Debt & Debt Relief Options

Mar 24, 2013 by

The Law and the Nation’s Economic Crisis – Options for Relief, Including Bankruptcy:

Many Americans and Pennsylvanians are experiencing economic hardships due to the United States’ current economic crisis. For many hard-working Americans, a decrease in pay or hours available for work, loss of a job, insufficient health insurance combined with illness, having to financially support family members in a time of financial need, or simple overextension have led to unpaid bills and fear of lawsuits, repossession of cars and assets or home foreclosure.

In these hard times, many people are unsure of what to do, and do not know what will happen to their lives and property if action is not taken and changes are made. Thus, a consultation with an experienced lawyer who is knowledgeable in the areas of debt collection practices and bankruptcy laws can greatly help people to find their way out of these financial problems, and devise a plan to get their financial lives back on track.

Legal options for people to work their way out of financial problems include the following:

– Chapter 7 Bankruptcy: The primary relief under this chapter for people is the elimination of the most common unsecured debts (like credit cards and medical bills, and certain tax liabilities), and most consumer filers that are eligible for relief under this chapter can file under this chapter and keep their homes and cars. This chapter primarily helps people that can afford their mortgage/rent, car payments, utilities, but have no extra money left over to pay for credit cards or medical bills. People that succeed in getting a “discharge” (the techincal term for a court order that states that debts are no longer owed and cannot be collected) do not have to pay back any of their unsecured debts, and usually have the option to repay “secured debts” (like mortgages, car loans, etc.) if they wish to retain the property secured by the loan (like houses, cars, etc.). Once a bankruptcy attorney is retained, creditor harassment must stop, and most times the person filing only has to attend court one time. Married couples can file individually (meaning that one spouse files and the other does not) or jointly (meaning that both Husband and Wife file together). A typical chapter 7 case lasts 6-9 months from filing through discharge.

– Chapter 13 Bankruptcy: this chapter can help people that make more than the state’s median income level, but still cannot afford their minimum credit card payments. It also helps people that own valuable assets (like real estate), that don’t want to or can’t sell the property, but still need some more time to pay their past-due bills. This chapter can also help people “catch up” who fall behind on mortgage payments temporarily due to loss of income. Chapter 13 is a lot like debt consolidation through the Federal Court system, where consumers can be relieved of their debts by paying back a smaller percentage of the total amount of unsecured debts due, which is ideal for some people who can afford to pay something to creditors, but can’t pay the full amount due through minimum monthly payments. Like Chapter 7, once a bankruptcy attorney is retained, creditor harassment must stop, and most times the person filing only has to attend court one time. A typical chapter 13 case lasts 3-5 years.

– Non Bankruptcy Options: Some people can avoid bankruptcy by not paying minimum monthly credit card payments, instead saving that money. They can then negotiate settlements on debts by using that saved money, basically paying off the credit cards for pennies on the dollar through a lump-sum settlement. There are unfavorable consequences if this method is used however, like the potential for lawsuits and other collection activities by creditors and damage to your credit while the debt-settlement is being completed.

For some people, none of these options will work for them and they will simply have to change some of their spending habits or standard of living, or may have to sell some assets in order to meet their debt obligations.

Each person or families’ financial situation and problems are unique, and because of that, their solutions will also be unique. All of the options listed above have good and bad elements, and those elements must be carefully weighed by each person or family. Thus, in order to be fully advised on which course of action to take, a consultation with an experienced bankruptcy attorney is necessary to get complete and specific advice. Call my office if you’d like to have a consultation to get the specific advice that you need.

-Joseph Edward Morascyzk, Esquire

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