Collections and repossession are remedies sought by creditors against debtors who have defaulted on their obligations. Collections include any technique to get the debtor to make up the remaining debt, including use of a collection agency or the courts. Creditors may also have outstanding debts legally recognized, and then enforced against a debtor’s property involuntarily with garnishments, liens or levies. Repossession of collateral is another technique used when property is pledged to secure a debt.
Commercial bankruptcy is a remedy available to businesses that are unable to pay their debts. Options include liquidation, in which many of the business’s assets are sold and the proceeds are divided among the creditors, and reorganization or restructuring, in which the business continues to operate according to a plan that allows for at least partial payment to creditors.
Consumer bankruptcy is a method through which individuals may be able to get out from under insurmountable debt and make a fresh start, albeit with a negative impact on their credit ratings. As in commercial bankruptcy, there are two options: liquidate non-exempt and unencumbered assets to pay off creditors or file a wage earner plan that allows the debtor to retain more assets while working to pay off his or her wage earner debts at an amount that he or she can afford.
Creditors’ rights include a full range of options available to creditors to collect unpaid debts. Creditors’ rights include collection actions, repossession, foreclosure, garnishment, replevin, attachment, obtaining a court judgment, liens and forcing the debtor into involuntary bankruptcy.
Deficiency refers to a balance remaining on a debt if your property is foreclosed or repossessed, and then is sold for less than what you still owed. For example, you may have a foreclosure deficiency when a bank or lender forecloses your home and sells it for less than the outstanding amount you owed on the mortgage. You may have a car repossession deficiency if a lender repossesses your vehicle and then sells it for less than you owed on the loan.
Discharge is the bankruptcy term for wiping out many of the debtor’s remaining debts at the conclusion of the bankruptcy proceeding. Only certain debts are dischargeable. The most common debts that are not dischargeable are student loans (in most cases), most income tax debts, and child support/alimony.
Foreclosures are the actions taken when a mortgagor fails to make the required mortgage payments on time and the lender, or mortgagee, forces the sale of the property — often the debtor’s home — to pay off the debt. Foreclosures can be either judicial, which requires court involvement, or pursuant to a clause in the mortgage that allows for such sales.
Garnishment is a creditor’s remedy aimed not directly at the debtor but rather at a third party that owes money to the debtor or holds some of the debtor’s property. The garnishment process notifies the third party that the creditor intends to apply the third party’s property to satisfy the debtor’s debt. Typical garnishees, as the third parties are called, include the debtor’s employer and the bank in which the debtor has his or her accounts.
Means test is a form that must be filed in every Chapter 13 case and in every consumer Chapter 7 case. The means test first determines whether the Debtor is above or below the median income that applies to the Debtor’s circumstances. Median income is determined by where the Debtor resides and the size of the Debtor’s household. Debtors whose monthly income is above the median must meet a means test to determine if they are financially eligible for straight Chapter 7 liquidation. In brief, the debtor’s income after allowable deductions is analyzed in relation to his or her debt to determine whether he or she qualifies for a Chapter 7; if not, the debtor must file for relief under Chapter 13 of the Bankruptcy Code.
Reorganization and restructuring are methods by which individuals, families, and bankrupt businesses may reorganize in order to keep operating (for businesses) and pay off creditors at least part of what is owed. This bankruptcy option has many advantages over liquidation, which may require selling off assets.
Workouts are non-bankruptcy agreements between debtors and creditors in which the creditors agree to take less money than the full amount owed or accept payments over a longer period of time than originally anticipated. Workouts have the advantages of being voluntary, less complicated and less negatively perceived than bankruptcy.
Zingarelli Law Office has helped hundreds of people in the Greater Cincinnati area and throughout Ohio and northern Kentucky get debt relief. We want to help you get the chance to achieve a fresh financial start. Contact Zingarelli Law Office for a no-obligation initial consultation today.