It’s easy to lose focus of your goals in the middle of a marathon pandemic, civil unrest and political polarization. Yet, you must. Never mind the chaos swirling all around us. You cannot idly sit by and wait for the government or cavalry to come.
You alone are making important financial decisions today that will culminate into a compound effect in the near future. If you stopped paying rent due to Covid-19, what options do you have to avoid and eviction? What about a forbearance on your home?
When you need to stop paying debts, how long before the creditors start collecting? These are stressful times and money is always at the heart of every disaster. Here are your options for getting out of debt in 2021.
This year I am highlighting the bankruptcy option first because it’s important to understand that what you think you know about bankruptcy is changing and getting better all the time. Bankruptcy is SO POWERFUL that it stops all the following actions under 11 U.S.C. §362, known as the Automatic Stay:
What’s better than the most powerful protection against creditors?
In 2021 we have more asset protection limits than ever before here in California. Increased California Homestead Exemption limits became effective January 1, 2021 under California Code of Procedures Section 704.730 provides:
(a) The amount of the homestead exemption is the greater of the following:
(1) The countywide median sale price for a single-family home in the calendar year prior to the calendar year in which the judgment debtor claims the exemption, not to exceed six hundred thousand dollars ($600,000).
(2) Three hundred thousand dollars ($300,000).
(b) The amounts specified in this section shall adjust annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.
This is a life preserver for so many Californians whose home values have skyrocketed since the 2008 crash that they would otherwise be forced to sell their homes and move, after paying off their debts. What this exemption does is protect the equity in your home, up to the limits shown above, from being taken by a bankruptcy trustee to pay your creditors. YOU KEEP YOUR HOME!
If you’re still thinking bankruptcy is the worst thing ever for your credit and are pursuing alternatives like borrowing money with a debt consolidation loan, consider the costs.
Borrowing more money always cures a debt problem doesn’t it? Not always. These are usually high interest rate loans and you’re still repaying all of this debt, over time, with interest. If you’re being turned down, that’s a sign you would benefit from filing for bankruptcy protection.
A home equity line of credit can also be used if you have a lot of equity in your home and a job to pay it back. But what do you do when you’re declined?
Debt settlement companies lure you with ads telling you to avoid bankruptcy. In debt settlement programs, you’ll usually make a monthly payment to them that includes there FEES first, with the rest building up enough reserves to they can negotiate your debt for you. The game of debt settlement is to pay less than what you owe on your debts and who doesn’t love a good discount. However, even after you get that nice discount, the creditor may send you an I.R.S. form 1099-c cancellation of debt tax bill. The cancelled debt is counted as “income” to you. Add in the company fees for their services and you’re paying more than you need to.
Think of a Chapter 13 Debt Repayment Plan Bankruptcy as both a consolidation loan, but it’s not debt; AND a debt settlement plan all rolled in to one payment plan. Here are the benefits of a bankruptcy that you cannot get from any other plan to eliminate your debt.
Now pending before Congress, this Bill stands a great chance of SUCCESS with the Democrats in control. That’s because Democratic sponsors Senator Elizabeth Warren (D-Mass) and House Judiciary Committee Chairman Jerrold Nadler (D-N.Y.) introduced this beautiful piece of legislation.
The passing of this law will have a significant impact on our rules and forms because it consolidates the two bankruptcy chapters 7 and 13 into one chapter 10. It also allows you to stop your rental eviction and make payments to your landlord without having to move.
The BEST part is that
This year is about to get a whole lot better once we bring leadership back to our country and unite over our commitment toward ALL MEN ARE CREATED EQUAL as our shared American Value.