Get Out Of Debt

Credit Counseling and bankruptcy are both ways to relieve the stress of debt. However, they are very different and it is important to understand both before making a decision as to which is best for you.

Credit counseling is a program designed to help those who are in a state of debt and cannot find a solution to their debt problems. They offer services that will allow you to work with a certified credit counselor to devise a plan that is tailored to your specific needs and goals. Credit counseling agencies often provide services for free and will help to educate you about how to avoid financial problems in the future by offering debt management classes or seminars. They do not erase your debt. Instead they work with you to budget money so that you can pay off the debt often times by debt consolidation. Collection will continue while using a credit counselor, however, in most cases companies who are owed money will try and work with you to help you payoff your loans. Credit counseling services often help you to reestablish credit after the loans are paid.

Bankruptcy is very different. It will completely clear your debt in most cases and you will no longer be hassled by collection agencies and their attorneys. There are two kinds of bankruptcy; the one that is right for you will depend on your situation. When filing Chapter 13 bankruptcy you are able to keep property that is mortgaged such as your house or car and are expected to repay debts in three to five years. Under Chapter 7 bankruptcy, you must give up all property and assets that you own. There are exceptions in some states for items such as work tools and household furnishings. Bankruptcy will certainly clear your debts and stop foreclosures and wage garnishments, however, you will be unable to establish credit for up to ten years. Filing bankruptcy can also be very expensive compared to credit counseling.

Take time and research credit counseling very carefully before deciding on bankruptcy as it can save your credit in the long run. Most people feel much better about themselves when they can pay off their debt and become educated about how to stay out of debt rather than filing bankruptcy.

Bankruptcy exemptions are laws written by both the state and federal government to ensure that a debtor’s assets are protected in order to ensure a fresh start after filing for bankruptcy. When filing for bankruptcy, debtors are required to fill out quite a few papers. Among these is the Schedule C form. In this form, a debtor will list the property that he is claiming to be exempt.

The laws that govern bankruptcy exemptions are numerous, but a debtor has two options: choose to follow state exemption laws or federal exemption laws. However, only 15 states and Washington D.C. allow a debtor to choose between federal or state exemption laws. These states are: Arkansas, Connecticut, Hawaii, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Washington, and Wisconsin.

Defining what kind of property is exempt under federal law

Again, only the 15 states mentioned before and Washington D.C. allow a debtor to use federal exemption laws. Also note that these exemptions can be doubled if a debtor is filing with his spouse.

Real property

Real property, co-op or mobile home up to $16,150.00

Personal Property

Animals, appliances, books, clothing, crops, furnishings, household goods, and musical instruments: up to $425.00 per item, $8,625.00 total.

Vehicles: up to $2,950.00

Jewelry: up to $1,225.00

Tools of trade, i.e. work tools: up to $1,625.00

Health Aides: unlimited

Burial plots: up to $16,500.00

All other property: up to $8,075.00 of