When people get into financial trouble, they seek out information from a variety of sources – many people want to compare bankruptcy vs debt settlement. If your credit card debt is starting to get out of control, then you may be looking for answers of your own.
One of the most common pieces of advice people get when it comes to overwhelming credit card debt, medical bills, cash advance loans, lines of credit and collections notices is to declare bankruptcy. It can be easy to say that you should declare bankruptcy, but actually doing it is a completely different story.
Bankruptcy – What It Means
Bankruptcy is something that you file with the U.S. Bankruptcy Court. It is a legal procedure that is designed to give you a program to pay your debt to as many of your creditors as possible. It is something that stays on your credit profile for up to 10 years and can prevent you from qualifying for certain kinds of jobs or getting approval for a mortgage.
One of the most popular myths about bankruptcy is that all of your debt is magically forgiven and you get to start over again. The reality is that the bankruptcy court sets up an account that you pay into that pays your creditors back.
The court gives all of your creditors a chance to submit payoff amounts for each account, and then the court sets up your repayment account. Some debts are discharged, but not all of them.
Another myth about bankruptcy is that you lose everything you own to pay off your debts. The truth is that some of your possessions are liquidated, but each state allows for certain items to be exempt from the proceedings. You will need to talk to a bankruptcy attorney to find out what is exempt.
The Bankruptcy Process
In order to file bankruptcy, you have to pay a lawyer and you have to pay court filing fees. You also have to take a debt counseling course from a federally certified debt counselor that you also have to pay for.
The process can take months, and you have very little control over the outcome. Whether you like the outcome or not, you must make your court-appointed payments each month or risk further legal action.
The Debt Settlement Alternative
A better alternative to bankruptcy is debt settlement. The reason that people file for bankruptcy in the first place is because they cannot afford their debt payments. A professional debt negotiator can reduce your debts by as much as 50 percent and get you into a debt reduction program you can afford.
The Debt Settlement Process
Debt settlement is much different than consolidation. A debt consolidation program requires a loan to pay off all of your debt. You will either need good credit or a lot of collateral to qualify for a consolidation loan. In the end, you are still left with the same amount of debt that you started with.
The debt settlement process goes right to the heart of the problem and negotiates low payoff balances with all of your creditors. Then, your debts are put into a payment plan that you pay into once a month.
No Credit Required
There is no need to qualify for a debt settlement program because there is no credit application required. Even people with the worst credit scores will qualify for this kind of assistance.
No Credit Hassles
The initial impact of a debt settlement account brings your credit score down. But your credit profile recovers quickly because your debt to income ratio has been drastically changed. You will find that your credit score will start climbing in a very short period of time.
Get The Things You Need
A debt settlement account is not a red flag on your credit profile that remains in place for years. The settlement account is normally paid off within two to four years, but you can start rebuilding your credit well before the account is paid off.
A bankruptcy stays on your credit for up to 10 years, and the average consolidation loan lasts between seven and 10 years. A debt settlement account will last only a fraction of that time and will help you get rid of your debt.
Bankruptcy Vs Debt Settlement
In the end, debt settlement is the smartest route to take. Your debt is reduced without the need for official court procedures, and you can begin rebuilding your credit immediately.
A debt settlement account will not prevent you from qualifying for a job and, after you have started to rebuild your credit, it will not stop you from getting a mortgage either. It is the smart alternative to the extreme solution of filing for bankruptcy.
Call us today, and let us do a comprehensive analysis of your personal finances to show you how we can help you avoid bankruptcy.