Best Debt Companys

166 Companies 2,736 Real Customer Reviews

Debt Relief Or Bankruptcy?

Posted By:  |  July 22, 2016  |  0 Comment(s)

As a nation, the total outstanding consumer debt is $3.4 trillion. Whether from an illness, overspending, medical emergency, or unemployment, debt is never a fun situation to be in. People struggling financially can choose a variety of ways to help eliminate their debt amount. Filing for bankruptcy and entering a debt relief program are two commonly chosen options.

Debt Relief

People having trouble paying the bills should talk with their creditors to see if they are willing to negotiate a payment plan. Credit counseling services can act as a great resource, help consumers improve their spending habits, and can get borrowers back on track to pay off the debt.

Pros:
Debt relief, like debt consolidation and debt settlement programs, can better protect one’s reputation and credit score. Debt relief programs can provide simple ways to save money and pay back the debt with a lower interest rate and monthly payment. Debt relief programs are often not a matter of public record.

Some nonprofit agencies charge very little for reputable and credible services. In fact, a lot of debt relief companies offer a free, no-obligation consultation with a certified counselor to go over one’s potential options.

Cons:
People need to watch out for hidden fees when it comes to debt relief programs. With additional fees, these programs could end up costing customers more money. Extending a repayment term could rack up interest rate costs.

Tax liability could also be an issue. The IRS may consider money saved from a debt relief program income. Also, some programs require collateral, and people who default on loan payments could lose their property.

Who Should Choose Debt Relief?
Debt relief programs are ideal for people starting to feel a little overwhelmed financially, and would like help getting back on track. They help people aiming to consolidate, settle, or resolve debt quickly, usually in just a few years. Debt relief programs are great for people wanting to decrease their interest rate and overall monthly payments.

Bankruptcy

People should be cautious when filing for bankruptcy. It can have truly unfavorable consequences, and negative impacts on one’s credit history. In fact, bankruptcy information stays on one’s credit report for 10 years and can affect one’s employment, living situation, and ability to get credit. Bankruptcy can also be expensive in attorney fees.

Pros:
Bankruptcy can erase unsecured debt and stop foreclosures, repossessions, and debt collections. With bankruptcy, most people have to give up their assets; however, there are some exceptions to this rule, varying by state.

Bankruptcy acts as a fresh start. It can protect one from creditors and collection activity with an automatic stay.

Cons:
Bankruptcy is a matter of public record, and filing fees are several hundred dollars. Not only that, but mandatory credit counseling from a government-approved agency is required six months before filing.

Who Should Choose Bankruptcy?
Bankruptcy should be used as a last resort, and only in a time of strong financial danger. If one is severely overwhelmed, having trouble making their minimum monthly payments, paying for everything with their credit card, and is constantly harassed by bill collectors, bankruptcy may be the ideal solution. This is a path for people to explore when they owe more than they can pay.

 

Sources:
http://www.valuepenguin.com/average-credit-card-debt
http://www.nolo.com/legal-encyclopedia/debt-consolidation-v-bankruptcy.html
https://www.consumer.ftc.gov/articles/0084-debt-relief-or-bankruptcy
https://www.legalzoom.com/articles/bankruptcy-basics-when-should-you-throw-in-the-towel

 

<–Back to Debt Blog                            Next Post: How Do I Stay out of Debt?–>

Poll

  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

Recently Reviewed:

Trending Blog Post:

Want us to review a company?

If there is a debt company that you don't see on our site, and would like us to review, please contact us.

Real Reviews (yes they’re real)

With so many debt relief companies out there, and a lack of sites willing to bring you the HONEST breakdowns of each company, what source can you turn to for the real information you can trust?

We are dedicated to bringing the truth out, and rank debt relief companies as they should be. Through our investigation, and experience with each company, we rank each company, and bring you our honest, unbiased opinion. We also include authentic user reviews by past customers of each company that are moderated and verified.

Like many sites, we are compensated through affiliate relationships with each company we review, however all of our rankings are based on our 11-Point Ranking Criteria.

All reviews are subject to moderation and approval. Any reviews that may resemble false information, or competitors of another company will need to be verified by our staff before being approved and published. We reserve the right to approve or deny any reviews left on this site.