In news article, a consumer has to decide choosing between credit card debt management plans and Bankruptcy Chapter 13 in their financial debt situation.
he consumer involved is unable to settle her credit card debts, and three of her credit cards are charged off.
Accordingly, a bankruptcy attorney advised her that she is above the median income to file for Chapter 7 Bankruptcy, but may opt to file Chapter 13 Bankruptcy that will require her to pay a fixed amount per month for three years.
However, the option will tend to close all her accounts including the good ones.
The person involved would like to seek assistance from consumer credit counselor in order to make possible arrangements with the creditors, and be able to keep the good and lines of credit accounts open.
Some Possible Debt Management Plans Options to deal with the Debt Situation
Debt Management Plans From Credit Counselors
A comment in the article proposes several options corresponding to the credit card debt management.
The focus is to consider the long-term effect that these options will provide in the given situation.
If the consumer considers her credit accounts as important, and desires to keep them, she must look for ways to pay her creditors with the purpose of satisfying them with payments according to the terms agreed-upon.
The consumer should remember that it is important to refrain from using her credit cards that can add more debts to the existing indebtedness.
In addition, she is encouraged to make a spending plan according to her reduced income.
The goal of the debt management plans is to spend lesser than what she earns and make an effort to save from her income as much as she can.
Debt Management Plans Bankruptcy Chapter 13 Versus Consumer Credit Counseling
The recommendation is to contact a non-profit credit-counseling group.
This counselor will review her monthly income and expenses, and assist the consumer to determine whether repayment of debt via credit card debt management plan would be to her best interest.
Keep in mind that, most likely, there is the possibility of a higher monthly repayment amount with the credit card debt management plan as compared with the Bankruptcy Chapter 13 filing.
This will lead for the review of the budget in order to determine whether the consumer can really afford to apply credit card debt management plan.
The Pros and Cons of Credit Card Debt Management Plan
The Pros of debt management plans
- The plan provides the chances to continue the payment of the all credit cards, which are under repayment arrangements at present.
- The consumer may only choose to include in the plan, the accounts that have been charged-off.
- The plan would save the consumer from the negative implication of bankruptcy on her credit report.
The Cons of debt management plans
- The person involved is expected to pay a larger amount of per month.
- The period of repayment, will going to be longer until the debt is paid completely.
- All the other accounts that are not yet charged-off included in the plans would be closed as well.
In the end, regardless whether the consumer chooses to file Bankruptcy Chapter 13 or make payment by adopting credit card debt management plan, she must establish savings in order to support six to twelve months of personal living expenses.