A recent study by the Pew Charitable Trusts showed that up to 80% of Americans are struggling with debt. If you’re one of them, you may be wondering what’s the best way to get out of debt so you can get a fresh start. You have many options available to you, and choosing the right one can be confusing. Bankruptcy is one option, but because a bankruptcy hurts your credit score and may make it difficult to obtain loans in the future, you may want to consider other options first. Here’s more about debt relief and how it differs from bankruptcy.
What is Debt Relief?
You’ve probably seen ads about bankruptcy, but did you know there are other steps you can take before it becomes necessary? If you have excessive debt, you may be able to negotiate with your creditors for a more manageable payment plan. There are also credit counseling services that can help you come up with a strategy to repay your debt. They may even help you make monthly deposits that will be used to repay your debt. Some may charge you for these services, while others are non-profit and may charge you little or nothing for their assistance.
Debt consolidation is another option that allows you to get a loan and pay off your debt all at once so you can make one monthly payment. Of course, this is just another form of debt, and while it may be more manageable than making multiple payments to different entities, the debt consolidation company may require you to put up your home or other assets as collateral.
How is Bankruptcy Different from Debt Relief?
As an individual with debt, you will most like use either Chapter 7 or Chapter 13 of the U.S. bankruptcy code to declare bankruptcy. Under Chapter 7, most of your assets will be sold off to cover your debt. You may be able to retain some exempt property like cars and household furnishings. When you declare bankruptcy under Chapter 7, you will have to wait at least 8 years before you declare bankruptcy again.
If you have enough income to declare Chapter 13 bankruptcy, you will be allowed to stay in your home and keep assets you would have lost under Chapter 7. A judge will approve a repayment plan that will have you out of debt in 3-5 years, as long as you can make the payments. The waiting period for Chapter 13 is also much shorter; you may be able to declare bankruptcy again in as little as 2 years or less. No matter which type of bankruptcy you choose, your credit score will take a hit.
Which One is Right for You?
How you get out of debt depends on many factors, including your income, assets, and debt level. If you’re facing insurmountable debt, the best thing to do is speak to a bankruptcy attorney as soon as possible. Nahrgang & Associates is one of the most trusted bankruptcy law firms in the Philadelphia area, and we can give you advice about your debt situation. If debt relief is possible, we will explain your options and can even negotiate with creditors on your behalf. If bankruptcy may be the best option for you, we will explain each type to you so you can make an educated decision about your financial future. Our bankruptcy attorneys in Delaware County, Pa will never push you to take a particular course of action; rather, we will help you get all the information you need to make that decision for yourself.
If you would like to get in touch with us, call (610) 489-3041 for your free initial consultation or fill out the online form on our contact page. You don’t have to let debt control your life. Nahrgang & Associates and our top bankruptcy lawyers are here to help.