Debt Relief: Impact in Your budget

Sometimes dealing with debt can feel like a shell game½you make a payment on one debt at the expense of making a payment or remaining current on another debt.  What are your options to resolve your debt while maintaining a balanced budget?  Learn more about your various options below. At Acclaim Legal Services debt resolution law is all that we do.  We offer free consultations to review your personal circumstances and give you expert legal advice on your best option to:

• Resolve your debt;
• Balance your budget and;
• Improve your credit.

These should be the goal of any debt resolution plan.  The purpose of this 5-part blog series has been to break down the various aspects of resolution methods to help educate you on the process and help you determine which method might be the most effective for you.  Call us today at 866-261-8282 to speak with a licensed Michigan attorney for a free consultation. Here is a general overview of how the various debt solutions impact your budget based on the method employed to attempt resolution.  

Debt Settlement:

Debt settlement offers a reduced payback amount to a creditor in consideration for an immediate lump sum payment.

• Budget Impact:If you have:
  • Available disposable income;
  • Limited debt;
  • A small number of creditors;

½than this could be an effective means of lowering your debt-to-income ratio and clearing up old debt that may be depressing your credit score.

If you don't meet the above parameters, this method of debt resolution may but strain on your budget or not be as effective in providing total debt relief and improved credit.

Debt Management Programs (DMPs):

Debt management programs are a form of debt consolidation.  The program attempts to set up voluntary payment arrangements with your creditors at reduced interest rates.

• Budget Impact:This debt resolution is successful if the repayment terms are:
  • Accepted by all creditors;
  • Workable within your income and budget;
  • Terms at honored by all parties to avoid a creditor taking legal action during the repayment process to pursue a judgment or wage garnishment.

DMPs fail mainly because the program is voluntary for creditors and they are not legally bound to the repayment terms.  Therefore they are free to pursue legal remedies to collect on the debt at any time during the debt consolidation process.

Chapter 7 Bankruptcy:

Chapter 7 bankruptcy legally eliminates all general unsecured debt obligations with a court discharge.  The program allows you to surrender property (car, mortgage, etc.) that you can longer afford or do not wish to keep.

• Budget Impact: Since filing Chapter 7 bankruptcy eliminates all of your unsecured debts, it can provide swift debt relief and aid in re-balancing a budget that may have been bloated by debt.  Chapter 7 can to resolve secured debt obligations if you behind on payments and no longer wish to keep the property.

It cannot help you with repayment terms on secured debt if you have fallen behind on payments - even if you feel you can get caught up once the unsecured debt is eliminated from your budget.  If this type of help is what you seek, look at filing a Chapter 13 reorganization plan.

Chapter 13 Bankruptcy:

Chapter 13 bankruptcy is a court authorized debt consolidation plan that allows you to defer unsecured debt at 0% interest while you bring secured debt obligations current under court protection.   Chapter 13 bankruptcy provides an organized method of paying your creditors back with court oversight and protection.

• Budget Impact:The Chapter 13 plan offers unique debt consolidation features, such as:
  • All unsecured debts are paid back at 0% interest. This is non-negotiable for creditors and they cannot "opt" out of the plan like a DMP.
  • All secured and priority debts (i.e. mortgage, vehicle payment, tax debts, etc.) are brought current before any monies are paid to unsecured creditors.
  • You income and budget determines how much, if any, unsecured debt you are required to pay back. Whatever debt balances remain are legally eliminated with a court discharge at the completion of the 36 - 60 month program.
  • You have the options to modify secured debt obligations:
    • Reduce the interest rate and/or extend the payment terms of a car loan. You may also be able to reduce the principal balance depending on length of ownership.
    • Remove a second mortgage or home equity loan.
    • Reduce the amount owed on a rental property.
    • Negotiate a mortgage loan modification with court supervision to keep the mortgage company accountable.

Find Your Best Debt Relief Option

We hope that 5-part blog series has helped you to better understand your options for debt resolution.  Our firm specializes in debt relief - it is all that we do.  We encourage you to call us for a free consultation so that we can provide you with a firsthand evaluation of your finances. At that meeting we will:

• Carefully review your monthly income, expenses and outstanding debt;
• Discuss your long terms financial goals;
• Answer any questions you have and address and areas of concern;
• Provide a qualified recommendation on your best next step for achieving debt resolution and improved credit.

Call us today at 866-261-8282 or schedule a consultation online.  We offer same day legal protection and have six convenient Michigan offices in:  Detroit, Ann Arbor, Flint, Dearborn, Southfield and Warren.