If you have a considerable amount of debt, you are familiar with that tight feeling in your chest and feeling like you can barely breathe. Every day, you’re staring at your bills, trying to figure out how to pay your creditors and still put food on the table for your family.
Fortunately, you do have options available for tackling your debt.
What’s best for your situation?
Debt negotiation involves working with your creditors to reduce the total amount you owe. While receiving less than the amount they’re owed, creditors may agree because it ensures they’ll recover some of the money rather than risking no repayment.
Some may prefer this route as it’s typically faster than bankruptcy and doesn’t require court proceedings. However, the negotiated debt may be marked as “settled” on your credit report, negatively impacting your credit score. Furthermore, creditors are not obligated to accept your settlement offer.
Chapter 13 bankruptcy allows you to restructure your debt into manageable payments that you pay over a specified period, which is usually three to five years. To be eligible for Chapter 13 you need to prove you have enough income to stick to a repayment plan and your total secured and unsecured debt must be less than $2,750,000. You must also undergo credit counseling before filing a bankruptcy petition with the Southern District of Florida bankruptcy court.
While Chapter 13 bankruptcy halts creditor collection efforts and allows you to retain your assets, it will lower your credit score and stay on your credit report for seven years. Bankruptcy filings are also accessible to the public.
Deciding between debt negotiation and Chapter 13 depends on your finances, goals and priorities. Negotiation may be your best option if you are disciplined enough to make payments without a court-approved repayment schedule and wish to keep your financial situation private. If you desire legal protections and more structure, Chapter 13 could be what you need to get started on your path to a fresh start.
