If you find yourself struggling to pay your bills, you are not alone. Studies indicate that many Americans live from paycheck to paycheck because they have too much debt and not enough income to pay down their balances. Around one in three consumers in the United States actually have delinquent debt, and they may be looking for ways to deal with this debt effectively.
Some consider debt relief as a way to get rid of their overwhelming financial woes. Debt relief companies offer different types of programs that may allow you to secure lower payments that are more manageable or get rid of balances altogether. This is an attractive option for many, but consumer bankruptcy may actually be a better choice in some situations. Before you make choices that will affect your financial future, learn about all of the drawbacks and benefits to both bankruptcy and debt relief programs.
Debt relief companies advocate on behalf of the applicant, working directly with creditors or debt relief companies. Sometimes, they are able to negotiate a lower payment that will allow you to catch up or simply make timely payments each month. It may also be possible the company could negotiate a lump-sum payment that is lower than the total you currently owe. This means you could make a one-time payment and be done with that debt completely.
One thing to consider is that forgiven debt can come with steep tax penalties. The Internal Revenue Service considers certain types of forgiven debt as taxable income, which may leave you with an expensive bill you will owe to the IRS. It’s important to factor in this potential penalty, especially if you are already struggling to pay bills and make ends meet.
Which one is best?
Every financial situation is different. For some Tennessee consumers, debt relief programs may make sense. For others, bankruptcy is truly the best way to deal with debt once and for all. A careful and thorough assessment of the individual case is the best way to find out.
If you are concerned with your debt, bankruptcy could offer you a way out. Through Chapter 7 or Chapter 13 bankruptcy, you can deal with certain types of balances and enjoy a reprieve from debt collection efforts. Speaking with an experienced bankruptcy attorney about your situation can help you understand the options available to you.