If you are struggling with an overwhelming debt on your home mortgage and/or high-interest credit cards, you are not alone. Given the current economic situation in the country, there are millions of individuals who find debt repayment exceedingly unaffordable. Explore the various strategies of settling your debt and extricating yourself from the vicious cycle of principal and interest. You might want to know a little about debt management plans vs bankruptcy and the right option for you.
Debt management plans vs bankruptcy
- Bankruptcy is a legal procedure that discharges certain portions of your debt or renegotiates your repayments. You can create a plan that is more feasible and practical for you to follow. On the other hand, debt management plans are created by credit counselors. They work in conjunction with your lenders and try to get your debt terms changed. This is including outstanding balances, interest rates, and late fees and penalties revised.
- Once the bankruptcy case is dismissed, you are legally free of all your debt obligations. However, a debt management plan will stay in the process and go on for years until all your debts are repaid.
- Bankruptcy can provide you a quick fix to your financial concerns. However, it also can negatively impacts your credit score. For instance, while the chapter 13 bankruptcy will stay on your credit report for a period of 7 years. The chapter 7 will show up for as long as 10 years from the time of filing the petition. A debt management plan will not have any effect on your credit worthiness.
- Bankruptcy issues a legal order for an automatic stay on all collection activities. The debt management plan designed by your credit management company may or may not be accepted by your creditors.
Before you choose any debt relief option, consult with a bankruptcy lawyer in Citrus Heights. They can review the pros and cons of each, helping you make an educated decision.