Finding relief from overwhelming debt

Many of us have experienced stressful life-changing events, such as job loss, divorce, serious medical concerns, failure of a small business, or death of a spouse. Any one of these events can stretch a budget to its breaking point, overwhelming one with debt.   

Does this describe you, or someone you know? If so, you do have options, but do not wait—the bills are not going to magically disappear. 

First, try to speak with your creditors. If they are inflexible about reducing interest rates or monthly payments, credit counseling may help. Experienced counselors can contact your creditors and try to negotiate improved terms that will enable you to pay off your debts, while still making an allowance for groceries and other essentials. They may even be able to get creditors to accept less than the total amount owed. Once your budget has been established and a repayment plan is in place, creditors will no longer hound you, provided you make your payments.

The counselor may recommend that you cut up your credit cards, and change your lifestyle, but the benefits are that you can pay your debts without further damaging your credit, or having to declare bankruptcy. [A note of caution: there are many debt negotiation scams conducted by unethical individuals and businesses to take even more money from unwitting consumers. Therefore, it is best to use a nonprofit service. Consumer Credit Counseling Services Inc. is the most popular and accessible.]

If the debt has become so large and unmanageable that even a consumer credit service cannot help, then filing for bankruptcy may be the solution. Bankruptcy allows individuals, couples and small businesses get a fresh start, free from most debt.  

Chapter 7 and Chapter 13 are the two most common types of bankruptcy. In a Chapter 7 bankruptcy, debtors are able to discharge most debt while retaining all or most assets, subject to income and asset qualifications. In a Chapter 13 bankruptcy, a debtor is responsible for repayment of debts in a predetermined plan that states how and when the debt will be repaid, usually at a monthly amount that is less than if the debtor had not declared bankruptcy.

The bankruptcy process occurs under the control of the Federal Bankruptcy Court. Regardless of the type of bankruptcy filed, the court will order an automatic stay at the time of filing. This stay will stop most creditors from further collection activity, which comprises the following:

  • Repossession - Bankruptcy prevents repossession once a case is filed. However, filing for bankruptcy will not result in the return of a previously repossessed vehicle.
  • Foreclosure – Filing either a Chapter 7 or a Chapter 13 will temporarily stop a foreclosure, and gives many debtors an opportunity to keep their houses. 
  • Wage Garnishments - The filing of any bankruptcy will stop wage garnishments.
  • Lawsuits – Creditors often sue debtors in court. These lawsuits are stopped when bankruptcy is filed.   
  • Evictions - A landlord may evict despite bankruptcy, particularly if a possession judgment has been made against an individual. The stay may delay the eviction for a short period in some circumstances.

There are certain debts that cannot be discharged, including child support, spousal support, and, except in limited situations, tax debts and student loans.

Bankruptcy can provide a fresh start for those in debt. A qualified bankruptcy attorney can guide you through the process and ensure that the details of your individual case are handled properly.

Margaret Montano

Margaret Montano is a bankruptcy and family law attorney with Gallup & Burns, LPA. Born and raised in Cleveland Heights, Montano moved back to the Heights after living in California for 13 years. Contact her at 216-621-4636 or

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Volume 6, Issue 9, Posted 11:41 AM, 08.06.2013