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Debt Consolidation, Debt Management, Debt Settlement vs. Bankruptcy- Which Way is Best?

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Are you struggling with debt?  Many Americans struggle with debt every year. Looking for the best way out of debt can be exhausting and time consuming.  The most common ways out of debt are debt consolidation, debt management, debt settlement, do it yourself, and bankruptcy. As to debt consolidation, management and settlement companies, be careful, there are many unreliable and even predatory companies that will take advantage of you. We advise you to consult with a knowledgeable attorney before you decide.

DEBT CONSOLIDATION

Debt consolidation may mean getting a new loan to pay off your existing debts. The term “consolidate” means to group several things together into one. Doing this may lower your monthly payment and interest rate.

The problem with debt consolidation is you have not reduced your amount of debt, you have simply lumped all of your debt into one loan with one payment.  You are still accruing interest on your high balance and it may take years to pay off this loan.

 

DEBT MANAGEMENT

A debt management plan is a program offered by companies or non-profit groups that say they will help you negotiate a new payment plan with your current creditors.  The debt management company may negotiate your debts with your creditors and you will make a monthly payment to them directly on your behalf.

There are several problems with these debt management plans. Unfortunately, not all of these companies are honest about what they are selling and how they distribute your funds.  We have had many clients tell us that they paid one of these companies for years without ever seeing their balances go down.

 

DEBT SETTLEMENT

Debt settlement occurs when you work directly with your creditors for lower payments or amounts due. Usually, you must have that full amount to immediately pay. This can be good if you have the funds to pay.

Even if you do have the funds for debt settlement, not all creditors will work with you.  Creditors who do reduce your debt will send you a 1099 tax form and the forgiven amount is treated as income to you.  You will likely owe the IRS a part of the savings of debt settlement.

 

DO IT ON YOUR OWN

If you don’t have much debt and can tighten up on your expenses for a short period of time then this can work.  Start by paying extra on your high interest debt while paying minimum on other debts. When that debt is paid off then snowball the funds into the next highest interest debt.  This is not an option if you can only make minimum payments.

 

BANKRUPTCY IS OFTEN THE BEST OPTION

There are hundreds of thousands of bankruptcies filed in the US each year.  Most are filed by families.

Bankruptcy is often the fastest and easiest way out of debt.  Creditors can refuse to participate in consolidation and debt management cases but they cannot refuse to participate in a bankruptcy. Bankruptcy filing will stay on your credit report for up to 10 years, but all of the options above will affect you for about the same amount of time.  The key to credit after bankruptcy is paying all your debts on time, and careful consideration of any future debt. You will be able to get new credit rather quickly if that is what you desire and can afford. Under federal bankruptcy protection you can protect your assets and wipe out your debts.  There are no negative tax implications for discharging debt in bankruptcy.

MORE INFORMATION

Call 513-752-3900 today for your free consultation with an experienced attorney and then decide for yourself if bankruptcy is your best way out of debt. Keegan & Company Attorneys is located in Eastgate and Middletown, Ohio. Since 1992, our experienced lawyers have helped people protect their hard earned assets and wages and obtain relief from overwhelming debt. Our office helps consumers get financial relief through the use of Bankruptcy.

Will I Lose My Home in Bankruptcy?

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Home ownership is part of the American Dream.  So, what happens when you achieve this dream and run into financial difficulty? In most cases you can keep your home even if you decide to file for personal bankruptcy.

CHAPTER 7 BANKRUPTCY AND YOUR HOME

Chapter 7 bankruptcy also referred to as straight bankruptcy or liquidation bankruptcy is a process to discharge your unsecured debts. Thankfully, in Ohio there is a large homestead exemption.  As long as your equity in your home does not exceed this exemption the bankruptcy court cannot sell your home. As of 2023, this exemption is approximately $145,000 per individual and $290,000 per couple. To keep your home in Chapter 7 you should be current on your house payments. As long as you are current and do not have equity beyond the exemption amount you will be able to keep your home.   If you wish to keep your home you will typically sign a reaffirmation agreement. This document makes your mortgage non-discharged and your mortgage holder will continue to report your payments to the credit reporting agencies.

CHAPTER 13 BANKRUPTCY AND YOUR HOME

If you have too much equity in your home or are behind on your mortgage payments you can save your home through a Chapter 13.  A Chapter 13 bankruptcy is a repayment plan.  If your home is in foreclosure you can file Chapter 13 up to the moment the sheriff auctions your home. You will then make your regular house payment and your arrears payment through the Chapter 13 Trustee. Once you complete your case you will be current on your home and will then make your payment directly to your lender.

MORE INFORMATION

Call 513-752-3900 to schedule a free consultation. We will give you plenty of time to discuss your individual circumstance with an experienced bankruptcy lawyer.   We offer fair fees, payment plans, easy parking and two convenient locations: Eastgate, Clermont County & Middletown, Ohio. Since 1992, Keegan & Company Attorneys has helped thousands of your neighbors protect assets and gain financial peace of mind.

