Debt consolidation versus Chapter 13 Bankruptcy repayment. Maybe you don't want to file a Chapter 7 total discharge, because you would really like to repay your creditors at least part of what you owe them. Or maybe you aren"t eligible for a Chapter 7 bankruptcy, due to income or assets. You have probably seen commercials on television touting the benefits of using Debt Consolidation services as an alternative to filing for bankruptcy.
But before you contact a Debt Consolidation company, please take advantage of a free consultation with our office to see how a Chapter 13 bankruptcy may be better for you.
When your creditors receive notice of a Chapter 13 Bankruptcy filing, your creditors are prevented from attempting to collect money or file suit, even if the repayment plan proposed requires only a small percentage of your debt to be repaid! If your creditors attempt to collect money from you or take property that belongs to you while you are in the middle of a Chapter 13 repayment plan, they face hefty fines and penalties as punishment.
... BUT creditors are NOT required to cooperate with a Debt Consolidation and may still file suit against you and garnish wages.
Your creditors may still file suit against you for non-payment of the debt, repossess your car, foreclose on your house, and garnish your wages, even if you are working with a Debt Consolidation company! Debt Consolidation does NOT assist with past due income taxes.
Debt consolidation companies usually won"t help to defend you when your creditors file lawsuits against you, and they will usually advise you to consult an attorney for assistance, which means even more fees and costs. Before hiring a debt consolidation company, you should specifically ask them whether they would help you in the event that someone files a lawsuit against you after you hire them.
A Chapter 13 Bankruptcy allows you to pay some or all of your debt back to your creditors, according to your family"s income and budget, and at the same time STOPS ALL collection activity and legal actions against you, STOPS your creditors from charging late fees and high interest rates, AND HELPS to rebuild your credit.
And in many cases, a Chapter 13 Bankruptcy payment is significantly smaller than the payment proposed by a debt consolidation company.
For people who can afford to pay back 100% of their debt, a Chapter 13 bankruptcy will allow them to do so while preventing legal actions, while preventing high interest rates and late charges, and while helping to rebuild on time repayment history.
But for people who are only able to pay back a smaller portion of their unsecured debt, a Chapter 13 bankruptcy may involve a significant discharge of debt. For example, if your Chapter 13 plan only allows for payment of 5% to your unsecured creditors, then upon completion of the plan, you obtain a discharge of 95% of your unsecured debt! And the creditors will NEVER be able to collect any more money from you.
A Chapter 13 payment plan is tailored specifically to your budget and to your ability to repay a percentage of debt, and NOT based on what the creditor wants you to pay.
"Non-profit" is not the same as "free"! Debt consolidators are usually not attorneys, and even if they are a "non-profit" organization, they usually charge significant fees for their services. Before you contract with a debt consolidator, you should have a clear understanding of what the debt consolidator is going to charge you for their services. You should also clearly understand how much of your monthly payment goes to pay the debt consolidator, and how much actually goes towards paying your creditors back. We often hear stories about failed debt consolidations where only a small portion of the monthly payment was actually available for repayment of creditors.
Rather than requiring you to come up with the total amount of missed payments at one time, a Chapter 13 bankruptcy may allow you to pay back the arrearage to your creditor over a longer period of time, and ensures that you can keep your car or house while the arrearage is satisfied.
A Chapter 13 bankruptcy may be a great way to eliminate the fines and penalties for late payment of taxes, ensure that your tax liability is paid off within a reasonable period of time, and prevent or eliminate Tax Liens and Tax Sales of real estate.
Some tax liability can be discharged in a Chapter 13 bankruptcy, while other taxes may be paid off without the continued snowballing of interest and penalties. Call us for a free consultation to see if a Chapter 13 bankruptcy can help you with your specific tax-related situation.
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