A debt settlement may have been a more appealing option to you at first because it would allow you to figure out a plan without going through court procedures. However, since then, your financial situation may have gotten more dire, and you are struggling to manage your lower lump sum debt amounts. With each passing day, you may be closer to the unfortunate reality that a bankruptcy petition is necessary. Well, please continue reading to learn what happens if you file for bankruptcy before you finish your debt settlement program and how an experienced Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can help you better understand the importance of timing.
What happens to my debt settlement accounts after filing for bankruptcy?
Essentially, once you file for bankruptcy, your debt settlement accounts with debts included in your case will be frozen. This is thanks to the Kentucky bankruptcy court’s issuance of an automatic stay.
So, from this point forward, your creditors can no longer negotiate or accept further payments for these debts. Similarly, the third-party debt relief company can no longer collect or distribute further payments for these debts. Additionally, at this time, all communication between you and your creditors must go through the court, your appointed trustee, or your lawyer. Essentially, any such actions may violate federal bankruptcy law.
With this, the debt relief company may terminate your account, and it may not survive bankruptcy. If your funds were deposited each month in a holding account, you may be eligible for a partial refund. However, if you paid the company upfront service fees, these may be nonrefundable. This may all depend on the procedures of the particular company, and we will help you navigate how to get the most out of this situation.
Should I finish my debt settlement program before filing for bankruptcy?
There is no one answer to the question of whether you should finish your debt settlement program before filing for bankruptcy. At the end of the day, it depends on your unique, current financial standing.
For this, reflect on how overwhelmed you are with your outstanding debts, even with your ongoing debt settlement plan. If you believe this feeling of being financially swamped will persist, maybe it is time to switch over to bankruptcy. And while you may worry about bankruptcy’s long-term effects, such as lowering your credit score, you should know that your debt settlement plan will probably inflict similar consequences.
Lastly, while your debt settlement program may take years to see through, your bankruptcy case may close in as little as four months (i.e., for Chapter 7 bankruptcy). If you wait too long and start to fall behind on your debt settlement plan, your outstanding creditors may file lawsuits against you to collect what they are owed. In short, bankruptcy’s automatic stay may offer you protection from severe actions such as these.
To conclude, when it comes to your bankruptcy case, you should not settle for anything less than spectacular legal representation. So please hire us to help with your bankruptcy proceedings. A skilled Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center looks forward to working with you.
