If you are a consumer that is considering Bankruptcy, it is very important to understand all of your options and the potential implications and benefits of each. If your goal is to avoid bankruptcy, a debt settlement program could be a viable option for you. It is important to understand that in some occasional circumstances consumers that were enrolled in a debt a settlement program may have ultimately decided to pursue a bankruptcy.
If you have examined your options and decided that bankruptcy is your best option, you should seek legal advice from a seasoned bankruptcy attorney with in the state you reside.
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The information below should not be construed as legal advice however, should be used as a brief overview of the two major bankruptcy options a consumer has.
Chapter 7 - OnOctober 17, 2005, bankruptcy code was dramatically revised via the "Bankruptcy Abuse and Consumer Protection Act." The goal of this act was to prevent or make it more difficult for people who could afford paying their debt to file for Chapter 7 bankruptcy. Consumers wishing to file for Chapter 7 bankruptcy are subject to a "means test" by the courts in which their income and expenses are assessed relative to national and local living standards and the median income for the state in which the bankruptcy is filed. If the client has sufficient means to support their debt, they won't qualify for Chapter 7. Consumers wishing to file for Chapter 7 must obtain Consumer Credit Counseling from an agency approved by the U.S. trustee's office within 180 days of filing in order to examine their alternatives. If you are considering bankruptcy you should expect to pay up-front fees to your attorney of as much as $10,000 and also be aware that the bankruptcy will be public record and reported on all the major consumer credit bureaus for up to 7-10 years.
Chapter 13: - In chapter 13, the courts will evaluate your monthly income and expenditures in order to create a viable repayment programming lasting up to 5 years in most cases. You will be assigned a bankruptcy trustee to enforce and monitor your repayment plan. Each type of bankruptcy halts the legal process creditors take in pursuit of collecting their monies.
An advantage of a debt settlement plan is that it does not appear on a credit report in the same manner. A debt settlement will affect your credit because of the negative payment history associated with the program, but there is no specific indication that you are in a settlement program. Many consumers opt for a debt settlement program because as described above, filing for Chapter 7 has been made more difficult, and the flexibility of a debt settlement program versus a Chapter 13 repayment plan is often more desirable.
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