Debt Settlement Or Bankruptcy: Choose The Best One
Many people have this misconception that debt settlement and bankruptcy are the same thing. To get out of this misconception, they need to know all the information. In order to present the truth, a comparative study is required. This is not a guide to sort out things without the help of bankruptcy attorney in Edmond, OK, or somewhere else. It is just for clearing up the confusion.
Here you go!
Debt settlement is based on a simple idea. It is where you can ask the creditors to accept a lesser amount than what you owe. You can state the reason and negotiate the amount. It is always recommended to hire an attorney to do this because of his knowledge on the subject. Once the creditor lowers the amount, you need to pay them back in a lump sum or installments. It is better not to opt for the lump sum as the creditor will assume that you are able to give the actual amount and they will then create pressure to receive more.
Pros and Cons
Looking at the brighter side, it can be said that with a debt settlement, you will have a solution for the creditor regarding debts and you will not have any tag of bankruptcy on your credit report.
The area of consideration, here, is greater than if you were to seek bankruptcy. By taking the option of debt settlement you may bring some added problems, like:
The free-rider problem, where the creditor refuses to believe in your situation. They may want documents of your income, assets and liabilities to see if you can truly not pay the amount. If there are other creditors involved, they could force you to make another creditor take the hit instead of them and make you pay themselves in full.
They may ask you to keep your valuable assets on mortgage and pay them fully.
The creditor will mark the pending payment to the unpaid portion for tax. This will lower the taxable income of the creditor and this liability will be credited to you as income. And you will be liable to pay the tax for this phantom income. In Edmond, many people suffer from this awful situation.
If you fail to pay that reduced amount because of any crisis, they may take legal action against you. They might file to sue you as a prelude to levying funds from all your assets and bank accounts.
Bankruptcy, on the other hand, discharges all your debts either under Chapter 7 or Chapter 13, depending on the eligibility. It then calculates your expenses and income, leaving a sum for your living and they take the rest for repaying the debt. Once you file for bankruptcy, all your debts will be removed. Along with debts, it also helps to avoid the tax hit.
Pros and Cons
It allows you to get rid of all debts entirely. There will be no calls and claims for money from the creditors. The repayment plan is quite manageable, and you don’t need to worry about it. It will be calculated and taken automatically. A bankruptcy attorney in Edmond, OK, can help you out to understand the entire picture.
Looking at the pitfalls, it can be said bankruptcy does not have much of in comparison to debt settlement. This is the reason why it is so popular in Edmond, and the U.S. The Bankruptcy Code was enacted pursuant to the Constitution of the United States of America, in article I, section 8. This gave the power to congress to establish laws in the U.S. pertaining to bankruptcy. It demonstrates that it is a constitutional right for the U.S. people.
If you are thinking about your credit report, there is a way to mend this area for you. You do not need to be in debt and you can start fresh again. Thus, you can improve your credit scores. Rest assured knowing a bankruptcy attorney in Edmond, OK, will explain everything to you.
If you are in debt and can’t find any way to repay them, seek bankruptcy. Hire professional lawyers from Chris Mudd and Association and get rid of your debt to live tension-free.