Debt relief and bankruptcy
Consumers in Illinois may benefit from learning more about the distinguishing factors that differentiate filing bankruptcy from obtaining debt relief. Many people consider bankruptcy the option of last resort, since it may have adverse effects on the credit report that are long lasting. Bankruptcy may impair debtors' ability to obtain a residence, insurance, employment or credit because the records remain on the credit report for up to 10 years after filing.
The Federal Trade Commission advises the public to be wary of debt relief advertisements with ambiguous language because some are designed to mislead debtors into unknowingly filing for bankruptcy. Aside from the Internet, these advertisements for debt relief are often found in magazines, newspapers and telephone directories. Before filing for bankruptcy, debtors are advised to consult with creditors and attempt to reach an agreement to modify the existing payment plan. They are also advised to get in touch with a credit counseling service as well.
With credit counselors, the debtor is required to deposit an agreed-upon amount with the service each month so the organization can transfer the funds onto creditors. These organizations work with creditors and debtors in an effort to develop a repayment plan that is amicable for both parties. These counseling services are often free or available at minimal expense. Some debtors may be compelled to take out a home equity line of credit or a second mortgage as an alternative means to debt relief.
Those who need help exploring debt relief or bankruptcy options may benefit from consulting a lawyer. Legal counsel may be able to help debtors prepare the required documentation to ensure the process is completed properly, and can describe the eligibility requirements associated with a Chapter 13 bankruptcy filing.
Source: FTC, "Debt Relief or Bankruptcy? ", December 04, 2014