What's better: declare bankruptcy or sign-up for Credit Counseling program?
Bankruptcy is the very last line of defense for a debt overburdened consumer. A declaration of bankruptcy forces creditors to completely stop from attempting to collect the money you owe. It stops wage garnishment, and depending on which form of bankruptcy you declare, you are free of debt. You get a fresh start.
This is very common procedure these days and for a lot of people probably is the only way out of debt.
Bankruptcy will stay on your credit report for up to 10 years. Generally, you will have to wait 2 years to apply for a mortgage. On the other side joining the consumer counseling debt consolidation program you'll have a chance to pay off your debt in 2 to 4 years and your credit report won't get affected as much.
What happens if I file bankruptcy?
There are two types of bankruptcy available to most people. If you file Chapter 13, you may keep a mortgaged house or a car. Rather than surrender property, you may pay off your debts over three to five years so for a lot of people it doesn't make sense - you still must pay your debts and have bankruptcy on your credit for 10 years. True though you can apply for a mortgage the very next day after Chapter 13 is declared.
Filing bankruptcy under Chapter 7 requires you to surrender all assets that are not exempt in your state. Exempt property may include items such as basic household furnishings and work-related tools, car and even some equity in your house if you own one. Any non-exempt property will be given to creditors to cover at least some debts but since the majority of people declaring bankruptcy has nothing anyway, creditors often get nothing.
Both types of bankruptcy may get rid of debts where creditors have no specific rights to property and stop foreclosures, repossessions, garnishments, utility shut-offs, and debt collection activities. Bankruptcy usually does not wipe out child support, alimony, fines, taxes, and student loan obligations.
How long does a bankruptcy stay on my credit report and how does it affect my credit?
Under the Fair Credit Reporting Act — a federal law — a bankruptcy can remain on your credit report for up to 10 years.
How does Debt Management Program differ from Chapter 13 bankruptcy?
DMP is voluntary for both you and your creditors. Therefore, all creditors may not waive interest. However, when you have repaid your debts, a good credit recovery program will help you regain your credit.
In contrast, when you file for Chapter 13 bankruptcy, it becomes public record. The court will administer the plan and all interest will be stopped. You may also have difficulty obtaining credit in the future.
If I need legal advice on filing bankruptcy, and don't have the money to pay for an attorney, what should I do?
You can contact the local bar association, legal aid services, or a university law school with a legal assistance program for a referral to an attorney.
