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Phone: 805.492.7045
Due to precautions related to COVID-19, we have expanded our options for remote consultations. Please contact our office to discuss whether a full phone consultation or video conference is appropriate for your situation.

Options in California, If You Can’t Pay Your Debts

When it comes to debt there is so much that many people simply do not understand. If you cannot repay your debt, there are options that can keep you from losing money, overpaying, or from being so far in debt that you cannot get out. Taking the time to learn about different debts, which debt to pay back first, and what options there are can make all the difference.

Debt

There are tons of different types of debt out there and taking a moment to learn about each can help you better understand what debt you have and what debt you are dealing with.

Secured debt is one of the most common types of debt. Secured debt means that the debt was taken out against a physical item. A great example would be a mortgage, a car loan, or a line of credit that was extended with the sole purpose of purchasing one particular thing.

Secured debt is often thought of as a safer form of debt as the item that the credit was used for can be returned or repossessed. A great example would be a mortgage, if you cannot pay your mortgage, the bank can foreclose on the house, sell it for what it they can get, then you are only liable for what is left over.

There is also unsecured debt. This is debt that does not have a tangible or a physical item associated with it that can be either repossessed or returned if you get behind on payments. The perfect example for this would be a credit card.

This is general credit that is not applied to one specific thing, this means that the bank or the creditor cannot repossess or take back any one thing to recoup the cost of the credit that you are not able to pay back.

There is also government debt, this is debt that is owed to the government directly. This could be loans that were extended based on need, a good example might be a government loan to help keep a business afloat during the current COVID-19 pandemic. This type of loan often has a very low interest rate but it cannot be defaulted on if you do end up filing for bankruptcy or for other debt relief.

On top of the different type of debts there are also debts that are categorized by priority.

A high priority debt is the first to look at. These debts are those that are directly impacting your life. This can be debt associated with a court ruling, debt that is seizing or taking part of your paycheck, debt that puts a hold on your property or a debt that is going to seize something you own immediately to pay.

A good example could be a court judgement. Say you were sued and you owe a specific amount of money, the judge orders that your paycheck be garnished and this affects your life. You want to pay off that debt as quickly as possible to get your life back to normal.

Medium-priority debt are those debts that are of medium importance. This could be payments that are due every month and that do have a deadline. You want to pay these debts back each month to help make sure you are staying on top of your debt but if you are unable to pay it or if you have to pay another debt first, you are not going to have serious issues associated with delaying it.

Low-priority debts are those debts that do not have collateral associated with them. This could be a credit card payment as you are not going to have anything that can be directly repossessed if you do not pay back the loan. This could also be something like doctor’s bills, hospital bills or bills for specific services.

Which Debts Should You Repay?

When it comes to repaying debts you should take the time to look at each debt carefully and then determine what debts is the most important and which debt is going to have the biggest impact on your life and what debt is going to impact you the most if you do not repay it.

Are you going to lose your house if you do not pay your mortgage that month? It is more important that you repay your mortgage so that you can keep a place to live than it is to pay a credit card payment or any other debt that does not have something associated with it that can be repossessed.

You should take the time to look at your debts and determine which one is the most important and which one is going to have the worst repercussions if you do not pay it back at the time.

Options in California If We Cannot Pay Our Debts

There are a few different options when it comes to repaying debt and getting your finances in order.

Negotiate with Creditors –

The first is to talk with your creditors and work to negotiate a lower payment. In some cases, you can talk with your creditors and then discuss what options for repaying less back. Your creditors may accept less if you pay back the amount at once rather than continuing to pay over time.

A good example would be if you owe $1200 and you are paying back a specific amount each month. Your creditor may accept less, $800 for example if you pay back the $800 all at once instead of paying over time.

Seeking Help from a Consumer Credit Counseling Agency –

Another option is that you talk with seek help from a consumer credit counseling agency. This is an agency that takes a monthly sum of money from you then negotiates on your behalf with the creditors to help get rid of your debt. Instead of your paying every month to various creditors, you would pay the counselling agency and then they would work with the debt collectors to help get your debts under control.

File for Bankruptcy –

You can also file for bankruptcy. This means that you would default on debts that you owe and then you would start over without those debts on the table. You cannot default on all loans, there are some types that you are not able to default on like student loans and government loans.

Taking the time to talk with a bankruptcy attorney can help you to figure out what debts you can bankrupt on, what debts you will need to reaffirm and what your new monthly payments will be.

Apply for a Student Loan Payment Plan –

If you are dealing with student loans, you can always work out a student loan payment plan. This will help you set how much you can pay each month so that you can stay on top of your payments and keep your debt under control.

No matter what debt you are dealing with it is always best to take the time to really consider what debts are the most important, what debt you need to pay back first, and how to best manage the debts that you are dealing with.

Consult with lawyer

If you need help deciding which action would benefit you the most, consider consulting with Berneman Law Firm. We have a team of debt relief lawyers to get more information. Otherwise, if you are thinking of filing Chapter 7 or chapter 13 bankruptcy in Los Angeles & Ventura County, California, then talk to our bankruptcy attorney.

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