Find The Best Debt Relief Option For You

Find The Best Debt Relief Option For You background

Different Debt Relief Options

Bankruptcy

The bankruptcy law was updated in 2005 making it more difficult to file due to stricter guidelines. Over the course of the last decade debt relief options have become more available enabling more consumers to pay off or negotiate debt in place of filing bankruptcy. These advances have saved millions of consumers from bankruptcy and still provide the debt relief needed.

There are six different forms of bankruptcy available to consumers in the US. Some require liquidation of assets to pay off creditors and then the remainder is discharged. Other forms allow some of the debt to be forgiven while the remainder is restructured with a court approved repayment plan. For all filings, there is an initial means test that must be passed in order to qualify. You must demonstrate that you will not be able to pay your debts in their current status. Credit counseling, budgeting and financial education classes are often required as part of the discharge.

Bankruptcy has an array of long term negative consequences. Your credit score will suffer for many years, though if your credit is bad already due to late payments and collections, it may not be reduced much more. Lower credit scores may result in higher insurance payments, difficulty renting an apartment and even difficulty finding a job. The filing will be reported to your credit report for up to 10 years and is considered public information. During the years following a bankruptcy you will have difficulty qualifying for credit, which includes buying a home or car. The further in your past the bankruptcy occurred, the lower negative impact it will have on your credit worthiness. It takes time to rebuild and reestablish credit after a bankruptcy.

The most common types of bankruptcy are available through Chapter 7, Chapter 11, or Chapter 13, depending on your circumstances. The rules for what can be discharged and what assets you are able to keep will vary from state to state. A local attorney is a great resource for the specific laws in your state. Debts that are typically included in a bankruptcy include the following:

    Debts generally covered through bankruptcy include:

  • Credit Card Debt
  • Unsecured loans
  • Medical Bills
  • Collection Accounts

    Debts generally not discharged in bankruptcy include:

  • Student Loans
  • Tax debt
  • Child support and Alimony
  • Debt incurred after filing and some debts incurred the six months prior to filing
  • Debt resulting from a lawsuit such as a DUI settlement
  • Secured debt like your home or car (These can be foreclosed or repossessed by the lender if payments are not maintained. Generally you are allowed to keep one car and your primary residence as long as payments are continued)

    Some indications bankruptcy might be right for you include:

  • Inability to make minimum payments
  • Fixed income that will not increase over time
  • Most debt is unsecured
  • You have explored all other viable options unsuccessfully

Benefits

  • Debts Discharge Or Repayment Plan Arranged And You Have A Chance To Start Over
  • Stops Collection Calls And Does Not Require Debt To Be Paid Back

Challenges

  • Required To Pay A Bankruptcy Attorney
  • Filing On Credit Report For Up To 10 Years
  • Court Decides What Assets You Can Keep And What Will Be Liquidated
  • Court Overseeing Discharge Of Debt Or Repayment
  • Must Qualify To Be Able To File
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