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Be careful about debt relief programs

Many companies claim in their advertisements that they can help debtors in Ohio consolidate their debts into a single monthly payment, and some of these are accurate. Some companies offer credit counseling services where they try to help a debtor negotiate lower monthly payments and better interest rates as long as the debtor continues the repayment plan. The debtor then makes monthly payments to the credit counseling service, which pays all of the creditors on the debtor's behalf. Some nonprofit organizations offer this service for little to no charge.

In some cases, though, the advertisements could refer to a Chapter 13 bankruptcy, which offers debt relief after three to five years of income-based payments pursuant to a court-approved plan. This is a better alternative for some than a Chapter 7 bankruptcy because it allows the debtor to keep more personal property after the bankruptcy filing.

Both types of bankruptcy and all bankruptcy discharges stay on the debtor's credit report for up to 10 years. After filing for Chapter 7 bankruptcy, the debtor cannot do so again for at least eight years, but this waiting period can be as little as two years in a Chapter 13 bankruptcy. In both instances, the debtor is required to complete an approved credit counseling course prior to filing.

Many consumers consider bankruptcy as a last resort after attempting all other available forms of debt relief, but it can be helpful in some situations. Filing fees and attorney fees can become expensive, but an attorney can help to make sure that the paperwork is complete and accurate to avoid denial by the court and ensure that the bankruptcy includes all eligible debt.

Source: The Federal Trade Commission , "Debt Relief or Bankruptcy?", October 06, 2014

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