Fixed Income Debt Relief Without Bankruptcy FAQ

• I live on a fixed income. I have debts I cannot pay. I cannot afford to pay a settlement. I couldn’t even afford a bankruptcy attorney. How can anyone help me?
• While you may feel the combination of insurmountable debt and a fixed income offers no advantages, you may find yourself eligible for a special case of debt treatment that results in you not paying anything and your creditors leaving you alone.
• What would a person with no or low income do that others with debt could not?
• Let’s look at two concepts that we find throughout debtor, creditor and bankruptcy law. First, the government has an interest in letting people resume a life after debt rather than remaining crushed under the weight of excessive bills forever. Next remember that while creditors want their money they have no interest in wasting time or money when no opportunity for collection exists.
• How does that help me? The creditors still hound me every day?
• Follow the process to its potential conclusion, then you can understand the extra option we will discuss here and if it might be appropriate for you.
• I owe money; I don’t have any extra funds beyond what I need for food and rent. I can’t pay the debts. So what happens next?
• So far creditors call, write letters, make you feel lowly and guilty and take whatever you offer them. They always want more and anything you give them means a major sacrifice for you.
• Right, and I owe so much that this process could go on for 30 years and I would still never pay what I owe. I don’t see anything changing.
• In general each side has an option they can exercise without assistance or permission from the other party. For creditors they can bring you to court and force you to pay or seize your assets. Debtors may file chapter 7 or chapter 13 bankruptcy and have their bills discharged.
• I have read about bankruptcy. Not only don’t I want to file, I couldn’t even afford a bankruptcy attorney. Do local free legal services help people file bankruptcy?
• No, most local “legal aid” services designed for those on a low income will not help with a bankruptcy.
• Then I don’t see anything happening on my side. What about the creditors?
• They can sue you. You have admitted you owe the money, you will lose.
• I’m not impressed with this concept so far. I still would not pay any money, the creditors would still hound me and the court would have officially declared me a loser. Would it be better from there?
• No worse, if you didn’t pay the judgment issued when the court found you guilty of owing the debt. The creditor could force you back to court where a judge would have the power to seize your assets and garnish your wages.
• Wouldn’t that be a fine day, they’d seize everything I owned. I suppose a small measure of satisfaction might come from knowing they could not garnish my wages if I don’t have a job. Could they garnish my other income?
• No, the laws do not allow creditors to take any of certain income streams, such as social security, disability, alimony, or child support
• That’s good. I’ll be able to keep what little I got because I’ll have to buy new furniture when the creditor hauls mine away, right?
• No, judges in regular civil court cases involving debtors have certain rules they must follow similar to those found as bankruptcy court exemptions.
• Can you define bankruptcy exemptions?
• Asset exemptions in a bankruptcy case could be their own full FAQ, but for our discussion here just understand the basics, that while a bankruptcy court will take “everything” you own and distribute it to your creditors, certain items are “exempted” from “everything” so you can continue to live your life.
• For someone like me with almost nothing to my name and a fixed income, what crumbs would they leave me with?
• Now it gets interesting. Most courts would find you had so little that they would issue no order to have you pay under the judgment.
• Nothing?
• Nothing!
• So despite all those calls and nasty threats, if I do nothing the best they can do is go to court and get a judgment, and if I don’t pay that, a judge may eventually say I do not have to pay anything and they can’t take everything I own?
• If your income and assets meet certain levels that is exactly right.
• That’s great, is that it?
• No, it can get a step better.
• What is better than going to court losing but in the end not paying any money to the creditors?
• Not even having to go to court. Very often you will ultimately be ruled by a judge not to have to pay any money towards your judgment, a situation some call being “judgment proof”. This may allow you to avoid the whole process.
• How could you avoid the whole debtor – creditor court process?
• You can hire a lawyer to work on your behalf to convince the creditors that your financial situation renders you “judgment proof”. If they convince the creditors that pursuing a case against you represents a waste of time and money with no hope of success they will just walk away and leave you alone without dragging you through the court system first.
• Are you saying this whole thing can be as easy as getting a lawyer to tell my situation to my creditors and they go away forever?
• If you meet the criteria, very often, yes.
• What types of income and assets would qualify a person for this kind of treatment?
• Let’s answer each part of that question separately. For income, the type of income comes into play more than any exact number. These income streams may qualify you for the treatment described: social security, certain pensions, worker’s compensation, disability, public assistance, veteran’s benefits, alimony and child support. For assets, look at Chapter 7 Bankruptcy exemptions applicable in your area for a guide.
• How can I figure out what I should look at for bankruptcy exemptions?
• Start with a table of which states accept the US Federal bankruptcy exemptions in addition to their own state bankruptcy exemptions and which states only allow their specific state bankruptcy exemptions. Find your state. From there look up your own state bankruptcy exemptions. If federal exemptions remain an option for you look at those too. (U.S. Bankruptcy Code - Exemptions) (State Bankruptcy Exemption Choices) (Individual State Bankruptcy Exemptions)
• Are these types of lawyers expensive?
• Not really, but you may feel any fees feel expensive right now.
• How can I find a lawyer near me to do this?
• HELPS handles cases nationally or you could try to find a local attorney near you.
• What kind of attorney near me would handle a case like this?
• A bankruptcy attorney should have experience with this type of creditor interaction.
• Could I declare a bankruptcy?
• You could, but if you could get the creditors to leave you alone without going through the bankruptcy process why would you ever select the bankruptcy option?
• How will this affect my credit?
• Items the creditors walk away from generally remain on your credit report as open charge-offs until they drop off with the passing of time 7 years from your last activity. For many people with this type of debt credit no longer concerns them.
• If a judge is going to find me judgment proof anyway, why should I hire a lawyer at all?
• Hiring a professional to step in for you will stop the harassment by the creditors and allow you to know the outcome of your case in advance. When you end up before a judge you may be rolling the dice that he finds you judgment proof or not.
• What if the lawyer can’t convince them the client is judgment proof?
• While this happens very infrequently, no lawyer wins every case. In most instances, particularly when using lawyers who do this kind of work every day like HELPS, they know a great deal about how the system operates and if it looks like you have a questionable case they can inform you right from the start.