Debt Settlement Or Filing For Bankruptcy: Pros & Cons
Which Of The Most Common Debt Resolutions You Should Take
It’s never easy to struggle with debt. No matter what decision you make to resolve the situation, you may feel stressed and overwhelmed. Two of the most common debt resolutions are options are debt consolidation and filing for bankruptcy. Each of these options has its own benefits and drawbacks, with different processes and outcomes. Neither solution is always the right choice for everyone, so it’s best to consult with a Reno bankruptcy law office before making any decisions.
The Basics of Debt Settlement
Debt settlement usually enables you to pay off a debt for less than you actually owe. You, or a representative working on your behalf, will negotiate with your creditor to lower the debt in exchange for a lump sum payment. Once you’ve paid off the negotiated amount, your debt is reported as settled or paid. Many creditors are willing to work with debtors on settlements because they get at least some of their money back. If you file bankruptcy, they may not get any payment.
You can either settle debts yourself, or hire someone to do the negotiating for you. It can be helpful to have a professional do the negotiating for you, but you’ll need to be wary of scams. Consult the Better Business Bureau, Consumer Financial Protection Bureau, and your state attorney general’s website to find a reputable debt settlement company.
If you choose to go this route, you’ll need to have enough money on hand to make a large payment. Most settlement companies will require you to give them the money that they will then hold in escrow and use to make a settlement offer with your creditor(s). However, remember that not all creditors are open to debt settlements and some will not work with third party settlement agencies.
Pros & Cons Of Debt Settlement
Like anything else, there are pros and cons to debt settlement. Ultimately, you’ll end up paying less than you owe so you are free to focus your time and money elsewhere and stay current on your other bills. You’ll ultimately be relieved of financial stress and be able to make a clean start.
Negatively, debt settlement may not be the best option for everyone. Debt collectors will continue to contact you until your debts are settled, and you can’t pursue this option until you’re several months behind on your bills. You’ll end up paying late fees and increased interest rates, and get a reduced credit score. Also, many people who are struggling with debt can’t come up with a large lump sum of money at one time unless they are able to sell their home or make another significant financial decision. Occasionally, a creditor won’t want to settle and may even sue you; in some cases, you may even have to pay income taxes on the canceled debt.
The Basics Of Bankruptcy
Another option for significant debt is to file bankruptcy with a Reno bankruptcy attorney. Arizona recognizes two types of bankruptcies, Chapter 7 and Chapter 13. These have different outcomes and implications. To file Chapter 7, which is most common, you’ll provide information about your income, expenses, assets, and debts, with plenty of documentation. This type of bankruptcy will erase debts such as credit cards, medical bills, car loans, personal loans, payday advance loans, and utility bills, along with judgments from credit card companies and debt collection agencies. You will still be liable for child support, alimony, student loans, and government debts. In many cases, you will need to forfeit property such as real estate or vehicles, which will be sold to pay your creditors.
Reno Chapter 13 bankruptcy enables debtors to keep their home and property. You’ll work with a bankruptcy trustee to create a payment plan for your debts that fits your income. After 3-5 years of consistent payments, the remainder of your debt will be discharged. Chapter 13 is an option for people whose income is too high for Chapter 7 or who want to keep their home and assets in their possession. A Chapter 13 bankruptcy will only remain on your credit report for seven years, while a Chapter 7 bankruptcy will remain for 10 years.
Pros & Cons Of Filing For Bankruptcy
Bankruptcy can be a good option for some people, but isn’t the best choice for everyone. A Reno bankruptcy lawyer can help you sort through your options. The advantages of bankruptcy are that your debts are completely eliminated either immediately or at the end of 3-5 years, giving you a fresh financial start. Bankruptcy may be a good option if you do not have a lump sum of cash for debt settlement. However, if you file Chapter 7, you are likely to lose your bank deposits, property, vehicles, and even money that you may inherit within a certain time frame. A bankruptcy also remains on your credit record for 7-10 years, making it difficult for you to obtain a loan or purchase a home.
Get Legal Advice On Whether Bankruptcy Is Right For You
If you are struggling financially, contact the attorneys at Zero Down Bankruptcy Lawyers of Arizona. Our trusted firm is ready to provide immediate representation. We understand the stress that comes with overwhelming debt and will be by your side throughout the process. Call our office today or fill out the contact form on our website to schedule you no-obligation, free consultation!
Zero Down Bankruptcy Lawyers Of Reno