Debt Management aka Credit Counseling
|
| + (Pluses) |
- (Minuses) |
| Might obtain a good credit score |
Might not obtain a good credit score |
| Private |
Most Expensive Option |
| Can be sued but less likely |
Can be sued |
| Avoid Bankruptcy |
Low rate of Completion of DM Plans-50% est |
| 100% repayment |
100% repayment-higher monthly payment than DS- 60 months; you still pay interest on the debt |
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Some Creditor Harassment |
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No Automatic Stay against Creditor as in Bankruptcy |
Debt Settlement aka Debt Negotiation
|
| + (Pluses) |
- (Minuses) |
| Private—No public disclosure of personal information. No public hearings. |
Income Taxes—cancellation of debt can be ‘imputed income’ but not if your are insolvent |
| Avoid Bankruptcy |
Credit Score will be poor during the entire program |
| Less Expensive than Debt Management or Credit Counseling -Smaller total pay-out |
Interest, penalties, late fees continued to run |
| Lower Monthly Payment than Debt Management or Credit Counseling. You aren’t paying interest on the debt. |
Credit Harassment more likely than Debt Management |
| Can be preferable to Chapter 13 where Trustee insists on a 100% dividend to unsecured creditors. |
Doesn’t Stop Law Suits or garnishments |
| Might have a lower monthly payment than in Chapter 13 Bankruptcy |
24–60 months to complete Debt Settlement Plan |
| Payment in full on debts versus pro rata payments in Chapter 13-more debts are settled quicker. |
Low rate of completion |
| |
No Automatic Stay against Creditors as in bankruptcy |
Bankruptcy - Chapter 7 (Debt Cancellation)
|
| + (Pluses) |
- (Minuses) |
| Fast 90 days debts are discharged |
Embarrassment |
| Least Expensive Option |
Other Psychological issues—feeling of failure |
| Passing Credit score can be obtained faster than DS |
Remains on credit report for 10 years |
| 12–14 months to a passing credit score |
Debt Settlement might be more preferable than a Chapter 13 |
| Automatic Stay against all Creditors |
Chapter 7 might not be available due to income and expenses, can’t pass Means Test, assets might not be exempt, previous filing might be a bar. |
Bankruptcy - Chapter 13 (Debt Reorganization)
|
| + (Pluses) |
- (Minuses) |
| Stop Foreclosure and save home |
3–5 Year Debt Management Plan |
| Stop Repossession of Car |
Budget Discipline |
| Possible to eliminate 2nd mortgage |
Public Disclosure of Information |
| Possible to reduce monthly car payment |
Multiple Court appearances—at least 2 |
| Automatic Stay against creditors and lawsuits |
No Discharge of Debts for 3–5 years |
| Possible to repay credit card debt with no interest |
Might have to repay credit card debt with interest |
| Possible to repay as little as 10% of credit card debt and no interest |
Possibly might have to repay 100% of credit card debt + interest |
| Possible to repay tax debt without interest |
If case is dismissed, all taxes could still be due plus accumulated interest |
| No spending money on luxury goods and services |
No spending money on luxury goods and services |
| If self-employed, you have to make all payments to Chapter 13 Trustee |
Court ordered wage withholding if you are an employee, once Debt Management Plan is confirmed. |
| |
Chapter 13 Trustee can monitor your finances and tax refunds and claim tax refunds |
| Can spread mortgage arrearage over a 5 year period. |
Trustee can insist on making mortgage arrearage payments over 3 year period |
| Possibly can reduce car payment and use the savings to pay on mortgage arrearage |
Could stretch out for a longer period of time your car payments |
| Can handle debt in ways a Chapter 7 can’t handle the debt. |
More expensive than Chapter 7 |
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Considerable documentation is required for all of your finances |