Should I Consolidate my Debt Before Filing Chapter 7 or Chapter 13 Bankruptcy?

Should I Consolidate my Debt Before Filing Chapter 7 or Chapter 13 Bankruptcy?

For some individuals, falling on hard times can happen through no fault or personal failing of their own. In some cases, a serious illness, injury, or medical event creates significant amounts of medical debt while preventing the individual from working. In other situations, a divorce, separation or other difficult family situations can push a household into debt. The important takeaway to remember is that few people want to fall behind and most people are willing to explore all options to get a fresh financial start.

Therefore, many potential clients come into our Philadelphia bankruptcy law offices considering an array of options to address their financial concerns. Potential clients frequently ask about whether a debt consolidation could prevent the need for a bankruptcy or if a consolidation should be filed as part of a bankruptcy petition. The Philadelphia bankruptcy lawyers of Sadek & Cooper are proud to address concerns like these for individuals considering bankruptcy in Pennsylvania and southern New Jersey.

What Is Debt Consolidation? Should I Consider it as a Bankruptcy Alternative?

Debt consolidation is often marketed as a solution to debt problems. Unfortunately, debt consolidation is rarely a long-term solution to debt problems. The relief it provides may even encourage financial irresponsibility that further exacerbates the financial situation. This is because a debt consolidation generally works by treating the symptom of the “illness” and not the cause.

philly bankruptcy lawyers

To start, a debt consolidation requires creditors that are ready and willing to negotiate. If all creditors are willing to negotiate, you can roll all of your payments into a single payment to a debt consolidation company. However, if one or more creditor refuses to negotiate, you will not be able to consolidate your debt fully.

Furthermore, debt consolidation negotiations typically concern modifications to the amount of time to pay or the interest rate. However, in most cases, debt consolidation companies will negotiate and creditors will be willing to accept longer repayment terms. At first glance, this seems like a benefit to the borrower because he or she can pay less money over more time. Unfortunately, the full principle still exists and it will now continue to accrue interest over a longer period. Furthermore, the reduced monthly payments may encourage the borrower to take on new debt. While all experiences differ, debt consolidations often result in the borrower paying more overall while they remain in debt for years.

Debt Consolidations May Delay Your Return to Financial Health and Are Not Typically required as Part of a Bankruptcy Filing

As one can see, debt consolidations are not appropriate in all circumstances. Often superior relief can be achieved through a Chapter 7 bankruptcy or a Chapter 13 bankruptcy filing. Since there are limits on how often one can receive a bankruptcy discharge, it is prudent to explore all options. However, one can see how a Chapter 7 or Chapter 13 bankruptcy might offer superior and more expedient relief in the examples below.

Assuming that one’s debt is mostly unsecured debt and that one qualifies for Chapter 7 bankruptcy, a filing of this type is the fastest way to get out of debt. Chapter 7 bankruptcy is simply the most effective means to dispatch with credit card debt, medical debt, and any other debt not secured by property. In many cases, an individual can complete a Chapter 7 bankruptcy proceeding in about 6 months and emerge debt free. Contrast this outcome where financial health is achieved in less than a year to a debt consolidation where the individual will generally pay more money over many years.

tax bankruptcy lawyers

If a Chapter 7 bankruptcy is unavailable or inappropriate due to significant amounts of secured debt or assets, a Chapter 13 filing also typically results in a more favorable outcome than a debt consolidation. Like a debt consolidation, filing for bankruptcy will simplify your debt payments by allowing you to make a single payment to the bankruptcy trustee. While it is true that a Chapter 13 plan can take three to five years for the taxpayer to complete, a debt consolidation would likely entail a similar timeframe. However, at the end of a Chapter 13 proceeding, a bankruptcy discharge can forgive a significant amount of the outstanding debt. This relief is not generally available in a debt consolidation. Chapter 13 of the bankruptcy code also contains provisions permitting certain secured loans to be “stripped” and treated as low priority unsecured debts. Thus, Chapter 13 bankruptcy often results in outcomes that are more favorable for people looking to handle their debt concerns.

Work with Strategic Bankruptcy Lawyers in Philadelphia

If you are considering your bankruptcy and non-bankruptcy options to get out of debt, the lawyers of Sadek & Cooper may be able to help. To schedule a free and confidential bankruptcy consultation at our Philadelphia, Pennsylvania, or southern New Jersey law offices call 215-545-0008 today or contact us online.

