A Drastic Step for Dealing with Debt: Approach with Caution and Understanding
Your debts are legally waived. The downside is that bankruptcy can remain on your credit report for 10 years. You will also have legal fees and trustee fees that can get quite expensive. And not all debts will be wiped clean in Bankruptcy. You will still owe your most recent back taxes, your student loans, any fines you owe to government agencies, and alimony payments and child support payments. Bankruptcy will also make it difficult to get a new mortgage.
It is easy to fall into debt these days. Whether it’s being tempted by credit card companies sending you pre-approved cards in the mail, urging you to sign up, or medical bills piling up because of an injury or an illness, you sometimes fall behind on bills and end up in debt. In this article we’ll look at options and impacts around Chapter 7 Bankruptcy vs Debt Resolution.
Chapter 7 is the type of personal bankruptcy that most people think of when they hear the term bankruptcy. Chapter 7, also known as straight or liquidation bankruptcy, can be damaging both to your credit report and to you in your everyday life. In a case of chapter 7, the court appoints a trustee to oversee the case. That trustee is tasked with collecting your assets, selling them, and then giving the money raised to your creditors who have successfully filed claims on what you owe them.
The trustee doesn’t take all of your belongings. You can keep some “exempt” property that will help you get a fresh start in your post-bankruptcy life. The property and items that are allowed to be considered exemptions can vary depending on your state of residence, but they often include such things as:
Other than the few items allowed to be kept as exempt property, the trustee will sell most of your belongings. So you’ll then have to replace much of it, which will cost a tidy sum of money.
Perhaps even more punitive is the damage done to your credit report. A Chapter 7 bankruptcy remains on your credit history for 10 years before being deleted. That leaves a black mark on your credit report for a decade, which will make it harder for you to qualify for a loan or even be able to rent an apartment.
If you choose the debt resolution option, you negotiate with your credit card companies or other creditors to forgive some of your debt and accept less of a payment than the total due. But rather than negotiating with the creditors yourself, you hire a company such as DebtBlue to work with the creditors on your behalf. Although there’s no minimum amount needed for a debt resolution, it is generally accepted that people with unsecured debt of at least $10,000 are typically the people who benefit most from resolutions.
The length of time it takes to pay off the debt through a resolution varies on a case-by-case basis, but it is typically a 12-24 month period. That saves you a lot of time — and money in less interest being charged — compared to paying off the debt through making monthly payments, especially if you make the minimum payments due on your credit cards. Debt resolution can save you thousands of dollars in interest charges.
And a debt resolution doesn’t affect your credit score as much as Chapter 7 does because the debt resolutions are typically taken off your credit report in less time than a Chapter 7 filing.
Now that you have an overview of both Chapter 7 bankruptcy vs debt resolution, it should be clear that debt resolution is the better option because it doesn’t require the majority of your assets to be sold and it doesn’t stay on your credit report for as long as Chapter 7. If you feel that debt resolution may be right for you, be sure to contact DebtBlue to see if our program is right for you….
When you become part of our debt reduction program, your monthly deposits will be lower than monthly payments you were making.