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To file for bankruptcy or not? Debt, Bankruptcy, and Financial Relief

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Location: Kalamazoo  |  Law type: Bankruptcy law attorneys
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So I have a bunch of outstanding debt and 3 of the debt collectors have filed court cases against me. One of them has a Judgment Lein and 3 of them have wage garnishments in place.

I submitted a request for installment payments through the court with one of the three to get the wage garnishment disposed of. So with this particular one I started making payments at the end of February 2022 of $25/wk and the balance is $5,526.11.

I was trying to work out settling for a lesser amount of money with one of the creditors because they are the ones who I owe the most to and also are the ones who have a Judgement Lein against me. Their 20% discount if paid in one lump sum would be $9183. My only option available to me was to cash out my 401K. I have no stocks or bonds. I have no savings of any kind. Cashing out my 401K as much as I didn't want to was my only option. I had just upwards of $13,000 in my account and after cashing out from taxes taken out and the 10% early withdrawal fee I was only going to get back $8,400. I called back to re-negotiate and see if they would be willing to meet me at the $8400. At 1st the answer was no, but the 2nd person I spoke with spoke to his district manager and said that they would take $8700. This was still going to leave me short to close out this account on top of the fact that I'll still have other outstanding accounts that will need to be taken care of as well.  

I spoke with my husband and asked if he'd be willing to do a home equity loan on the house or a cash-out refinance and he's absolutely 100% against it will not even discuss it. 

So now my hands are tied and I don't really know what to do because I can't come up with all of the money to pay all of them off. In total for all owed to all creditors is around $20,467.94 plus accured interest. I made just over $17,500 in 2021.

 

So my question is I was wanting to know if it was thought to be a good idea to file bankruptcy at this point or should I continue on trying to take care of these on my own?

 

I'm supposed to call to make the payment of $8,700 to them by this Wednesday, April 20th, 2022. 

 

Thank you for your time

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4 months 1 week ago, Bankruptcy law attorneys, Texas

Legal Solution

The response provided below is specific to Bankruptcy law attorneys in the jurisdiction of Kalamazoo. If the response is inadequate, please submit a detailed inquiry.

Debt, Bankruptcy, and Financial Relief

Contextual Analysis

Your current predicament is layered and intricate. On one hand, there's a mounting debt of approximately $20,467.94 with accrued interest and wage garnishments in place. On the other, the contemplation of cashing out your 401K and the reluctance of your spouse to use home equity adds to the complexity. Balancing these dynamics necessitates informed legal action and perhaps financial counseling.

Relevant Bankruptcy Law Resources:

  • Bankruptcy Code Title 11, United States Code: Governs all bankruptcy cases in the U.S.
  • U.S. Trustee Program: Part of the Department of Justice responsible for overseeing the administration of bankruptcy cases.
  • U.S. Courts - Bankruptcy: Provides general information on bankruptcy laws and procedures.

Potential Solutions:

  1. File for Bankruptcy: Depending on the type of bankruptcy (Chapter 7 or Chapter 13), this can give you a fresh start by discharging many debts or allow you to create a repayment plan. Before deciding, you should compare lawyers in your area specializing in bankruptcy to help guide you.

  2. Negotiation with Creditors: Instead of paying in full, try to renegotiate the debt. Creditors often prefer receiving a reduced sum immediately rather than waiting or risking getting nothing if you file for bankruptcy.

  3. Financial Counseling: Seek out a financial advisor or counselor. They can provide strategies to manage debt, budget effectively, and potentially avoid bankruptcy.

  4. Legal Action: If a creditor's behavior becomes overly aggressive or breaches the Fair Debt Collection Practices Act, consider legal action. This can be a strategy to find the right lawyer to defend you.

Cost Analysis for Legal Services in Kalamazoo:

Service Average Cost
Bankruptcy Consultation $200 - $400
Bankruptcy Chapter 7 Filing $1,000 - $2,500
Debt Settlement Negotiation $500 - $1,500
Financial Counseling Session $100 - $300

Note: Prices vary based on the complexity of the case and the experience of the attorney. In Kalamazoo, it's common for lawyers to offer a free initial consultation, but it's crucial to confirm this beforehand.

