Is Philadelphia Debt Consolidation Right for You?

Understanding the difference between debt consolidation and bankruptcy

In a nutshell, in debt consolidation you generally work with a company or organization that negotiates with your creditors on your behalf. They promise to settle your debt for less than you owe. Unfortunately, while there are legitimate operators in the industry, both the U.S. Federal Trade Commission (FTC) and the Better Business Bureau (BBB) receive scores of complaints from consumers about debt consolidation and debt settlement companies and their fraudulent practices.

Bankruptcy is a legal process whereby consumers can either discharge or reorganize their debts under the U.S. Bankruptcy Code.

Bankruptcy options

There are two types of consumer bankruptcy — and the one that is best for you will depend largely on your financial situation.

Chapter 7 bankruptcy, sometimes referred to as the fresh start option, may allow you to wipe out all of your unsecured debt, including credit card, medical and utility bills. In order to qualify for Chapter 7 bankruptcy, you must pass a “means” test. To pass the means test, your monthly income over the past six months must not exceed your state’s median income, whether in Pennsylvania or New Jersey.

Chapter 13 bankruptcy may be the answer for you if you do not qualify for Chapter 7, or if you want to prevent home foreclosure. Under Chapter 13, you and your attorney will develop a plan in which you pay back your non-dischargeable debts over a three- to five-year period. Because your monthly payments are reduced, you may be in a better position to catch up without having to liquidate a lot of assets.

Both bankruptcy options provide relief by:

• Stopping creditor and collection agency harassment
• Putting a stop to liens, wage garnishments and bank account levies
• Eliminating unsecured debt
• Reducing stress on you and your family

In Philadelphia, debt counseling is required in advance of a bankruptcy filing. The U.S. Department of Justice provides a list of approved credit counseling agencies that may, along with legal counsel, be of benefit to you as you make a decision regarding your financial future.

Non-bankruptcy options

Do you feel that bankruptcy is not right for you, or that you are not ready to file for bankruptcy? You may still have options.

The entities (credit card or utility companies, doctors or hospitals, etc.) to whom you owe money may be amenable to a creditor workout. Simply put, this is an agreement between you and your creditor in which you agree to a payment schedule. If you have tried, with limited success, to come to terms with your creditor, your attorney may be able to negotiate on your behalf.

Foreclosure defense

Mediation programs have been in the news, and are part of the government’s push to help homeowner’s save their houses from foreclosure. In Philadelphia, the Residential Mortgage Foreclosure Diversion Program has been adopted by the Court of Common Pleas. It is one avenue that those whose homes are at risk of foreclosure may want to explore.

Find out more about Philadelphia debt consolidation help and bankruptcy by contacting a qualified lawyer

Whether you are considering debt relief, debt reorganization or debt counseling, Philadelphia attorneys can explain your rights, your legal recourse and your options. To find a lawyer in your area, please fill out the online form or call 267-428-1386.