Debt Relief & Bankruptcy
Unexpected life events can cause you to take on more debt than you can repay. If you can no longer make payments as agreed, there are many different options to consider. Two terms you might hear are debt relief and bankruptcy.
What Is Debt Relief?
Debt relief is a blanket term to cover various methods to help get you out of debt. These options are not done through a court.
- Credit counseling: There are many resources available to help counsel you on your debt. There is typically little to no cost, and it is offered by government or non-profit agencies.
- Debt management: After counseling, you can get assistance to form a plan. You will be given guidance on what you should be paying off first and help negotiate with creditors on a payment plan.
- Debt consolidation: You can pay a firm to consolidate debts on your behalf, which can lower the interest rate and create one payment for you to make. Another option is to apply for a loan to consolidate debts into one.
- Debt settlement: This occurs when you negotiate or settle with your creditors. You can pay a lump sum to them in exchange for the rest of the debt to be erased. If you need assistance, the Federal Trade Commission offers resources.
What Is Bankruptcy?
Bankruptcy is a legal process that goes through a court. You will likely need to hire a lawyer that specializes in bankruptcy if this is the right option for your situation. There are two types of bankruptcy that an individual can file:
- Chapter 7: When you file Chapter 7 bankruptcy, you may be required to liquidate some of your assets to cover debts. Examples can include personal property of value, second cars, vacation homes, and many types of money accounts. Chapter 7 can stay on your credit report for up to 10 years.
- Chapter 13: You are allowed to keep your possessions when you file Chapter 13 bankruptcy. It organizes your debt into one payment and lays out a repayment plan. Chapter 13 will stay on your credit report for seven years.
If you are overwhelmed with debt and unsure where to start, a credit counselor or a bankruptcy lawyer, like the Law Offices of Ronald I. Chorches, are two good options. They are experienced professionals and can recommend which route to go based on your situation. It is best to contact a professional as soon as you have concerns about repaying debt.