Debt Relief Options In Wisconsin
Jul 29, 2020
When are you trying to figure out the best way to manage your debt, it is wise to look into all your options before making a decision. Not all debt relief options are right for everyone. Let’s explore the most common ways to take care of your debt in the State of Wisconsin.
A consolidation loan from a bank or credit union can be a good option to handle a smaller amount of debt. The bank or credit union loans you the amount of money you need to pay off your debt and then you have one monthly payment to your bank or credit union, typically, at a better interest rate than the average credit card rate. If you have poor credit or are dealing with a large amount of debt, you may have a hard time getting a consolidation loan without putting up an asset you already own as collateral. If you cannot pay the loan, you risk losing that asset. Plus, if your consolidation loan is at a credit union, you may be attaching that loan to your auto loan and bank accounts without realizing it; it is called cross-collateralization. To find out more read our blog, Bank Accounts and Bankruptcy.
USE YOUR HOME EQUITY
If you are lucky enough to have equity in your home, you may be able to take that equity out of your home to pay off your debt by refinancing your mortgage or taking out a home equity loan. We do not recommend taking unsecured debt that could be discharged in bankruptcy and turning it into secured debt. However, if you do not qualify for bankruptcy and no other debt relief options work for you, it is an option. Just remember if you do not keep current on your payments, you could lose your home.
Many people choose to borrow money from their 401(k) to pay off debt and it can be a decent option if you are not planning on retiring any time soon. The interest rate on 401(k) loans is lower than the average credit card and the interest you pay is to your own account. Make sure the amount you borrow is large enough to pay off your debts, you are aware of any early withdraw penalties, feel confident that you have job security and will be able to repay the loan to avoid tax consequences that cannot be discharged in bankruptcy.
DEBT MANAGEMENT PLAN
A debt management plan is not a loan, it is a program that combines several debts into one monthly payment. It is a program to pay back your unsecured creditors, such as credit cards, over a long period of time, typically 3 to 5 years. The debt management company works with your creditors to reduce your monthly payments by negotiating a lower interest rate or extending the amount of time to pay off your debts for a fee. It can be a helpful way to manage your debt. Please note, debt management companies have no legal ability to force a creditor to work with them or to stop a creditor from garnishing your wages, but a Section 128 can. Check out our blog, Wisconsin Section 128 vs Debt Management Plans
A Wisconsin Section 128 is a repayment plan of your debts through the Wisconsin state court for a 3-year period at 0% interest. Zero percent interest! Once your case is filed, the court orders your creditors to stop the interest from accruing on your debts and stretches your debts over a three-year period. Your creditors listed in the Section 128 are also ordered to stop harassing you and cannot garnish your wages. If your wages are currently getting garnished, the creditors must stop the garnishment once your case is filed. A Section 128 is a great solution to handle high interest debts and stop wage garnishment.
CHAPTER 7 BANKRUPTCY
If the amount of debt you have is more than you can repay, a Chapter 7 Bankruptcy could be a good option for you to wipe out your debt and give you a fresh start. A Chapter 7 Bankruptcy can get rid of your unsecured debts, including credit cards, medical bills, pay day loans, money judgments and unsecured loans. You can also choose what secure loans, such as home, vehicle, boat, and camper loans, you want to keep. If those secured loans are a burden, you can also choose to surrender the property and no longer be responsible for those loans. A Chapter 7 Bankruptcy also stops garnishments. If you are unable to file a Chapter 7 Bankruptcy or you are trying to save a house from foreclosure, you can look at a Chapter 13 Bankruptcy.
CHAPTER 13 BANKRUPTCY
A Chapter 13 Bankruptcy is a great way to save a home or vehicle that is in default. Falling behind on a home or car loan due to job loss is very common right now. Once you return to work it can be hard to get caught up again. A Chapter 13 Bankruptcy will stop foreclosure or repossession and allow you to take the amount you are behind and repay it over a 3 to 5-year period. A Chapter 13 Bankruptcy will also take care of your unsecured debts, stop a garnishment and is a great solution for repayment of back taxes.
Dealing with debt can be overwhelming and sometimes you don’t know what to do, so you do nothing, and the problem just gets worse. At Pedersen Law Office, LLC we understand how stressful being in debt can be; that is why we offer free consults. We will discuss your circumstances and goals and help figure out what option is best for you and help you through the entire process.