Which Debt Management Option Is Best for Your Financial Situation?
If you’re struggling with overwhelming debt, you may be wondering what options you have. Two of the most common debt management options are debt settlement and bankruptcy. Although they are different processes, they both offer the same solution: finding a road out of debt. Each approach has its advantages and disadvantages, but it can be tricky to know which choice might be ready for you. That’s where a trusted Hawaii bankruptcy attorney can provide invaluable advice and guidance.
What Is the Difference Between Debt Settlement & Bankruptcy?
Bankruptcy can offer a fast way out of debt but has a long-term impact on your credit score. Chapter 7 bankruptcy will eliminate your debt, while a Chapter 13 bankruptcy will create a 3-5 payment plan to repay part of what you owe. In contrast, debt settlement doesn’t require filing through the court. You’ll negotiate with your creditors to pay less than what you owe, typically in a lump sum payment. Many creditors are willing to negotiate a settlement because they will typically receive only a very small payment if you file for bankruptcy.
When Should I Consider Debt Settlement Or Bankruptcy In Hawaii?
If your debt payments, beyond mortgage or rent, exceed 20-30% of your income, you may need action to help you repay your debts. The severity of your debts, what assets you own, and the stability of your income, along with your willingness, ability, and commitment to overcoming debt, are key elements of the decision between debt settlement and bankruptcy. Consulting with an experienced debt settlement lawyer can be a great way to review your options and determine which path may be best for you.
What Are The Advantages & Disadvantages Of Debt Settlement?
- 2nd box: lump sum.
- State and federal taxes might consider
- Just as with bankruptcy, your credit score may be damaged
What Are The Advantages & Disadvantages Of Bankruptcy?
Individuals who do not want to take the debt settlement approach may find filing for bankruptcy to be a better option. There are two general paths to bankruptcy: Chapter 7, which eliminates most debts but may require the sale of your home and other assets to repay what you owe; and Chapter 13, which protects your assets but restructures some or all of your debt into a 3-5 year payment plan. Filing for bankruptcy will affect your credit report for up to 10 years and will not include some types of debt, such as student loans, income taxes, and child support payments.
Bankruptcy clears most of your debts and offers a fresh financial start without any taxes paid on the forgiven loans. Additionally, your creditors will be prevented from pursuing collections immediately after your file. Negatively, bankruptcy can mean the loss of your home, assets, and some possessions, and has a longer impact on your credit score.
Can I File For Bankruptcy After Debt Settlement?
This is a very common route to debt elimination. For many people, bankruptcy is a last resort option. You can certainly attempt to settle your debts first and then file for bankruptcy later. If you file for Chapter 7 bankruptcy, your settled debts will be included in the discharge.
Is Debt Settlement Or Bankruptcy a Better Option?
Unfortunately, there is no one-size-fits-all solution to debt management. The good news for individuals struggling with debt is that there are multiple options for relief! Consult with your bankruptcy law firm to discuss the pros and cons of each option and obtain guidance on which approach may be right for you.
Hawaii’s Leading Bankruptcy & Debt Settlement Lawyers Are Ready To Help You
Don’t continue to suffer under the weight of overwhelming debt! If you are worried about your financial future and wondering how you’ll come out on top of massive debts, call the experienced attorneys at Blake Goodman, PC, Attorney. We have guided thousands of clients through the processes of bankruptcy and debt settlement with outstanding results, and we are confident that we can help you, too! You don’t need to face bankruptcy, debt settlement, and debts alone. Contact us today for your free consultation!