For people with high debt amounts and low monthly incomes, they only have two options in terms of debt relief. One of them is bankruptcy and the other is debt settlement. There are specific instances wherein the two can be chosen to relieve a debtor of their debts. It all boils down to what you are willing to sacrifice.
The key to choosing the right debt relief option is to know the pros and cons of each. You need to know what type of program will suit the financial situation and capabilities of the debtor. Let us discuss each option so you can make smart choices for your debt solution. The goal is not just to get rid of debt but to make sure that you stay that way. Debt elimination is one thing - freedom from debt is another. Aim for the latter so you enjoy the fruits of your debt relief efforts.
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Bankruptcy is a dreaded word but sometimes, it is a necessary path to achieve debt freedom. However, you need to know the right chapter to file for to protect your properties and other assets. Some bankruptcy chapters can do this - like Chapter 13. However, that will require a form of repayment scheme - which is similar to debt settlement without the grave credit score effect of course.
This is why most people are aiming for a Chapter 7 bankruptcy. This form of debt relief discharges most unsecured debts like those acquired from credit cards, payday loans, medical bills and other personal loans. Debtors are now asked to take a means test that will analyze their financial situation to determine whether they are qualified to file a Chapter 7. The whole process begins with the submission of documents and several paperworks that will help define all your debts. A bankruptcy lawyer will help you with this. Debtors are not required to appear in court but they are required to submit documents in time. All wage garnishments and collection efforts will cease while you are in court.
The thing with a chapter 7 bankruptcy is it may endanger your property from being liquidated to pay off your debts. If you really cannot afford a repayment plan, this is a possible scenario that the courts may rule against you. Also, when you have filed for bankruptcy, you are not allowed to file again (at least for a certain period of time).
While this option is faster and can keep collectors away, the damages incurred by your credit score is sometimes not worth it. This is why debt settlement is the fast rising option preferred by most debtors. The idea is to lower your debts into a certain percentage of your outstanding balance. When you have paid for the agreed percentage of your debts, the rest will be forgiven. Unlike bankruptcy, this will not stop collectors from calling but if you hired a professional debt negotiator, they can take the calls on your behalf.
The thing about debt settlement is it can only work on certain debts like credit cards and other unsecured debts. If you will hire a professional to negotiate for you, this will come with a service fee - although that should be charged once there is proof of a successful settlement.
Unlike bankruptcy, debt settlement has no guarantee. That is why you need to put your trust in a debt settlement company that is reliable and trustworthy. The key is to educate yourself so you can select the right company to trust and you can monitor the whole process even while in the sidelines.
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