Debt Settlement or Bankruptcy: Choose the Better One
Many people have this misconception that debt settlement and bankruptcy are the same things. To get out of this misconception, they need to know the right thing. In order to present the truth, a comparative study is required to be focused on. 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 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 you owe. You can state them the reason and can negotiate on the amount. It is always recommended to hire an attorney to do the same because of his knowledge on it. Once the creditor lowers the amount, you need to pay them in a lump sum or in installments. It is better not to opt for the lump sum as the creditor will assume that you are reluctant to give the actual amount and thus they will create pressure to receive more.
Pros and Cons
Looking at the brighter side, it can be said that by debt settlement, you will have a solution for that creditor regarding debts and you will not have any tag of bankruptcy on the credit report.
The area of consideration, here, is greater than the above-mentioned one. By taking the facility of debt settlement you may bring some added problems, like:
The free-rider problem, where the creditor refuses to believe in your situation. Here, they may want documents of your income, assets and liabilities to ensure if you can truly not pay the amount. Knowing about your other credits, they will force you to give the hit to the other and pay them full.
They may ask you to keep your valuable assets on mortgage and pay fully.
The creditor will mark that pending payment to the unpaid portion for tax. It is for lowering 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 term.
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 and leaving the sum for your living, they will take the rest for repaying it. 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 makes you get rid of the debts entirely. There will be no calls and claims for money from the creditors. The repaying option is quite manageable, and you don’t need to worry about it. It will be calculated and taken automatically. The 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 it in comparison to debt settlement. This is the reason why it is so popular in Edmond, rather in the U.S. The Bankruptcy Code was enacted pursuant to the Constitution of the United States of America, in article I, section 8. This gives power to the Congress to establish even 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. You need to be in debt and clear the same on your own again. Thus, you can improve your credit scores. Rest, the bankruptcy attorney in Edmond, OK, will explain you.
Hence, if you are in debt and can’t find any way to repay them, just go for bankruptcy. Hire professional lawyers from Chris Mudd and Association and get rid of the debts and live tension-free.