GET YOUR FREE CONSULTATION

superlawyers_badge

SEEWHAT OUR CLIENTS ARE SAYING

Kelly McKenna
Kelly McKenna
11:57 19 Apr 18
This form - specifically Yoninah Orenstein and Patrick Cooper are PHENOMENAL. They were great to work with, very fair with legal fees, and successful in getting an excellent settlement for my divorce (short term marriage
Dessiana Cruz
Dessiana Cruz
13:11 04 Apr 18
I was nervous about bankruptcy, but from the moment I stepped in your office I felt at ease. This process was so easy with your help, that yesterday I was talking to my coworkers about it and recommending your firm to them. You make something that’s scary seem easy and I thank you so much for helping me!
Valerie Nesbitt
Valerie Nesbitt
14:51 03 Apr 18
Sadek and Cooper have been excellent. Everyone has been extremely helpful and patient. The lawyers I have worked with, Matt and Brad, are extremely knowledgeable. I felt very comfortable with them handling my case.
Marlena Lucas
Marlena Lucas
16:08 02 Apr 18
Very simple. Any time I had questions, they were answered quickly. The lawyers are just great. Just a fast painless process.
James Smith Sr
James Smith Sr
13:19 14 Mar 18
Everything has been great. Really awesome job with my case... You and your staff have done a perfect job in my opinion.
Michkel Davis
Michkel Davis
17:02 09 Mar 18
Mr. Sadek was the best and most thorough lawyer I’ve ever met. He’s very human and caring about our case. His whole staff is great too. Highly recommend...
Tamika Richardson
Tamika Richardson
14:56 01 Mar 18
My bankruptcy went very smoothly with your firm. No issues. You are all very nice. That’s why I recommend my sister to your firm and your now helping her too! Thanks again.
Geraldine Ross
Geraldine Ross
14:14 28 Feb 18
This is an Excellent firm to work with; my questions were answered in a timely manner and I felt very supportive in handling my bankruptcy. I would highly recommend this firm to others who have found themselves in a position like mine.
Lavern Baker
Lavern Baker
17:03 23 Feb 18
You are all super lawyers. Brad and Matt made me feel comfortable. Every one in your office so nice and just made it easy. You’re the best!
peter b
peter b
19:42 21 Feb 18
Thank you, Sadek and Cooper Law offices for your dedication on my behalf. I appreciate Matthew and Patrick and your staff and all that everyone did to support me in this legal matter. You took an embarrassing, sad experience, for me, and turned it into a successful solution without all the emotional pain expected. After dealing with a loan modification company for over eighteen months without going to an attorney first that is the biggest mistake anyone can make. The Modification Companies set out to sell you lies, broken promises and dilute the homeowner's assets with no knowledge of any kind of law. I can't stress enough stay away from Modification companies, as a Military Veteran and family man, protect you or your family best interest. Go directly to Sadek and Copper you will not regret it! This firm moves with Super speed and diligence protecting you and your family's the entire process, even after watching some of these other attorneys in the courtroom appearing to mishandled their clients’ cases before the Trustee. You made it easy and I’m finally getting my financial life back on track! Thank you for your prompt replies to me, your clear information and preparation needed when at the courthouse. I would of course recommend you to others and I am glad you were the one who had my case. Kind genuine law firm who treats you like family. God bless you all and I pray for your continued success in your field of expertise. This firm is Super Lawyers for a reason. They are the best at what they do! Pete
Doug Tinlin
Doug Tinlin
06:55 15 Feb 18
Brad Sadek gave me hope when he decided to handle my mortgage for enclosure defense. I had exactly 10 days left of the 30 days ultimatum given me, but he was able to bargain for an extra 30 days for me to pay up. That duration turned out just right.
Jacinth Jacinth
Jacinth Jacinth
16:07 31 Jan 18
Excellent service. Brad and Matt were outstanding and friendly. They helped me through this. I’ve never met attorneys like these. Thank you!
julie njoku
julie njoku
12:29 24 Jan 18
Brad Sadek is excellent!. He understands and he's fair. You feel like you have someone fighting for you. The staff is friendly, professional, and courteous. These guys are the best at what they do !
Owen Black
Owen Black
20:14 09 Jan 18
Thanks for the great service! I would recommend this firm highly. Throughout the years I have been helped by this firm greatly and very much appreciated.
Steven Rychalsky
Steven Rychalsky
15:30 09 Jan 18
Sadek and Cooper law office was a wonderful experience to work with. Bankruptcy is a difficult experience but they helped with the stress so much and made it easy. I would recommend Sadek and copper too anyone.
Chris Kourelias
Chris Kourelias
19:09 28 Dec 17
Working with both Brad & Matthew was a pleasure. Both gentlemen are extremely knowledgeable and helpful in providing me the right assistance needed to make the correct decision to benefit me in the long run. I would recommend both candidates to anyone looking for assistance with a reputable law firm.
Jennyfer Santana
Jennyfer Santana
21:17 21 Dec 17
Highly Recommended. Matt & Brad assisted with my case. I felt comfortable throughout the entire process. Matt was very understanding, patient, and ensured he answered all my questions! Both great guys and very friendly! It was a pleasure working with Matt and Brad.
Next Reviews Write a review
Call Us Now