Credit Counseling VS Debt Settlement VS Bankruptcy Filing
http://creditfederal.com/article/articles/683/1/Credit-Counseling-VS-Debt-Settlement-VS-Bankruptcy-Filing
By CreditFederal.com - A good or bad credit personal loan, auto and mortgage financing, and credit card resource.
Published on 08/13/2009
If you don't think credit counseling is right for you, what about debt settlement?
Debt settlement is much like a combination of Chapter 7 and Chapter 13 bankruptcies. It's like Chapter 7 in that it allows you to walk away from certain amounts of your debt. For example, if you owe a creditor $10,000, you may be able to settle that amount down to a payoff of only $5,000. And; like Chapter 13, it allows you to repay the agreed settled amount.
Less cost: Debt settlement; especially if you do all the negotiations yourself through our free debt settlement tips, is much cheaper than hiring a bankruptcy attorney.
More private: Unlike bankruptcy filing, debt settlement remains private between you and your creditors.
No cosigner worries: Unlike bankruptcy, with debt settlement you can get your creditors to agree not to pursue any cosigners or co-account holders for payment of the unpaid portions.
No qualification requirements: Anyone can qualify for debt settlement, at any time.
No worse credit report score: Debt settlement will not likely impact your credit score any moreso than bankruptcy filing.
If you still; after reviewing all your other options, think that your only debt relief option is to file bankruptcy, consider these issues:
Pre Bankruptcy Tip: If you're considering bankruptcy, get advice quickly and consider all your options other than bankruptcy. Don't wait until bankruptcy is your only and last option, especially if you're getting notices of foreclosure or lawsuits. There are other ways to get out of debt, such as by negotiating debt settlements.
More helpful resources:
Free debt settlement - Do It Yourself debt settlement to negotiate lower bills.
Joint credit card debt - Which spouse pays the bills (loans and credit cards) after divorce.
Pay off debt - Loan options and tips to pay off debt.
Credit Report Joint Debt
Get Out of Payday Loan Debt
Budgets, Debt Management, Consolidation, Settlement, Counseling and Bankruptcy
Short and Long Term Debt Relief
When you need debt relief, your three big options are credit counseling, debt settlement and bankruptcy filing. Review free tips before choosing.
Credit Counseling VS Debt Settlement VS Bankruptcy Filing
You owe tons of money that you cannot payoff and you need fast debt relief. Three main options to choose from are credit counseling, debt settlement and bankruptcy filing. Which is fastest and cheapest, and which can you Do It Yourself (DIY)?
Debt Management Plans:
Debt Management Plans (DMP) are able to get your finances back on target, but it takes your effort as well and it must match your needs. The top tip is to consider all debt relief options before signing an agreement that must be broken later. Debt relief options include a legitimate credit counselor, a debt settlement company, or perhaps filing bankruptcy.
Credit counselors use debt management plans geared to paying off credit card debt over five or more years to help a person avoid bankruptcy filing. A debt settlement company does the same, but instead of spreading out payments they reduce (negotiate) the balance owed. Some people when going the debt settlement route must get the money to pay off the debt in full and debt settlement may be documented on credit reports. There is some question as to the degree of impact it has on credit scores. When using a credit counseling agency, once a DMP is implemented, making debt payments on time can help rebuild bad credit reports which is good for your personal credit.
The biggest problem for consumers who are in debt is that they often postpone getting debt help. Once this happens, debts have a way of growing out of control and makes getting out of debt take longer. Debts need to be tackled fast and soon with a plan. There are many self help plans online but it may be harder to find a plan that fits individual needs and they will not have tailored advice from a debt professional.
Legitimate Credit Counselors deal with consumers everyday and are trained at helping people get out debt. They give tips for managing a budget, rebuilding bad credit scores, and setting up payment plans. Counselors can give valuable information about the kinds of debt that can be managed and the length of time for getting out of debt according to personal circumstances. There are HUD-approved housing counselors who also help consumers buy their first homes and give advise on mortgage refinancing and modification when their payments aren't affordable.
Credit counseling is one debt option to use instead of filing bankruptcy which stays on credit reports for seven years. With credit being hard to get and harder to get approved due to the economy's problems, most consumers try to avoid having bankruptcy on credit reports. Seeking out credit couselors for information can be enlightening and the very thing needed to begin to get debt help.
Some of the problems with Chapter 13 bankruptcy is that about 40% of the filers in a 2007 study actually completed repayment plans. Some were converted into Chapter 7 filings allowing debtors to erase most of the unsecured debt and others were dismissed, leaving borrowers vulnerable to collectors. Many Chapter 13 filings fail because the debtors are trying to stop a home foreclosure without having the income to pay off the back mortgage payments after initiating a plan. So bankruptcy may be one of the last options for getting out of debts.
