Debt Negotiation And Consolidation Assistance

Debt consolidation consists of taking one loan to pay off several much smaller loans, often at a much lower interest rate. The benefits include:

  • One monthly payment
  • An improved credit score
  • Interest accruing at a lower rate
  • Lower total monthly payments

Debt consolidation typically involves paying off numerous credit cards through a consumer loan from a bank, credit union or similar institution. Often, the lender requires security for the loan, such as a second home mortgage or collateral ― a car, boat or recreational vehicle. Debt negotiation can occur when a creditor sells the debt to a factoring company (a company that buys debt at a deep discount hoping to profit), and the factoring company accepts a compromise settlement from the debtor.

Debt consolidation must be started early ― while the credit score is sufficiently high and the debt-to-income ratio is low enough to qualify for the consolidation loan.

Debt negotiation involves negotiating a substantial reduction in the payoff of debt. The lender considers the debtor's ability to pay and their risk of default, and recognizes the benefit of a certain payment.

In some instances, debtors hire third parties to negotiate debt settlement on their behalf. Debtors send payment each month to the negotiator who keeps a portion for payment of fees and sends the rest to the creditors. In some cases, the negotiator retains the money until a substantial sum is accumulated and then negotiates and pays one creditor at a time on the basis that the settlement will be paid promptly. In other cases, the negotiator negotiates with all creditors upfront and sends a prorate amount to each creditor monthly.

Debt negotiation works best for people who have a relatively small number of creditors, each of which has relatively high balances, and when the debtors have take-home income substantially greater than their living expenses.

Debt negotiation can be risky. If any creditor refuses to "play ball" or gets anxious, the creditor can sell the debt to a debt buyer or sue the debtor, which will take the debtor's available income away from the negotiation plan. All previous payments will be lost and the debtor will be forced into a bankruptcy anyway. A Chapter 13 bankruptcy acts like debt negotiation, except that the creditors are forced to accept the settlement. Creditors cannot refuse to accept the reduced payoff.

Debt negotiation can also result in a tax obligation. The forgiven debt is treated as income to the debtor unless an exception to taxation applies. Before entering into debt negotiation, the debtor should consult with a knowledgeable tax preparer or attorney to understand any potential tax ramifications.

Post-Bankruptcy Services

The bankruptcy code provides for discharge of debts in a Chapter 7 bankruptcy and following successful completion of a Chapter 13 plan. However, there are a few issues that remain to be resolved following discharge.

Removing Judgment And Liens

Although the bankruptcy discharges the underlying debt, judgments continue to encumber real property, and IRS liens remain in force to the extent of the value of the debtor's assets. The attorneys at Hess & Jendro Law Office, P.A., can quickly and inexpensively remove judgment liens through the state courts in which the judgment is filed. We also can negotiate the satisfaction of IRS liens on your behalf.

Loan Modification Or Settlement

Programs such as HAMP and HARP assist homeowners in modifying the interest rate on their home mortgage loans. Homeowners who attempt loan modification often find the process very frustrating and slow. Lenders can be difficult to work with ― insisting on strict deadlines from the homeowner, while taking a great deal of time to act themselves; demanding exact information; repeatedly demanding the same information; and looking for reasons to deny the modification request. The attorneys and staff at Hess & Jendro Law Office, P.A., understand the program requirements and qualifications, and have considerable experience in gathering and presenting the documentation necessary to qualify for loan modification. We have successfully assisted numerous homeowners in obtaining considerable reductions in their monthly payments and substantial savings over the life of the loan.

What Is A Lien Strip?

If your home has a market value less than the payoff of your first mortgage, your second mortgage can be treated in a Chapter 13 as an unsecured loan. Following successful completion of your Chapter 13 plan and discharge of debt, the attorneys at Hess & Jendro Law Office, P.A., can help you obtain and record satisfaction of the second mortgage lien or void the second mortgage altogether.

Restoring Your Credit

As a free service to our clients, the attorneys at Hess & Jendro Law Office, P.A., provide advice and guidance on improving or restoring your credit score. We want you to qualify for a mortgage loan, car loan or other credit at reasonable interest rates as soon as possible. We also work with people who specialize in improving credit scores. This enables you to effectively reduce expenses and manage debt following bankruptcy.

Contact Us To Find Out More About Debt Assistance

Call our office in Elk River at 763-200-6626 or use our online intake form. We serve clients in the northwestern part of the Twin Cities as well as Central Minnesota. Our lawyers are available to answer your questions, even by appointment on nights and weekends.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.