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Strategies for managing debt

When trying to determine the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy, individuals in Ohio might benefit from knowing about all of their options. A recent article discussed two strategies that a person might pursue when trying to deal with their debt and how the approaches may affect a person's credit score.

Before filing for bankruptcy, an individual might consider contacting a nonprofit credit counseling agency to find out if they qualify for a debt management plan. Such plans might allow a person to make affordable payments in order to eliminate debt. A consumer might also try negotiating a debt settlement in order to stop creditor calls, and an attorney could help with an individual bankruptcy.

Filing for bankruptcy may stop mortgage foreclosure, car repossession and creditor calls. Chapter 7 and Chapter 13 protections are two options that may lead to a drop in a debtor's credit score, but they will be able to make progress toward financial stability. Under Chapter 13, a person is given a three to five year period of time to repay creditors. Chapter 7 bankruptcy involves a liquidation that permits a person to clear unsecured debt. This type of bankruptcy stays on a person's credit report for 10 years. Additionally, legislation was passed in 2005 that requires consumers to attend credit counseling, meet income requirements and pass a means test.

Pursuing bankruptcy protection can be complex, and each type has strict eligibility requirements. Filing can provide relief from dealing with unpaid bills and harassment from collectors. A lawyer who is familiar with bankruptcy law may be helpful during the process in educating clients about the best solution to their individual financial status.

Source: Michigan State University, "The difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy", LaShawn Brown, May 23, 2014

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