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Debt Payment Plans Versus Bankruptcy: What Is Right For You

On Behalf of | Sep 25, 2013 | Bankruptcy

Do you feel like your debt is spiraling out of control? Have you been searching for tools to help you manage your financial situation? You may have discovered resources regarding both debt payment plans and bankruptcy. Each has its merits, and there are some circumstances in which bankruptcy might be your only solution.

Avoiding Bankruptcy With a Debt Repayment Plan

You may choose to avoid the route of bankruptcy. This avoids having a bankruptcy on your credit record. If you feel like you might be able to regain control of your situation in a few years by committing to a regular debt repayment plan, it is possible that you might be able to avoid bankruptcy.

The downside of this approach is that creditors do not have to accept your proposal, even if it comes through an experienced credit counseling agency. Your creditors can still sue you, garnish your wages, repossess your car, foreclose on your house, etc. If they do agree to a payment plan, be sure to get it in writing and stick to it.

Filing Bankruptcy – Know Your Options

Remember that bankruptcy laws are actually in place to protect you. That is why so many people use the word “relief” in connection with bankruptcy. If you are in over your head, Chapter 7 bankruptcy provides the fresh start and immediate relief that many people need to gain control of their situation.

There is another kind of bankruptcy which is actually a payment plan. Chapter 13, also known as debt reorganization, is similar to a payment plan you would work out with each creditor. The difference is that it is not optional. If you file a feasible plan, the creditors have no choice but to accept it. You will pay your creditors back over a three to five year period, but not always 100%. At the end, some debt can be wiped off. Unlike working with a credit counselor, while in a Chapter 13, you cannot be sue, have your wages garnished, your car or home sold, etc. You are protected by the bankruptcy laws during your repayment plan.

Federal bankruptcy law now requires that you complete some form of financial education class. This gives you the tools to implement a new approach, thereby reducing the chance of financial problems in the future. If you feel like you have been crippled by mounting debt, it is time to reach out to a bankruptcy attorney and learn about your options. If you’re ready to take the steering wheel for your financial situation, bankruptcy can you give the relief you need.