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A chapter 7 bankruptcy
There are two types of bankruptcies available to individuals–a chapter 7 and a chapter 13. What is the difference? A chapter 7 bankruptcy will discharge (get rid of) most of your unsecured debts. Unsecured debts are debts such as credit card debts, medical bills and personal loans. They are called unsecured because they don’t require you to put up your house, automobile or some other asset as collateral.
On the other hand, chapter 13 bankruptcies are more of a way to reorganize your debts and pay them off over a 5-year period. If you have a six-figure income, it won’t be multiple–choice–you’ll have to file for a Chapter 13 bankruptcy.
The pros and cons of a chapter 7
The pros of a chapter 7 bankruptcy are that it will discharge all of your unsecured debts and let you start rebuilding your credit almost immediately. Plus, you can get an attorney to handle a chapter 7 bankruptcy for as little as $400 to $500, though the better ones charge more like $1.200 to $1,500. This means that a chapter 7 bankruptcy will likely cost you less than a debt settlement program.
The cons of a chapter 7 are that you cannot discharge some debts, including past-due child support and alimony, fines and income taxes owed and student loans. Also, a chapter 7 bankruptcy will stay on your credit record for ten years. You may have a very difficult time getting new credit during that 10-year period, and you could even have a hard time getting a job as many employers won’t hire people who have a bankruptcy in their past. If you want to buy a home, you’ll have to wait three years from the time your bankruptcy was discharged, have good credit during that time and be able to get an FHA insured loan.
While some people, including bankruptcy attorneys, will tell you it’s as simple as a walk in the park, it isn’t. It’s really one of the top five negative events that you could go through. It ranks with severe illness, divorce, disability and the loss of loved one. It is a life–altering experience and can leave you with deep wounds to both your psyche and your credit.
The pros and cons of debt settlement
Unlike chapter 7 bankruptcies, debt settlement won’t get all of your unsecured debts discharged. While a good debt settlement company can get your debts reduced to a fraction of what you owe but you’ll still have to pay them off. Debt settlement will probably cost you more than a bankruptcy and will have as an adverse affect on your credit. It’s a way to get your debts paid off in 24 to 48 months and with monthly payments you can afford. Some of your creditors may agree to do a thing called re-age your accounts and bring them to a current status so that your credit score would be boosted right away. And once you finish debt settlement, you will longer be subject to collection calls or legal action. It’s a way to stop all those harassing phone calls.
Not all of your payments go to your creditors
The cons of debt settlement are that it can’t be used to reduce secured debts and some of your payments will go to the debt settlement company and not your creditors - this is the fee for services. Debt settlement companies often charge upfront fees, plus monthly fees and won’t pay your creditors until there is enough money in your account to settle. Your credit will take a hit because you will have to stop paying your creditors for probably six months before they’re ready to talk settlement. And any time you stop making payments on debts, this will definitely have an adverse affect on your credit score.
Debt settlement the right way
If you’re interested in debt settlement, you should be interested to know that we do it the right way. With National Debt Relief, there are never any upfront fees. You pay nothing unless we can present a plan that you approve. Our debt professionals will get your balances reduced to the lowest possible amount and you can expect to settle your debts within 24 to 48 months of starting a debt settlement plan. Don’t let a bankruptcy scar you for life. Fill in the free debt analysis form and let us get started helping you.