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Is It Better To File Bankruptcy Or Try To Settle With My Lenders?

Even though the idea that bankruptcy is a last resort is no longer a common thought, many people still prefer to tread water and squeak by financially by paying only the minimum amount due, to avoid going into default. But the truth is that if you are only able to pay the minimum payment, you will be spinning your wheels for years and making no real headway with your budget. The benefit of filing for bankruptcy rather than engaging in this cycle of never getting ahead is that after a bankruptcy case is over, you start fresh and can make different financial choices.

That said, there are still options to fix your finances that fall just short of filing for bankruptcy. One of those options is to pick up the phone and call your lender to offer a settlement of the debt, for less than what is owed. Some creditors are agreeable to doing this, but is it really a better choice than bankruptcy? Here are some things to consider in this regard:

• Not every lender will agree to work with you, but may lull you into believing they are reviewing your file and until a final decision is made you need not make any payments. The problem here is that if you stop making payments, and the lender then declines to accept a lesser amount, you will have to pay all of the past due amount at once along with accumulated interest and maybe even late fees
• If your lenders are agreeable to taking less than what is owed, you still have to come up with a lump sum to make the payment. If you are already financially strapped this can be a tall order, and could require you to take out a refinance loan. Unfortunately, taking out more debt has never proven an effective way to get out of debt.

But, with bankruptcy, you can eliminate or reduce your debts altogether. If your debts are reduced in bankruptcy, the type of reduction received is not the same as what a lender may offer you outside of bankruptcy. This is because the bankruptcy laws allow you to pay the value of certain things rather than the balance, and the value is most times less than even a reduced offer from a creditor outside of filing bankruptcy. Once your debts are reduced or eliminated, you can take the extra money you have from not having to make large payments, and set it aside for savings or use it to pay your other bills. If you need help with your financial situation, call our office today.

For more information about bankruptcy, contact us today at We will go over the facts of your case and let you you’re your next step.

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