5 Ways Chapter 13 is Better than Debt Consolidation

First Way

Protection of the Automatic Stay when filing your Chapter 13 Bankruptcy is a much better solution than signing up for a traditional debt consolidation. The Automatic Stay is a Temporary Restraining Order prohibiting Collections!  The order comes from a federal court and therefore preempts or supersedes state laws allowing creditors to collect.

A Debt Consolidation program, is a wish and a phone call to beg the creditor not to sue you while you are in repayment.  While most creditors will play along, there are many that will not.

A Debt Consolidation is a mangy dog begging for scraps at the doors of justice.  “Stay Boy! There’s a good doggie!” 

Second Way

When your chapter 13 bankruptcy payment plan is completed in 3 to 5 years, your temporary restraining order is made into a permanent injunction called your Discharge Order. Even better these Court Orders have teeth.  If a creditor violates one of them whether during or after your bankruptcy, you can sue them in the bankruptcy court and they have to pay your attorney to sue them to get them to back off or even pay you back. When you hear the word “stay” think of the word “stop”.  The Automatic Stay stops foreclosures, repossessions, wage garnishments, bank levies, creditor harassment and driver’s license suspensions.  Debt Consolidations do not provide the same protection as that of a Federal Court Order.  Debt Consolidations can possibly help you reduce your interest rates if you beg. 

Third Way

Chapter 13 Bankruptcy forces your creditors to work with you and your attorney whether they like it or not.  While in debt consolidation which is voluntary, some of your creditors aren’t going to work with you.  The debt consolidators pretty much know which ones and under what circumstances they won’t work with you.  The debt consolidators that have been working the deal for a while should already know which ones are not going to play along.  But for some reason, they never tell you:    “Oh and by the by, Equable Ascent Financial (or Asset Acceptance or Your Creditor Here) is not going to take your offer and they’re going to sue you now.  But just keep paying the monthly payment so that I can take my percentage and pay the other creditors slowly but surely while you get sued.  And I also told them that you have a new address, but oh ya, I forgot to tell you that too, even though you didn’t move or anything . . . but just keep paying your monthly payments so that I can get my monthly percentage of your payments, okay, thanks.”  

Fourth Way

The Chapter 13 bankruptcy repayment plan reduces interest rates down ZERO 0% and can reduce principal balances down to as little as ZERO 0% on your credit cards, medical bills, personal loans to private lenders, even older taxes as well.  Debt consolidations outside of bankruptcy can reduce interest rates too, so long as the creditor in question goes along with it.  On rare occasions principal balances might be reduced too for the few creditors who decide to go along with it.

Fifth Way

Chapter 13 Bankruptcy can reorganize all of your debts, such as repaying and restructuring your recent back taxes, your missed house payments, and even spread the last 2 or 3 years on your car payments out over 5 years thereby reducing the car payments by half or more. Often even if you repay your credit cards and medical bills in full but cut the interest rate down to 0%, in every case I’ve seen, you will have a lower payment than if you go to a debt consolidator outside of a bankruptcy.

Temecula Chapter 13 Bankruptcy

In Murrieta and Temecula a chapter 13 bankruptcy is a fantastic financial tool for restructuring your debt and making life easier and finances manageable. You could potentially reduce your monthly payments by several hundred or more than a thousand dollars.  Particularly when your debts are for the types of obligations that are revolving or renewing.

If you’re considering a debt consolidation loan, a chapter 13 bankruptcy may be just what you need. A chapter 13 bankruptcy allows you to consolidate your debts and separate them into classes. You can reduce a car payment, both by cutting the interest rates and extending the term of the loan and paying it off ahead of the credit cards. You can include child support and income taxes and give them a higher priority in the payment plan so that they get paid off completely and ahead of the credit cards too. Your credit cards and medical bills and gambling markers get paid whatever is left over.

Example: if you owed $15000 on a car, $15000 in back child support and $30,000 to credit cards, and if your budget only allowed a payment of $700. You’d setup a 60 month plan for $700/mo. Normally you’d have to pay probably $1500 to $2000 per month on that debt depending on interest rates and terms. Of the $700/mo that you would pay for the 60 month plan, your credit cards would get approximately only $200/mo. Less in fact because the bankruptcy trustee would take his fees out of that $200 and also the car would have a small interest rate applied but not compounded.

Call now to get started today or to see if a chapter 13 bankruptcy is right for you. Call 951-200-3613.

