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Options to Deal With Debt
Buried in credit card or medical debt?
Having trouble making your car payments?
Pushing your utility bills until the break of being shut off?
Struggling with your mortgage or rent payments?
Using your credit cards or retirement to cover your basic necessities?
Wondering how you are going to make it to your next paycheck?
WE UNDERSTAND and want you to know there are solutions to help your situation.
You may be getting flooded with advertisements and pamphlets telling you to pick this option or do this but not that. But it’s important to know ALL of your options so that you can pick the best one for you. Believe it or not, all the options available can be good, better than others, or won’t make sense depending upon your particular situation.
All these options are like a set of tools to be used for a particular project, or in our case, financial situation. For example, just as you probably wouldn’t use a screw driver to bang in a nail, it may not be a good decision to file a Chapter 7 Bankruptcy if you had $30,000 in your bank account because it may be taken away from you. But the scary thing is you could still do it and there may be people out there trying to convince you to do so because it is their livelihood. (But just so you know, there are certain very limited situations where it would be a viable option to file a Chapter 7 Bankruptcy in the previous example and still manage to keep the money while eliminating all of your other debts.)
I am going to give you some of the options in this page and describe them as generically as I can, but there are many different rules and nuances with each option that may make it perfect or a deal breaker for your particular situation that may not be listed here. That is why it is best to seek out an experienced debt relief attorney who is going to take the time to explore your entire situation and to go over ALL of your options in detail so that you can pick the best plan for you.
Putting Your Head in the Sand
The first option to addressing your Debt I’m going to lay out is to do nothing at all. I have seen many people go this route or attempt to pursue this avenue, at least until the bad things started to happen….
This strategy involves ignoring those credit card balances and other monthly bills and hoping that they will go away, forget about you, or lose you records. Maybe you can last until the Statute of Limitations expires since your last payment in 4 years.
However, the trouble usually begins when the 3 a day phone calls don’t stop, the company files a lawsuit, freezes your bank account, garnishes your pay, or puts your personal belongings up for Sheriff Sale.
There are some people in certain situations who choose this option, and end up ok at least surviving financially, but it takes some planning and ability to live off of the banking and financial grid.
Debt settlement is typically a process where your debt to each particular credit card company or other creditor is reduced through negotiating a settlement. Most of the time the better settlements with the lesser amounts owed are reached after the person stops paying the credit card the regular monthly minimum payments. Further, you will usually only be able to get a lower settlement if payment is made to the credit card company in 1 or a few lump sum payments over a short period of time. The typical rule is the longer the repayment term, the higher the settlement amount will be.
Debt Settlement is usually where most people start to begin to try to get out of debt. And it makes sense because as we learn later, there is a huge amount of money spent in advertising and hyperbole telling us the only option we should ever look at is paying all or an acceptable amount of the debt back to them through a deal or settlement. But while this may be a viable option if you have the funds available to settle the particular debt, or all of them, the common problem I see in my practice is that people are usually in debt for a reason and are not able to save the money to receive a good settlement that makes sense. Additionally, If you settle a debt with a creditor and save over $600, the IRS and PA Department of Revenue will treat the forgiven amount as income and tax you on it.
Something else we see a lot of are individuals using “debt consolidation” or “debt settlement” companies to make settlements for them and paying these companies instead of the actual credit cards. Many of these instances have lead to my clients paying tens of thousands of dollars in wasted fees, without even making a dent in their debt and having to start all over again with a different option.
With that being said, there are certain situations where settling debts one by one with a person’s creditors is definitely the best route for that particular person to pursue. But the entire situation must be looked at carefully along with all the other options through a neutral looking glass.
Bankruptcy is a form of debt relief whereby individuals or companies that cannot afford to fully repay their credit cards, mortgage, car payments, and/or any other debts can file to eliminate their debts. Just like everything else in life, bankruptcy comes in different shapes and sizes and is utilized in different ways depending upon what you are trying to achieve.
For example, in one scenario, a person filing a bankruptcy can eliminate every single debt they have, in another, a large portion of their debt and pay the remainder in a 3 or 5 year plan, and in another, get their credit card and medical bills eliminated while continuing to pay their mortgage and/or car payments.
Although there are 6 types of bankruptcies provided for in the Bankruptcy Code, the two most prevalent types of personal bankruptcy are Chapter 7 and Chapter 13. A person can also file a Chapter 11 Bankruptcy depending upon his or her debt load and assets but this type of bankruptcy is usually for businesses that are trying to keep operating while reorganizing their debts.
Chapter 7 Bankruptcy
A Chapter 7 Bankruptcy is the type of bankruptcy where all of a person’s debt can be eliminated except for student loans, unpaid Federal and State Taxes that have accrued in the last 3 years, and child / spousal support. It is usually referred to as a liquidation bankruptcy because if a person has “too much” value in his or her assets, these assets can be sold to pay off a portion of his or debts. The amount of assets a person can keep, or what is known as “exempt property,” is well laid out in the Bankruptcy Code, Pennsylvania Law and other sources. We are lucky in Pennsylvania in that we have the ability to use very good or high amounts of these “exemptions.”
When speaking with a client and going over his or her situation, we know whether a situation exists where there may be an issue and go over it beforehand. However, this is hardly ever an issue as most people who are behind don’t have very large amounts of money in the bank, or airplanes, yachts, or expensive paintings. But if a person does, there are other options.
You can learn more general information about Chapter 7 Bankruptcy here.
Chapter 13 Bankruptcy
A Chapter 13 Bankruptcy is typically when a person’s finances are reorganized and a
plan is developed for the person to pay a portion of his or her debts in a period of either 3 or 5 years. It is the second most common form of bankruptcy filed after a Chapter 7 and is commonly referred to as a Wage Earner's Bankruptcy.
A Chapter 13 is typically utilized in situations where a person has “too many” assets that would otherwise be liquidated in a Chapter 7, makes “too much” money to file a Chapter 7 Bankruptcy, or owes back amounts on a mortgage, car payment, taxes or other form of debt and wishes to get caught back up. A Chapter 13 Bankruptcy is also frequently used by people who are scheduled for a Mortgage Foreclosure Sheriff Sale, Eviction, or Car Repossession as it can stop almost any collection effort dead in its tracks as soon as it is filed and allow the individual to make payments on the back amount through the 3 or 5-year Bankruptcy Plan.
You can learn more general information about Chapter 13 Bankruptcy here.
In reviewing these options, it is important to remember that each option is a tool to be used for a particular situation and desired outcome. Additionally, each option has different benefits and drawbacks, as well as a litany of laws governing their uses. Consequently, it is extremely important to have a specialized Debt Attorney examine your entire situation so there are no “surprises.”
Alex Tuttle has been recognized and rated as a Top Attorney and Distinguished Attorney in the areas of Civil Litigation and Debt Relief, as well as a Client Choice and Top Contributor by Avvo, and regularly represents clients in Bucks, Chester, Delaware, Montgomery, Lehigh, and Northampton Counties. If you are in need of any assistance or have any questions, please contact us to go over your situation. We would love the opportunity to help you and get your life back to normal.
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Here at Tuttle Legal, our primary focus is you. In our office, we have represented 1000s of people through some of the toughest times in their lives in civil actions, mortgage foreclosure proceedings, and bankruptcy.
It is our practice to provide you the most stress-free experience possible while going over your whole financial situation and providing you ALL the options available so you can make the best choice for you and your family.