When times get tough, it’s not easy to tell which direction to take. All in all, if you’re in so much debt, you must deal with the destructive cycle and perhaps join a debt reduction program. While some people opt for debt settlement, many file for bankruptcy. Both options work well, but you need adequate information to make informed choices. Should I opt for debt settlement or file for bankruptcy? Let’s learn more.
Debt settlement- what does it involve?
Debt settlement involves negotiations with creditors. It’s a debt relief approach that involves negotiators who discuss issues regarding your debt on your behalf. It’s a type of agreement between the two parties. It aims at reducing the debt and agreeing on favorable repayment terms.
With this type of arrangement, you can only negotiate unsecured medical bills, personal loans, and debit-credit cards. You can’t settle rent, utility bills, insurance premiums, car loans, and taxes using this approach.
What is bankruptcy?
This is a legally binding process that discharges a significant portion of your debt. It also structures your repayments, making it easier to repay the debt. Bankruptcy is an excellent option for individuals and businesses struggling with debt. To file for bankruptcy, you require the expertise of an attorney. Why not click https://baylegal.com/practice-areas/bankruptcy/ to learn more on how a bankruptcy attorney can be of help? You’ll also get information on the bankruptcy practice areas and how to get a free consultation.
Debt settlement Vs. Bankruptcy- Which works best?
Each debt repayment plan has its share of pros and cons. With bankruptcy, you don’t have to worry about creditors harassing you. You’ll be protected against creditors, and they won’t stress you over the payments. What’s more? You can resolve our financial woes quickly and won’t pay tax on the erased debt.
What are the cons? Filling for bankruptcy affects your credit rating severely. You need a good credit score to secure loans, which may deter you from getting credit for loans in the future.
On the other hand, debt settlement involves negotiations with creditors. If done successfully, you may end up paying a significantly lower amount than what you owe. However, your creditors may not accept your offer and may even take you to court for defaulting payment. You also have to pay penalties for late payments and sometimes legal fees. Therefore, you may end up with more debt if not careful.
What of taxes? With debt settlement, you pay taxes for the discharged amount. You also cater to the debt settlement company’s fees. Moreover, debt settlement will impact your credit rating, which may take years to restore. With bad credit, it will be difficult to get financial assistance from banks and other lenders.
Do I need an attorney?
If you choose the bankruptcy option, you need an attorney to help you out. The process can be lengthy and somewhat complex. But, the lawyer knows how to go about it and will offer the much-required guidance. The professional will also inform you of your rights and the necessary documents to ease the process.
The bottom line
There are various debt repayment options available. To avoid mistakes, engage an attorney for guidance. The professional will help you understand your options and what suits you best. Only hire a lawyer from a reputable firm for this guarantees quality services.