Debt Consolidation

Non-Profit Debt Consolidation

There are tons of non-profit debt consolidators in the Murrieta and Temecula areas. In general what they do is, set you up with a debt consolidation plan. One place put it this way, “You will be able to combine most, if not all of your unsecured debt and make one single monthly payment.” Your accounts don’t vanish, you haven’t done a consolidation loan, but instead the debt consolidators pay your various accounts monthly as you pay the debt consolidation company. They claim that you will become more organized and eventually learn to understand your finances better through participation in the program. Finally they stated that debt consolidation “may reduce” your payments.

You may have heard that “those who can’t, teach.” Well, if someone wants to teach you about your debts, ask yourself how much they can do about it? (As an aside, most of the teachers I know are quite able and deserve more than they’re getting right now, but these debt consolidators are often not even college grads.)

Hmmm, “May Reduce”? Wait a minute, isn’t that why you are thinking about contacting these people in the first place, because you don’t have the income currently to meet all the financial obligations that you have right now? I doubt that’s the deal your looking for. I expect you’re looking for a will-reduce-your-payments type of plan. Certainly there are a few of you who can afford all of your debts and are just looking for a way to get organized and if that’s the case, maybe a debt consolidation company is right for you. But if you’re like most people who are looking into this you’re probably looking to make a bit more progress than that.

What most of these companies will tell you that they do is that they contact your credit card companies and medical bills and what not, and they negotiate a payment for you. Either they are going to try to reduce the principal, interest, extend the term of the contract or a combination of them.

But what they do not tell you is that, if they’ve been doing this for a while, they already know which of your credit cards are going to play ball with them and which will not. How could they not know? Think about it. However, they will never tell you that you have a card or account that won’t want to participate.

So, they set you up with a debt consolidation payment plan and never tell you that one of your accounts didn’t like the terms and decided not to participate. Instead, after getting a reduced payment or even no payment at all, 6 months or 10 months later, that card sues you. You call up and exclaim, Wells The Fargo! Why am I being sued? And the debt consolidators tell you, “oh goodness, it appears that they’ve decided not to participate.” At that point you’re going to have to file bankruptcy before you have your wages garnished or a bank levy hits your checking and savings accounts.

And why does that sweet little old non-profit debt consolidation company do that to you? For the money! Yes, fans that’s right, for the money. Just because they’re not for profit does not mean that the officers of the company don’t take a huge salary. It just means that they cannot declare a dividend to share holders. So, what difference does it make? Answer: You’re paying bankruptcy prices to non-lawyers for a non-legal service without the great results you’d get if you simply filed a bankruptcy instead.

So wait a minute, you’re only paying them $20/mo and about $300 down to set it up, right? (low end some charge you thousands) That’s a lot of months that they’ve set up your payment plan for. How much did they tell you? 48 months? 36 months? 36 x 20 = $720 and if they have 500 of you making payments through this type of plan that’s $10,000/mo plus $150,000 in set up fees. And as one debt consolidator put it, “I keep the float.” Meaning every month he’s got tens of thousands in his accounts collecting interest from his bank and he absorbs that interest for himself. And for all that they “may reduce” your payments which means that one of the credit cards may not participate and will sue you. Maybe not but good luck getting a guarantee out of them.

Chapter 13 Bankruptcy

Do you know what one is? It’s a debt consolidation plan with the Federal Bankruptcy Code behind it backing you up and forcing your creditors to listen up and back down. Creditors must take the plan. I love it, we reduce interest rates on creditors to 0% and often reduce principals down to 5% or 10% of the total balances.

Try as you might, you could pay off all your debts if only you didn’t have those pesky 20% to 29% interest rates.  With interest rates like that it will take decades to pay off your debt if you paid only the minimum payments.  They will just never let you pay down the principal. And it will be literally decades.

What if you owed say $60,000 in credit cards, medical bills, a repossessed car, and a student loan? That would cost you $1000/mo . . . if you didn’t have to pay all that interest. But with all the interest, late fees and penalties, you’re looking at monthly payments of $1500 to $2000/mo. Maybe more. Without the interest, penalties and late fees aren’t things tough enough already in Murrieta or Temecula?

A Chapter 13 bankruptcy gives you leverage that the debt consolidators only wish for. You can force the credit cards, student loans and medical bills to take 0%. If that’s all you can afford, then 0% interest. If you can afford only $500/mo, guess what, then they get only about 50% of the principal.

And none of them can sue you either, and if they want to opt out and not participate, they can, but what they’ll get is 1) they can’t sue you and 2) they get paid nothing at all. Call me for more information on how to you might qualify for this type of bankruptcy debt consolidation.

Oh, and let’s keep it real, yes I do it for the money, but I’m also an attorney with years of experience offering a real solution to a very real problem. Not a way to “learn about” or “understand” your debts. Let’s do something about it. Call now 951-200-3613.