Debt settlement and bankruptcy are both viable paths to debt relief. They can reduce and, in some cases, eliminate your debt, but each involves different processes that come with benefits and drawbacks. Learn about some key differences between these two types of debt relief to find the solution best suited to your situation.
With debt settlement, you negotiate with the creditors of your unsecured debt to reduce the amount owed. You then set up a repayment plan for the remaining balance.
Unlike bankruptcy, debt settlement is not a legal process handled by the courts, though a lawyer can represent you in negotiations with creditors. Settlement is ideal for people with a consistent income, as making regular monthly payments will be a part of the settlement agreement.
Depending on the agreement and the amount of money owed, you can completely settle a debt within a short timeframe, usually a few months to two years. A settled account can stay on a credit report for up to seven years.
Consumers can file for either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 eliminates most unsecured debts, while Chapter 13 restructures them into a long-term repayment plan. Both involve filing a legal case with the courts and having a bankruptcy trustee oversee the process.
Chapter 7 is better for individuals who aren't working or don't have extra income to devote to a repayment plan every month. Chapter 13, which offers debt relief in a similar way to settlement, allows for longer-term repayment, typically over three to five years, so regular income will be necessary. All bankruptcy filings remain on a person's credit report for up to 10 years.
The decision to settle a debt or file for bankruptcy is a major one that will affect your finances now and in the future. Greg Dunn, Bankruptcy and Debt Relief Attorney, will help you explore all your options and find the one that offers the most benefits. Since 1996, Attorney Dunn has provided debt relief guidance to clients throughout the Honolulu, HI, area. Whether assisting with bankruptcy and debt settlement or addressing foreclosures and wage garnishments, he will help get you on the road to financial stability. Call (808) 524-4529 or visit his website to find out more about his services.