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Bankruptcy May Be Your Option

Bankruptcy often more beneficial than debt settlement

Many people in Oklahoma have debt that is overwhelming. Often, this debt is a result of medical expenses or a lost job. Once the debt accumulates to a certain point, many began to consider their debt relief options. While using a debt settlement company may seem like a good option, bankruptcy is often the better choice.

The premise behind debt settlement companies is that they will attempt to persuade creditors to forgive a portion of debt, often with a large payment. While a relatively recent increase in the regulation of these types of companies means they are more likely live up to their promises, seeking Chapter 7 bankruptcy protection is often a better fit. For example, when a consumer files for bankruptcy, an automatic stay goes into place, protecting the petitioner from wage garnishment and lawsuits. The debt settlement process can take years to complete, and the debtor could be sued by creditors in the meantime.

Additionally, those going through the debt settlement process are advised to stop paying their credit card and certain other bills in favor of putting the money in a savings account. During the three to four years that it can take to complete the process, late fees and interest continue to accrue. The debt is actually settled for a percentage of the current balance -- including the additional fees and penalties -- rather than the balance at the time proceedings are initiated.

While both Chapter 7 bankruptcy and debt settlement will impact a person's credit score, that score will start to rebound immediately; in the case of Chapter 7, the score could start to improve in months rather than in years when compared to debt settlement and the time it takes to complete that process. Despite a commonly held misconception about Chapter 7, most people are able to go through the process without losing their personal possessions. For those overwhelmed with debt in Oklahoma, the best option may be to start with an honest conversation with an attorney who has experience with debt relief options.

Source: theeagle.com, "Debt settlement a bad alternative to bankruptcy", Liz Weston, Aug. 28, 2017

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