Debt Relief or Bankruptcy?
Does debt have you down? You are certainly not alone. Consumer debt is at an all-time high. Whether your debt dilemma is the result of an illness, unemployment, or simply overspending, it can seem overwhelming. In your effort to get solvent, be on the lookout for advertisements that offer seemingly quick fixes with “debt relief”.
In fact, the Federal Trade Commission (FTC) warns consumers to be savvy and read between the lines when confronted with debt relief ads promising to:
- Consolidate your bills into one monthly payment without borrowing
- Wipe out your debts! Consolidate your bills! How? By using the protection and assistance provided by federal law. For once, let the law work for you!
- Consolidate your debts! Avoid bankruptcy! Settle for pennies on the dollar!
Let’s be clear. There is no such thing as “debt relief”. Bankruptcy, however, is a real alternative that helps individuals and businesses deal with debt.
Chapter 7 Bankruptcy provides a clean slate on your debts with no repayment to creditors, whether they are personal debts or personally guaranteed business debts. For the overwhelming majority of individuals, all of their assets are protected under the bankruptcy code and not sold by a court-appointed official to pay your creditors. For example: exempt property may include the equity in your home, cars, jewelry, work-tools, household goods and furnishings, and so forth.
Chapter 13 Bankruptcy provides for some repayment to creditors. One reason for filing a Chapter 13 Bankruptcy is if a portion of your assets are unexempt and you want to retain them. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off all or a portion of your debts during a three-to-five year period rather than surrender any property. After you have made all of the payments under your Chapter 13 Plan, you receive a discharge of your debts.
Both Chapter 7 and Chapter 13 Bankruptcy can get rid of unsecured debts and stop foreclosures, repossessions, garnishments and utility shut-offs, and debt collection activities. Both also provide exemptions, as discussed above, that allow you to retain your assets. Keep in mind that personal bankruptcy usually does not erase child support, alimony, fines, taxes, and student loans.
With that said, consider bankruptcy as a way to manage your debts. Just be aware of anything that seems too good to be true with a promise of “debt relief”.