Credit Counseling or Bankruptcy: Which is Best for
You?
People often get to a place where they
simply cant pay their bills, especially in todays
economy which is not particularly sympathetic toward
the poor or even the middle class. Inflation has impacted
nearly every facet of daily life including food, gas,
rent, clothes, utility bills and more. At the same
time, salaries, especially in the lower ranges, have
utterly failed to keep pace. When you get to the place
where you cannot pay your bills and have money left
over for food and other necessities, there are some
hard decisions that have to be faced. The options
are credit counseling and debt management services,
or bankruptcy. Both have their pros and cons, so which
road to take depends largely on the individual and
how severe his or her financial problems have grown.
There are numerous credit counseling/debt
management services available, both in most local
communities and over the Internet. The services vary
considerably, for example some charge fees and exist
to make a profit, while others are strictly operated
by volunteers and dont charge fees for their services.
Some services are certified or accredited, and others
are not. Some guarantee confidentiality, and unfortunately,
others do not.
If your debt situation has not yet reached
a point of no return, credit counseling and debt management
may be the best option for you. This is the way it
works:
Check out a variety of counseling services,
both in your community and on the Internet to determine
which best suits your needs. Avoid those that charge
high fees, do not guarantee your privacy and that
dont have any credentials or accreditations to offer.
Make an appointment with the agency
of your choice. When you go to the appointment, take
as much of your paperwork and documentation with you
as possible, i.e. proof of your expenses and income,
along with verification of the debts you owe.
The counselor will review your situation
and develop a plan to help you pay off your bills.
Legitimate counseling services can often persuade
your creditors to take less than the total amount
you owe and arrange for longer periods of time to
pay the debt off.
Instead of paying your bills directly,
in most cases, you make one monthly payment to the
counseling service, which then distributes that amount
among your creditors according to the agreements they
have worked out. The arrangement leaves you enough
money to live and halts collection procedures. Over
a period of time, all your bills are paid in full
and you essentially have a new start, provided you
dont get yourself back into additional debt in the
meantime.
On the other hand, if you have too much
debt and your creditors are not inclined to work out
payment arrangements with you, the best possibility
may be declaring bankruptcy. There are numerous bankruptcy
attorneys and, again, it behooves you to shop around
to obtain the best possible services at the least
possible price.
It is wisest to work with an attorney
who does a lot of bankruptcy work because he or she
will be most familiar with the rules and regulations
as well as with the judges and bankruptcy trustees
who work in the local system. A good attorney will
know what the trustees and the courts will allow and
what they wont, and will be able to advise you as
to your best options.
There are two kinds of bankruptcies
available to individual debtors. Those are Chapter
7 and Chapter 13. Chapter 7 is a complete discharge
of all nonsecured debts, and some secured ones, generally
including everything except taxes and school loans.
The debtor generally has to give up anything of value
that can be sold to pay his or her debts, although
in most cases a persons home and their primary transportation
are exempted. In a Chapter 13, nothing has to be given
up, but the debts have to be paid in full. The court
simply works out a repayment plan and instead of paying
the money to your debtors, you pay it to the bankruptcy
trustee who then distributes it to the creditors.
There are advantages and disadvantages, as well as
eligibility requirements, for both types of bankruptcy
and the bankruptcy attorney can best advise you which
option will work better in your particular situation.
Whether you choose credit counseling
or bankruptcy, either one can help you eliminate debt
and get back on your financial feet. Both can stop
collections procedures and eliminate annoying and
harassing phone calls from collectors. The bottom
line is, you dont have to continue suffering; there
are ways to get out of the debt situation and begin
again. The most important thing is, once you are out
of debt, carefully manage your money so you dont land
back in the same situation again.
Ethan Hunter is the author of many credit
related articles. If you are looking for help with
Payday Loans or any type of credit issue please visit
us at