Credit counselors are trained in the areas of debts and can give insight and tips to consumers while helping them get out of debt. Here are some free tips to consider if you are deeply in debt:
Debt Management Plans:
Debt Management Plans (DMP) are able to get your finances back on target, but it takes your effort as well and it must match your needs. The top tip is to consider all debt relief options before signing an agreement that must be broken later. Debt relief options include a legitimate credit counselor, a debt settlement company, or perhaps filing bankruptcy.
Credit counselors use debt management plans geared to paying off credit card debt over five or more years to help a person avoid bankruptcy filing. A debt settlement company does the same, but instead of spreading out payments they reduce (negotiate) the balance owed. Some people when going the debt settlement route must get the money to pay off the debt in full and debt settlement may be documented on credit reports. There is some question as to the degree of impact it has on credit scores. When using a credit counseling agency, once a DMP is implemented, making debt payments on time can help rebuild bad credit reports which is good for your personal credit.
The biggest problem for consumers who are in debt is that they often postpone getting debt help. Once this happens, debts have a way of growing out of control and makes getting out of debt take longer. Debts need to be tackled fast and soon with a plan. There are many self help plans online but it may be harder to find a plan that fits individual needs and they will not have tailored advice from a debt professional.
Legitimate Credit Counselors deal with consumers everyday and are trained at helping people get out debt. They give tips for managing a budget, rebuilding bad credit scores, and setting up payment plans. Counselors can give valuable information about the kinds of debt that can be managed and the length of time for getting out of debt according to personal circumstances. There are HUD-approved housing counselors who also help consumers buy their first homes and give advise on mortgage refinancing and modification when their payments aren't affordable.
Credit counseling is one debt option to use instead of filing bankruptcy which stays on credit reports for seven years. With credit being hard to get and harder to get approved due to the economy's problems, most consumers try to avoid having bankruptcy on credit reports. Seeking out credit couselors for information can be enlightening and the very thing needed to begin to get debt help.
Some of the problems with Chapter 13 bankruptcy is that about 40% of the filers in a 2007 study actually completed repayment plans. Some were converted into Chapter 7 filings allowing debtors to erase most of the unsecured debt and others were dismissed, leaving borrowers vulnerable to collectors. Many Chapter 13 filings fail because the debtors are trying to stop a home foreclosure without having the income to pay off the back mortgage payments after initiating a plan. So bankruptcy may be one of the last options for getting out of debts.
Credit counselors are trained in the areas of debts and can give insight and tips to consumers while helping them get out of debt. Here are some free tips to consider if you are deeply in debt:
- Avoid pulling money out of your retirement account.
- Try working out repayment plans with your creditors without an agency.
- Try to do it yourself, by cutting expenses and pay more than the minimum balance due on debts.
- Pay more toward the debt with the highest interest rate first while paying the minimums on debts with lower rates.
- Consider getting a low interest loan to use to pay off all the debts and have one debt payment.
- Don't wait until debts are way out of control, tackle them as soon as you know you are in trouble.
- Consider all debt relief solutions such as credit counseling, debt settlement, and bankruptcy options.
If you don't think credit counseling is right for you, what about debt settlement?
Debt settlement is much like a combination of Chapter 7 and Chapter 13 bankruptcies. It's like Chapter 7 in that it allows you to walk away from certain amounts of your debt. For example, if you owe a creditor $10,000, you may be able to settle that amount down to a payoff of only $5,000. And; like Chapter 13, it allows you to repay the agreed settled amount.
Less cost: Debt settlement; especially if you do all the negotiations yourself through our free debt settlement tips, is much cheaper than hiring a bankruptcy attorney.
More private: Unlike bankruptcy filing, debt settlement remains private between you and your creditors.
No cosigner worries: Unlike bankruptcy, with debt settlement you can get your creditors to agree not to pursue any cosigners or co-account holders for payment of the unpaid portions.
No qualification requirements: Anyone can qualify for debt settlement, at any time.
No worse credit report score: Debt settlement will not likely impact your credit score any moreso than bankruptcy filing.
If you still; after reviewing all your other options, think that your only debt relief option is to file bankruptcy, consider these issues:
- Should you file: Bankruptcy is for when you suffer major life events that significantly reduce income, increase bills or both. The most common reasons for bankruptcy: divorce, unemployment and medical bills. Filing bankruptcy halts; at least temporarily, collection attempts and foreclosures. If you're unemployed or recently re-employed but facing foreclosure because of missed payments, Chapter 13 can help you save your home, because it allows you to repay missed payments over three to five years. It can also stall a foreclosure long enough for you to regain employment.
