How Do I Eliminate Unsecured Debt Through Common Law or UCC Relief Statutes?
In finance, when a party borrows money, he may assume either a secured or unsecured debt. Secured debts are debts in which the lending agreement specifies assets against which a loan is being made, so that the lender may take possession of those assets if the party fails to pay back the debt. For example, a mortgage is a secured debt in which the property is the collateral for the loan. An unsecured debt, on the other hand, is any debt in which assets have not been specified as collateral. Credit cards are unsecured debts, because a credit card holder does not have to specify collateral before using the card. A borrower has a variety of options for eliminating unsecured debt.
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Instructions
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Understand the Debt Obligation
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Review the lending agreement. Identify the date on which you as the borrower first failed to meet the repayment schedule. Identify any provisions in the agreement, such as arbitration, that you must perform before proceeding with alternative solutions.
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Identify your state's statute of limitations for debts and, thus, whether you are still responsible for repaying the debt.
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Perform any required debt relief actions under the agreement, where applicable.
Renegotiate the Debt
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Contact the lender and inform her of your inability to repay the debt. Request to discuss alternative solutions, and inquire about negotiating a new arrangement or whether a credit counselor should be present.
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Arrange a new repayment agreement based on your ability to repay the debt, if the lender is willing to speak to you in person.
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Obtain a credit counselor, a qualified attorney or debt financing specialist to assist you in renegotiating or consolidating your debt. Sign the new debt consolidation contract and proceed with repaying the debts on the agreed upon schedule.
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Consult with a financial adviser before agreeing to sign a UCC-1 (Uniform Commercial Code-1) financial filing to transform unsecured debt agreements into a collateralized debt with new terms. This is important because UCC-1 agreements can create collateralized debts or liens that may survive bankruptcy proceedings.
When Consolidation Fails, File for Bankruptcy
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File a Chapter 7 bankruptcy petition with the court. Consult an attorney or financial adviser to better understand the Chapter 7 Banking Code as relates to next steps in the process.
It's important to note that bankruptcy should always be an option of last resort. Most creditors will be perfectly willing to renegotiate or consolidate unsecured debts if they feel that the lender will otherwise file for bankruptcy.
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Pay the filing fees or apply to receive either a partial or total fee waiver.
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Work with the assigned trustee to compile and submit the appropriate documents. Identify all creditors and lenders and ensure that they have been informed of the Chapter 7 filing.
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Attend the meeting of creditors. All debtors in bankruptcy must attend such a meeting and submit to questioning under oath by creditors.
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Comply with the final decision of discharged and surviving claims.
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Tips & Warnings
Under common law rules, subsequent contracts made with a creditor usually take precedence over older contracts. In addition, oral contracts are legally binding. Once a new agreement has been made, a creditor cannot pursue a claim under a prior agreement, except when the new agreement violates a renegotiation clause in the older agreement.
Keep thorough records. No matter what method of debt resolution you turn to, organized records will not only speed up the process but ensure that creditors cannot make exaggerated claims, such as the extent to which payments have been made or the financial assets of the debtor.
Attorneys and credit consolidators may charge high fees. If your debts are relatively uncomplicated, it's best to try to negotiate a new agreement first. You can always consult with a qualified expert before making any final agreements or signing any documents.
