is bankruptcy worse than doing a debt settlement?
I have bad credit and i am trying to improve it so later on down the line i can decide to buy a house. I have at least 7500 dollars in debt but is it safer for my credit to to bankruptcy or a debt settlement?
Tags: bankruptcy, Debt, Doing, settlement, THAN, Worse
December 20th, 2009 at 11:41 am
Some companies when doing a debt settlement will mark the tradeline as paid in full or paid as agreed. This shows more favorable on a credit report. But you must make sure that any agreement prior to payment reads “Paid in full” or “Paid as agreed”. Don’t just assume that they will report to the credit borrow that way. If you cannot realistically make the payment, negotiate the actual amount down as far as you can.
Most credit card companies will take what you can offer, just to get it off the books and move on. However, whatever arrangement you make. Be sure that it’s reasonable for you to make the payment/payments. That it isn’t something you’ll find yourself having to comeback and renegotiate the terms on…
Bankruptcy doesn’t necessarily hurt your chances for purchasing a home. FHA will usually allow you to purchase 18 months after the completion of a bankruptcy. This usually has to be followed with a letter by you stating what the cause for bankruptcy was, and what has changed to assure that this won’t happen again.
Just my two cents.
December 20th, 2009 at 12:20 pm
Is $7,500 in debt really enough to ruin the next 7 years of your life over. That is chump change. Do a debt settlement. Bankruptcy is reserved for people with real debt…..like at LEAST $20,000.
December 20th, 2009 at 12:53 pm
A debt settlement shows up negatively on your credit report for just as long as a bankruptcy. Also, you will have to pay taxes on the amount the creditor writes off, as this is considered income for you. The amount of debt you are talking about is relatively small, so it might just be better to try to pay it off, though you can file bankruptcy on any amount. Good luck.
December 20th, 2009 at 1:45 pm
If you are in serious debt, debt settlement is a much better option than bankruptcy. A bankruptcy will be listed and hold your credit score down for 10 years, while the delinquent payments incurred while enrolled a Debt Settlement program will be there for only 7 years (and in some instance, even less). So at a minimum, your credit report will be cleared at least three years earlier when using Debt Settlement company as opposed to bankruptcy. Another important factor to remember is that a typical debt settlement program ultimately resolves your debts for much less than other debt relief options. And, unlike bankruptcy, you won’t have to sell your house or other assets in order to free yourself of your liabilities.
It is better to seek help from any reputed debt settlement company. Such companies can handle it properly as they are experts in that field. I took help of freedom debt relief to get rid of my debts. I have joined their debt reduction program one year back and now I am almost debt free.
December 20th, 2009 at 1:52 pm
Neither. Both will totally trash your credit score. It is silly to go through the he** of bankruptcy for only $7500. You could pay that off in less than 9 months with a part time job. Besides the fact that bankruptcy is not free. You would owe court costs and attorney’s fees. First you need to stop spending money that you don’t have. Please do not consolidate or use a debt reduction company . It is not free, they will lower your payments by increasing the length of time until you are debt free, and you will take a hit on your credit score. Or they negotiate your debt down after telling you not to pay for awhile adding another hit to your credit score. Student loans are the only debt that can garnish your wages for non payment without taking you to court first. Just list them out on a piece of paper or a spreadsheet and follow the plan. If you work the plan, the plan will work for you.
A. Have a garage sale and sell anything that you no longer need or want.
B.Get a temporary part time job, if you have one, get another.
Here is a plan that can help you. If you work the plan, the plan will work for you:
1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an “emergency fund” category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don’t even have to worry about it. You must cut your spending and live on less than you make.
2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.
3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:
To start :
Debt #1 (highest interest): minimum payment+ extra payment
Debt #2 (middle interest): minimum payment
Debt #3(lowest interest): minimum payment
Debt #1: paid off
Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment
Debt #3: minimum payment
Debt #1: paid off
Debt #2: paid off
Debt #3:Minimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.
That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.
4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.
5a. When you have your emergency fund in place, add a category for “fun” to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.
5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.
5c. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest.
You can do it and it isn’t as hard as you think. Just follow the plan.
December 20th, 2009 at 2:05 pm
Bankruptcy is much worse than debt settlement for only 7500 of debt. It can cost you $500 to $2000 to file bankruptcy and you still may have to pay most of it back if you cannot qualify for chapter 7. Even debt settlement is not recommended for lower debt amounts. Maybe debt consolidation is better for you. Bankruptcy and debt settlement are equivalent in terms of ruining your credit. Easier to recover from settlement though once you are done. I say look into consolidation instead.
December 20th, 2009 at 2:09 pm
Determine if you qualify for bankruptcy by reading the most current version of the U.S. Bankruptcy Code, found in Title 11 of the U.S. Code. However, the revamped Bankruptcy Code is extremely complex to understand, so don’t be surprised if you aren’t able to comprehend much of what you are reading. The Bankruptcy Code can be found online. Many books attempting to explain the Code in plain English have been written, so check out your local library or bookstore for some helpful titles. Even if you discuss your financial problems with an attorney who specializes in bankruptcies, you might still want to read up on the law for yourself.
Determine which bankruptcy chapter you qualify for by reading the descriptions of each type of bankruptcy, as well as by reading the rules and regulations associated with each. This information can be found at your local library, bookstore, online, or by talking with an attorney who handles bankruptcies in their everyday practice.
http://bankruptcy-info.we.bs/
Court costs for filing bankruptcy are different depending on which chapter you file. Currently, a Chapter 7 bankruptcy costs $299 in filing fees while a Chapter 13 costs $274, although Congress can change those fees at any time. It will also be important to learn how much an attorney will charge you to represent you in your bankruptcy. If you meet with a bankruptcy attorney, they will likely give you a written fee quote for their services either at your first meeting or perhaps in the mail. Do not expect to be able to email a bankruptcy attorney for a price quote on what they would charge for their services. Bankruptcy is an extremely complex area of law and an attorney well familiar with the law’s complexity wouldn’t likely give you a fee quote over the phone or in an email without knowing your entire financial picture. Would you call a doctor to ask how much it would cost to set your broken arm? Do you think the doctor would even come to the phone, and secondly, do you think they should or would give you an answer? They don’t know how broken your arm is by talking to you on the phone and a bankruptcy attorney doesn’t know how bad your financial situation is until they meet with you to discuss it.
Another important consideration is deciding whether filing for bankruptcy will resolve your credit problems. Depending on the types and amounts of your debts, a bankruptcy filing won’t necessarily rid you of your duty to pay some of your bills, even though you filed for bankruptcy. Keep in mind that a bankruptcy filing remains on your credit record for ten years but a bad debt is only supposed to stay on a credit report for seven.
Bye…
January 26th, 2010 at 2:03 am
Great information, Thank you so much… keep up the great work.
February 12th, 2010 at 11:47 am
Very true, great post… Keem ‘em coming!
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