Cicero Bankruptcy Attorney On The Difference Between Chapter 13 And ...

Chapter 13 and bill consolidation that you see on TV do have some similarities according to Cicero bankruptcy attorney.  Those similarities include having one place to pay all of your creditors through a trustee or through a debt consolidation company.  They do have a similarity in that they try to reduce the interest rate and often try to reduce the amount of the underlying balance. 

The big difference between Chapter 13 and bill consolidation that you see on TV is that Chapter 13 is federal law that has a lot of strength to it.  Chapter 13 has the automatic stay which once your case is filed, creditors cannot take certain action against you without permission from the federal bankruptcy court.  In bill consolidation that you see on TV, the creditors are not prohibited from collecting upon you, from garnishing your wages, from suing you or from calling you.  The bill consolidation company hopes that they can get all of your creditors on board and go along with the repayment program.  However, in my experience, there is always a creditor or two that doesn’t wish to be a part of that payment plan and would rather pursue the debtor on their own through some type of lawsuit or garnishment or bank citation. 

I have handled hundreds of cases where someone had tried bill consolidation through a TV organization prior to coming to my office for a Chapter 13.  One of the complaints that I heard most often with people who tried bill consolidation outside of bankruptcy is that the balances didn’t go down, the money didn’t get forwarded to the creditors and the people want up in a worse situation after they tried bill consolidation band before they tried bill consolidation. 

With Chapter 13, every month you are in the Chapter 13, that trustee is making disbursements to your creditors pursuant to the terms of your plan, pursuant to a hierarchy set out in the United States bankruptcy code.  You actually see your balance is going down.  You actually see creditors having to abide by the automatic stay and you get to see creditors who, if they don’t participate in the Chapter 13 repayment plan, the debt can be eliminated in full provided it’s not a secured debt. 

You also have an opportunity in Chapter 13 to dictate which creditor you are going to pay through the plan, which creditor you are going to surrender an item to, when a trustee is going to receive a payment, how they are going to receive a payment; as long as you are providing all of your disposable income towards your Chapter 13 plan, you are going to have success. 

The only problem with Chapter 13 is if you can’t make a payment, the creditors are going to take action or the trustee is going to dismiss your case.  However, Chapter 13 has so much more strength and legality behind it where bill consolidation through a non-bankruptcy remedied simply does not have the strength to hold the creditors off and really make the debt go away over a long period of time.