The Relationship Between Bankruptcy and Credit Counseling Bankruptcy and credit counseling are both adequate tools that can be used to help you fight off your debts and resolve problems with unresolved debts. People often seek credit counseling before they file for bankruptcy and it’s also likely that during the filing for a bankruptcy credit counseling sessions will be mandated. A certified counselor will allow you to consider all options with your debts before you go through the process of having your debts discharged. Credit counseling solutions will help you to understand the consequences of your debt as well as the options that are available to you.

If you’re the type of person that has a large amount of unsecured debt which seems insurmountable and you are facing ongoing and irritating encounters with your debt collectors, seeking credit counseling or a bankruptcy solution could be a great way for you to get on with your life. Even though bankruptcy will be noted on your credit report for between 7 to 10 years, working with a credit counselor can be a fantastic way that you can consider all of your options and even petition your creditors to discharge a portion of your debts. 

A DIY Examination

One of the first things that you will need to do to gain control of your finances is to start resolving some of your early debt issues by yourself. Reaching out to your creditors and explaining the position that you are in could give you the option of a repayment plan or the chance that some of your debts could be reduced. Addressing your credit issue by taking on a second job or reworking parts of your budget could make your debts more manageable as well. If your creditors see that you are taking an active effort to repay your debts it is possible that you may not need to file for bankruptcy as long as you keep a disciplined approach to budgeting in the future.

The Process of Credit Counseling

Looking towards credit counseling agencies can help you to access some improvements for your current financial situation and explore the various options that may be available to you. Make sure that when you are seeking a credit counselor that you are using a non-profit company as there are many companies that work to consolidate debts and counsel people on managing their debts while taking high fees to solve the problem. With a wide range of nonprofits available and people willing to help you for no fees, you can save more money as you enjoy a brighter financial situation for the future.

Most reputable non-profit credit counselors can help you create a debt management plan that will be 3 to 5 years to complete. Credit counselors will take you through every aspect of your plan and discuss the overall impact of repayment plans and how it may affect your finances in the future. You can often get a quality projection on what your credit score will be after repaying your debts and some of the financial products that you could qualify for in the future if you stick to your repayment plan. 

The Process of Bankruptcy

Bankruptcy is the best solution if you are unable to meet any terms of a repayment plan or if it’s impossible for you to work at consolidating your debts into a simple plan of repayment. If you’re facing absolutely overwhelming odds, a bankruptcy could allow you to move on quickly and start building up new assets and credit for your future finances. 

It’s true that your credit score will take an initial hit from the moment that you file and a chapter 7 bankruptcy can remain on your credit score for around a full decade. Filing for Chapter 7 bankruptcy can lead to convocations with future borrowing and even your ability to find jobs within the financial sector. 

When you file for bankruptcy federal law dictates that you must attend a 60 to 90 minute credit counseling for bankruptcy session. This is certified under the US trustee program at cost around $50. If you can’t afford to pay the cost, it can be provided for free but you must demonstrate that you don’t have the financial means. You will need to complete credit counseling in order to file for bankruptcy as this counseling will help you to explore every possible option before you file for bankruptcy. 

Advantages and Disadvantages

Attending credit counseling can be beneficial whether you are doing it as part of a mandated bankruptcy filing or on your own. Learning a bit more about how to manage your personal finances and debts can be highly beneficial for the future. The greatest advantage of filing for bankruptcy is that you can discharge many of your debts immediately or utilize a repayment plan to help you face your debts head on with some forgiveness in unsecured debt. The downside is that it will affect your credit rating for several years. 

If you are having difficulty deciding on which option would work best for you, consider contacting us today! We would love to help you through your bankruptcy process or answer any questions regarding a potential bankruptcy!