Gavel and petition for bankruptcy

The Differences Between Bankruptcy and Debt Consolidation & How A Lawyer Can Help

Debt Consolidation vs Bankruptcy

There are generally two main solutions to overwhelming debt: debt consolidation and bankruptcy. Debt consolidation refers to getting a new loan, generally at a lower interest rate, to pay off your debts. Bankruptcy involves the discharging of debt (Chapter 7) or entering a 3-5 year agreement to repay the debt (Chapter 13).

When you are deep in debt, you search constantly for a way out. The bills may be piling up. You may have no money left, and phone calls may put you on edge. When you are losing your home or when your monies are being garnished, it can feel like there’s no end. It is the kind of situation that prompts some people to make rash decisions. You need not fall into this mental trap. Things are rarely as bad as they seem.

What you need is a bit of help— a calm and steady hand that will help provide solutions to your financial problems in a way that works best for you. A bankruptcy attorney can provide you with such guidance; they can give you the insight and expertise you need to get out of the suffocating morass of debt.

Debt Consolidation

A debt consolidation program refers to a service offered by a company or organization to negotiate your debt with creditors. While debt consolidation programs can sometimes be helpful, they are in most cases simply a band-aid that only serves to make your financial woes worse over time. If you decide to contact a debt consolidation company, you’ll start by speaking with a debt consolidation agent to determine your payments and discuss the company’s fees.

The great disadvantage of debt consolidation is that it tends to be expensive in the long run. From a legal standpoint, it leaves you exposed and unprotected. Remember that debt consolidation agents are not bound by ethics and have no legal power to enforce any of your creditors’ agreements. Furthermore, if you are unable to meet the monthly payments, you could be penalized. If you lose your job or suffer some other financial setback, you will be back where you started.

The biggest risk to debt consolidation is that creditors are under no obligation to enter a payment plan or to continue one. Unfortunately, many debtors have all too often learned this expensive and painful lesson after months or years and thousands of dollars. Even if you have been paying into an agreed debt consolidation plan for 2 years, a creditor might still take you to court and force you into bankruptcy, losing the money already paid through the debt consolidation plan. You can generally avoid this nasty pitfall by discussing your situation with a bankruptcy attorney before deciding on debt consolidation.

Chapter 7 vs. Chapter 13

If you are deep in debt and financially unable to dig your way out, you should file for bankruptcy. Chapter 7 is usually your best option if you are unable to make ends meet. Chapter 7 wipes out all or nearly all your unsecured debts. It will clear you of credit cards, medical bills, and most other debt without the need for a repayment plan. To qualify for Chapter 7, you must meet certain income and asset requirements. If you make too much money, or have too many assets, you may be required to file for Chapter 13.

Chapter 13 is for those who have a higher income/asset threshold, but still need some room to breathe and a little more time to pay down their debt. It allows you to reorganize your debt and to negotiate a repayment plan with your creditors. Under Chapter 13, your attorney will ensure creditors are bound under federal law to the repayment plan; a debt consolidation agent is not able to do so.

If you believe that filing for Chapter 7 or Chapter 13 rather than taking out a debt consolidation loan is the way to go, then the first thing you should do is retain the services of a bankruptcy attorney. Throop Law has extensive experience and expertise in helping ordinary people navigate this process.

How Throop Law Can Help

If you file Chapter 7, an order called an automatic stay will be issued, which will stop creditors from pursuing you. A trustee will then be appointed to review your paperwork and sell your non-exempt property to pay back your creditors. Here is where a bankruptcy attorney can be invaluable.

Throop Law attorneys have deep insight into the law. They can help you file the initial paperwork for your Chapter 7. They can then help you deal directly with the court-appointed trustee. It is important that you have someone who understands your life circumstances and can fight to ensure that you are still able to live with some comfort and dignity. Your Throop Law attorney will examine your assets closely and protect as much of your property as possible.

Protecting Your Rights

The main purpose of these laws is to protect consumers against abuse by creditors. Contrary to popular myth, persons who fall into uncontrolled debt are generally NOT reckless, irresponsible, or lazy. In fact, it’s usually the unforeseen and unfortunate events that take place beyond a person’s control that lead them down the rabbit hole. Chapter 7 and Chapter 13 are designed to give ordinary people the means to restore their financial health; however, it is near impossible to optimize such laws to their maximum effect without the help of a lawyer.

Throop Law has helped a great many people in the Richmond area protect their rights as citizens and consumers. You can trust the lawyers at Throop Law to look out for your interests and to use the law to produce outcomes highly favorable to you. You may be in financial trouble, but all is not lost. In fact, help is often just a phone call away.

Call Throop Law today at (804) 215-1515 to receive the help and financial advice you need to get back on your feet.

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