If you are grappling with significant debt, the financial, legal, and personal consequences you face may have you contemplating formal debt management options. Unfortunately, debt consolidation companies are often predatory and target financially vulnerable people in ways that ultimately trap borrowers in a cycle of debt.
A Toms River debt management lawyer from Gillman Capone can examine your personal financial situation and strategize your legal options. Our dedicated bankruptcy attorneys can help you find the best possible solution to your debt and guide you through every step of the legal process.
Debt negotiation (or settlement) and bankruptcy are both options for managing overwhelming debt, but they operate very differently. Debt negotiation is an informal process with several potential issues, while bankruptcy is a formal process that offers stronger legal protections and often a faster, more complete resolution. While it may seem less severe than bankruptcy, debt negotiation has several potential pitfalls and issues.
Creditors are under no legal obligation to agree to a settlement, meaning the process may fail after months of effort. If negotiations fail, you may end up owing more than when you started due to added fees and interest, having wasted time and money that could have been used to pursue other options. Throughout the negotiation process, creditors and collection agencies can continue to call you, charge late fees and interest, and even file lawsuits against you, which can lead to issues like wage garnishment.
To encourage creditors to negotiate, debt settlement companies often advise you to stop making payments, which can severely damage your credit score through an accumulation of missed payments and charge-offs. Debt settlement companies also charge fees, typically a percentage of the debt enrolled or settled, which can be substantial. There is also a risk of falling victim to disreputable companies or scams.
The amount of debt forgiven in a settlement is considered taxable income, which could result in an unexpected tax bill at the end of the year. If you are struggling with debt, you should consult with a Toms River debt management attorney to discuss whether debt negotiation or bankruptcy is the right solution.
Filing for bankruptcy can be an excellent debt management option to utilize a structured, court-supervised process that legally forces creditors to adhere to a formal repayment plan while stopping collection efforts immediately. A Toms River attorney can evaluate the full scope of your financial situation to determine the best path forward with debt management.
A Chapter 13 bankruptcy is a powerful tool for individuals with a steady income who have fallen behind on payments or have too much non-exempt property to qualify for Chapter 7. When you file for Chapter 13, the court issues an automatic stay, which immediately stops all collection activities, including foreclosures, repossessions, lawsuits, and creditor harassment. You, with the help of your attorney, propose a repayment plan to a bankruptcy trustee that outlines how you will pay all or a portion of your debts over a period of three to five years.
Priority debts must usually be paid in full (e.g., recent tax debts, child support, alimony). The plan can help you catch up on missed payments for secured debts like your mortgage or car loan so you can keep your property. Unsecured creditors (credit cards, medical bills) may receive only a partial payment or nothing, depending on your income and expenses. The court must approve the plan and once you successfully complete all payments, the remaining eligible unsecured debts are legally discharged.
A Chapter 11 bankruptcy could be a viable option for some debtors. It is primarily for businesses, but can also be used by high-net-worth individuals whose debts exceed the limits for filing Chapter 13. The automatic stay goes into effect upon filing, stopping all collection efforts. In most cases, the debtor (individual or business) remains in control of their assets and business operations, but operates under the general supervision of the court.
The debtor proposes a plan of reorganization that details how creditors will be paid, involving complex negotiations and voting by different classes of creditors. The court confirms the plan if it meets legal standards. The debtor then carries out the plan over time, and once the plan is successfully completed, eligible debts are discharged.
Our Toms River lawyers can ensure you understand the financial choices in front of you, and help you implement the debt management solution that makes the most sense. Our legal team has over 30 years of experience representing individuals and small businesses in bankruptcy proceedings to eliminate or restructure significant debt, including certain types of IRS or state tax problems.
We recognize that bankruptcy might not be the best fit for everyone. Our firm can also guide you through advisable alternatives, such as negotiating your debt or achieving a settlement agreement that secures your best financial interests. Contact us today to request your free case consultation.
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