Your Choices In Debt Relief
Anyone dealing with financial hardship or overwhelming debt burdens knows just how stressful the process can be. Often, people feel they have no way out, but the opposite is true. The key is knowing which option is best for your situation.
The Options
Many people have found luck in relieving their debts on their own through a systematic payment plan that tackles each debt one at a time. While this debt management plan is effective, it certainly takes discipline. Debt negotiation is another route you can choose, whereby you make an arrangement with your creditor directly to modify your payment terms in a way that you can afford. Debt negotiations can also be effective, but not everyone will be able to secure a plan with their creditor. Being too far in default, missing payments on a secured debt or having an unstable payment history are all reasons a creditor could deny you a negotiated plan. Settling debts can have similar challenges and may be even be more costly in the long run. Another big aspect to consider about all of these options is whether you have any assets at risk of liquidation or are expecting your financial hardship to be longer lasting. In either of these cases, bankruptcy could be the better option.
One of the advantages that bankruptcy can offer is the immediate halt to credit collections and liquidation proceedings. Unlike other methods of debt relief, filing for bankruptcy can protect you from creditors while you work out a plan to resolve your debts under court supervision. There are two types of personal bankruptcy that may be beneficial for you.
A Chapter 7 bankruptcy is reserved for those with severe financial hardship, or whose income is equal to or less than the median income level of their state of residence. This restriction is put into place to prevent abuse of the bankruptcy system and ensure that only those who truly cannot afford to repay their debts are offered an elimination plan. Since debts are generally not repaid in bankruptcy, the court could liquidate some of your nonexempt assets, like luxury items, in order to satisfy debts to creditors. Any remaining balance is typically eliminated and your debt accounts are considered resolved.
A Chapter 13 bankruptcy is referred to as a wage earners plan, because there is some level of repayment required. However, the amount that is required to be repaid is based on a strict evaluation of your income. Therefore, repaying debts in Chapter 13 occurs through a series of affordable payments, spread out over the course of three to five years. It is this debt repayment that offers a wider protection of all of your assets, even the luxury items, in bankruptcy.
The Options
Many people have found luck in relieving their debts on their own through a systematic payment plan that tackles each debt one at a time. While this debt management plan is effective, it certainly takes discipline. Debt negotiation is another route you can choose, whereby you make an arrangement with your creditor directly to modify your payment terms in a way that you can afford. Debt negotiations can also be effective, but not everyone will be able to secure a plan with their creditor. Being too far in default, missing payments on a secured debt or having an unstable payment history are all reasons a creditor could deny you a negotiated plan. Settling debts can have similar challenges and may be even be more costly in the long run. Another big aspect to consider about all of these options is whether you have any assets at risk of liquidation or are expecting your financial hardship to be longer lasting. In either of these cases, bankruptcy could be the better option.
One of the advantages that bankruptcy can offer is the immediate halt to credit collections and liquidation proceedings. Unlike other methods of debt relief, filing for bankruptcy can protect you from creditors while you work out a plan to resolve your debts under court supervision. There are two types of personal bankruptcy that may be beneficial for you.
A Chapter 7 bankruptcy is reserved for those with severe financial hardship, or whose income is equal to or less than the median income level of their state of residence. This restriction is put into place to prevent abuse of the bankruptcy system and ensure that only those who truly cannot afford to repay their debts are offered an elimination plan. Since debts are generally not repaid in bankruptcy, the court could liquidate some of your nonexempt assets, like luxury items, in order to satisfy debts to creditors. Any remaining balance is typically eliminated and your debt accounts are considered resolved.
A Chapter 13 bankruptcy is referred to as a wage earners plan, because there is some level of repayment required. However, the amount that is required to be repaid is based on a strict evaluation of your income. Therefore, repaying debts in Chapter 13 occurs through a series of affordable payments, spread out over the course of three to five years. It is this debt repayment that offers a wider protection of all of your assets, even the luxury items, in bankruptcy.
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