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Discussing financial challenges is key to starting over

There are many reasons that consumers delay filing for bankruptcy or delay in seeking debt relief assistance form a professional. For some it is simply a matter of pride, while others fear bankruptcy will be worse for them in the long run. In fact, the most cited fear consumers have about bankruptcy is that bankruptcy, whether Chapter 7 bankruptcy or Chapter 13 bankruptcy, will destroy their credit score and permanently harm their ability to access financial assistance for car loans, a home or even school. But this belief may not necessarily be rational or true.

When a consumer files for bankruptcy the bankruptcy does turn up on their credit report. For people who file for Chapter 7 bankruptcy the bankruptcy will remain on their report for 10 years, while a Chapter 13 bankruptcy remains on a credit report for seven years. While this is an understandable concern it is far from a permanent scar. Consumers can almost immediately start to remedy the credit blemish by acquiring a secured credit card to establishing a household budget, both of which are important to future financial success.

Like bankruptcy, debt settlement can also hurt a person's credit score. Debt settlement typically refers to a settlement deal reached between the consumer and the creditor, often in the form of a lump sum, which wipes out the debtor's remaining obligations. While debt settlement agreements can also negatively impact a consumers' credit, the impact is usually not as harsh as bankruptcy. Unfortunately, the consumer has to have the money on hand to negotiate a settlement, something many people facing financial challenges do not have.

In the end, it cannot hurt for debtors facing serious financial challenges to sit down with debt relief or bankruptcy professionals to discuss the options. From debt management plans to settlement offers and bankruptcy, there are a number of avenues available to consumers looking for a fresh financial start. What plan is right for any given person depends on a variety of factors from the size of their debt to the amount of their income and the size of the estate. The key to getting started is just a phone call.

Source: Fox Business, "Debt Settlement vs. Bankruptcy: Which is Worse for Credit Score?" Jane McNamara, April 23, 2014

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

Toll Free: 888-376-0282
Phone: 423-933-1606
Fax: 423-877-0363
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