When you are in debt, you might want to do anything you can to get yourself out of the trouble you have created. You might have been doing fine with your payments and they a medical emergency or another expense popped up, throwing you into a cycle of debt that you just can’t get out of. Debt settlement and bankruptcy are both options that you might consider. It’s wise to take a look at debt settlement vs bankruptcy to see which might be a good solution for your issues.
What Is Debt Settlement?
If you are considering debt settlement, you will likely work with a professional company that can help you with the process. The first step they will have you take is to stop making payments on your debts.
That can be scary as you could have collection agencies calling you and pressuring you to pay. It can also send your credit scores down, which can hurt you if you need to get a loan or do other things soon after the process is complete. Instead of making payments, you aren’t simply spending that money on other things, but rather you are putting that money in a separate saving account, as directed by the experts you are working with.
Once you save up enough money, you can have the professionals work with your debtors to reach an agreement. At that point, they haven’t received any payments from you for a while and they might be willing to take less in order to get payment at all. Your debt relief company may be able to negotiate a smaller overall debt for you in order for the debtors to get their payment. Once the settlement is reached, you pay the creditors in a lump sum from the savings you have available.
What Is Bankruptcy?
There are two different types of bankruptcy available. Chapter 13 takes 3- years to complete. Chapter 7 can clear your unsecured personal debts in about half a year. This is something you have to file for and you could be freed from debt collection. However, there can be a lot of damage done to your credit and it can take years to dig yourself out of those pitfalls.
When To Consider Debt Relief Options
If your monthly debts go over 20% of your income and you are struggling to make timely payments because of it, you need to take action. You can learn more about the option from professionals companies with a good reputation and you can then get advice as to which avenue you might want to take. Here are some situations in which debt settlement might be the better way to go.
-You may be able to negotiate the debt down to a level at which you can afford the payment.
-The debt burden could be released enough on you that you are able to make a lump sum payment.
-Your income is stable so you can pay essential bills and still save money for the debt settlement.
There are also situations in which bankruptcy might be the better choice. Here are a few to consider:
-You have tried other debt relief options and bankruptcy is the only option left to you.
-You are at risk for losing your home if you don’t catch up on payments.
-You can’t make payments without getting payday loans, which could put you further into debt.
-You lost your job and you aren’t able to make debt payment at all.
These are just some general guidelines to help you decide between debt settlement vs bankruptcy. It is best to work with reputable professionals who can give you trustworthy advice to help you choose the right path. You need financial help and one of these avenues might be the right choice for your situation.