Credit Counseling Versus Bankruptcy Attorneys
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Which Way is the Best Way to Go?
When debt is looming large and a person feels a great deal of pressure to do something positive about their financial situation, is it better to go the credit-counseling route or is choosing a bankruptcy attorney the best way to go? The answer to that question is not a simple one because each, in it’s own way has merit and can help in different situations. However, because they are very different before making a final decision, it’s important to know how each can impact on your situation.
Credit Counseling or Bankruptcy
Let’s start with Credit Counseling. Credit counseling is designed to help those who are in a state of debt and feel there is no solution to their debt problems. With a credit counselor’s help the debt won’t be erased, but instead credit counseling will help a person budget their money so that they can eventually pay off the debt. Sometime this is referred to as debt consolidation. Bankruptcy on the other hand is very different. Bankruptcy will completely clear a person of debt, which means you will no longer receive calls from collection agencies and/or attorneys. However, although bankruptcy will clear your debts and stop foreclosures, once you file bankruptcy, you won’t be able to establish credit again for up to ten years.
Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and Credit Counseling
Some people are confused by bankruptcy and credit counseling thinking that they are equal, but that isn’t the case. The only similarity when filing Chapter 13 bankruptcy and credit counseling is that there is a repayment plan set up for both. Chapter 7 bankruptcy, known as straight bankruptcy involves the liquidation of all assets except those that are exempt under state law. Homeowners who are dealing with mortgage and auto payment arrears generally use Chapter 13, as it is a valuable tool for those who have the ability to repay a portion, or even all of their debt. Chapter 13 bankruptcy allows an individual to pay their debt over a three to five year period, without additional interest accrued. Chapter 7 bankruptcies can only be filed once every six years.
Bankruptcy Does Not Clean Up a Bad Credit History
Bankruptcy is often the only way to avoid foreclosures, repossessions, garnishments, and other debt collection, while still maintaining some assets. Bankruptcy does not clean up a bad credit report and will in all likelihood affect a person’s credit rating for up to ten years. The advantage of Chapter 13 bankruptcy over credit counseling is that the repayment plan is a binding court order and deals with all creditors, whereas private debt repayment plans only bind the creditors that are willing to negotiate.
Carefully Evaluate Bankruptcy or Credit Counseling
While bankruptcy may help alleviate the anguish of overwhelming debt, it might be best to consider credit counseling first or possibly contacting creditors to see if something else can be worked out. When using credit counseling, creditors can recoup the money owed while bankruptcy is a more drastic measure. In most instances, it’s probably best to choose credit counseling as the person in debt has some control over their credit standing.
Seek the Help of a Competent Attorney
Bankruptcy will clear your debts and stop foreclosures, but remember, with bankruptcy, it will take up to ten years to establish credit again. Before deciding on either credit counseling or bankruptcy, consider the fact that paying off your debt will in the long run provide a greater sense of freedom and self-confidence, which can lead to the making of wiser decisions about money in the future. Credit counseling can help you gain control over spending habits, but before making your final decision, it would be best to seek the advice of a competent bankruptcy attorney who can advise you on whether bankruptcy or credit counseling is the right choice.
About the Credit Counselors at Straight Credit Counseling
We at Straight Credit Counseling do everything we can to help individuals and families get back on track and totally out of debt. Credit Counseling services offered by Straight Credit Counseling helps individuals repay their debts by using careful budgeting and management of money strategies. A qualified counselor offers advice on how to manage outstanding debt as well as answering various credit questions. If you are ready to improve your credit, the team at Straight Credit Counseling is available to conduct a no obligation consultation. To arrange for a session by phone, please feel free to e-mail us at info@StraightCreditCounseling.com. Contact us today and rest in the knowledge that your credit report will soon be one that you’re proud to present.