If you're dealing with debt, you're likely considering a few different options. Chapter 13 bankruptcy is designed to restructure your debt in order to create a repayment plan, through which you can pay off your debt within three to five years. In general, Chapter 13 bankruptcy is faster and easier to recover from than Chapter 7 bankruptcy, and it has some advantages over other debt management processes.
A debt consolidation involves taking out a single loan and using it to pay off all of your other debt. The advantages of a debt consolidation are that you only need to make a single payment, that you can often get lower interest rates, and that you can set the terms of your loan -- for instance, you could consolidate all your credit cards into a 10 year loan. The disadvantage is that you generally need good credit to get a consolidation loan and there's no guarantee of the interest rates. Chapter 13 bankruptcy will be able to restructure your debt with any credit rating.
Debt settlement involves settling your debt for a certain amount of cash, which is generally a fraction of what you owe. For instance, a credit card with a $20,000 balance could be settled for $15,000 today. Debt settlement can be advantageous for those who have liquid assets because it gets rid of your debt right away and saves you money long term. However, it requires that you have cash on hand, and you need to negotiate with your lenders in order to get a debt settlement agreement. Chapter 13 bankruptcy is based on your earnings and you won't need any cash at hand.
Debt management solutions often negotiate with your creditors to lower your interest rates and remove fees. Once negotiations have been completed, the debt management company will take in a single payment from you and distribute it to your lenders. Debt management solutions operate very similarly to Chapter 13 bankruptcy. The difference between this type of service and bankruptcy is usually the cost involved; a debt management company will usually charge a fee every month to administer the account.
Everyone's financial situation is different. If you're considering bankruptcy, you may want to consult with an attorney that specializes in the process, such as Stuart R Whitehair Attorney. Bankruptcy attorneys are extremely knowledgeable about debt solutions and will be able to review your personal situation to determine whether bankruptcy is right for you.