Chapter 7 bankruptcy is something that many people turn to when they see no other way of being able to manage their outstanding debts. It used to be that filing bankruptcy pretty much wiped the slate clean, but that has changed. The most common form of bankruptcy will require you to reorganize your debt and pay it off.
However, there are other forms of repaying debt that can help you avoid bankruptcy. Beginning with a credit counseling agency is your most productive move. Most debt counseling agencies today not only help with debt management plans, but they work with debt settlement and bankruptcy experts. This means that no matter what your debt situation is you can get the help that you need be visiting a credit counseling company.
If you are not a financial expert, your debt may not be as bad as you think. Unless, you have more in debt than you make in a year, there are most likely other alternatives that may be able to help you avoid filing bankruptcy. Debt settlement is an option that allows you to settle your accounts in full through an agreement with the lender to pay less than what is owed on the account.
Credit counseling is a plan that gives you the option to combine all of your unsecured debts into one account that requires only one payment per month. The benefit here is a significant interest rate reduction. Credit counseling will usually have you debt free in 3 to 5 years and debt settlement normally takes 1 to 3 years. Debt settlement will ruin your credit and require you to pay incomes tax on the forgiven amount. You will not have either of these with credit counseling.
It is best to talk to a non profit credit counseling agency before making a decision about bankruptcy. The worst thing that can happen is that would turn out to be your only alternative, but wouldn’t want to make sure you had no other alternatives before you filed bankruptcy. Talk to a credit counseling agency, if you not are sure of your debt relief alternatives.
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When it comes to elimination of huge debts people either think of filing for chapter 7 bankruptcy or to opt for debt settlements. Regardless of the law a settlement is always considered to be better than filing a bankruptcy. With introduction of new law things will change to a certain level but financial settlement will still continue to be a better option for creditors as well as the debtors.
New law vs. Old law of bankruptcy
The financial institutions were never in favor of the old bankruptcy law as they could not recover anything from the person who filed bankruptcy under chapter 7. In case the debtor qualified under chapter 13 of the bankruptcy they still had to wait for the specified period to recover certain amount of their debt. The debtors preferred settlement more than bankruptcy. Bankruptcy can stay on their credit reports for a period of 10 years which is a very long time span. To some extent the new law is certainly in favor of creditors as more and more people will be forced to file bankruptcy under chapter 13 which means that the creditors would be able to recover at least some portion of their lending.
Debt settlement negations will continue
Even with new bankruptcy law the settlement still remains a better option for creditors as well as debtors. Debt settlements lower the debtor’s credit score but this is preferred over bankruptcy staying on their credit report for a longer time span. One might feel that with new law for bankruptcy creditors will not be so flexible for settlements. On the contrary no drastic effect would be there on the negotiations for the financial settlements. There are many reasons for this. With new law if the person qualifies for chapter 7 the creditors get nothing. Even if he qualifies for chapter 13 then also the creditors have to wait for a period of 5 years before they could recover 30 to 50 percent of debt. If they are in a position to recover the same amount in a lesser time span by through the debt settlement option they would naturally prefer it.
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Debt settlement is a viable alternative to filing bankruptcy. Most consumers are able to eliminate at least 60% of their unsecured debt while avoiding many of the negative consequences with filing bankruptcy. If you are over $10k in unsecured debt you will be eligible for debt settlement.
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Chapter 7 bankruptcy is not an easy process to manage. There are many details to where you need to remain in constant communication with creditors, courts and court officials. There are piles of documents needed to be prepared and more to keep track of. It is better if a professional handles your case. However, how do you know how to choose the right bankruptcy attorney for you? If you solely choose a bankruptcy attorney by pay scale, then you may be missing other qualifications, which may cause further financial burden in the end. If an attorney does not get the bankruptcy case right from the beginning, then extra money and time spent will leave you with nothing. Therefore, here is a quick guideline on how to find a successful, efficient, creditable bankruptcy attorney.
Ask Family and Friends for Referrals
Unfortunately, people are suffering financially causing people to file for bankruptcy. Thus, the odds of knowing someone that has gone through the bankruptcy procedure is high. Consequently, start asking those you know that have gone through the process. Enquire who was utilized for the case. What lawyer did they hire and what was the outcome of the case? Referrals are a great place to start.
Check Qualifications
Ask the potential lawyer what is the attorney’s experience. What is his/her educational background? Does he/she have a clean record with the national and local bar association? What do the courts think of him/her? The bankruptcy courts are a great source to use when finding out about qualifications. Court employees are eager to discuss colleagues. You shall know if someone is highly regarded or not at all. People are appropriately vocal in this arena and asking around shall narrow your choices assisting you in accomplishing the task.
Discuss Expectations
A professional should be able to answer what to expect from filing bankruptcy. What will the process entail? What should you expect from creditors? Are collection agencies going to be hounding you during the filing process? What are you required to pay back? Are any debts dismissed during the process? Is there additional information needed to proceed forth? These are all valid questions the attorney should be able to address. It is common knowledge for a bankruptcy attorney. If the attorney is unable to reply to these questions, then I would suggest move on and look at other bankruptcy attorney candidates.
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