Debt problems can cause extreme emotional distress, which can impact a person’s physical health. In many cases, debt problems arise from circumstances that are beyond our control. Examples include job loss, death of a family member, illness, disability, accidental injury, divorce, and failed business ventures. Unfortunately, some individuals are not able to “bounce back” after a financial crisis without assistance.
Dealing with debt problems alone can be frustrating, stressful, and frightening. Our Peoria debt problems attorneys work with clients to find an affordable solution to their debt problems. We discuss bankruptcy and non-bankruptcy options for resolving debt.
Non-Bankruptcy Options for Debt Problems
There are several bankruptcy alternatives for resolving debt problems. Each of the options avoids bankruptcy, but they also have negative features that could result in more financial harm.
For example, debt settlement seems like a reasonably good way to resolve debts. You negotiate with your creditors to accept a reduced lump sum payment to settle the debt in full. Some individuals work with a debt settlement company that handles the negotiations. However, creditors are not required to work with you, and any debts that are forgiven or written off become income that you must report in your tax returns.
Debt settlement also requires you to have a lump sum payment for each creditor. If you borrow money against your home or you use your savings, you could be creating a bigger financial problem for yourself.
Debt consolidation also sounds like a reasonably good way to get out of debt. You combine all your debts into one monthly payment. Again, you need to have money to pay off each loan. If you borrow against your home, you are risking losing your home if you cannot repay the debt.
Also, if you work with a debt consolidation company, you pay high fees for the company to negotiate with your creditors to lower your monthly payments. The creditors do this by extending the term of the loan, which means you are paying much more than you owe. Your creditors are not required to participate in the debt consolidation.
Filing Bankruptcy in Peoria to Get Rid of Debts
Some individuals benefit by filing a Chapter 7 or Chapter 13 bankruptcy case. When you file for bankruptcy relief, your creditors do not have a choice whether to participate in your bankruptcy case. Creditors must follow bankruptcy laws and rules.
With a Chapter 7 case, you may get rid of all your unsecured debts without paying anything to the creditors. In a Chapter 13 case, you could also get rid of all your unsecured debts, but for a payment that you can afford. The types of debts and other factors determine whether you can get rid of all or most of your debt in bankruptcy.
Bankruptcy gives you a true fresh start to overcome a financial hardship and get back on your feet. The bankruptcy discharge (debt forgiveness) wipes the slate clean for most debts. Creditors cannot take any actions to collect a discharged debt.
Contact Our Peoria Debt Problems Lawyers for More Information
If you are interested in filing a Chapter 7 or Chapter 13 case, talk with our Peoria debt problems attorneys. They can help you compare each debt relief option and examine the pros and cons of all options so that you can choose the best debt relief option for you.