Being in debt can be stressful, especially if you are faced with the possibility of bankruptcy. Each year millions of people file for bankruptcy. However, this is not necessarily the best option for everyone, as every person's debt situation is different. Consider a number of factors when determining whether bankruptcy or debt settlement is the right solution for you.
Assess
In order to decide the best course of action to address your debt situation, you need to determine the exact amount of debt you owe. One of the best ways to do this is to request a copy of your credit report, which will allow you to see all of your current debts. You should also review and collect all outstanding billing and credit statements and organize them either according to amount owed or original due date. Depending on how much outstanding debt you have, you may qualify for settlement.
Income
The next step is to calculate your monthly income. If your income does not exceed the total amount of your basic necessities, like rent, food, transportation and utilities, then you do not have the extra money required for a lump sum settlement payment. To see it you qualify for Chapter 7 or Chapter 13 bankruptcy, you need to compare your average monthly income to the state median. If your income is higher than the median, you can only qualify for Chapter 13, and will have to pay back a portion of your debts.
Settlement
If you think that you qualify for debt settlement you need to contact a licensed settlement company so it can begin negotiations with your creditors. When a person agrees to debt settlement, he is agreeing to repay anywhere from 40 to 60 percent of his original debt, usually in one payment. While debt of any kind can lower an individual's credit rating, debt resettlement often does so by approximately 50 points. This may be avoidable if your agent can get your creditors to report your debts as "paid in full" on your credit report.
Bankruptcy
If you decide to file for bankruptcy you should be aware of certain key factors. Depending on your income, bankruptcy may not eliminate all of your debts, as you may have to repay a portion of them. Furthermore, a bankruptcy appears on your credit report for seven to 10 years, during which time it may be difficult to secure new credit for things like an apartment or car. In addition, your credit score may go down by 200 to 250 points, which can take several years to restore. You should speak with an attorney to begin bankruptcy proceedings.
0 comments:
Post a Comment