 

Bankruptcy Terms Explained

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If you are facing financial difficulty and considering bankruptcy protection you want to educate yourself on the process and terms before moving forward. Here at Keegan & Company our attorneys will take the time to explain the process in plain English.

Following is an explanation of the most common terms.

BANKRUPTCY –  A legal procedure for businesses and individuals to eliminate debt.

BANKRUPTCY PETITION – The document filed with the bankruptcy court to open a bankruptcy case.

CHAPTER 7 – The chapter of the bankruptcy code in which you eliminate unsecured debts.

CHAPTER 13 – The chapter of the bankruptcy code in which you will pay back a portion of your debts over a three to five year period.

BANKRUPTCY TRUSTEE –  The representative of the bankruptcy estate who exercises statutory powers, principally for the benefit of the unsecured creditors, under the general supervision of the court and the direct supervision of the U.S. trustee. The trustee’s responsibilities include reviewing the debtor’s petition and schedules and bringing actions against creditors or the debtor to recover property of the bankruptcy estate. In chapter 7, the trustee may liquidate property of the estate, and makes distributions to creditors, although this is relatively rare.

AUTOMATIC STAY – An injunction that automatically stops lawsuits, foreclosures, garnishments and all collection proceedings against you the moment the bankruptcy petition is filed.

341 MEETING OF CREDITORS – The meeting required by section 341 of the Bankruptcy Code at which the debtor is questioned under oath by a trustee about his/her financial affairs. Also called creditors’ meeting. Currently, this meeting is held over the phone at our office.

EQUITY – The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered.

The offices of Keegan & Company Attorneys provide free consultation, fair fees and monthly payment plans.  We allow plenty of time for you to sit down with an experienced attorney to discuss your individual situation. Our attorneys will guide you toward the best path to solve your unique problems. Fees are based on your individual situation and will be quoted at the consultation. During and after your case, we are available to gladly answer any of your questions. Call 513-752-3900, to schedule your free, no obligation consultation.

How Can Bankruptcy Help Me?

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WHAT IS BANKRUPTCY?

Bankruptcy is a legal procedure giving debtors federal protection from creditors.  Under the bankruptcy code you can protect certain assets, get relief from most debts and enjoy a fresh financial start!

HOW CAN BANKRUPTCY HELP YOU AND YOUR FAMILY?

Filing bankruptcy can wipe out credit card debt and other unsecured debts. Once filed, no creditor can collect on those debts.

Bankruptcy can stop creditor harassment.

Bankruptcy can stop repossession of your car and  foreclosure of your home. You may still keep your home even if a foreclosure has already been filed.

Medical debt is discharged through bankruptcy. Overall, medical bills are the main reason in the U.S. for bankruptcy. Hospitals and ER services cannot refuse you service in the future because of your bankruptcy.

 

WHICH BANKRUPTCY OPTION BEST FITS MY SITUATION?

The most common filings for bankruptcy are Chapter 7 and Chapter 13. Chapter 7 will wipe out all your unsecured debt (credit cards, medical debts, utilities, etc.). In most situations, you can keep your house and vehicle in Chapter 7, as long as your current on payments. Chapter 7 is a straight bankruptcy. Chapter 7 bankruptcy will stop all collection proceedings including phone calls, mailings, garnishments and court proceedings. Most bankruptcy filings in the U.S. are Chapter 7.

Chapter 13 is a repayment plan and is sometimes referred to as a wage earner plan. You must have a reliable source of income. Chapter 13 will stop a foreclosure of a home and/or repossession of vehicles. It is designed to help you catch up on your home and/or vehicle payments if you are behind. You will repay 1% to 100% of your unsecured debt, depending on your individual situation. This will last a minimum of three years and maximum of five years. During this time it will be up to the creditors to file claim in order to be paid during your case.

WHAT DEBTS WILL A BANKRUPTCY NOT ERASE?

Most of your debts can be discharged in a bankruptcy. Some kinds of debt can never be discharged. Call and set up a free consultation if some of the following items are part of your debt picture.

Student Loans – Most student loan debt is not dischargeable. In some situations a debtor can discharge student loan debt if they can prove the debt causes an extreme hardship. This is usually an uphill battle but possible.

Taxes – Some income tax debt can be discharged in bankruptcy, but this varies. Make an appointment to discuss your individual situation.

Alimony and Child Support – Back payments (arrearages), current child support and alimony are non-dischargeable .

Fines and Penalties – Most fines that are imposed by a court and most penalties that are assessed by a government agency are non-dischargeable.

WHAT HAPPENS AFTER BANKRUPTCY?

You can improve your credit after the discharge (or completion) of your case. Through bankruptcy people gain the opportunity to rebuild their credit that without the fling would be much more difficult.

FREE CONSULTATION

Contact Keegan & Company Attorneys at 513-752-3900 to schedule a free consultation with an experienced attorney. Choose one of out convenient offices both with free parking: Eastgate and Middletown, Ohio.