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Types of Debt Resolution: Bankruptcy/Debt Consolidation/Litigation and Settlement

Carlisle Law Firm does not resolve debt through bankruptcy filings. However, we evaluate every client’s situation in order to determine the best course of action, even if that means referring the individual to a bankruptcy attorney. Where appropriate, a bankruptcy filing can provide a comprehensive solution that results in an almost immediate halt to debt collection efforts. That said, bankruptcy is not available, or advisable, for everyone. Bankruptcies remain on credit reports for 10 years and damage credit scores, and can disqualify debtors from obtaining conventional mortgage loans for up to 4 years. A bankruptcy filing can also disqualify job and professional license applicants from employment in many fields involving financial responsibility.

Consumer bankruptcies are filed under Chapters 7 and 13 of the US Bankruptcy Code. A chapter 7 bankruptcy is also commonly called a “fresh start” bankruptcy, due to the availability of a “discharge” of the scheduled debt. However, a discharge of debt under chapter 7 is only available once every eight (8) years, and there is a “means test” to ensure that the debtor’s income and expenses are within allowable limits. As a chapter 7 bankruptcy may require the “liquidation,” or sale, of the debtor’s non-exempt property, it is important to determine whether there are valuable assets that could be lost as part of a bankruptcy filing.

The purpose of a chapter 13 bankruptcy is to create a re-payment plan for all or a portion of the debt. These plans are based on the type, or “priority” of debt involved, and the income of the debtor that is available for re-payment. The inability to re-pay the debt under Chapter 13 may result in the dismissal of the case, or an involuntary conversion to chapter 7, where assets of the debtor may be put at risk of loss.

Debt consolidation companies have earned a less than stellar reputation over the years. Because of predatory practices employed by many debt consolidation companies, laws and regulations have been enacted to curb unethical practices by these companies. In theory, “debt consolidation” usually involves an agreement between the debtor and the debt consolidation company, whereby the debtor makes regular monthly payments to the debt consolidation company for a pre-determined period of time. In exchange for fees that are deducted from the debtor’s payments, the debt consolidation company attempts to negotiate settlements with creditors and debt collectors, using the funds paid by the debtor.

Complaints against these companies generally relate to the fee amounts and the inability of these companies to represent the debtor’s interests once a lawsuit has been filed. Even though many of these companies are operating under the banner of some attorney or law firm, there is generally no legal representation afforded to the debtor in the event that a creditor chooses not to negotiate with the debt consolidation company and files a lawsuit instead.

Carlisle Law Firm helps to resolve debt at any stage of the collection process; from in-house collection of “charged off” debt, to post-judgment garnishments and levies, and everything in between. Candidates for representation by Carlisle Law Firm are individuals and small businesses facing active debt collection efforts that do not justify the extreme option of bankruptcy, or, where bankruptcy is otherwise unavailable or unappealing. Our most effective weapon against debt collection is our extensive trial and litigation experience combined with a thorough knowledge of the debt collection industry. Our guiding philosophy regarding debt collection is expressed as follows: 1.) the longer a debt remains unpaid, the lower its actual value; and 2.) the more time that is spent collecting a debt, the lower the profit margin for the debt collector.

The failure to pay consumer debt is usually unintentional and due to some unforeseen event that has caused the debtor to re-prioritize financial obligations. The debts that are usually the last to get paid are unsecured debts that are unrelated to essential goods or services. Carlisle Law Firm assesses each case by looking at the debt objectively and practically. The value of a debt collector’s claim is not determined solely by the actual amount owed. They must consider the amount that is likely to be collected, the unreimbursed costs of collection, and the time to be spent in collection.

Another important factor affecting the settlement of consumer debt is the debt collector’s exposure to liability for violations of consumer protection laws, and the possibility of other sanctions that may be imposed through litigation. This risk assessment, and the value of potential consumer claims, can heavily influence the process of negotiating a debt settlement. Our counsel and advice on settlement is aided by years of experience with thousands of consumer collection claims.

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