When are the advantages and Disadvantages of Debt Collection Debt Settlement or Bankruptcy?

There are many options to manage your debts. For instance, you can choose to settle debts or file bankruptcy. The option you choose depends on your financial goals. The advantage of debt settlement is that you won’t have to pay off the entire balance you owe. With debt settlement you or a debt settlement company, working on your behalf, negotiates a lower payment to eliminate the unsecured debts. The major disadvantage is that it’s not legally binding. Thus, creditors don’t have to agree to settle the debts. If they do, they can still sue you. Bankruptcy is one of the legal debt relief options. The advantages of filing chapter 7 bankruptcy is when you want to eliminate your unsecured debts such as medical bills, personal loans and credit card bills. However, the disadvantage of using chapter 7 is that other unsecured debts such as student loans, taxes and child support are not dischargeable. Thus, you’ll owe them regardless of if you file or not.

The advantage of chapter 13 is that you are able to pay creditors. That’s if you have the money to make the monthly payments and pay your creditors. However, the major advantage for both chapter 7 and 13 is the legal protection that it provides. Thus, when you need to stop a foreclosure, lawsuit or wage garnishment. The automatic stay in the both bankruptcy chapter immediately stops creditors from pursuing or continuing any debt collection activities against you.

Before you choose, talk to a lawyer about debt settlement and bankruptcy.