NJ Lawyer Explains Potential Pitfalls Associated with Alternatives to Filing Bankruptcy

Credit Counseling

Often times, individuals who are faced with the prospect of filing for bankruptcy elect to engage in credit counseling. A counselor will attempt to negotiate with your various credit card companies in order to obtain more favorable terms as it relates to the repayment of your debt. Successful credit counseling results in the debtor paying a lower interest rate on the amount that is owed on the cards, but sometimes the credit card companies still require full payment of your obligation.

The consumer needs to be made aware that often creditors do not negotiate with credit counseling services. Furthermore, credit counseling services have no ability to compel the debt collector to take any type of affirmative action to relieve you of your financial burdens. If a lawsuit is filed against you, a credit counselor is not an attorney and they will not be able to defend you from such a lawsuit.

Debt Consolidation

Credit Card DebtAnother type of alternative to bankruptcy that is often utilized involves debt consolidation. Debt consolidation usually means taking out one loan and incorporating all of your debt into that one loan while paying off the separate existing loans. The new loan is typically secured by collateral, i.e. valuable assets that you may own, such as your residence. If you are unable to pay all of the monies back with respect to the consolidated loan, a creditor then has the right to take and/or sell the collateral that has been supplied. Debtors often times don’t understand the difference between credit card debt, which is unsecured debt, and collateral debt which is secured debt. In essence, what transpires with debt consolidation is you are taking unsecured debt and making it a secure debt. This could prove to be problematic depending on your financial circumstances.

Contact an Experienced NJ Bankruptcy Lawyer with Questions

In the event that you are unsure as to whether or not there exists any viable bankruptcy alternatives that best serve your particular circumstances, please call the Point Pleasant Beach bankruptcy lawyers of Villani & DeLuca at (732) 965-3390. The New Jersey bankruptcy lawyers at Villani & DeLuca have represented residents in Ocean County, Monmouth County, New Jersey throughout the entirety of the bankruptcy process. Please contact the bankruptcy attorneys at Villani & DeLuca today to set up your free confidential consultation.