Often when people here that a Denver or Aurora Chapter 13 bankruptcy involves a repayment plan that must be followed for a certain amount of time, they wonder if it would just be better to consolidate their debt and negotiate a debt settlement. It’s understandable that someone would want to explore all options before settling on bankruptcy, and debt settlement is a viable alternative. However, it does not offer you the same protections as a Chapter 13 bankruptcy does. Let’s take a look at the differences between these two debt relief options.
Chapter 13 Bankruptcy and Debt Settlement in Centennial and Parker: The Ins and Outs of Debt Settlements
With a debt settlement, you are using a third party to consolidate your debt and negotiate a payment plan. You will no longer have to pay your credit card and other debt individually but will have one monthly payment. Sounds great, right? Well, there are some caveats to the plan. The first is that these debt settlement companies charge you a certain rate (usually high) to facilitate these payments. So, you will end up paying more in the long run. Also, not all your creditors may agree to the plan, meaning they will continue to add their high interest rate charges despite the settlement having its own interest rates. Often, people think their credit score will be saved if they choose the debt settlement route, but these are still reported to credit reporting agencies. Also, you will have to continue the payment plan until all the debt is paid off – there is no set end date.
Chapter 13 Bankruptcy: Basically Debt Settlement with More Guarantees and Success
A Chapter 13 bankruptcy, on the other hand, addresses some of the issues you see with debt settlement. First of all, you are not paying back the entirety of your debt. You are set up with a payment plan that will last for 3 to 5 years. Once you have completed that plan by making your payments for the required amount of time, the rest of your debt is discharged. Secondly, your creditors are, by law, required to agree to the terms of the bankruptcy repayment plan. They don’t get to be obstinate and make you pay them back entirely with high interest rates. Bankruptcy basically offers you the same options and reliefs as a debt settlement, with more guarantees and success.