Debt Settlement Vs. Bankruptcy: Which One Is Right for Me in Ohio?
When Ohio residents fall behind on their bills and the debts keep piling up despite their best attempts to make payments, one answer to the problem may be filing for bankruptcy. However, debt settlement is an alternative option that may work better for some people and may shield them from bankruptcy’s credit impact.
Chapter 13 Bankruptcy
This type of bankruptcy filing resolves debts through a repayment plan that can take three to five years to complete. Chapter 13 also has limits on the amount of debt you can owe. People who file for this type of bankruptcy must agree to repay some portion of their debts. The repayment amount and timeline depends on the type of debt and amounts owed. Repayment plans are usually structured to last between three and five years, but defaulting on the plan payments can have negative consequences. For example, a person who stops paying could lose all invested money in the plan and face collection actions. Chapter 13 filers can keep their assets, and filing may help a person who is facing foreclosure catch up on payments.
Chapter 7 Bankruptcy
With this type of bankruptcy filing, most or all a person’s debt is wiped out completely. Credit card bills, unsecured loans and medical bills are eligible for complete removal regardless of the balance. However, student loans cannot be discharged unless the filer has a legitimate financial hardship hindering repayment. There are also income guidelines for Chapter 7 qualification. If a person meets the income requirements for the location and family size, he or she can file for Chapter 7 bankruptcy. A potential drawback of this type of filing is that people may have to give up assets. The non-exempt assets can be sold and the proceeds are used to pay creditors. However, most assets can be shielded with exemptions.
Debt settlement is the process of getting creditors to accept less than the balance owed in return for satisfaction of the debt. Creditors will not settle accounts unless they are delinquent by at least 90 days. Some accounts can be settles for as little as twenty percent of the amount owed. To settle a debt, yourself or your counsel would call a creditor to negotiate a fair amount. Most creditors will not settle unless a person is able to make one single payment at the time of payoff or several small payments that are automatically deducted from a bank account. The benefit of debt settlement is that you can resolve your debts without filing a bankruptcy or losing assets. However, the downside is that cancelled debt sometimes must be reported on taxes as income and can reduce a refund or cause a person to owe additional tax.
Please feel welcome to contact Wood & Brewer, LLC today and take advantage of their free consultation. They can help you decide if the possibility of settlement first. If it is not feasible, they can also work with you when filing bankruptcy is the best option for you in Ohio.