An image of the Memphis, TN Skyline from The Arnold Law Firm, A Bankruptcy Lawyer serving all of Tennessee

Feeling as though you’re drowning in debt can be incredibly overwhelming. As such, you may explore the different options available to help you get relief. Generally, the main two options those in debt utilize are bankruptcy or a debt settlement. Unfortunately, neither of these are particularly pleasant experiences, but you’ll want to understand how they differ and the pros and cons of each option before determining how you will pursue debt relief. Regardless, if you’re in debt, it’s in your best interest to connect with a Shelby County, TN bankruptcy lawyer to explore your legal options regarding these matters.

What Are the Differences Between a Debt Settlement and Bankruptcy?

The first option you may want to explore when you’re in debt is settling the amount you owe. This essentially allows you to negotiate how much you owe to your creditors. Generally, you’ll find that if you can pay 40-70% of the balance in full, creditors may accept this in lieu of pursuing the total balance you owe. It’s important to understand that some companies will offer to settle on your behalf, using their own funds. However, they will put you on a strict budget and can charge you up to 25% in fees. Additionally, it can sometimes take longer than filing for bankruptcy. You’ll find that if you stay on top of this, you may be able to settle on your own without your information being public record as it could be with bankruptcy.

Bankruptcy, on the other hand, functions in two different ways. If you file Chapter 7, your non-exempt assets will be liquidated or sold by a court-appointed trustee as a means of paying off your debts. Filing Chapter 13, however, puts you on a repayment plan by reorganizing your debts. You will then pay your trustee the monthly payment, and they are responsible for distributing it to your creditors. This plan will last three to five years.

The downside of bankruptcy is that you must qualify for Chapter 7, and filing will stay on your credit report for ten years for Chapter 7 and 7 years for Chapter 13. Additionally, you may find that certain assets are at risk and your credit score can plummet.

How Can an Attorney Help Me Determine What’s Right for Me?

As you can see, there are considerable differences between settling your debt and filing for bankruptcy. That’s why it’s in your best interest to connect with an experienced attorney to explore your options. In general, you’ll find that working with an attorney can help you explore the best options to help yourself recover financially.

If you’re considering whether or not you should file for bankruptcy, connecting with an experienced attorney from the Arnold Law Firm is critical. Our team understands how complex these matters can be, which is why we are committed to fighting for you. Connect with us today to discuss your circumstances and learn how we can guide you in the right direction to feel relief.