4. Consumer Credit Debt
    5. A.5. Legal Help
    6. A.6. Mortgage Debt
    7. A.7. Tax Debt
    8. A.8. And for Further Reading ...
  11. B. Bankruptcy FAQs
  12. Notes
    1. B.1. Introduction
    2. B.2. CHAPTER 3: Fighting Back
    3. B.3. Chapter 4: Budgeting Your Way Out of Debt
    4. B.4. CHAPTER 5: The Danger of Quick Fixes
    5. B.5. CHAPTER 6: Debt Counselors: How to Tell the Badfrom the Good
    6. B.6. CHAPTER 11: The Way Out of Auto Debt
    7. B.7. CHAPTER 12: The Way Out of Tax Debt
    8. B.8. CHAPTER 14: 21 Bankruptcy Myths
    9. B.9. CHAPTER 16: Understanding the Bankruptcy Process
  13. Glossary
  14. C. About the Authors