Debt Relief Blog Series: Determining Your Best Option. Part II: Legal Protection
This is the second installment in our 5-part series exploring the implications of various debt resolution options. One of the biggest concerns about managing debt or trying to negotiate with creditors is unexpected creditor actions, such as:
- Judgments; • IRS Levy; • Garnishment; • Or even just constant threats or harassing calls.
What Legal Protections do the Various Debt Relief Options Provide?
Debt Settlement: Debt settlement attempts to negotiate a reduced payback amount in consideration for a lump sum of money to legally satisfy the debt.
- Legal Protection: Until the debt is legally settled with a binding written agreement, there is no protection from potential creditor actions.
Debt Management Programs(DMP): DMP's create a repayment plan by negotiating payment terms directly with each creditor.
- Legal Protection: There is no legal protection until the debt has been paid in full under the terms of the accepted repayment plan. If a payment is missed during the repayment plan, the creditor may force you into a new payment plan and add additional fees or interest charges.
- Another problem with DMP's are the potential Hold-outs (creditors who refuse to participate). This is probably one of the bigger issues with Debt Management Plans. One stubborn creditor can not only derail the whole repayment process by refusing to participate, but also create a potential budget crisis by establishing a wage garnishment that take 25% or your net take-home pay or garnishes your entire bank account.
If this happen, it may be time to consider bankruptcy as a solution to gain protection and debt relief. If a creditor does garnish your wages or bank account, and takes over $600 within 90 days of filing a Chapter 7 or Chapter 13 bankruptcy, we can get the month back for you.
Chapter 7 Bankruptcy: Chapter 7 is a "fresh start" program that allows you to quickly eliminate all general unsecured debt obligations and surrender unwanted property (real or personal) with a court discharge.
- Legal Protection: You have full legal protection from your creditors as soon as your case is filed with the court. This means it is illegal for creditors to call you once the case is filed! You will immediately be protected, and as stated above, we can work on getting any garnished funds back if your circumstances meet the requirements.
Chapter 13 Bankruptcy: Chapter 13 is a court-authorized debt consolidation program that allows you to reorganize your debts over a 36 - 60 month time period.
- Legal Protection: Similar to a Chapter 7 bankruptcy, legal protection and court oversight occur immediately upon case filing. In addition to the basic protections listed above, Chapter 13 bankruptcy also provides some unique legal protections, such as:
- Stopping a home foreclosure (with arrearage payback at 0% interest);
- Preventing a vehicle repossession, or getting a vehicle back;
- Stopping or removing Tax liens and tax levies. Chapter 13 also provides some exclusive debt reduction opportunities that tailor to your personal debt and income situation.
- Program highlights include:
- 0% repayment on all unsecured debt obligations. Most clients qualify to eliminate a good portion, if not the majority, of their general unsecured debt obligations (such as credit cards, medical bills, personal loans, etc) with a court discharge.
- Potential to remove a second mortgage or home equity loan(s).
- Reduce your vehicle payments and potentially reduce what you owe altogether, depending on your length of ownership.
Discuss Your Debt Resolution Options
We offer a free consultation to carefully review your debt resolution options and discuss the pros and cons of each option as it relates to your unique circumstances. Call us today at 866-261-8282 to speak with a licensed professional.