At Westgate Law, we keep receiving queries from people struggling to manage their debts. They’re all searching for solutions and look to us in times of need.

Recently, we received a thought-provoking query from Mary, grappling with a complex debt situation. Her scenario is not uncommon; thus, we shed more light on such financial dilemmas. If you relate to her situation, here are the potential solutions.

Mary’s Financial Struggle

Mary is facing a daunting financial situation. She approached us with a multi-layered debt issue:

• Old Debt: $13,000 (About 5 Years Old)
• Current Debt: $7,000 (From Credit Cards)
• Back Taxes: $1,700
• Pending Lawsuit: $2,800 (With Steep Penalties and Interest)

She states, “I feel so overwhelmed I can’t keep current on monthly bills (utilities, car payments). Can you please advise what may be my best option? Chapter 7 or 13 or credit counseling?”

Assessing the Options

Mary’s situation is complex and stressful. And we’re inclined to say that none of the options she’s mentioned would help her. Let’s study each scenario in detail.

ü  $13,000 – Old Debt

Mary’s dealing with an old debt that might have surpassed the statute of limitations, potentially freeing her from the legal obligation to pay.

Generally, creditors have 4 to 5 years to sue you for an outstanding balance. This period begins on the date of the last debt payment or the last time you used the credit card. If the statute of limitations has run on these debts, you’d want to avoid paying even a single penny.

Once you’re over the statute of limitations period, we’d only advise people to pay back this debt if legally required. If you do otherwise, it’ll be a complete disaster and begin the statute all over again.

ü  $7,000 – Current Debt

For Mary, staying current on these payments could allow her to opt for credit counseling and debt consolidation. Managing her payments on time is the key!

If you’re in a similar situation, you can consolidate the debt and make one monthly payment to the credit counselor, who will mail a payment to each creditor. It’s a viable option, but only if all the creditors are included in the credit counseling plan and you can comfortably afford the payment. It allows you to tackle your debt situation more strategically.

ü  $1,700 – Back Taxes

While bankruptcy might offer Mary a way to discharge this debt, it would depend on specific criteria.

If you’re in this situation, you can always speak to a bankruptcy attorney to understand if these taxes can be eliminated under Chapter 7. Filing for bankruptcy only to clear the tax debt won’t help. We suggest that you continue your existing payment arrangement with the tax authority. Although you’ll incur ongoing penalties and interest, these additional costs may still be less burdening than the fees and ramifications of a Chapter 13 bankruptcy.

ü  $2,800 – Pending Lawsuit

Unfortunately, this debt can prove disastrous for Mary. This pending lawsuit would have a significant risk of escalating to wage garnishment or bank levy, potentially forcing Mary into bankruptcy.

If the creditor obtains a judgment, Mary will have limited time to work on her payment plan. They might attempt to levy her bank accounts and garnish her wages. This is why bankruptcy sounds more reasonable.

It’s also crucial to determine the monthly payment required by the judgment creditor, as it can simplify decision-making and influence the ability to manage other debts.

Seek Professional Help with Westgate Law

Dealing with debt can be daunting, but you don’t have to do it alone. Westgate Law is here to provide expert advice and support throughout the process. If you’re facing a situation similar to Mary’s, we can help you explore all avenues. We can tailor our guidance to your unique situation, ensuring the best possible path to financial stability.

Contact Westgate Law and let’s together find the best path forward in your financial journey.