Debt Settlement is a good option for individuals that have small amounts of unsecure debt and funds available to offer as a lump sum settlement. It is important to note that debt settlement does NOT stop collection activity such as wage garnishment, bank levy, foreclosure, or repossession until the creditor has accepted the debtor’s offer. Many individuals would rather try to negotiate with their creditors instead of filing bankruptcy to minimize the impact on their credit.
However, in order for debt settlement to be successful, the individual will typically need to have around 20-30% of the total they owe to offer one-time lump sum payments to creditors. Many individuals are not able to gather the funds together to make debt settlement work, but people who can on average tend to save 70-80%. It is important to remember that debt settlement can have tax consequences such as a 1099-C (Cancellation of Indebtness “COD”), which should be discussed with an Atlanta Tax Attorney prior to settling.
Debt Negotiation and Defense is good for those who are actively facing a creditor judgment, bank levy, or wage garnishment and unable or unwilling to file bankruptcy. In order for a creditor to collect their debt, they must first file a lawsuit in the county in which the debtor resides. If the debtor does not file an answer, the creditor will get a default judgment. If the debtor files an answer, it will likely delay the proceeding and the court will set a hearing. It is always in the best interest of the debtor to file an answer to a lawsuit.
However, as long as the creditor can prove that the debt is owed (state a claim) and process was properly served, the creditor will win the judgment. Once a creditor obtains a judgment, they must file a second lawsuit to collection the judgment. The second lawsuit is usually filed against debtor’s employer (wage garnishment) or bank (bank levy).
A wage garnishment continues for a period a six months, whereas a bank levy is a one-time hit on the debtor’s bank account for funds available on the date of the levy. It is possible to defend these types of actions. Available defenses for collection lawsuits include failure to properly serve the debtor, filing the lawsuit outside the statute of limitation, or failing to prove that there is a claim.
As for wage garnishments and bank levies, the debtor can file a traverse (exemption) which states the funds are exempt from levy because they are social security benefits, unemployment benefits, workers compensation, veteran’s benefits, state pension benefits, disability benefits, money that belongs to a joint account holder, child support or alimony, or any other exemptions as provide by law.
It is very important to speak with an Atlanta Tax and Bankruptcy Lawyer sooner rather than later in these types of cases, because often times we can work out a settlement prior to the creditor issuing a wage garnishment or bank levy. By reaching out to the creditor ahead of these actions, the Debtor can reduce their stress, save time and money.
Last alternative to bankruptcy is debt consolidation. Debt consolidation is process that combines all your debt into one monthly payment. Individuals wishing to consolidate their debt can do through a debt consolidation company. It is always important to research and make sure the company has a good reputation and proven results. While debt consolidation can be a good tool to lower interest rates, the amount paid is typically the same or more because the term of the loan is extended. In addition, debt consolidation does NOT provide the same protection as bankruptcy when it comes to stopping wage garnishments, bank levies, and foreclosures.
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