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Bankruptcy, Debt Consolidation, or Settlement: How Do You Decide?

Going through financial difficulties is never easy, but having a good strategy is an approach that will help you get your life back on track. If you think you might file for bankruptcy in the near future, talking to a bankruptcy lawyer in Johnson County, Kansas can help you get clarity on your situation so that you make the best choices. Bankruptcy, debt consolidation, and settlement are three paths you can take. So, how do you know which approach is right for you?

Bankruptcy, Debt Consolidation, or Settlement: How Do You Decide?

No matter how much debt you have, there are always choices. Three of the options you may consider are bankruptcy, debt consolidation, and settlement. With all three, the goal is to give you a clean slate as soon as possible with minimal damage. So, how do you know which to choose? These factors all weigh in:

Starting Over With a Bankruptcy Lawyer

Understanding your options is the first step in working towards a stronger financial future. At Stockton & Kandt, LLC, we will make sure you get the answers you need to start over in a way that is right for you. Here are the three most common approaches you can take when your finances become overwhelming:

Bankruptcy

The goal of bankruptcy is to have a large portion of your debt discharged. There is a myth that bankruptcy requires you to give up all of your assets, but for most people, that isn't true. In the majority of cases, individuals are able to save their homes and automobiles while getting on a path that allows them to pay their family's living expenses and improve their finances.There are two types of bankruptcy: Chapter 7 and Chapter 13. The main difference between the two is that with Chapter 7 bankruptcy, your debts will be largely cleared by your filing court. In order to qualify, you must meet certain requirements and pass a state-specific Means Test. Chapter 13 bankruptcy usually forgives a portion of your debt and sets you up on a payment plan for the remainder. Generally, paying back the debt takes around 3 or 4 years.

Debt Consolidation

Debt consolidation is a process that allows you to take out one loan to pay your individual accounts. This can help avoid paying high interest and getting charged for multiple late fees. It can also minimize the hassle of dealing with multiple debts. However, you need to have some good standing when it comes to credit in order to secure the single loan that will replace the others. That makes this approach inaccessible for many people.

Settlement

Debt settlement is the process of negotiating with your creditor to reduce the total amount that you owe. Often, people pursue this option with the help of a debt settlement company. The aim of a creditor who agrees to reduce the debt is to collect one large payment as opposed to spending time and resources following up on the total amount. It is important to remember, however, that debt settlement is not an option for everyone because creditors are not obligated to cut down the amount you owe.

Should You File for Bankruptcy?

Debt consolidation and settlement might be good options for you if you have relatively high credit and the financial ability to pay off your debt according to a plan. However, they might not be the best options for you if you:

Chapter 7 Bankruptcy vs Chapter 13 Bankruptcy 

Working with a bankruptcy lawyer can help you understand which of the two types is best in your situation. The consideration is based on factors like which chapter you qualify for and which of your assets you would be required to give up in either case.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy forgives most of your debt within just a few months, and there is no limit to the amount of debt that can be forgiven. You might be required to sell some property to pay back some of the debt, however, bankruptcy law protects certain belongings from being used in this way. In many cases, people are allowed to keep their homes, especially if they have not yet generated much equity.If you intend to file for bankruptcy and want to qualify for Chapter 7, you must prove that your income to expenses ratio is below a certain threshold. The Kansas Means Test is how the government determines whether or not you are eligible.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy differs from Chapter 7 because it requires individuals who file to gradually pay back the debt that is not immediately discharged. The repayment schedule, which usually spans a few years, is created according to your ability to channel disposable income towards the debt. With this option, you will not be required to sell any belongings. Often, the bankruptcy court will reduce the amount of interest and the principal you owe on your debts.

Freedom From Creditors

Both forms of bankruptcy have some major advantages. Once the bankruptcy court has made its decision, creditors will be legally obligated to stop harassing you. Bankruptcy can help you avoid wage garnishment, harassing calls, and other intrusive practices. Plus, you can think of it as a clean way to start over.

Schedule a Consultation in Johnson County, Kansas

Facing the fact that it's time to get legal help for your finances is a powerful first step to take. We can help you go over your debts and assess the current status of your finances. We will make sure it is done correctly and in a way that works for you. You can contact our Overland Park office at (913) 521-2828 or our Gardner office at (913) 856-2828.

Our Services

At Stockton & Kandt LLC, we serve Johnson County, Kansas by practicing multiple areas of law. Our offerings include business and franchise law, family law, estate planning, bankruptcy, and divorce. In the case of bankruptcy, elements of these specialties often overlap. When you work with us to file for bankruptcy, you can be sure that the legal advice you receive will take into account how to best protect all of the areas of your life, from your family to your business.