Wink & Wink Can Help You Understand These Important Debt Solutions
When our clients start experiencing serious financial difficulties, we’ve noticed that their first inclination is to hurriedly figure out the fastest solution. This is completely understandable to us, as there are few feelings as relieving as taking control of one’s finances in a way that offers promise for the future.
At Wink & Wink, however, it may surprise you that – because of our experienced legal approach – we might recommend that those who are experiencing financial distress do a good amount of research before leaping at the first opportunity that comes their way. It’s far wiser to rely on our team of expert bankruptcy and debt settlement attorneys to present a plan that benefits you.
For instance, you might decide that debt consolidation looks like a good fit, until you recognize that there are options, such as Chapter 13 bankruptcy and debt settlement, that will truly help you discharge your debts, not just shuffle them around and leave you on the hook for payments.
Once our clients take time to weigh the pros and cons of debt consolidation, the options we just mentioned – Chapter 13 and debt settlement – require some understanding, and, likely, strategic assistance from attorneys well-versed in bankruptcy and debt settlement law.
Here, then, we offer definitions of Chapter 13 Bankruptcy and debt settlement – two viable options for our clients struggling with their finances – as well as a comparison of these two approaches. With Wink & Wink at your side, you can make a measured, beneficial decision for yourself.
What is Debt Settlement?
Debt settlement is a negotiation with your creditors to accept a lump sum payment that is equivalent to just a fraction of what you owe on certain kinds of debts, such as medical and credit card bills. Many Denver residents who have sought debt settlement as a solution to their financial difficulties have, in many cases, achieved a 50 percent reduction of their overall debt.
If you can establish a track record of being unable to pay your creditors – at least three months is our recommendation – you represent risk to your creditors. They will be more likely to settle for a smaller percentage of your debt as opposed to what they are asking now: that you pay in full plus absurdly large interest and fees.
While some debt settlement companies suggest that you pay settlements over time in monthly payments, we advise against this whenever possible, as there is a possibility that over the course of time in which you are expected to pay back this fraction of your debt, you could again default on payments. Also, creditors tend to accept less to settle if paid in a lump-sum rather than in monthly payments over time.
And it is important to know that you cannot settle most secured debt, such as mortgages and car loans, without losing the collateral. If you stop paying on these debts, the creditor tends to start by pursuing repossession or foreclosure.
As you can see, there is a strategy and careful legal planning involved in maximizing a debt settlement to your advantage, so it is always recommended that you seek the advice of bankruptcy and debt settlement attorneys who can guide you through the process to your benefit.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy does have some similarities to debt settlement. Some of your debt is discharged – completely eliminated – when you file for Chapter 13 bankruptcy, and some of this debt is paid back over a three-to-five-year period.
As with debt settlement, there are specific kinds of debt you can discharge, called “non-secured assets,” meaning they aren’t backed by collateral such as a piece of real property or a car. Unsecured debts include medical and credit card bills.
After certain debts are discharged, the remaining debt is paid over a period of time, which is different from the typical debt settlement case. There are also additional requirements to qualify for Chapter 13 bankruptcy:
- You must file as an individual or jointly – corporations and LLCs are not eligible for Chapter 13 bankruptcy
- You must earn regular income, which can include social security or a pension from a former employer.
- Historically, there are debt limits in Chapter 13 bankruptcy. This meant your total unsecured debt could not exceed $465,275, and your secured debt (such as a mortgage or car loan) could not exceed $1,395,850. However, these limits have been temporarily increased to $2,275,000 of total debt (secured and unsecured) under the Bankruptcy Threshold Adjustment and Technical Corrections Act (the “Act”) enacted on June 21, 2022. This larger combined threshold reverts back to the secured and unsecured limits after June 21, 2024.
Additionally, the three-to-five-year repayment plan represents a range, depending on where you stand in relation to Colorado’s median income for your household’s size. If your income is above this threshold, you must pay on a five-year Chapter 13 bankruptcy plan. If your income is under this threshold, you can choose the length of your repayment, within three to five years.
Which Option – Debt Settlement or Chapter 13 Bankruptcy – is Right for You?
Our bankruptcy and debt settlement attorneys can help you reflect on your financial situation. We recommend that you get in touch with a bankruptcy firm that offers a free consultation, like Wink & Wink, as soon as possible. Then, you’ll be able to make a full determination of the best debt solution for you.
Chapter 13 bankruptcy could be the solution for you, if:
- You have unsecured debts (for example, medical bills and credit card debt) that you are no longer able to pay.
- You have steady income that will allow you to pay off your secured debts (such as home and car loans) over a period of time (three to five years, depending on Colorado law, as mentioned above).
- Your ability to repay (i.e., income minus allowed expenses) over the 3 to 5 year plan represents a fraction of your total unsecured debt (i.e., less than 50%). When this happens, you are likely getting out of debt in Chapter 13 for less than you could settle debt outside of bankruptcy.
Debt settlement could be the solution for you, if:
- You are unable to pay back your unsecured debt (such as the medical and credit card bills mentioned above) in full.
- Your ability to repay debt will force you to repay more than 50% of your debt in Chapter 13 bankruptcy.
Wink & Wink’s Further Resources for Chapter 13 Bankruptcy and Debt Settlement
Wink & Wink’s responsibility to our clients includes educating them as much as possible on legal definitions, procedures, laws, and regulations surrounding debt relief in Colorado. We believe that a team of experienced, reputable bankruptcy and debt settlement attorneys should be transparent with our clients, so that they can make informed decisions about their finances.
For more information and details on both debt settlement and Chapter 13 bankruptcy, the team at Wink & Wink, the leading bankruptcy and debt settlement attorneys in Denver, have created comprehensive guides for both debt solutions.
Schedule a Free Consultation with Wink & Wink to Take a Positive Next Step Forward
If you’ve read our resources, you’re likely ready to schedule a free consultation with us. During this session, the team at Wink & Wink will sit down with you and set you on a path to the right debt solution for you. Call us today at (303) 410-1720 or send us a message online.