Levels of personal debt are high across the nation and many New York residents may be struggling with debt problems. For many people who are searching for a solution to debt problems, debt relief services may seem like an attractive option. However, many of these services encourage customers to file for bankruptcy while labeling their services “debt relief.” Bankruptcy is an effective option for dealing with debt but it may not be the best choice for everyone.
Personal bankruptcy is a tool that can be used to eliminate outstanding debt when interest rates and past due notices become too much to manage. There are two main types of personal bankruptcy. Chapter 7 bankruptcy involves selling off all non-exempt property and assets to repay debts in exchange for debt cancellation. Chapter 13 bankruptcy allows more property to be kept by the owner but requires setting up a payment plan.
Before signing up with a debt relief service, people struggling with debt should know that they have options. They may be able to negotiate with credit card companies to lower interest rates or create a payment plan. Working with a credit counseling service is also a good way to build a plan to climb out of debt. In some cases, taking out a loan to repay debt may be effective.
If other options do not work out, bankruptcy could be an effective tool for debt relief. If this is the case, an attorney may be able to explain the bankruptcy filing process in a clear and thorough way. The laws regarding bankruptcy can be complex and confusing, and an attorney may be able to help a client make the best choice for his or her financial future.
Source: FTC, “Debt Relief or Bankruptcy?“, November 24, 2014