Initially, declaring bankruptcy may have seemed too daunting, so you entered a debt settlement plan instead. But since this decision, your financial circumstances may have changed once again, sadly for the worse. Now, you may worry that bankruptcy would have been the better choice to offer you the financial relief you desperately need. Well, if this thought is sitting heavy with you, please follow along to find out whether it is best to file for bankruptcy in the middle of your debt settlement and how a proficient Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq., P.C., can help you navigate this tricky and financially delicate situation.
What is the difference between debt settlement and bankruptcy?
First of all, you must understand the implications behind debt settlement and bankruptcy before you choose either path. In simple terms, debt settlement is when you negotiate a deal with your outstanding creditors, typically to reduce the lump sum amount you owe them. This may be handled through a third-party debt relief company, and therefore, it is an out-of-court procedure. And with that, your outstanding creditors are not legally required to negotiate an agreement with you. Worst case, they may respond to this plea by filing a lawsuit to collect the debt.
Then, as you can already guess, bankruptcy is a formal legal procedure supervised by the federal court. In a Chapter 7 bankruptcy, you may liquidate your assets to pay off your non-dischargeable debts. And in a Chapter 13 bankruptcy, you may follow a court-ordered repayment plan for your outstanding creditors. Here, your creditors do not have to give their approval before you file your bankruptcy petition. However, they may actively participate in the process, such as filing motions to lift the automatic stay or rejecting a proposed repayment plan.
Is it wise to file for bankruptcy if I’m already in debt settlement?
As you now understand, debt settlement and bankruptcy are two totally separate processes. You may initiate these processes at any time. Notably, you may be allowed to file for bankruptcy even after negotiating a debt settlement agreement with your outstanding creditors. Upon submitting your bankruptcy petition, your existing settlement agreements may be overriden. However, you cannot get back the debts you already paid and settled in these agreements thus far. Meaning, these debts may not be made dischargeable at the end of your bankruptcy proceedings.
With that said, at this time, the third-party debt relief company you are working with may be legally obligated to stop collecting or distributing payments for debts included in your bankruptcy case. Although you may need to formally cancel your contract with the company to ensure further withdrawals do not occur. Unfortunately, you may not get a refund for the advanced fees you paid to the company, especially if they were not held in trust. Rest assured, this is something your attorney can help you sort out.
To conclude, when it comes to your bankruptcy case, you should not settle for anything less than spectacular legal representation. So please hire us to help with your bankruptcy proceedings. A talented Rockland County bankruptcy attorney from The Law Offices of Allen A. Kolber, Esq., P.C., looks forward to working with you.
