How to Choose Credit Counseling or Bankruptcy
People often get to a place where they simply can’t pay their bills, especially in today’s economy which is not particularly sympathetic toward the poor or even the middle class. Inflation has impacted nearly every facet of daily life including food, gas, rent, clothes, utility bills and more. At the same time, salaries, especially in the lower ranges, have utterly failed to keep pace. When you get to the place where you cannot pay your bills and have money left over for food and other necessities, there are some hard decisions that have to be faced. The options are credit counseling and debt management services, or bankruptcy. Both have their pros and cons, so which road to take depends largely on the individual and how severe his or her financial problems have grown.
There are numerous credit counseling/management services available, both in most local communities and over the Internet. The services vary considerably, for example some charge fees and exist to make a profit, while others are strictly operated by volunteers and don’t charge fees for their services. Some services are certified or accredited, and others are not. Some guarantee confidentiality, and unfortunately, others do not.
If your debt situation has not yet reached a point of no return, credit counseling and debt consolidation may be the best option for you. This is the way it works:
· Check out a variety of counseling services, both in your community and on the Internet to determine which best suits your needs. Avoid those that charge high fees, do not guarantee your privacy and that don’t have any credentials or accreditations to offer.
· Make an appointment with the agency of your choice. When you go to the appointment, take as much of your paperwork and documentation with you as possible, i.e. proof of your expenses and income, along with verification of the debts you owe.
· The counselor will review your situation and develop a plan to help you pay off your bills. Legitimate counseling services can often persuade your creditors to take less than the total amount you owe and arrange for longer periods of time to pay the debt off.
· Instead of paying your bills directly, in most cases, you make one monthly payment to the counseling service, which then distributes that amount among your creditors according to the agreements they have worked out. The arrangement leaves you enough money to live and halts collection procedures. Over a period of time, all your bills are paid in full and you essentially have a new start, provided you don’t get yourself back into additional debt in the meantime.
On the other hand, if you have too much debt and your creditors are not inclined to work out payment arrangements with you, the best possibility may be declaring bankruptcy. There are numerous bankruptcy attorneys and, again, it behooves you to shop around to obtain the best possible services at the least possible price.
It is wisest to work with an attorney who does a lot of bankruptcy work because he or she will be most familiar with the rules and regulations as well as with the judges and bankruptcy trustees who work in the local system. A good attorney will know what the trustees and the courts will allow and what they won’t, and will be able to advise you as to your best options.
There are two kinds of bankruptcies available to individual debtors. Those are Chapter 7 and Chapter 13. Chapter 7 is a complete discharge of all nonsecured debts, and some secured ones, generally including everything except taxes and school loans. The debtor generally has to give up anything of value that can be sold to pay his or her debts, although in most cases a person’s home and their primary transportation are exempted. In a Chapter 13, nothing has to be given up, but the debts have to be paid in full. The court simply works out a repayment plan and instead of paying the money to your debtors, you pay it to the bankruptcy trustee who then distributes it to the creditors. There are advantages and disadvantages, as well as eligibility requirements, for both types of bankruptcy and the bankruptcy attorney can best advise you which option will work better in your particular situation.
Whether you choose credit counseling or bankruptcy, either one can help you eliminate debt and get back on your financial feet. Both can stop collections procedures and eliminate annoying and harassing phone calls from collectors. The bottom line is, you don’t have to continue suffering; there are ways to get out of the debt situation and begin again. The most important thing is, once you are out of debt, carefully manage your money so you don’t land back in the same situation again.
Is Bankruptcy Your Only Way Out?
Piling up debt to a point that you may be forced to file bankruptcy is unfortunately, a fairly common occurrence. People from all social and economic classes have simply forgotten the tried and true principals of our forefathers that a penny saved is a penny earned and the result has become an avalanche of debt issues that have forced families into filing for bankruptcy.
Of course, it’s not always your fault, unforeseen factors such as an illness or loss of income due to loss of work and other factors all come into play but regardless of the why you are between a rock and hard place financially you need to do something about it. And the sooner the better.
Debts can come in any number of ways from the most common like, credit cards, mortgages, and medical bills. On the other hand, if you are fortunate to have a little equity in your home a debt consolidation loan may be your saving grace but what happens if you can’t go down that path to financial solvency?
Clearly, filing for bankruptcy is not a perfect solution to your debt problems, especially with the new bankruptcy laws making it much more difficult to wipe out all of your debt. Even after bankruptcy you may still be faced with a sizeable percentage of your current debt and you may even lose your home.
Ok, so what’s the solution? Realistically, there is no easy solution but one alternative is to seek the help of a debt management professional who can map out a proper plan for you to get your head back above water. Another nice benefit is that they can also give you insight into how to avoid sinking your financial ship down the road by teaching you some tried and tested financial principles on how to manage your income.
Today, many organizations offer debt settlement programs for people fighting to recover from living beyond their means and what’s nice is that you can contact and consult with them for the most part for free.
The process is also easy and pain free because in most instances they initially only require you to fill a simple form and they only collect the most basic information. At that point, you just have to sit back and wait for them to contact you and they will take you step by step through the whole process.
Of course, you should always contact a number of companies and then after consulting with each one you can then decide which one you feel the most comfortable with. Remember, your current debts won’t go away on their own and so the sooner you do something about them the sooner you can get the burden of financial woes off your shoulders and move on with your life.