When you’re in over your head with debt, how do you choose the best way out of it? Debt settlement and bankruptcy each have their merits and disadvantages. As a Salt Lake City chapter 13 bankruptcy attorney firm, we’ll walk you through everything you need to know about both of these options. That way you can make an informed decision. Once you’re ready to move forward, it’s best to talk to a lawyer who can guide you based on your unique situation.
The first thing you want to do is look at how much debt you have. Start with credit card debt, but also include loans and other types of debt. Determine whether your debt is mostly unsecured or secured. If you have unsecured debt that is greater than 25 percent of your yearly income, a debt settlement is unlikely to work because you’re usually required to pay back 70 percent of what you owe. Normally, for the credit card companies to reduce your debt, you’ll have to pay them a lump sum, so you will need to have enough cash to cover that payment. If you owe a lot of money, your lump sum will be large as well.
Next, if you also have secured debt such as mortgages, car loans, etc., bankruptcy could be the way to go. There’s more than one type of bankruptcy to choose from, so it’s important to have an experienced Salt Lake City Chapter 13 bankruptcy attorney guide you through the process. Most people choose a Chapter 13 or Chapter 7 bankruptcy.
If, however, you feel that you can meet your monthly living expenses and still have enough for a settlement payment, debt settlement could be a viable option for relieving your monetary obligations. Just make sure your creditors offer you a repayment schedule you can afford.
You could also apply for a Chapter 13 bankruptcy if you have the ability to repay part of your debts. You and your attorney can work to prepare an affordable repayment plan that will be overseen by a bankruptcy court. A Chapter 13 bankruptcy is essentially a debt settlement backed by the power of the bankruptcy court. Your creditors will work with your lawyer under the guidance of the court and a trustee to decide the amount of debt that will be repaid based on how much you can afford over a 36 to 60-month period.
With a debt settlement, you can attempt to negotiate student loans or settle with creditors on your own, but it’s often difficult to get all of your creditors to agree to reduce payments, and with no legal enforcement, any that do reduce payments can always change their mind at a later date. A debt settlement company may also charge excessive fees to negotiate on your behalf. You may also have to pay taxes on your forgiven debt amount during debt settlement, as opposed to complete forgiveness during bankruptcy. Both bankruptcy and debt settlement will have an equal impact on your credit report, so choose the option that works best for your financial situation.
Based on your income level and the types of debt you have, debt settlement and bankruptcy proceedings can be complicated and chaotic, but a Salt Lake City Chapter 13 bankruptcy attorney can walk you through all of your available options. As a reputable law firm, the Justin M. Myers legal team will let you know whether bankruptcy is the best choice for your situation and help you move towards a debt settlement if they find that’s the option that’s in your best interest. We offer a free consultation to look at and direct your current situation, so call us at 1-801-505-9679 today!