Debt Negotiation Attorneys
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DEBT NEGOTIATIONS ATTORNEyS IN SOUTHERN CALIFORNIA
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A debt settlement involves negotiating directly with creditors and lenders to agree to a lesser amount owed by the debtor. Lenders and creditors are inclined to participate in debt settlements because they understand that if debtors cannot pay their bills, this may lead to bankruptcy, in which some cases creditors may not receive anything.
Using debt negotiations is also beneficial because it may prevent high litigation costs. When debt begins to accumulate, debtors often find themselves unable to make regular payments, which is not in their best interest. This made lead to collection lawsuits, in which creditors have a right to sue when debtors are in default. This will result in penalty fees, litigation costs, and possible tax ramifications. Repossession, foreclosure, and other collection actions will be time-consuming for not only debtors but lenders and creditors as well. Debtors must also be aware of tax consequences and ramifications of debt settlements. An experienced attorney will be knowledgeable of the fact that any amount of a loan which if forgiven is considered by the IRS to be taxable income. This means debtors have to pay taxes on the amount which was discounted from the debt. Debts discharged in bankruptcy, on the other hand, are not treated as taxable income, so there is no tax liability on any amount forgiven in bankruptcy.
It is important to note that debtors may have multiple creditors and lenders. Debt settlements must be negotiated with each lender and creditor individually, and there are no guarantees payments may be deferred due to a debtor’s obligations to other creditors. Each debtor will require either modified payments or a lump sum payment. Many debtors do not have access to income or assets to pay off debt all at once. For this reason, it is vital to obtain legal assistance. Experienced attorneys can help organize debt obligations and create negotiation plans to the benefit of the debtor.
Additionally, attorneys can help protect debtors from the behavior of lenders and creditors. Lenders and creditors can be very aggressive and often engage in harassing behavior which can cause stress to debtors in addition to the overwhelming burden of outstanding debt obligations. Fortunately for debtors, the Federal Government and the State of California have recognized such behaviors and created legal protections for debtors.
For debtors, whether bankruptcy rather than debt settlement may be a more advantageous option. Debtors can reduce their debt by the same amount or greater in bankruptcy, or even have the debt discharged altogether. While there are several factors to determine if filing for bankruptcy is the best option it is important to note the difference between the types of bankruptcy. Doing so will help debtors assess how bankruptcy will impact their financial situation.
Chapter 7 is the most common bankruptcy because it allows debtors to “erase” many types of debts. This chapter is reserved for low-income debtors and allowed them to wipe out most types of unsecured debts, such as credit card debt, medical debt, utility bills, and taxes for specific ages. Chapter 7 Bankruptcy is also known as the “liquidation bankruptcy” because a bankruptcy trustee is responsible for liquidating assets (if any) and using the proceeds to pay off creditors as much as possible. Certain debts are not dischargeable in bankruptcy, such as child support, spousal support, recent taxes, student loan debt, tort claims, criminal fines, and contractual purchases that involve land or automobiles.
Chapter 13 is known as the “Reorganization” bankruptcy. Chapter 13 is designed primarily for homeowners who have fallen behind on their mortgage payments but currently have enough income to make mortgage payments. Individuals may choose to file for Chapter 13 Bankruptcy as their income level may not allow them to qualify for Chapter 7 because their income is too high. Under Chapter 13, debtors develop a “reorganization” plan which details payments plans to relieve the debt over a period of three to five years. Depending on a debtor’s income level and type of debt, payments can account from anywhere between 10 and 100 percent of the debt incurred. Like Chapter 7, certain debts can’t be reduced or eliminated with Chapter 13, and this includes child support, spousal support, tort claims, and criminal fines.
Chapter 11 is also known as “Reorganization” bankruptcy. Chapter 11 Bankruptcy is filed by individuals with over a million dollars in debt. Additionally, businesses filed for Chapter 11 bankruptcy with the same amount of debt in an effort to remain open. Chapter 11 Bankruptcy is typically very advantageous because it allows to keep their assets and continue to keep businesses open as their debts are reorganized so creditors can be paid off.
The Federal Fair Debt Collection Practices Act and California’s Rosenthal Fair Debt Collection Practices Act protects debtors from abusive, unfair, or deceptive practices by debt collection agencies.
See 15 U.S.C. §§ 1692-1692p; Cal. Civ. Code §§ 1788.
California Rosenthal Fair Debt Collection Practices Act protects from harassment from collection agencies, original creditors and repossession agencies. California Rosenthal Act incorporated substantive provisions of the FDCPA, including those dealing with false misrepresentations, threats, harassment and unwarranted communications with persons other than the actual debtor. Specifically, the California Rosenthal Fair Debt Collection Practices Act expansive definition of “debt collector” includes anyone “who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection”. Cal. Civ. Code §§ 1788.
Although California debtors have protection under both the FDPCA and the California Rosenthal Fair Debt Collection Practices Act, it is important to both laws do not cover all debts. The FDCPA and the California Rosenthal Fair Debt Collection Practices Act limit protection to personal debt, family debt, or household purposes (consumer debt). Neither the FDPCA nor the California Rosenthal Fair Debt Collection Practices Act applies to business and commercial debts, even when a business debt takes the form of a personal loan. Additionally, alimony, child support, criminal fines, and tort claims are not generally covered by either law.
Additionally, The Federal Fair Debt Collection Practices Act and California’s Rosenthal Fair Debt Collection Practices Act, debtors may sue debt collectors, creditors, and collection agencies for violating any part of said laws by engaging in harassing behavior such as threatening litigation, calling at all times of the day, or continued contact with debtors have they have requested to stop. Debtors may not be privy to this the applicable sections of the Federal Fair Debt Collection Practices Act and California’s Rosenthal Fair Debt Collection Practices Act. An experienced attorney can help debtors determine if they need to file a suit under both laws, third party lenders, original creditors, collection agencies, and other individuals.
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Arcstone Law was established as a Foreclosure Defense Law Firm helping homeowners sue the banks after the mortgage meltdown of 2008. During that time the efforts of our lawyers were recognized and published by the State of California as precedence for other attorneys to rely on. Today our team of lawyers have grown, and our practice areas now include contract law, purchase/sales, quiet title litigation, partition actions, bankruptcy, eviction law, probate, divorce law (where Real Property is at issue) estate planning, business law and personal injury.
We focus everyday on providing high quality legal representation for our community and we dedicate ourselves to our clients and their cases. Whether you need legal assistance in Eviction Court, Probate Court, Federal Court, Bankruptcy Court or Appellate Court, there is no challenge that our experienced legal team is not ready to assist with. We have won thousands of cases and obtained millions of dollars in judgments and settlements for our clients. Call us today to schedule your consultation with a licensed attorney.