Many Americans are burdened by overwhelming personal debt due to raised consumer prices, stagnant incomes, high credit card balances, and other monthly obligations. Bankruptcy and debt settlement are two primary solutions to alleviate this financial burden, but they achieve the same result through different means. Before choosing either option, it’s crucial to understand their key differences and how they will impact your financial future. Please continue reading as we explore these options in further detail and how our determined Gillette Bankruptcy Lawyers can help you navigate these tough times.
What is Bankruptcy?
Bankruptcy is a legal process in which individuals or businesses can wipe out debts and receive a fresh financial start. There are different types of bankruptcy you can pursue, like Chapter 7, which is advisable for those dealing with unsecured debts. This process involves liquidating non-exempt assets to pay back creditors before issuing a discharge. Another option is Chapter 14, which restructures debt into a monthly repayment plan that will span three to five years. Once your repayment plan has been fulfilled, any eligible debt will be discharged.
Businesses are generally entitled to file Chapter 11, which works similarly to Chapter 13, by reorganizing debts into a repayment plan. However, this is often a more complex and expensive process. Chapter 11 will allow your company to continue operations at a downsized capacity.
Ultimately, through bankruptcy, you may discharge most unsecured debts and repay some or all of your debts with a structured plan. It’s important to note that bankruptcy should be your last resort.
What is Debt Settlement?
Debt settlement, on the other hand, involves negotiating with your creditors so that you can pay off your debts for less than what you owe. You can work with creditors offering to pay a lump sum in exchange for a reduced debt and the creditor will agree to forgive a percentage of your total debt. You should note that only unsecured debts are eligible for a settlement. This means you cannot settle matters like mortgages or car loans through this debt relief strategy. Creditors usually prefer to receive a reduced payment rather than have the entire debt forgiven through bankruptcy.
How Do I Know Which Option is Right for Me?
It’s important to understand that debt relief can provide a lifeline for those grappling with crippling levels of debt. It encompasses a range of strategies designed to alleviate financial burdens and pave the way toward long-term financial stability. These strategies typically include reducing the principal debt amount, negotiating lower interest rates, or consolidating multiple debts into a single, manageable monthly payment.
The nature of the debt and your unique circumstances will determine which debt relief options are available. Each debt relief option has its advantages and disadvantages. As such, it’s crucial to carefully consider the potential implications of each option to ensure you choose the most appropriate debt relief strategy for your situation.
If you have considerable personal debt, bankruptcy may be in your best interest. This will eliminate eligible debts and provide certain protections from collection efforts. However, the consequences of this process are severe and last years. If you have manageable debt and are concerned about your credit score, debt settlement may be the right option for you. Nevertheless, you won’t be granted the same protections as bankruptcy and may incur considerable fees.
If you’re unsure how to proceed to get debt relief, please don’t hesitate to contact an experienced lawyer at 307 Bankruptcy, who will help you navigate your options and determine the best course of action. Connect with us today to learn how we can assist you.
