Bankruptcy or Debt Settlement: Which Is Best For You?
By Scott Sumerford on Monday, October 22nd, 2007 :: 2:04 pmCategory: Watching Out 4 You
If you are suffering under a mountain of credit card debt, then you may be pondering bankruptcy. Before filing for bankruptcy, consider if debt settlement might be a better option for your personal debt-relief needs.
Chapter 13 Bankruptcy
The current bankruptcy code stipulates that you pass a means test to file Chapter 7 bankruptcy. If you are over the median income level for your state, then you will most likely have to file Chapter 13 bankruptcy. Chapter 13 bankruptcy establishes a repayment schedule where you will repay nearly all of your current debt in three to five years instead of providing a quick discharge from debts.
Chapter 13 costs hundreds of dollars in filing fees, court fees, and lawyer fees. Typically, the fees accrued due to filing bankruptcy are added to your repayment schedule, which extends the time it takes to repay your debt.
One benefit of Chapter 13 bankruptcy is that it puts a stay on collection actions against you, which means collectors have to cease contact with you. This stops harassing letters and telephone calls but doesn’t eliminate your debt. You will still be obligated to repay your creditors the full amount the courts determine you can afford and within the time limit the court decides.
Debt Settlement
Debt settlement is a debt-relief method that works with creditors to reduce your total debt balance. There are no credit checks or specific income requirements. Debt settlement companies also act as a buffer between you and collection agents that constantly harass you.
A benefit of debt settlement over bankruptcy is the time it takes to eliminate debt. With Chapter 13, your repayment schedule will be three to five years. Debt settlement can remove debt in less than 36 months. This means you will be out of debt faster and ready to start building a debt-free future.
Bankruptcy doesn’t have to be the result of credit card debt. Debt settlement offers a viable alternative that will work with you to provide debt relief. It is important to understand your debt-relief options so you can make choose which method is best for you.
Author Bio: Scott Sumerford has several years of experience working in the financial industry and has written a myriad of articles on various financial matters. Read more about how Credit Solutions offers a viable alternative to debt consolidation.
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