Debt Resolution vs. Bankruptcy

Debt Resolution vs. Bankruptcy

Debt resolution and bankruptcy are both strategies that can help you pay off credit card debt — and stop those harassing calls from creditors and collections agencies. But, of course, there are differences between debt resolution and bankruptcy, and you need to know those differences if you want to choose the best option for your situation. Let’s discuss each of these strategies and how they might apply to clearing your debt and helping you get on with your life.

Debt Resolution

Debt resolution is the process of negotiating with your creditors and coming to reasonable terms by which you’ll resolve your debt. In the end, you will still owe some money, but it will be less than you currently owe and with a repayment plan that you can live with.

People who pursue debt settlement can’t afford to pay off all their debts at once, and they often find themselves struggling to make even the minimum payments each month. Thus, not only are they unable to pay down their debts but they find themselves getting deeper and deeper in debt as interest piles up. A debt resolution settlement stops that interest from accruing and allows them to actually pay off their debt instead of watching it grow.  In this way, debt resolution settlements typically save debtors hundreds — if not thousands — of dollars, while simultaneously improving their credit scores.

We should point out, though, that debt resolution does not guarantee results. Once a settlement is paid, the account is resolved. There is no negative impact on your credit report. However, creditors are not required to enter into a settlement agreement. They can pursue any legal action to collect the debt.

Bankruptcy in Georgia

So, what’s the difference between debt resolution and bankruptcy? Bankruptcy, provides legal protection. Through filing for bankruptcy, you can either reorganize your debt to enable you to pay it off or get rid of the debt completely — depending on your income, the type of debt you have, and your goals for keeping certain assets. Bankruptcy requires you to file a petition with your local federal court, which you certify under oath. Bankruptcy also requires you to pay attorney fees and costs associated with filing in court. Now, let’s talk about the two types of bankruptcy that you’ll likely encounter as you start down the road to resolving your debts.

Chapter 13 Bankruptcy

Much like debt resolution, Chapter 13 Bankruptcy involves a debt repayment plan. Under Chapter 13, debts such as student loans, property taxes, and spousal support obligations are made through a repayment schedule that lasts between three and five years. Debts — such as credit card debt or delinquent mortgage payments — are terminated, completed, or reorganized.

While all of this may sound a lot like debt resolution, there is one big difference between debt resolution and bankruptcy. Once you file for bankruptcy protection, creditors are no longer able to contact you directly, and they may no longer charge interest or late fees on your debt.

Chapter 7 Bankruptcy

Now let’s talk about Chapter 7 bankruptcy, which differs a great deal more from debt resolution. Chapter 7 Bankruptcy is the liquidation chapter, covering debtors who have unsecured debts that exceed their income.

Typically, unsecured debts are accumulated after divorce, illness, and/or job loss. A popular myth about Chapter 7 Bankruptcy is that you will automatically lose your stuff. This is not true! During your free debt resolution consultation, we will analyze and determine if your property is exempt.

Filing for either form of bankruptcy will provide immediate protection from repossessions, court proceedings, and wage garnishments. Filing bankruptcy may impact your credit report for up to 10 years after filing. If you are weighing the pros and cons of debt resolution vs. bankruptcy, we understand your needs so contact us at 844.422.8339 (Ga-Buddy) or reach us online.

Georgia Bankruptcy Attorneys | Areas of Service

We serve people throughout Georgia, including but not limited to Metro Atlanta, Georgia; Marietta, Smyrna, Dallas Georgia, Douglasville, Riverdale, Clayton County, Alpharetta, DeKalb County, East Point, College Park, Conyers, Athens, and Macon, Georgia.

Don’t risk attempting to file your petition alone in an attempt to save money. You face a high risk of having your petition rejected if you are unsure how to navigate the Bankruptcy Code.