Debt settlement and bankruptcy are solutions to the same problem what are the most direct methods to get out of debt but they each come with their own advantages and disadvantages, and choosing the right one can be tricky. If your debts are so massive that you can’t imagine repaying them, it’s time to evaluate both options as you look to restore your credit health and financial well-being. Bankruptcy can offer the fastest path out of debt, but the long-term impact on your creditworthiness is severe. A bankruptcy will stay on credit reports from s 7-10 years, which will greatly impede your ability to get a loan, receive a credit card or buy a home Bankruptcy, which is adjudicated in federal court, either wipes out your personal debt (Chapter 7) or creates a 3-5 year plan for repaying creditors (Chapter 13). Debt settlement doesn’t require a court filing and, unlike bankruptcy, can often be handled without a lawyer or financial counselling. A settlement is a deal you negotiate with creditors to pay less than the amount owed, usually with a lump-sum payment. Debt SettlementDebt settlement also known as debt negotiation and debt arbitration must never be confused with credit counselling and debt management programs. In debt settlement, you or your representative attempt to get creditors (usually credit card issuers) to accept a portion of the total balance as payment in full. Individuals can try negotiating for themselves if they have access to substantial amounts of cash. The cash will be used to pay a substantial portion of their account balances — somewhere in the neighborhood of 40-70 percent. Key Similarities and Differences And BankruptcyLet’s first acknowledge the slim similarities between debt settlement and bankruptcy: Each is designed to erase or forgive certain types and certain amounts of debt. Also, at the end of each, your credit score will have absorbed a hammering. That’s pretty much it. Beyond that, the two processes are remarkably different animals. When to Consider Debt Settlement or Chapter 7 BankruptcyIf your monthly debt payments, excluding mortgage or rent, exceed 20% of your income, you have a debt problem that requires action. The seriousness of the problem, and your ability and determination to overcome it, will determine whether a debt settlement plan or bankruptcy is the better option. Utah Bankruptcy and Debt Settlement on CreditBoth bankruptcy and debt settlement can reduce your creditworthiness and lower your credit, or FICO, score for years. Bankruptcy, no matter which chapter you file under, is certain to bring down your score. The better your score is to begin with, the more it will drop. Advantages and Disadvantages of Bankruptcy Free Initial Consultation with LawyerIt’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
Ascent Law LLC
8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506
Ascent Law LLC
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