- Which bankruptcy to file: The two main types of bankruptcy are very different. If you were out of work and got behind on the house payments but can now meet your mortgage, a Chapter 13 might be your best option. If you don't own a home but are struggling with medical bills, then Chapter 7 might be a better choice. Like any major financial decision, you need to gather information. Write down the assets that are important to you, and what you need to get from your bankruptcy. When you talk with an attorney, go through the list and find out how the two types of bankruptcy (combined with the laws in your state), would impact each item.
Chapter 7: Allows you to walk away from debts entirely. This option is used by those whose debts are so high or income so low, that after basic expenses they don't have the money for a payment plan.
Chapter 13: Allows you to draft a plan to repay all or part of the debts over three to five years.
FREE Bankruptcy Forms - Do you qualify: Before you can file bankruptcy, you'll be required to take a credit counseling class, and later just before your bankruptcy is officially concluded, you'll take a second, two hour session. For a Chapter 7, you must show through income (if you are below the state median) or through both income and expenses (if you are above the state median) that you can't repay your debts.
- What your state allows: Your location makes a difference. When it comes to which assets you can keep in bankruptcy, rules vary widely by state. In addition, income and expense limits used for determining whether you qualify for a Chapter 7 will vary by location. Also attorney's fees and filing fees will vary. Filing bankruptcy doesn't mean giving up all your possessions. You keep your personal property, such as clothes, electronics, household furnishings and other exempt assets. Depending on your state laws, the type of bankruptcy you file, and your finances, you can sometimes retain larger assets, such as cars and the family home.
- Can you afford the costs: Costs vary depending on your attorney and location. But in general a Chapter 7 can run $1,500 to $2,500, while a Chapter 13 can run $2,000 to $4,000. With a Chapter 13 bankruptcy, you can include bankruptcy costs in your plan and pay them over three to five years. But with Chapter 7, that's not an option. Since most attorney first consultations are free, don't be afraid to interview several attorneys and let them know price is a factor. It's possible to get free or low cost legal help. Some law firms may have discount programs. In addition, the bar association might have a list of firms that do low cost or pro bono work. Some cities have organizations such as the Consumer Bankruptcy Assistance Project to assist low income people.
- Is your credit score important to you: Bankruptcy goes on your credit report and gives you a very bad credit score. The entry stays on your credit report for about 10 years, but over the course of that time as the bankruptcy ages it becomes less devastating. But if you already have a bad credit score (due to chronic late and missed payments, chargeoffs, etc.), filing bankruptcy may not make your credit score much worse. And you could actually see your credit improve a year or so after bankruptcy filing. You could even be considered for an FHA loan about a year after filing a Chapter 13 and about two years after a Chapter 7 bankruptcy.
- Do you have cosigners on the loans/credit cards you want included in your bankruptcy: Cosigners will likely be affected. A bankruptcy protects only the filer, not anyone elese on the accounts. Bankruptcy doesn't protect joint account holders (cosigners). Although a bankruptcy removes your debt obligation to a creditor, it doesn't remove the debt obligation from anyone who cosigned your loan (or is on the credit card account, etc). The creditor may pursue your cosigner for payment, even though bankruptcy has freed you from the debt. In short, your bankruptcy makes the bill a burden to your cosigner. Tip: Divorce has much the same affect as bankruptcy filing. Before you finalize a divorce, pay off bills or have the obligations transferred into the name of one party or the other.
- Do you want people to know about your financial problems: Bankruptcy is a public event. Although bankruptcy involves your personal financial information, it's public information. Anyone will be able to see everything about your financial situation in the last few years. Not only is there a humiliation factor, but your boss (or prospectful boss) will know and this may affect promotion or hiring.
Pre Bankruptcy Tip: If you're considering bankruptcy, get advice quickly and consider all your options other than bankruptcy. Don't wait until bankruptcy is your only and last option, especially if you're getting notices of foreclosure or lawsuits. There are other ways to get out of debt, such as by negotiating debt settlements.
More helpful resources:
Free debt settlement - Do It Yourself debt settlement to negotiate lower bills.
Joint credit card debt - Which spouse pays the bills (loans and credit cards) after divorce.
Pay off debt - Loan options and tips to pay off debt.
Credit Report Joint Debt
Get Out of Payday Loan Debt
Budgets, Debt Management, Consolidation, Settlement, Counseling and Bankruptcy
Short and Long Term Debt Relief