Bankruptcy vs. Debt Relief

Facing large amounts of debt can be a very startling and upsetting reality. Before you know it, spending and debt may become out of control, leaving you worried about the future, facing creditors, and even potentially becoming the subject of lawsuits and asset seizures. During our current financial times, this has happened to many residents of Mississippi’s Gulf Coast. 

As you think about your options and what your next steps are for gaining your financial footing, you may be thinking about bankruptcy. Before you file, it is important that you understand all of your debt relief options. As you navigate these options, working with a Mississippi bankruptcy lawyer may provide valuable insight and guidance.

What is Bankruptcy?

Bankruptcy is the court-facilitated process of settling or/and discharging a person’s debt. A bankruptcy judge oversees the process, which may involve a debtor liquidating their assets and repaying creditors or/and entering into a repayment plan that becomes a legal obligation through the court. 

A bankruptcy filing will remain on a person’s credit score for between seven and 10 years and, while it can certainly provide a financial fresh start, it can also make it difficult to secure new sources of funding, a credit card, or a mortgage. It can also make it difficult to secure certain jobs in some cases.

Bankruptcy is typically considered a last-resort option that people only consider after they have exhausted other debt-relief options. It should be undertaken only after counsel with a financial professional or/and lawyer to ensure that the applicant understands all benefits and consequences, as well as what type of bankruptcy they are eligible for and how to correctly initiate and move through the process. 

Other Debt Relief Options

As stated, bankruptcy is usually something that people pursue only after they have explored other debt-relief options to no avail. Of course, depending on your level and type of debt, as well as other factors—such as your current assets and sources and level of income—other debt-relief options may be perfectly satisfactory in helping you to right your financial footing. 

Some examples of other debt relief strategies include:

  • Debt settlement. One type of debt relief option that may be practicable for Mississippi Gulf Coast residents is debt settlement. Debt settlement is a negotiation between you and your creditor(s) that essentially states that you will pay a certain amount in exchange for your total amount of debt being reduced. For example, if you owe $100,000, a debt settlement agreement could include you making a payment of $75,000 over the course of a certain amount of time at a fixed interest rate. The important components of a debt settlement agreement are that 1) you agree to pay the agreed-upon amount and 2) you are getting something beneficial out of the agreement, such as a reduced debt amount or another accommodation, like lower interest payments.
  • Debt consolidation. Another strategy for alleviating debt may be debt consolidation. The idea behind debt consolidations is that multiple, separate debts are all consolidated into a single debt. This can make it easier to manage payments. For residents of Mississippi’s Gulf Coast who have the income to make payments but are struggling with how to prioritize repayment, debt consolidation can be very beneficial. 
  • Refinancing. When a person is facing a large amount of debt, they may be at risk of losing their home or other assets if they are defaulting on these loans. Rather than rush into bankruptcy or just continue to fail to make payments, refinancing may be an option. Lenders want to get repaid, and if repayment can only happen if the terms of the loan are adjusted, a lender may be eager to do this. For example, a lender that serves the Mississippi Gulf Coast may be able to lower your monthly payments in exchange for a longer loan term with higher interest rates. You’ll end up paying more overall but will have less of an immediate financial burden.
  • Credit counseling/budgeting. For some people, getting out of debt may start—and end—with forming good financial habits. Attending financial classes aimed at learning how to create and maintain a budget, make smart decisions with credit, and save for the future can be very valuable. Typically, this approach is combined with another debt relief method.

Be Aware of Scams and Get Legal Help 

As you consider various debt relief options, including bankruptcy, it is important to know that scammers are out there who are looking to take advantage. For example, there are companies that may agree to help you settle your debt in exchange for a large fee. Some of these companies are legitimate; others should be avoided. If you are unsure whether you should work with a company or how to proceed as you seek financial security, it is strongly recommended to consult with a financial professional or Mississippi Gulf Coast bankruptcy attorney to review your options. 

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