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Examine the differences between debt settlement and bankruptcy

On Behalf of | Jul 21, 2023 | Chapter 13 Bankruptcy, Chapter 7 Bankruptcy

If you’ve got credit card debt and unforeseen circumstances occur, such as losing your job in Michigan, keeping up with monthly payments can be challenging. When you’re in this position, you have a few options. You can ask your creditors to settle for less. You can also file for bankruptcy. Understanding these choices can help you select the one best for you.

Use a debt settlement to make it easier to pay

When you’re having trouble paying monthly credit card bills, you may want to ask your creditors if they’ll accept less. Sometimes, debts can be settled for 35 to 75 percent of the balance outstanding. If you haven’t been making monthly payments and are significantly past due, a creditor may want to negotiate to help ensure they get a portion of their money back. This option is better than getting nothing back at all.

Chapter 7 bankruptcy

If you can’t pay any of your debt back due to a lack of funds, you may want to file a Chapter 7 bankruptcy. Doing so allows your total debt to be wiped out. To go this route, you must meet specific income guidelines. Using a Chapter 7 bankruptcy also requires you to forfeit some of your assets.

Chapter 13 bankruptcy

Filing for a Chapter 13 bankruptcy is also an option when you want to clear your outstanding debts. However, choosing this option is more complex than filing a Chapter 7 bankruptcy. With Chapter 13, there are limits on the amount of debt you can include. However, unlike a Chapter 7 bankruptcy, you can keep all your assets.

When you’re having financial troubles, using a debt settlement, Chapter 7 or Chapter 13 bankruptcy can be beneficial. Weighing the pros and cons for each one is best to ensure you pick the appropriate process for your circumstances.