If you find yourself swimming in a sea of debt, you may be wondering how you can possibly pull yourself out. You might be debating on whether or not to pay off your debt in full or do a bankruptcy filing.
When you choose to go the route of paying off your debt, also known as a debt settlement, you typically won’t need to contact a lawyer or financial counselor. A debt settlement is when you negotiate with a creditor to pay them a lump sum. The lump sum you end up paying the creditors is much lower than what your debt originally was. Most creditors would rather you pay them a lump sum, since declaring bankruptcy means they cannot collect from you.
A bankruptcy filing may occur when you are unable to pay the reduced amounts that were negotiated with your creditors in the debt settlement. There are two types of bankruptcy, Chapter 7 and Chapter 13. Chapter 7 will get rid of your debt in around 6 months, but you may not be able to keep your home. Chapter 13 will allow you to keep your home after your bankruptcy is settled, but you will still have mortgage payments to make. Chapter 7 typically is declared by those at the state’s median income level.
Debt settlements might be good for you for a number of reasons. For starters, if your creditors are willing to work with you to reduce your debt by a large margin, debt settlement might be the move. In addition, a stable income and the willingness to stick to a debt repayment plan are other signs that a debt settlement would work better for you than declaring bankruptcy.
If you are in danger of losing your home, filing for Chapter 13 bankruptcy will help you catch up on mortgage payments. Bankruptcy also may be ideal for those who have no more options when it comes to debt relief, especially if they cannot afford the lump sum payments. This includes those that would have to draw from their retirement or IRA funds to pay off their debt.
Another factor many don’t consider when deciding between debt settlement or filing for bankruptcy is the amount of time it will take to pay off the debt. A good rule of thumb is that if the debt will take over 5 years to pay, it’s best to file for bankruptcy.
If you’re considering filing for bankruptcy, contact a bankruptcy attorney at Fair Fee Legal Services today.
Fair Fee Legal Services
8665 South Eastern Avenue, Suite 101 Las Vegas, NV 89123