Creditor calls, piles of bills, declined cards—if you are dealing with debts, you may be wondering how you will ever get back on your feet financially. Luckily there are some tools to regain stability. Bankruptcy and debt settlement are two popular options. Here is a brief guide to each one to help you choose the right one.
Most people assume that debt isn’t negotiable. In fact, debt settlement lets you get back to stability faster by asking the creditor to accept less than what you owe. With strong negotiating—usually best left to a lawyer—it’s possible to settle for as little as 35% of the total balance.
Creditors engage in debt settlement because it allows them to get a definite, secure payment on at least part of what you owe. They may make a counteroffer in response to your initial request but that doesn’t mean they aren’t interested. If you come to an agreement, you may have to make one lump sum payment or several smaller payments in the near future—just make sure you have funds on hand.
The most common types of personal bankruptcy are Chapter 7 and Chapter 13. Chapter 7 bankruptcy focuses on liquidation. Your assets are sold to pay off creditors and then your remaining debts are discharged. The filing stays on your credit report for ten years.
Chapter 13 bankruptcy focuses on restructuring. The debts are reorganized into more manageable payment plans. After four to five years of regular payments, the remaining debt is discharged. The filing stays on your credit report for seven years.
Which Option Is Best for You?
This depends on your personal circumstances. For instance, Chapter 7 bankruptcy has an income limit, so if you earn over a certain amount of money, you don’t qualify. Preferences also play a role. Debt settlement is less damaging to your credit, which some people find favorable.
A lawyer dealing with bankruptcy and debt restructuring can advise you on the best choice to suit your needs. If you decide to go ahead with one of these options, they can handle the necessary paperwork and negotiations.
Located in Dothan, AL, The Gil Law Firm helps clients in Alabama, Florida, and Georgia get out of debt. Rafael Gil III and his fellow attorneys have successfully represented thousands of clients. Find out more about their bankruptcy services online. For an appointment, call (334) 673-0100.