Seek Further Clarification:

Your current situation is complex, and a thorough evaluation of all the nuances is necessary. We recommend a detailed consultation with a legal expert. Remember, it's essential to weigh all options and understand the long-term implications of your decisions. Don't hesitate to ask a free legal question for immediate guidance.

Relevant Questions for You:

  1. Bankruptcy Eligibility: Are you aware of the means test for bankruptcy eligibility in your state?

    • The means test compares your income to the state median and determines if you can pay back a portion of your unsecured debts.
  2. Asset Inventory: Have you taken an inventory of all your assets, including non-monetary ones?

    • This is vital when considering bankruptcy, as some assets might be exempt while others might be liquidated.
  3. Future Financial Plans: How do you envision your financial situation post-settlement or bankruptcy?

    • Understanding your long-term goals can help shape your immediate decisions.

Relevant Q&A for Legal Concerns in Kalamazoo:

How does wage garnishment work in Michigan?

Wage garnishment is a court order that directs an employer to divert a portion of the debtor's wages to the creditor. In Michigan, the maximum garnishment amount is generally 25% of the debtor's disposable earnings.

What is the difference between a Chapter 7 and Chapter 13 bankruptcy?

Chapter 7 is a liquidation bankruptcy, where most of your debts are discharged after certain assets are sold. Chapter 13, on the other hand, allows you to create a repayment plan to pay back your debts over 3 to 5 years.

Are there alternatives to bankruptcy?

Yes, alternatives can include debt consolidation, debt settlement, or seeking adjustments to loan terms with lenders.

Can a 401K be seized in a bankruptcy proceeding?

Generally, in a federal bankruptcy proceeding, assets in a 401K are exempt and protected from creditors.

How long does a bankruptcy stay on my credit report?

A Chapter 7 bankruptcy can stay on your credit report for up to 10 years, while a Chapter 13 bankruptcy typically remains for 7 years.

Disclaimer

This content is for informational purposes only and does not establish an attorney-client relationship. It's always recommended to consult with a local attorney about your specific situation.

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Legal question "To file for bankruptcy or not? Debt, Bankruptcy, and Financial Relief" has been changed 9 months 1 week ago. Demonstrate your legal skills and willingness to help and answer right now! Issue is related to the location of Kalamazoo & area of law: Bankruptcy law attorneys.
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Would you like to find an experienced bankruptcy lawyer near me (you) quickly and for a good price? Generally, bankruptcy law can provide a timeline (arrangement) for the repayment of non-dischargeable personal (corporate) debts. The ability to repay secured debts is valid for both Individuals as well as organizations (governmental and private). Bankruptcy comes in five varieties where each offering different options "settling" with debts.

  1. Chapter 7: Cancelation of unsecured debts (credit cards and personal loans). Bankruptcy law in the United States has changed dramatically in 2005. Liquidation of personal debts under a Chapter 7 is the most common form of debt relief. Most of chapter 7 cases are classified as "no asset".
  2. Chapter 9: Reorganization of municipalities and related local entities sheet (not for Individuals and Corporations). A chapter 9 of bankruptcy law in U.S is very special. It is a form of debt reorganization (not disposal). Remember, it is only avaliable to Municipalities
  3. Chapter 11: This chapter Provides a lot of options to reorganize debt. There are options such as "debt cancellation", repaying some debts for Individuals, etc ...
  4. Chapter 12: Restructuring of debts for Family Farmers is done according to this chapter.
  5. Chapter 13: repayment of some debts over a period of three to five years + reduction on secured debts and their elimination.

Is it better to file for a bankruptcy under Chapter 11, Chapter 12 or Chapter 13? It depends on your case. Your first step should be finding and hiring the best and most affordable bankruptcy attorney near you. Bankruptcy proceedings in the United States are (should be) supervised by District and Bankruptcy Courts governed by the bankruptcy rules (promulgated by the Supreme Court - www.supremecourt.gov)

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