Federal bankruptcy laws have changed. It is now more difficult for consumers to qualify for Chapter 7 bankruptcy, and Chapter 13 bankruptcy will not protect you against foreclosures, wage garnishments and lawsuits.
Furthermore, filing bankruptcy will seriously damage your credit, which may worsen your financial woes by making it that much more difficult for you to obtain financing when you need it.
For these reasons, filing bankruptcy may not be the best option for dealing with your financial difficulties.
Debt Settlement
If you cannot make your debt payments, and simply need more time to settle your finances to get back on your feet, debt settlement may be your best option. Moreover, if you do not qualify to file and receive a discharge under federal bankruptcy laws, debt settlement may be your only option.
In a debt settlement program, you negotiate with your creditors to pay off a compromised amount of debt. Overall, this approach may be easier on your credit, but it will require you to make a lump sum payment and continue your monthly installment payments until the settlement kicks in.
Furthermore, unlike bankruptcy, which may completely wipe out your unsecured debt and give you a clean slate to begin rebuilding your credit, debt settlement only gets you out from under a portion of your debt. The rest you must pay off; and, in accordance with the Fair Credit Reporting Act, this debt may also stay on your credit report for several years. As a result, it may be more difficult for you to repair your credit. For this reason, some lenders view a debt settlement in the same light as a bankruptcy.
Bankruptcy or Debt Settlement
As a general rule, if your monthly debt payments do not exceed the amount of monthly disposable income you have, and you can afford to make the negotiated lump sum payment to the settlement company to satisfy your creditors, debt settlement may be a better option for you, as it will be less damaging to your credit rating. But you should be aware that there are tax liabilities for the voluntary forgiveness of your debt: the money you save will be treated as income for tax purposes.
On the other hand, if you have more monthly debt than disposable monthly income, and you can qualify for Chapter 7 bankruptcy, bankruptcy may be your best option. However, because of the damage bankruptcy does to your credit, some would say that it should only be considered a last resort.
Free Consultation: Bankruptcy Lawyer
Do you want to know whether you qualify for debt relief under the Bankruptcy Act? Would you like to know the costs and procedures of an Oklahoma bankruptcy? Call (405) 563-7888 for a free consultation with a Oklahoma City bankruptcy lawyer, or (888) Debt-Line to speak with an Oklahoma bankruptcy attorney handling bankruptcies statewide.