What is the Difference Between Debt Relief and Bankruptcy in Pennsylvania?

What is the Difference Between Debt Relief and Bankruptcy in Pennsylvania?

If you are a Pennsylvania resident in need of debt relief, there are many options for reducing or eliminating what you owe. A few examples include debt settlement, debt consolidation, Chapter 7 bankruptcy, and Chapter 13 bankruptcy. While people sometimes use these terms interchangeably, significant differences exist – and the choice you make will have major consequences upon your short- and long-term financial health. Continue reading to hear Philadelphia bankruptcy attorneys explain some of the key differences between bankruptcy and other common forms of debt relief, such as debt consolidation and debt settlement.

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Bankruptcy vs. Debt Consolidation or Settlement

If you’ve been struggling with excessive debt, you aren’t alone – far from it. As recently as 2015, a survey by the Pew Charitable Trusts revealed that as many as eight in 10 Americans have some form of debt, such as mortgage debt, medical debt, credit card debt, or all three.

In a difficult economic climate where millions of Americans feel saddled with debt – including thousands here in Pennsylvania – a variety of debt relief services have proliferated. What is “debt relief”? Put simply, debt relief is the reduction or elimination of debts.

Two of the most prominent examples of debt relief services are:

  • Debt Consolidation Services
  • Debt Settlement Services

Some of these services are more effective than others – and some can be outright harmful to unwary consumers. If you’re a Pennsylvanian who’s living with debt, it’s important to weigh your financial options carefully before making a decision about how to proceed. Let’s begin with a closer look at debt consolidation, how debt consolidation works, and how debt consolidation differs from bankruptcy.

As the name suggests, debt consolidation involves combining (consolidating) multiple debts into one. Debt consolidation companies and bankruptcy alternatives lawyers can assist debtors with this process. Instead of making payments to three, four, or more creditors each month – each occurring on a different date – the debtor makes a single monthly payment, or a lump sum payment, after negotiating with his or her creditors. Put simply, the debtor borrows one loan to repay multiple loans. In addition to simplifying the debtor’s payment schedule, another benefit of debt consolidation is that it can lower interest rates, resulting in more affordable payments. Thus, the debtor obtains a measure of relief from his or her debts.

Bankruptcy differs from debt consolidation in that – at least in Chapter 7 bankruptcy – there are no lump sum or monthly payments to make, nor does the debtor take out additional loans. In Chapter 7, a debtor’s debts are wiped out after his or her property is liquidated by a bankruptcy trustee. Debts that can be “discharged” (wiped out) include medical debt, credit card debt, business debt, and debt from personal loans from friends and family. By using bankruptcy exemptions, a Chapter 7 debtor can protect certain property from liquidation, yet still obtain relief from dischargeable debts. There are also many cases where a trustee “abandons” (decides not to liquidate) property, because the sale would not generate significant proceeds.

In Chapter 13, which is another common type of bankruptcy in Pennsylvania, the debtor makes a monthly payment to the bankruptcy trustee for three to five years. The trustee then disburses funds to the debtor’s creditors. By making full and timely payments, the debtor can retain and protect his or her property, including homes and vehicles. When the payment plan ends, the bankruptcy court discharges the remaining dischargeable debts. The Chapter 13 bankruptcy process in Pennsylvania can ultimately be rewarding, but is also lengthy and complex, so it is vital to be represented by an experienced Philadelphia Chapter 13 lawyer.

Debt settlement is another option, though debt settlement companies have attracted scrutiny and controversy in recent years. In debt settlement, a debt settlement company will negotiate with your creditors on your behalf. The goal is convincing your creditors to let you pay a “settlement” that is less than what you owe. However, before your debts can be settled, you must typically add money to a special account for at least 36 months.

Even then, there is no guarantee that the debt will actually be settled, which means you could receive little to no debt relief despite having paid for a service. As the Federal Trade Commission cautions, “[Debt settlement] companies may try to collect their own fees from you before they have settled any of your debts – a practice prohibited under the FTC’s Telemarketing Sales Rule (TSR) for companies engaged in telemarketing these services.”

Debt settlement and debt consolidation are common, but not the only, alternatives to bankruptcy in Pennsylvania. Depending on your circumstances, other possible options might include:

  • Entering a pre-foreclosure forbearance plan to gain extra time for mortgage payments.
  • Exercising your rights under the Fair Credit Reporting Act (FCRA) to dispute errors or omissions on your credit report.
  • Short-sale of property prior to foreclosure.

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Philadelphia Lawyers for Chapter 7, 13, and Bankruptcy Alternatives

When you’re living with crushing debt, it can feel overwhelming to research all the options for lowering what you owe. Scams and misleading claims abound, and even when services are legitimate, it is often difficult for debtors to anticipate the long-term effects they will have. Federal regulations and Pennsylvania bankruptcy laws are often challenging to interpret, and in the process of restructuring or eliminating debt, it is easy to make small errors that have large impacts.

Stop struggling to compare confusing options. Instead, let the experienced Philadelphia Chapter 7 attorneys of Sadek and Cooper Law Offices, LLC handle the work for you. We can explain your financial options with clarity and detail, provide an honest assessment of the possible outcomes, and manage every aspect of your case with efficiency and precision.

Thousands of people have already trusted us to handle their bankruptcy cases. Now, let us handle yours. To talk about Chapter 7 debt relief, Chapter 13 debt relief, or exploring the alternatives to bankruptcy in Pennsylvania, call Sadek and Cooper Law Offices, LLC at (215)-545-0008 for a free legal consultation today.

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Thomas Wright
Thomas Wright
15:09 24 Apr 18
Sadek and Cooper Law did a great job on my bankruptcy case. I really appreciate their assistant. Thank you
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.
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