If you ask any financial expert, they usually advise that bankruptcy be the last option of any debtor. The reason for this is the negative effect that it has on your credit score. An estimate of 200 points or more will be deducted from your current score. Not only that, the blemish of bankruptcy will stay with you for the next 10 years. If you have plans to get financial aid for a huge purchase or a start up business, you may have a hard time getting it.
In a lot of cases, people who think they need bankruptcy is diverted towards debt settlement . This type of debt relief program aims to reduce the total amount of the credit that the debtor owes.
The debt settlement process involves negotiating with the creditor to allow you to pay only a percentage of your debt. To get them to agree, you need to prove that you are in a financial crisis. To do this, you have to stop paying them. Instead of sending them payments, you put aside that money to grow your settlement fund. This is the fund that you will offer them and aim to have them agree to pay only a percentage of what you owe. Once they agree, you pay that amount and the rest of your debt is forgiven.
While that seems like a dream debt payment arrangement, there are some people who cannot even afford to pay the settlement fund. If this is you, then you need to accept the fact that bankruptcy is the best debt solution for your financial problem. To help you decide, here are other signs that bankruptcy should be considered immediately.
You have no income or very little coming in every month. Having no income to support yourself is a financial crisis that even debt settlement cannot help. You need at least a little extra after all basic expenses have been paid for to consider other debt relief options.
You have more debt than your income. Even if you have an income, if your debt is significantly greater than what comes in every month then you need to opt for bankruptcy.
You don’t have any assets to liquidate. If you have assets that you want to protect, bankruptcy is not the answer. If you land a Chapter 7 bankruptcy, the court may order that you have your assets liquidated and you can lose what you have left.
In some cases, working a bit harder to increase your income can help you afford debt settlement. If you see that you only need to add a little more, then you may want to consider working longer hours. Or you can apply for an online job that will help you meet the settlement fund requirements.
