Credit card debt and medical bills have become major issues for families in the United States. Until recently, the total household debt of Americans has continued to increase each year since 2014 according to the Household Debt and Credit Report by the Center for Microeconomic Data.
Not all debt is bad. In fact, debt is what allows you to buy homes and cars, pay for college and make costly repairs or medical bills easier to afford. But for most families, debt is hard to control and we are often caught in the vicious cycle of having payments that we cannot afford. In turn, our credit score declines, and debts become overwhelming.
If you are worried about your credit card debt, use the Acclaim Legal Services Debt Calculator tool to see exactly how much debt you have, how long it would take you to pay it off and what you would have to pay in interest along the way.
There are alternatives to bankruptcy, but typically working with credit card counseling services and debt management programs don’t produce the results you need to clear your debt, obtain a full legal discharge and improve your credit score through the process.
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Bankruptcy is a Better Solution for Debt
Why is bankruptcy a good option for overwhelming credit card debt or medical bills? With minimum monthly payments, you are often just servicing the debt by paying the interest charges, but never making headway to pay down the principal balance.
Bankruptcy gives you a chance to start over with a clean slate for most debts or consolidate your debt without penalties and gives you a chance to rebuild your credit.
There are two types of bankruptcy:
- Chapter 13 bankruptcy allows individuals to restructure their debt. Payments are based on what you can afford for a standardized time period with 0% interest rate. When the plan ends, any remainder of unsecured debt is discharged.
- Chapter 7 bankruptcy is available to those who want a fresh start.
Chapter 13 Bankruptcy
We help clients file for Chapter 13 reorganization to set-up reasonable repayment terms based their budget.
Make Your Creditor’s Work
During the process of the Chapter 13 Reorganization, all your creditors are required to file a “Proof of Claim.” Non-government entities have six months from the date of case filing to file their Proof of Claim. Government entities (IRS, State of Michigan, etc.) have 180 days to file their claims.
The Proof of Claim is a form that is filed with the court that establishes the amount of the debt and the creditor pursuing the debt. If you disagree with the amount claimed, the court has a process where we can object to the claimed amount and bring the matter before the court for resolution. If one of your unsecured creditors fails to file a claim within the specified time, the debt is automatically discharged at the completion of the program, even though they did not receive any payments. The responsibility is on your creditor to file a claim after we put them on notice, or they forfeit their rights and you are no longer obligated on the debt after discharge.
Benefits of Chapter 13 Bankruptcy
Here are some highlighted benefits of filing a Chapter 13:
- Prioritized Repayment Process: We prioritize secured debt obligations (mortgage, vehicle payments, etc.) and your monthly living expenses – no payments go to your unsecured creditors until you are caught up on all secured and priority debt obligations. You are only required to pay back what you can afford to your unsecured creditors. All remaining debt balances are discharged at the completion of the program.
- 0% Interest Repayment: While you are paying these debts back, they are reduced to 0% interest and there are no continued late penalties or fees. In other words, any payments you make are going straight to paying down the principal.
- Court Protection from Your Creditors: The program provides protection from your creditors including: home foreclosure, vehicle repossession, lawsuits, judgments, wage garnishments, etc.
- Reduce and Eliminate Debt: You have the opportunity to remove a second mortgage or home equity loan and/or reduce the principal mortgage balance on a rental property(s) to rebalance your home’s value relative to current market conditions.
- Begin Improving Your Credit: Work towards improved credit by restoring timely payments to your creditors and improving your debt-to-income ratio by focusing on paying down principal debt. These two factors alone account for 65% of your credit score according to FICO. Also, there are no late reports to credit while you are under Chapter 13 bankruptcy protection.
More Chapter 13 Resources
Chapter 7 Bankruptcy
If you have overwhelming unsecured debts and cannot make any payment efforts based on your budget and financial situation, you can file a Chapter 7 Fresh Start and eliminate the debts altogether. This process takes about three to five months to complete, but the protection from your creditors is immediate once the case is filed.
Other Chapter 7 benefits include:
- Halt to judgments or wage garnishments;
- Protection from utility shut-offs;
- Elimination of loan deficiency debt resulting from a home foreclosure or vehicle repossession;
- Fresh financial start to reset your debt-to-income ratio so that you may begin re-building your credit.
More Chapter 7 Resources
Trust Our Debt Resolution Experience
With over 50 years of combined debt resolution and legal experience, we are here to help you. We offer same day free phone or in-office consultations to discuss your finances, discuss your long-term goals and carefully explain your options for finding lasting debt resolution and financial freedom. Please visit our Testimonials page to read our client feedback.
We look forward to your call and earning your trust.
We offer free in-office or phone consultations to review your personal circumstances, analyze your situation and advise you on the best course of action. We specialize in bankruptcy law, debt resolution, foreclosure prevention and credit repair. We have offices in Detroit, Southfield, Dearborn, Flint, Ann Arbor and Warren, Michigan. Please call us toll free at 866-261-8282 or click here to schedule a consultation right now.