The Benefits and Detriments of Personal Bankruptcy vs. Debt Settlement  

         With the recent recession, many people are facing all kinds of financial problems. They are unable to pay their debts and this, in turn, is negatively affecting their credit ratings and scores. In a situation like this, it is common for a person to take any offer that comes his or her way.

         Some people claim that bankruptcy is the way forward to get out of a financial mess, while claim that debt settlement is the right step to take.

         Majority of people have some information about bankruptcy. The most common Chapters that a person can file bankruptcy under are Chapter 7 and Chapter 13. However, bankruptcy laws can be difficult to understand if you do not have a proper information and knowledge. This is the reason why people often file for bankruptcy using the services of a bankruptcy lawyer.

         If a person files for Chapter 7 bankruptcy, practically all the debts are discharged. This means that person is not under any obligation to pay his or her dues. However, each case is taken on its own merits and the court has the final say. One thing to note is that filing for Chapter 7 bankruptcy does not get rid of any liens and all the assets that come under the heading of non-exempt can be used to pay up all the creditors. However, the statutes governing exemptions are pretty lenient and a person can end up keep nearly all of the assets and discharging majority of the debts.

         Most people have to devise a payment plan as they usually do not or cannot qualify for Chapter 7. The reason for this is very simple. The person's income is too high for him or her to file for Chapter 7. Sometimes, the person does not want to lose the non-exempt assets. In these two cases, the only alternative for the person is to file for Chapter 13 bankruptcy. The payment plan can be anywhere from 3 years to 5 years and a certain amount of the person's income is made towards the repayment. The payments are then made to a trustee, who disburses the same to the creditors.

         Whether you are filing for Chapter 7 or Chapter 13, you should seek advice of an experienced bankruptcy lawyer. Remember, bankruptcy can spoil your creditworthiness and it will take 7 long years to get it removed from your credit history. In the mean time, you will not qualify for any credit or loans. Though bankruptcy allows you to make a new financial start, the climb can be a tedious one.

         The other option for a person facing financial difficulty is debt settlement. Today, there are several companies that offer this service. If you are facing problems in paying your debts on a monthly basis, you can get in touch with one of these companies. Once you sign up with one of them, the debt settlement company will work on your behalf to reduce the interest rate on your loans and credit bills. Then it will consolidate all the payments into one single monthly payment that has to be made to the company, who, in turn, will pay the creditors and lenders. However, if the pending balance is very high, the company will negotiate with the lender or creditor to settle the debt by accepting a lump sum payment. The debt settlement industry is unregulated and a creditor is not compelled to accept any deal made by the company. Therefore, it is prudent to check out the debt settlement company thoroughly before using its services. Make sure that the company is run by a qualified and licensed person. Also, find out all the fees that the company charges for handling your account.





The Benefits and Detriments of Personal Bankruptcy vs. Debt Settlement

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