Chris Layton

Trying to manage overwhelming credit card debt is like driving in a storm—you can only see what is directly in front of you. This leads to decisions that address a situation with today’s aggressive bill collector, but often leaves us facing the same situation around the bend.

There are numerous approaches to tackling overwhelming credit card debt, and there are plenty of people eager to take your money in exchange for the promise of debt relief. Consumers deserve to know that while the effect on your credit score is similar, you can get very different results from a bankruptcy filing vs. a debt consolidation program.

 

In Debt Settlement: Debt settlement companies are relying on the assumption that creditors will settle with you. In order to get those creditors to settle, they instruct you to stop paying your credit cards and instead give that money to the settlement company to pay their high fees and allow them to negotiate on your behalf.

In Bankruptcy: Bankruptcy is law. The rules are clear. Your bankruptcy attorney can tell you with great certainty—before you file—what you will and will not be able to accomplish by filing a bankruptcy. Consumer bankruptcy can eliminate credit card debt, medical bills, personal loans, judgments, tax debt and 2nd mortgages. It is undeniably a much more powerful tool for consumers.

What Happens When I Stop Paying My Credit Cards?

In Debt Settlement: When you stop paying your credit cards, your creditors take notice. They tack on fees. They report your delinquent payments to credit agencies, and they pursue all legal means of collecting the debt. If your debt settlement company is unable to negotiate successfully with one or more of your creditors, you just dramatically weakened your financial well-being—the debt not only remains but it has significantly increased. And the creditor is calling for repayment NOW.

In Bankruptcy: When you decide to file a bankruptcy, your bankruptcy lawyer will advise you as to when you can stop paying your credit cards. And yes, your creditors take notice. But they are bound by the Federal bankruptcy laws, which create an Automatic Stay that freezes all attempts at collection. So long as you qualify for filing bankruptcy and your situation does not give rise to a Presumption of Abuse, your creditors have no say in the matter—your filing will succeed and the debt will be discharged.

How Long Does It Take To Get Rid Of The Debt?

In Debt Settlement: Assume you subject yourself to the risk of debt settlement or debt consolidation. In addition to the risk that your creditors may not cooperate as expected, you also run the risk that one missed payment during the lengthy repayment period (typically 36 months or more) will undo the negotiated amounts with creditors.

In Bankruptcy: A Chapter 7 bankruptcy, by comparison, goes from filing to discharge of debts in typically three to four months. During that much shorter timeframe, you are no longer making payments to credit card companies (along with medical providers and other creditors), and no longer receiving any communications from those companies, per bankruptcy law.

Make a phone call today. A bankruptcy attorney can help you sort through the options and choose one that serves you best. Fifteen minutes will give you peace of mind, clarity and relief. Email me HERE or call 704.749.7747 for a free consultation.