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Debt Relief or Bankruptcy: Which is Right for You?
Debt ReliefIf you are having trouble paying your monthly bills and are falling behind in your payments, facing foreclosure on your home or default on your loans and credit cards, you may be seriously looking into bankruptcy or debt relief programs in order to help stave off disaster. Which option is right for you and your particular circumstances, however?
When to Consider Debt Relief
Debt relief programs are a valuable service provide by many private agencies all across the United States. With existing relationships with most major lenders in the country (and quite a few minor ones), these agencies are able to negotiate lower rates or payment/payoff terms on your behalf in order to give you some breathing room and allow you to pay off your debts at an easier pace. These debt negotiations can take place in just a week or two and may include a debt consolidation, whereby all of your debts are paid off by the debt relief firm and a new loan is opened in your name for the total of the payoff amounts. This has the benefit of bringing what before may have been many monthly payments to different lenders down to a single payment made to your debt relief company.
Debt Relief as an option for those struggling with making their regular payments may be the best option if:
- You still have a regular, stable job and can make the new payments
- You have recently filed for bankruptcy and are within the period where you cannot file again
- You want to avoid the ultimate black mark on your credit report
- You have assets that may be seized in a bankruptcy ruling such as a second home or expensive equipment that is not paid for
- You have not been chronically late on your debts thus far and are not in foreclosure or default
Debt relief can be the quickest and easiest way to get some relief from struggles to make payments, but under some circumstances it may not be enough. In those cases, you may want to take a serious look at the bankruptcy option.
When to Consider Bankruptcy
Bankruptcy is meant to be the ultimate in financial relief for the struggling consumer or business. It is a legal process whereby a judge, after reviewing your situation thoroughly decides that you are to be immediately free from all debt obligations you currently have - with some exceptions. There are certain debts, such as student loans, which are exempted from bankruptcy filings and will not be discharged. The downside to filing for bankruptcy is that it is the single most negative thing that can appear on your credit report and it will stay there, significantly damaging your chances at getting credit in the future, for up to seven years. The upside to bankruptcy is the freedom from worry for paying lots of debts and the ability to get a "fresh start" in a lot of ways.
Bankruptcy as an option for those struggling with making their regular payments may be the best option if:
- Your debt does not fall into the category of debts protected from bankruptcy like student loans
- Your debt is not secured by tangible property (like a house or a car) that you need but will no longer make payments on.
- You are unemployed, unable to find work and simply can't pay any debt anyway.
- You have been through debt relief unsuccessfully
Whichever route you choose, be careful when speaking to your attorney or to a debt relief company about your options. There are many attorneys out there only interested in making the money for handling your filing and so will push you into the bankruptcy option whether it is right for you or not. Similarly, there are many illegitimate businesses out there offering debt-relief solutions. In general you should be very suspicious and wary of those companies that demand an up-front payment for their services before they will even review your case.
