Bankruptcy Options and Alternatives
By Scott Sumerford on Friday, September 28th, 2007 :: 9:13 amCategory: Watching Out 4 You
Bankruptcy is a financially paralyzing decision that will affect your credit history for seven to 10 years. If you are contemplating bankruptcy, then you need to understand its different types and the alternatives available for debt relief.
Chapter 7 and 13 Bankruptcy
Bankruptcy laws enacted in 2005 affected the stipulations governing consumer eligibility for Chapter 7 and Chapter 13 bankruptcy. The new requirements and procedures are as follows:
- Chapter 7 is sometimes referred to as a liquidation bankruptcy because an appointed trustee can order your non-exempt possessions sold to repay your debts. Under Chapter 7, you must pass a means test that shows your income is below your state’s median income. Also, those filing Chapter 7 must receive credit counseling, pay higher court costs, and pay higher filing fees.
- Chapter 13 requires you to adhere to a repayment schedule to repay the entirety of your debts, and the filing fees for Chapter 13 have also been increased. This option also mandates you attend credit counseling before you are eligible to file. Credit counseling tries to prevent consumers who have viable debt-relief alternatives from filing for bankruptcy. The bankruptcy code, additionally, necessitates sufficient income to fulfill the repayment schedule the court creates. If you fail to follow the schedule, then you may not receive a discharge from debt.
Bankruptcy Alternatives
Credit counselors may recommend a myriad of debt-relief methods, but two common debt-relief solutions are debt consolidation and debt settlement.
- Debt consolidation is a form of debt relief that entails combining your debts under one loan. With a debt consolidation loan, the intent is to acquire a low-interest loan that will save you thousands in interest charges. Another advantage of debt consolidation is the convenience of one monthly payment. Paying several different creditors each month can be confusing, so one monthly payment makes keeping track of your debt easier.
- Debt settlement is an effective form of debt relief because it reduces an individual’s total debt. The program involves a trained representative from a debt settlement company working with creditors to eliminate debt. Once the creditor agrees to a reduced balance, the debtor pays the creditor the remaining sum.
Author Bio: Scott Sumerford has several years of experience working in the financial industry and has written a myriad of articles on various financial matters. Read more about how MyUSADebt offers a viable alternative to debt consolidation.
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