Debt is a problem many people across the country are facing. As they see their bills pile up and creditors begin harassment tactics, those with overwhelming debt may begin to consider the various options available to them, including debt settlement and bankruptcy. As Arizona debtors go through the pros and cons of each option, it is important to get as much information as possible because making an informed decision is essential in financial matters.
Consulting a nonprofit credit counseling company is a good place to begin. They can even help create a debt management plan if it is applicable, allowing the debtor to make manageable monthly payments.
However, for some debtors, debt management is not an option given the amount of debt they have acquired. These individuals can consider debt settlement, but it is important to keep in mind that debt settlement can only be achieved through making a lump-sum payment to settle the account. People may have to stop making payments on accounts until enough money is saved for a lump sum payment, and this may end up damaging credit scores, not to mention that it opens up the debtor to lawsuits from creditors.
Due to the perceived social stigma attached to filing for bankruptcy, Arizona residents facing financial difficulties may be hesitant to file for it. But many people facing overwhelming debt may find it a viable option as, depending on the type of bankruptcy, it may not only wipe out most bills, but also put an end to creditor harassment and places an automatic stay on foreclosure proceedings. Debtors can determine which form of bankruptcy is applicable for their circumstances based on eligibility criteria and then take the necessary steps toward restarting their financial future.
Source: Fox Business, "Debt Settlement vs. Bankruptcy: Which is worse for credit score?" Jane McNamara, April 23