When facing an overwhelming amount of debt, you may not know what your options are. Unfortunately, debt is made to seem like something that must be paid “or else.” However, there are many different options you may not be familiar with. One common practice is using bankruptcy as a negotiation tool with debtors. If you are considering bankruptcy, understanding how to use it to your advantage is essential when dealing with creditors. Keep reading to learn more about this process and how a Memphis, TN consumer bankruptcy lawyer can help you through this process.
What Are the Different Kinds of Bankruptcies?
For consumers, the two most common options for bankruptcies you can file are Chapter 7 and Chapter 13. Though similar in their attempt to discharge debts, they vary in the methodology of how payments are made.
In general, Chapter 7 bankruptcy liquidates the non-exempt assets of an individual as they are used to repay the dischargeable debts against them. Chapter 13 is the other standard option for those filing consumer bankruptcies and often the more desirable option. This is because you will enter a three to five-year repayment plan while still retaining your assets. Traditionally, Chapter 7 remains on your credit score for ten years, while Chapter 13 will last seven years.
How Does Bankruptcy Work as a Negotiation Tool?
Many are unfamiliar with the fact that they can use Chapter 13 bankruptcy as a tool to renegotiate specific terms and agreements. Because you are entering a payment plan, you can negotiate the amount owed with your creditors. Similarly, you may be able to include secured debt to renegotiate the terms of the agreement, allowing you to make one monthly payment and better maintain your finances.
Generally, when you negotiate the sum owed over the course of the repayment period, it is substantially lower than if you were to pay the initial debt owed.
What Should I Do if I Decide to File?
If you decide that filing for bankruptcy is the best option to pay off your owed debts, the most important thing you must do before proceeding is contact an experienced attorney. Unfortunately, this can be complicated, so ensuring you have legal representation familiar with bankruptcy proceedings is essential.
Similarly, you may not know the best negotiating method or whether or not the settlement offered is fair. Instead, allowing your attorney to review your case and enter discussions with your creditors to help you achieve the best possible outcome is essential.
When you need help navigating your bankruptcy case, the Arnold Law Firm is here to help. Our dedicated legal team has the experience you need to help you make the best choices to offer you a fresh financial start. Contact us today to learn more about how we can help you through this time.