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Do I Need Debt Relief or Bankruptcy?

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If you’re struggling to pay off debt and you’d like some help, there are two options to consider: debt relief or bankruptcy. Both programs offer to help you get rid of your debt while keeping your head above water. However, although good options, both debt relief and bankruptcy can have some downsides. Below is a list of advantages and disadvantages to keep in mind when considering if debt relief or bankruptcy is right for you.

To learn more about your debt options, contact a Cleveland Bankruptcy Lawyer at Luftman, Heck & Associates today at (216) 586-6600. We can discuss your legal options during our free consultation.

The Pros and Cons of a Debt Relief Program

The advantages of debt relief include the following:

  • You can negotiate amounts owed. If you decide to work with a consumer credit counseling business, you may be able to pay less than before and your bills can be lowered through their program.
  • You can lessen the impact on your credit score.
  • You can work with your creditors. Instead of avoiding creditors’ calls, you can work together to come up with a solution that decreases your debt and ends harassing calls from the collections department.

In addition to debt relief program’s advantages, there are several disadvantages you should consider as well such as:

  • Your creditors may not want to work with you. Your creditors may decide not to accept anything less than the full amount owed. If this happens, there is little you can do on your own, and you may want to seek advice from a debt relief lawyer.
  • You may choose the wrong program. If you enroll in a consumer credit counseling program without doing any research on it, you could end up owing even more money than before. Some companies charge exorbitant fees and could even decide to pocket your payments instead of sending them to creditors.

The Pros and Cons of Bankruptcy

Some bankruptcy advantages are as follow:

  • You can get rid of your debt quickly. If you choose a Chapter 13 bankruptcy, you will be finished paying off your bills in 3-5 years. With a Chapter 7 bankruptcy, your debts will be wiped out in as little as 4 months.
  • You stop harassment from creditors. The moment you file for bankruptcy, the court will issue an automatic stay, which bars your creditors from contacting you for payment while your case is being processed. This means you no longer have to endure the stress of receiving harassing calls from collections agencies.
  • You get a fresh start. Becoming debt-free gives you a chance to start over and avoid the same mistakes that got you into financial trouble in the first place.

The thought of wiping out your debt so quickly can be appealing. However, bankruptcy does have several disadvantages such as:

  • Your credit will take a hit. Bankruptcies remain on your credit report for a number of years including seven years for Chapter 13 bankruptcy and 10 years for Chapter 7 bankruptcy. This will lower your credit score, which could mean that you when you apply for a loan, you’ll get hit with a high interest rate or possibly even denied.
  • You could lose your possessions – including your house. For debts to be erased, you’ll need to give something to some of your creditors. In a Chapter 7 bankruptcy, you must sell your possessions and use the money to pay secured debts. Also, if you’re behind on house payments, your mortgage company will likely file a foreclosure. This can be hard to stop, especially if you cannot afford to pay the arrears owed.
  • You may not qualify. If you want to file for Chapter 7 bankruptcy, you must first take a means test to see if you are eligible. If your income is not low enough, the court will reject your application.

Contact a Cleveland Bankruptcy Lawyer Today

An experienced bankruptcy lawyer has extensive knowledge about both debt relief and bankruptcy. If you’re still unsure which one to choose, consider talking to our Cleveland bankruptcy attorneys at Luftman, Heck & Associates. You can meet with one of our attorneys to go over your case and make the best choice for your situation. For a no-cost consultation, call us today at (216) 586-6600 or contact us online.