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When Does Debt Counseling Make Sense?

When Does Debt Counseling Make Sense?

by Altaf

Many of our clients come to us at a very late stage. Often then, bankruptcy can no longer be averted. Many people take action very late for various reasons. Some feel ashamed of losing control of their financial situation and others take a long time to even admit that they have lost track of it. 

Feelings such as shame, fear or false hope and also ignorance lead to the fact that many debtors suppress the situation for so long. Although portfolio recovery lawsuit is possible after bankruptcy, it is better to seek advice in advance. At the time of the initial consultation, we often have no other option than to advise bankruptcy.

When should you seek advice?

It is important to seek advice immediately. Only then can bankruptcy be avoided and you can take an alternative path of debt relief – for example that of an out-of-court settlement. Do not fall into a kind of paralysis and watch the mountain of debt keep growing.  

What if you don’t act?

It is this “paralysis” that keeps many consumers falling into debt. If you don’t know where you are, you can’t find a way out.

So the most important rule is: act!

First, get an overview of the situation. How much are your income and how much are your expenses? How many creditors do you have and with which creditors are you already in arrears? Because only those who have an overview can get the situation under control again. 

In a second step, you should seek professional advice to discuss how to proceed and your options.

What can you expect from an initial consultation?

As part of our free initial consultation, we will give you an initial assessment of your situation and show you the available debt relief options. We will be happy to answer any open questions you may have about the various debt relief options and discuss with you how we can support you with your debt relief.

In order to be able to carry out an initial consultation with you successfully and purposefully, we require some data from you. This enables us to better assess your financial situation. For the initial consultation, it makes sense if you can provide us with the following data: 

  • Debt level 
  • Number of creditors
  • Income situation 
  • Maintenance obligations 
  • other assets

Performance creep

The discharge of residual debts is also at risk if, in the last three years prior to the application for opening, loans or state benefits were obtained by fraudulent statements on one’s own economic situation.

Hiding an inheritance 

Any inheritance must be reported at any time during the procedure. How much of the inheritance has to be transferred to the trustee depends on at what point in the bankruptcy proceedings the inheritance arises:

  • At the beginning of the bankruptcy proceedings, an inheritance must be completely assigned to the trustee if you do not reject it.
  • Half of an inheritance is to be surrendered during the conduct of business period. Further explanations and recommendations for action on inheritance during bankruptcy proceedings can be found in our article on gifts, profits and inheritance in bankruptcy.

Violation of the obligation to surrender

The legislature has ordered that assets acquired in connection with an inheritance may be surrendered to the bankruptcy administrator or trustee. The same can apply to a gift and a profit from a game of chance. Our article The new obligation to surrender in bankruptcy proceedings will answer whether and to what extent an asset acquired in this context must be surrendered by the debtor.

Violation of the obligation to surrender

Preference for individual believers 

The bankruptcy procedure follows the fundamental principle of equal treatment of creditors. This is already clear in § 1, according to which all creditors should be satisfied as best as possible through the bankruptcy proceedings. And § 283c even makes the deliberate satisfaction of creditors a punishable offense. It can therefore be explained why the debtor may no longer satisfy the claims of individual creditors or grant them securities when the bankruptcy begins. 

Failure to reimburse the trustee 

In § 298, the legislature wants to ensure that the trustee does not accompany the bankruptcy proceedings over a longer period of time without remuneration. As a rule, the minimum remuneration is covered by the amounts paid. If this is not sufficient in the very rare case, the remuneration has to be made from the non-attachable part of the income.

Legal protection for the debtor 

If you have been denied the discharge of your remaining debts, you are not defenseless. The law gives the debtor legal remedies at various points in the law. Which ones come into question for you depends on the respective alleged violation. The chances of success of a complaint against the refusal are different for each individual case. We would be happy to check this for you!

Legal protection for the debtor

When should you seek the advice of a credit counsellor?

There are several possibilities. Consider the following example:

  • It’s a good idea to seek free guidance and services if you’re having trouble making your monthly credit card and/or mortgage payments, are considering bankruptcy, or just want help creating and reaching your financial objectives.
  • You may be a good candidate for a debt management plan managed by the credit counselling organization if you are seeking or have been denied a consolidation loan for your unsecured debt (such as credit cards and personal loans).
  • A credit counsellor can help you with pre-purchase counselling if you’re thinking about buying a house.
  • If you’re having trouble paying your bills, a credit counsellor can help you navigate the crowded debt-relief market while avoiding frauds and damaging your credit score.

What are the benefits of consulting with a credit counsellor?

Your credit counsellor will listen to your financial objectives before gathering information to assist you in organizing your money, developing a budget, and developing a specific action plan to achieve your objectives. Most customers’ housing goals, such as buying a house, obtaining a reverse mortgage, or avoiding foreclosure, generally entail improving their credit, repaying debt, or fulfilling their housing goals.

The counsellor may retrieve your credit report and provide a thorough analysis, in most cases including your FICO credit score, as well as pointing out errors to dispute, potential dings to avoid, and strategies to enhance your score. Following the review, your counsellor will give recommendations for future actions and appropriate referrals to local resources for assistance with specific difficulties you may be experiencing. Referrals might be for things like utility or down payment help, local grants, free or low-cost health or dental clinics, instructions on how to file for financial assistance on a medical bill, and many other things. This initial consultation is completely free of charge and without commitment.

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