Although the number of new bankruptcy filings decreased by 6.9 percent in 2016, according to United States Courts, millions of Americans still struggle to pay their bills every month. It is always stressful to fall behind on a mortgage, vehicle payment, and other bills, but you have options if you are in this situation.
There are two main kinds of consumer bankruptcy: chapter 7 and chapter 13. Each has its own advantages and disadvantages, and it is possible to qualify for one without being eligible for the other.
If you are considering filing for bankruptcy, turn to the Law Office of Stuart M. Nachbar. Mr. Nachbar is a chapter 13 bankruptcy lawyer who has been helping clients regain their financial footing for more than 20 years. Call 973-567-0954 to schedule an initial consultation with a New Jersey bankruptcy attorney.
How Is Filing for Chapter 13 Bankruptcy Different from Using a Debt Consolidation Service?
Unlike chapter 7 bankruptcy, which eliminates your unsecured debt, chapter 13 bankruptcy essentially reorganizes it. When you file for chapter 13, you devise a payment plan for paying back your creditors, and they stop harassing you. Your payment is based on a mathematical formula, so you may be paying back as little as 2% of your debt.
Chapter 13 bankruptcy is similar to debt consolidation in that it restructures your debt to make it more manageable for your current income. Although private debt consolidation reorganizes your debt, as well, it does so using a different approach and does not grant you certain protections that bankruptcy does.
According to Nerd Wallet, debt consolidation allows individuals to combine, or consolidate, their debts to multiple creditors into a single debt with one monthly payment. The benefits of debt consolidation typically include a lower monthly interest rate and a faster payoff period.
There are some drawbacks to debt consolidation, though. If your debt is simply insurmountable, no financial footwork will ever eliminate it entirely. Additionally, private debt consolidation firms do not offer the same protection from creditors that bankruptcy does.
For example, upon the filing of a bankruptcy, the court automatically enters an order, the automatic stay, which prevents creditors from garnishing your wages, repossessing your vehicle, foreclosing your home, or levying your savings account. When you have an automatic stay in place, creditors cannot file any civil lawsuits against you.
If you are not in danger of eviction or losing your home to foreclosure and your debt is small enough that you could pay it off within two years, private debt consolidation may be the best option. The normal shortest time for a Chapter 13 Plan is three (3) years. If a utility company is threatening to cut off your services or you face possible wage garnishment, though, your attorney may advise you to file for bankruptcy.
If you would like to learn more about your options regarding bankruptcy, turn to the Law Office of Stuart M. Nachbar. Call 973-567-0954 to schedule a consultation with a chapter 13 bankruptcy lawyer. You can learn more about bankruptcy law in New Jersey by visiting the USAttorneys website.