When the collection calls and letters won’t stop interrupting your daily life, it’s time to take action and better your financial future. But, which path is best for your situation—bankruptcy or another debt relief option? If you’re struggling to see a way out of the mess, use the following guide to gain insight.

The Difference Between Bankruptcy & Debt Relief Options

What Is Bankruptcy?

The bankruptcy process is carried out by the federal government. There are two main types of bankruptcy—Chapter 7 and Chapter 13. Chapter 13 bankruptcy allows borrowers to create a payment plan, so they can reimburse lenders at an affordable pace. This can take anywhere from three to five years, during which you can keep your home. Before it can be removed, it stays on your credit report for seven years.

Chapter 7 bankruptcy is more extreme, as it completely eliminates your personal debt and stays on your credit report for 10 years. You likely won’t be allowed to keep your property, as it can be sold to reimburse your lenders. To qualify for Chapter 7 bankruptcy, you have to make under a certain amount of money a year.

What Is Debt Relief?

If you opt for debt relief, you can enter negotiations with your lenders, who will allow you to pay less than what you owe; this is because creditors know you can always file for bankruptcy, and if you do, they won’t be able to collect any funds from you. To settle a debt, you’ll have to make one large payment. This may require you to stop paying back your debts in small chunks, which can lower your credit score and raise your interest charges even further.

How Do They Differ?

The main difference between bankruptcy and debt relief options is the privacy—bankruptcy publicly involves the court, while debt relief is handled privately between creditors and borrowers. Also, bankruptcy is a faster process that takes a longer time to recover from. During those seven to 10 years, it will be harder to apply for a lease, get a loan, and do other activities that require a credit score assessment. While debt relief might take a while to negotiate and pay off, you can escape the hassle with a much higher credit score.

If you believe that bankruptcy or other debt relief options are right for you, turn to Law Office of James B. Mallory III today. This Statesville, VA, lawyer has over 28 years of experience in this practice area, helping clients find the fresh financial starts they crave. Whether you’re interested in Chapter 7 or Chapter 13 bankruptcy or debt help, call (704) 872-1911 to schedule a free consultation. You can also visit the website to learn more about his offerings.