Being forced into a bankruptcy usually happens when there is a crisis, such as what happens when they fall way behind on their mortgage payments and foreclosure is imminent or they get behind on their car payments to the point that they face repossession, or the IRS and the state are looking to attach their bank accounts or garnish their wages for back taxes. There are many reasons people feel like they have no choice but to file a Chapter 13 bankruptcy, but those are the most common scenarios I normally see.
Some crises leading to bankruptcy can be more subtle of course. For example, it is generally not a good sign when people start borrowing from their retirement accounts; that is a sure sign of trouble with their debt. It’s also unnecessary; instead of using up retirement money they will never see again, they can just file a Chapter 7 or Chapter 13 and be able to keep those assets, since retirement plans are generally exempt and the trustees can’t liquidate them to pay creditors. When people start borrowing money from their retirement accounts they really need to look at their debt situation carefully and do what they can to improve the quality of their lives, which usually means filing for bankruptcy.
Can Chapter 13 Help With Back Taxes?
Chapter 13 is great for people with tax problems because they will be able to consolidate their outstanding tax bills and pay them off over 5 years at zero interest in an amount they can usually afford. The exception would be if a federal estate tax lien had been recorded against them, but Chapter 13 stops wage garnishments and bank levies and it stops all collections, including the harassment dead in its tracks and gives a debtor a chance to breathe and to come up with a repayment plan.
The other good news under chapter 13 is that “non-priority” taxes, meaning those over three-and-a-half years old will not have to pay those back at all. A debtor in a chapter 13 only has to pay back the priority taxes, which are those from the last 3 full tax years back. A chapter 13 is great for those consumers with major tax problems.
What Is A Timeshare And How Can Chapter 13 Help With That?
A timeshare is basically either a points contract or a real estate transaction, which means that someone who did not want their timeshare any more would be able to list it under the rejected return provision of their chapter 13 plan, meaning they rejected the contract, rejected the lien and would return the collateral in full satisfaction of whatever they owed to the other party. It would not matter if they owed $15,000 and their payment was $400 a month, because if they did not want it anymore then they would simply choose to give it back and it is gone forever.
I deal with people who get trapped in timeshares all the time as they are one of the worst investments anyone can make, although some people swear by them. Unfortunately, those who get trapped in timeshares are usually those who can least afford them. While used car salesmen get a bad rap, those who sell timeshares can often be much worse, often keeping people in a room until they sign a contract regardless of whether they can afford it. I really despise timeshares and I feel bad for people when they come to me because they are stuck in these things, so I do what I can to help them get rid of them.
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