What is bankruptcy?
What are the types of bankruptcy?
Chapter 7 Bankruptcy
- Chapter 7 bankruptcy can provide a fresh start by discharging most of your debts
- The process is typically quick and can be completed within a few months
- You may be able to protect certain assets from creditors using exemptions
- You may have to give up some of your assets, including your home or car
- Chapter 7 bankruptcy will stay on your credit report for up to ten years
- It may be difficult to qualify for Chapter 7 bankruptcy, as there are income limits that you must meet
Chapter 13 Bankruptcy
- Chapter 13 bankruptcy can provide a more manageable payment plan for your debts
- You may be able to keep your assets, such as your home or car
- The process can stop collection actions, including wage garnishments and foreclosures
- You’ll have to make payments for several years, which can be difficult if you have a limited income
- Chapter 13 bankruptcy will stay on your credit report for up to seven years
- The process can be complex and may require the help of an attorney
Understanding Debt Settlement
What is debt settlement?
Overview of Debt Settlement
- You stop making payments to your creditors and instead make payments into an account managed by the debt settlement company or lawyer.
- The debt settlement company or lawyer negotiates with your creditors to settle your debts for less than what you owe.
- Once a settlement is reached, you’ll use the money in your account to pay off the settled debts.
Pros of Debt Settlement
- Debt settlement can help you pay off your debts for less than what you owe, which can save you money in the long run.
- You can avoid bankruptcy and its negative consequences, such as a lower credit score and the loss of assets.
- Debt settlement can provide a more manageable payment plan, as you’ll make one monthly payment to the debt settlement company or lawyer instead of multiple payments to your creditors.
Cons of Debt Settlement
- Debt settlement can be expensive, as debt settlement companies and lawyers typically charge fees ranging from 15% to 25% of your total debt.
- You’ll need to have a lump sum of money available to settle your debts, which can be difficult if you’re already struggling financially.
- Debt settlement can negatively impact your credit score, as settled debts will be reported as charge-offs on your credit report.
Which Option Is Right for You?
Your Level of Debt
Your Credit Score
Your Future Financial Goals
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