People who are struggling financially often look for different ways to help them get out of debt. Debt settlement and bankruptcy are two of the common tools consumers use to help them get out of debt. Many people wonder which tool is better to help them get debt relief. Financial hardship can cause immense amount of stress. This article will explore which option is best.
What is Bankruptcy
Bankruptcy is a legal way to help people get out of debt. A bankruptcy allows you to eliminat eyour debts. When most people file bankruptcy, they usually want to file Chapter 7 bankruptcy. A Chapter 7 bankruptcy can get rid of medical debt, unsecured loans, credit card debt and even some tax debt. A bankruptcy can stop debt collectors from coming after you. If you are unsure whether you qualify for bankruptcy, it is best to speak with a Staten Island Bankruptcy Lawyer or New Jersey bankruptcy lawyer who can point you in the right direction.
What is Debt Settlement?
Debt settlement is where a company negotiates a debt for a lesser amount than you owe. A debt settlement company will work with your creditors to come up with an agreeable amount. These payments are referred to as settlements. Creditors will allow you to either make lump sum payments or spread the payments out overtime. More often, consumers don’t have enough money to make a single lump sum payment so they will be forced to make payments overtime. When you sign up with a debt settlement company, you will put money into an escrow account to pay your creditors. The objective is that as the escrow continues to build, the debt settlement company will use this to offer settlements. Debt settlement companies will tell consumers that to negotiate settlements with creditors, they will be required to stop making any payments on their cards. Keeps in mind, that as the debt continues to fall into a delinquent status, it will be reported to the credit bureaus. This will cause a major impact on a credit score.
