Debt Relief or Bankruptcy?

If your bills and debts are becoming overwhelming, you may be tempted by advertisements that offer the promise of debt relief.  Before you plunge into solutions that may actually worsen your debt situation, you should be aware of the advantages, disadvantages, and the long-term effects of each.

The skilled and seasoned Ohio debt-relief attorneys at Fesenmyer Cousino Weinzimmer understand that financial problems can happen to even the most well-intentioned people.  We offer a free consultation to evaluate your entire financial situation – your income, your debts and your goals — and see which solutions are right for you.

Debt Relief Options

The primary debt relief options are debt settlement, consolidation loans, loan modification, and bankruptcy.

Debt Settlement

This is a way to reduce your debts with unsecured creditors, such as those holding medical bills and credit card bills. These creditors may agree to a settlement if you can come up with a lump sum of 40 to 60 percent of your debt, or they may agree to a payment plan for a lesser amount. Creditors might be willing to settle your debt for less than you owe rather than have you file for bankruptcy, in which case they might not get anything.

You can try to negotiate with creditors on your own, or you can contract with a debt settlement company and send them money each month. Some creditors will negotiate debt settlements only with experienced attorneys.

Debt settlement agreements should be made in writing and signed by an authorized representative before any payment is made to the creditor, who should agree not to pursue the remaining outstanding debt.

Pros

  • You wind up paying less money

Cons

  • Debt settlement negatively affects your credit report and may remain there for seven years.
  • There are many scammers in the debt-settlement industry, so you will need to research to determine whether complaints have been filed against the company you deal with.
  • Creditors do not have to agree to debt settlement and can continue to contact and harass or even file lawsuits to collect on the debt you until you settle your accounts.
  • Debt settlement costs either a percentage of your overall debt or a percentage of what is saved.

Debt Consolidation Loans

These loans allow you to combine multiple debts into one loan to reduce monthly payments, and there will be a schedule to pay the debts in full over a set period.

Pros 

  • This new loan rate will be lower than default credit card interest rates, and it reduces the number of creditors you have to pay each month. Consolidation loans may be taken as unsecured or secured, utilizing a fully-owned property such as a vehicle, or added as an additional mortgage against a home.

Cons

  • Secured loans on your vehicle or second mortgages or home equity lines of credit put your home or property at risk if you can’t meet the new payments.

Loan modification

This is an agreement between the lender and borrower to change the terms of a loan. Creditors benefit from getting some money and not having to seize and sell property.

Pros

  • You may receive a reduced payment, lower interest rate, and removal of late fees or penalties in order to help you pay the loan.

Cons

  • Your secured property will still be at risk if you can’t pay the loan.

Bankruptcy

Bankruptcy allows you to eliminate or restructure certain debts while under the protection of the federal bankruptcy court. The most common types are Chapter 7 and Chapter 13.

A Chapter 7 bankruptcy allows you to eliminate unsecured debt quickly. However, it may require that you liquidate your assets, if they are not exempt.

A Chapter 13 bankruptcy allows you to reorganize assets and consolidate your payments to avoid fees and fines and repay some or all of your debt affordably over a three- to five-year period. If you successfully complete the court-approved payment plan, the unsecured debts covered by the plan are discharged and you can keep most assets.

Pros

  • Protection from creditors – Ohio has an automatic stay that prohibits most creditors from collection activity such as harassing phone calls, lawsuits, garnishments, repossessions, and foreclosures. Fresh start — Chapter 7 bankruptcy eliminates most unsecured debt, such as medical bills and credit cards. Ohio’s exemptions may allow you to keep much of your property, which may include cars, work-related tools, and basic household furnishings.
  • Chapter 13 bankruptcy lets you repay a portion of your unsecured debts and you may be able to save your home from foreclosure and vehicle from repossession. A trustee distributes money to your creditors so you no longer have to deal with them.

Cons

  • Credit rating. A bankruptcy lowers your credit score and may stay on your credit report for seven to ten years. However, once you receive your bankruptcy discharge, you will have a clean slate, and since there are time limits on filing for bankruptcy again, it may actually be easier to get credit.
  • Privacy and reputation. Your employer may learn about your bankruptcy, and bankruptcy records are available to others at the federal bankruptcy courthouse.
  • Bankruptcy costs money to file, and filing usually requires an attorney.
  • Waiting period — You now must wait eight years after receiving a discharge in Chapter 7 before you can file again under that chapter. The Chapter 13 waiting period can be as little as two years between filings.

In addition, bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations.

Contact Us and Get Help

The experienced and compassionate Ohio bankruptcy attorneys at Fesenmyer Cousino Weinzimmer, know what it is like to struggle with financial problems and will help you find a solution.  Take the first step toward debt relief and CONTACT US TODAY FOR A FREE INITIAL CONSULTATION.

During your consultation, we will evaluate your entire financial situation and determine whether bankruptcy or another debt-relief plan is the best fit for your financial situation.  We will make sure you are aware of all your options and will walk you through the process.

Delaying can only worsen your situation, so call the Ohio bankruptcy attorneys at Fesenmyer Cousino Weinzimmer today!  Call one of our conveniently located office branches at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati) or email for your free consultation so we can determine what debt relief solutions will work best for you.

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