Bankruptcy Secrets
Informal
Bankruptcy
Informal bankruptcy is an old idea that's enjoying explosive growth now that the new bankruptcy law has taken effect. (effective October 2005)
With the new restrictions on getting the old Chapter 7 bankruptcy that allows a creditor to wipe out their debts, experts are predicting a new wave of informal bankruptcies.
If you're in more debt than you can handle you basically have three options. You can continue to struggle and pay as best you can, file for formal bankruptcy protection and debt relief, or you can try informal bankruptcy by simply not paying your bills, moving to a new address and leaving behind no forwarding address (or leaving behind a misleading fake address).
You'll have to pay your living expenses in cash for a year or two. And you'll have to get a job that won't require a credit check (or won't care that your credit rating is less than ideal). You can hide any assets you have and wait until the statute of limitations on your debts runs out.
Then you'll be free to move wherever you please, rebuild your credit (using secured credit cards) and get on with your life. An informal bankruptcy will of course damage your credit rating for up to seven years which isn't as bad as the standard ten years a normal bankruptcy appears on your credit report.
If you don't owe a lot of money, chances are your creditors won't spend too much time, cash or effort trying to find you. Why spend a small fortune finding you when they know you're probably broke? They can't get blood out of a turnip! They know that you're probably either too broke or too clever to fall into their traps. Either way they know you're not worth the effort.
Some people who use informal bankruptcy find it helpful to change their identity which helps them find new work and create new credit files for themselves. You can get a good identity changing guide at: www.ariza-research.com/new-id. It contains five different systems for creating a new identity complete with a genuine new drivers license, birth certificate, social security number and even major credit cards.
Before considering informal bankruptcy you really should consult a qualified bankruptcy attorney. This is especially true if you own a home or other easy-to-locate assets that your creditors may seek to seize. But if you have few assets you become what lawyers call "judgment proof" as no lawyer will spend any time legally attacking you.
If you can afford to, it's best to pay off your car before you start your informal bankruptcy. Otherwise repossession agents will dog your every step and jeopardize your whole program. If you can't afford to pay off your current wheels, you might want to consider selling it and buying a car you can afford to pay for in cash.
Some individuals sell their homes and pocket their equity before they start their informal bankruptcy. This gives them a "grubstake" that will help them through the first year or two.
The following states have unlimited homestead exemptions which makes informal bankruptcy less attractive as you might be able to protect all or most of your net worth by investing it in your property. Arkansas, Florida, Iowa, Kansas, Oklahoma, South Dakota and Texas.
Some states will expose all of your wages to garnishment. If you live in one of these states there is almost no limit to how much of your paycheck the court can grab. They include - North Carolina, New Hampshire, Pennsylvania, South Carolina, Texas and Vermont. If you have a good job you value and live in one of these states you might want to forget about informal bankruptcy and go with the more formal court bankruptcy court or you'll end up working for pennies after your creditors grab most of your paycheck.
Some states have very low homestead exemptions which will make it very difficult to hold onto your home through a normal bankruptcy. For this reason informal bankruptcy is more popular in these states. They include - Alaska ($5,000), Georgia ($5,000), Illinois ($7,500), Indiana ($7,500), Kentucky ($5,000), Missouri ($8,000), Ohio ($5,000), Tennessee ($5,000), Utah ($8,000) and Virginia ($5,000).
Everyone's
financial situation is different. For some, formal bankruptcy either
Chapter 7 or Chapter 13 is by far the best route. For others, informal
bankruptcy may be a much better option.
