What is the difference between Chapter 13 and debt consolidation?

Have you been watching late-night TV ads about debt consolidation as an alternative to bankruptcy? Here's the scoop.
Stephen Dunne, Esq.

Stephen Dunne, Esq.

Philadelphia bankruptcy, credit report, and debt collection abuse attorney

Have you been watching late-night TV ads about debt consolidation as an alternative to bankruptcy? Here's the scoop.
Stephen Dunne, Esq.

Stephen Dunne, Esq.

Philadelphia bankruptcy, credit report, and debt collection abuse attorney

Today is the day.

It’s past time you had someone in your corner.
Our first consultation is always free.

Do you see yourself as a person who repays their debts, at least to the extent you can?

If so, you may be trying to figure out whether to file Chapter 13 bankruptcy or hire a debt consolidation firm – the kind that runs ads on late-night TV.

Chapter 13 is a debt repayment plan enforced by a federal judge and doesn’t require you to negotiate with your creditors or pay another for-profit entity.

Debt consolidation is run by private businesses who make their money from…well, that’s a good question, isn’t it?

Who’s REALLY getting paid?

Some “debt consolidation” or “debt management” plans advertised on TV are set up so that HALF of your take-home pay goes to the consolidator. These types of programs are scams.

Even with the more “honest” debt management business models, they take the first 4 or 5 of your payments for themselves, rather than your creditors. Not only that, many creditors flat out won’t work with these debt management companies, which leaves you holding a bag filled with high fees and a negative credit report.

By contrast, if you file Chapter 13 bankruptcy, the “set-up fee” is your filing fee, which is only around $300. The ongoing cost is the trustee commission, which runs between 9% and 10% of the total amount of your plan payment.

What kind of protection do they offer?

A private debt consolidation company can’t keep creditors from suing you.

By contrast, filing bankruptcy initiates an automatic stay on all collection actions, including foreclosure or repossession.

A private debt consolidation company can’t offer you a debt discharge, which renders any future attempts to collect on the discharged debt unenforceable. Bankruptcy can, and does.

Working with a private debt consolidation company to get debt amounts forgiven results in an income tax bill. Achieving the same thing with a bankruptcy discharge has zero tax consequences.

Can I discuss the pros and cons of each approach with someone in detail?

You absolutely can. It’s free to chat with me about your options – you can call or text me at 215.551.7109, or drop me a line.

Let's go over how I can help. Our first chat is on me.

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