The process of Debt Settlement and Bankruptcy are both ways that a individual can initiate a process to end a severe credit pinch. Each process has pros and cons, but in the final analysis, bankruptcy is a process that is used when all else fails. The process of settling debts with a debt settlement agency is a good way to eliminate your debts, with the understanding that you can trim down some expenses and eventually pay off your obligations.
Debt assistance groups represent clients and negotiate an amount that can be paid over time to settle the account. The underlying process mitigates the debt that is owed but does not place the participant in credit situation that is as dire as bankruptcy. Prior to engaging a debt assistance group, an individual should examine their total monthly income and their necessary monthly expenses. If your monthly income exceeds your basic expenses such as utility bills, food, and basic housing expenses, then debt assistance is viable choice.
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Debt settlement groups will sometimes charge and upfront fee, but most of the time, they will incorporate there fee within your monthly payments. To qualify for this type of process, an individual most have at least $7,500 dollars worth of unsecured debt outstanding. It is important to ask about the minimum unsecured debt and any additional payments that are created once this amount shrinks below this level.
Many reputable debt assistance groups are endorsed by the Better Business Bureau. Individuals can ask these companies for references, as well as, look at different case studies on other individuals they have helped. It is important to choose a group that has a proven track record. One should ask how this process will effect their credit rating and what the drawbacks might be. Individuals must be prepared for collection agent calls, law suits and damaged credit.
Chapter 7 or Chapter 13 bankruptcy protection creates a court order in which an individual does not have to pay their credit obligations. Bankruptcy protection will stay on your record for 10 years, but might not eliminate all of your credit obligations. Chapter 7 and Chapter 13 protection cost approximately $300 dollars in filing fees which does not include any payments to a bankruptcy lawyer. The process of bankruptcy is very complex and should be the last solution in a financial crisis.
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