Overwhelmed? See how to get control of your debt.

You may be buried under credit card debt, recently separated, or involved in a business that went bad.  Whatever, the reason, you now find yourself in a situation in which there is seemingly no escape.  Keep reading to find out the options to deal with your debt problems and the pros and cons of each.

Bankruptcy

Bankruptcy is a legal process which you can get a discharge of eligible debts.  There are two main types of bankruptcy.

CHAPTER 7 BANKRUPTCY: If you qualify for a Chapter 7 bankruptcy, you will get a discharge of eligible debts such as credit card, medical, vehicle repossession and foreclosure debts.

CHAPTER 13 BANKRUPTCY: A Chapter 13 bankruptcy is a repayment plan over 3 or 5 years for people who don’t qualify for a Chapter 7 or have an asset they want to protect.  In a Chapter 13, you make a plan to repay your creditors based on the money you have left over after paying your necessary living expenses.

Pros:  You get rid of eligible debt, rules for creditors (automatic stay), a Chapter 7 bankruptcy will allow you to get a fresh start in a matter of months

Cons: may lose unprotected property in a Chapter 7, attorney fees and court costs are expensive, negative impact on credit score (impact depends on current credit score and diminishes over time)

Use Retirement Funds to Pay Debts

You may take funds out a 401k or IRA to pay off your debts.

            Pros:  No impact on credit score

            Cons: May not be eligible to withdraw funds, must pay ordinary income tax on withdrawal plus 10% penalty, retirement funds are very protected in bankruptcy, diminishes funds available for retirement

CREDIT COUNSELING/DEBT SETTLEMENT

Credit Counseling is a process by which an agency works with participating creditors to negotiate debt settlement for you.

            Pros:  I really can’t think of one!

            Cons: Expensive- agency fees are equal or greater to bankruptcy attorney fees, creditors do not have to participate, not eligible for automatic stay so you can be sued by non-participating creditor while making your payments, potential tax consequences, negative credit impact

Debt Consolidation

Debt consolidation is taking out one loan to pay multiple debts.

            Pros: convenient to pay only one loan, possibly a lower interest rate

            Cons: longer repayment period, no automatic stay protection, often taking out secured loan which puts an asset that may be protected in bankruptcy at risk

Do Nothing

You may choose not to take any action to get debt relief.

            Pros: You might not be collectible if you are low income, your income comes from social security and you have little property.

            Cons: Stress of collection calls, ect, no opportunity to rebuild credit

We are here to help you deal with your debt.  Call 419-462-9212 to schedule an appointment with Andrea Henning Law LLC to talk about what is the best way for you to tackle your debts!