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How do debt relief companies and bankruptcy compare?

On Behalf of | Dec 1, 2022 | Bankruptcy

Like many Americans, you may consider bankruptcy an absolute last-resort option, even if you are facing overwhelming debt. Worried about losing your house, your vehicle and other property that you value personally, you may wonder if a debt relief company might be the better choice.

Many such agencies do offer legitimate services that can help with limited amounts of debt. However, others may try to capitalize off their client’s desperation by offering a quick fix without providing the services promised.

How do debt relief companies work?

Debt relief companies generally consolidate your debt into a single payment plan. Under this unified plan, you may receive favorable terms like lower interest rates that make it easier to keep up with payments. However, you may also have to pay monthly service fees on top of what you own under the plan itself.

Unfortunately, there are also many companies that offer debt relief services that they do not intend to provide. Before trusting yourself to an agency, make sure to check their credentials and examine your contract carefully.

When might bankruptcy be a better option?

Medical bills, credit card balances and payday loans are all examples of unsecured debt that can easily become overwhelming. Consolidating debt alone may not be enough to help, especially if you are struggling with ongoing health issues, unemployment or foreclosure.

If this is your situation, filing for either Chapter 7 or 13 bankruptcy may help you eliminate or restructure debt while also keeping important assets that you might otherwise lose.