How to Decide between Bankruptcy or Settlement

Choosing bankruptcy or settlement for debts is a big decision and should not be undertaken lightly. There is a difference in debts that should be noted before making this decision as well. Two kinds are typically the type that will be owed – unsecured debt and secured debt.

Unsecured Debt

If you\’re dealing with unsecured debt then you have department store credit cards, regular credit cards, medical bills, or anything else that isn\’t attached to an asset. So if you aren\’t paying on these someone doesn\’t have the option to come take a piece of collateral away to satisfy the debt.

It\’s very possible to get 50% off the total amount when dealing with creditors, especially since most of them will take thirty cents on the dollar. There will be other companies that won\’t way from the 50% to 45% rule. This is going to depend on the amount of debt you owe, the company you\’re dealing with, and if you can accept the terms.

Secured Debt

This form of debt deals with vehicle loans, mortgages, and even student loans. You also have to understand that child support and alimony would also be classified as a secure debt.

If you do not make payments on these you can have your vehicle repossessed, house foreclosed on, garnished child support payments, and the same goes for alimony and student loans. You could also see your income tax refund intercepted until everything is up to date.

What it comes down to is if you\’re able to at least get a 40% to 60% reduction on these you might be able to pay your bills. This is a huge advantage, but for some it still won\’t matter. If there is nothing else left then bankruptcy can be considered. Basically the way it works is there are reduced interest rates and then the creditors see a division of the funds dispersed throughout all of them.

Bankruptcy is considered a Last Resort

It\’s very important to understand that you should only use bankruptcy if there is nowhere else to turn. When this is on your credit report it can stay there for as long as 10 years. So once you do it there is a good chance you will be turned down for credit in the next decade. If that wasn\’t the worst of it; bankruptcy is on public record for all to see.

There are a lot of times when bankruptcy doesn\’t affect some of your debt. Whatever it doesn\’t cover you could see a deduction from your wages. This means your boss might be notified, which could cause issues at work. In fact, there is a good chance you might lose your job as a result, especially if you need security clearance or a background check.

The Truth About Credit Card Debt Settlement

When considering bankruptcy or settlement, there are a few things that need to be clarified if settlement is going to be the alternative. First, some people claim that settlements can often be procured within 30 days. This is not the norm; it is more like 4 months to 6 months (or more). If the time starts extending to a year or 18 months, this is the time to worry about whether there will actually be a settlement or not.

Your credit definitely takes a beating here, but it doesn\’t hurt as bas as someone who files for bankruptcy. The recovery is a lot shorter, which can put you back on track. Just keep in mind that they can still call you while the process is taking place.

Settlements also depend on your creditors and how well you\’re able to work with them. If the creditor tells you they don\’t offer a settlement option, eventually they will call back exclaiming that they will. After all, some money received is better than it all being left on the table.

As with any transactions, beware of who you are dealing with as some companies have advertised that they can \”guarantee\” a settlement. Others have stated that a debt settlement for less than the balance can be accomplished and that it will not affect your credit. The term \”guarantees\” when it comes to debt settlement are not plausible. The outcome is entirely dependant upon the arrangements between you and the creditors.

If you have troublesome credit card debt problems and you can\’t decide whether bankruptcy or settlement is the correct path for you, please visit www.hoffmanbrinker.com for the Internet\’s most reliable source of information on credit card debt solutions.

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