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How to choose between debt relief and bankruptcy

New Hampshire debtors searching for a debt relief plan might want to consider bankruptcy. But before one goes down that route, there are other alternatives to consider. Each choice has pros and cons that should be weighed, and some options are better suited to different situations.

One of the simplest ways to deal with debt is to speak with lenders and ask if they might consider creating a modified payment plan. If they are not willing to do so directly with a debtor, they might be willing to work with a credit counseling service. These groups act as a third party to develop repayment plans, sometimes without charging for their services. Another option is to seek a loan to pay off debt, such as getting a home equity line of credit or another mortgage. However, this could put one at risk of losing the home put up for collateral.

When none of those options work, Chapter 7 or Chapter 13 bankruptcy could be the solution. Both could stop foreclosures, repossessions and wage garnishments. Chapter 13 bankruptcy will let people retain more of their assets. This option is for people with a regular income who can adhere to a court-approved payment plan. People with little to no income might qualify for Chapter 7 bankruptcy, but this requires a liquidation of many of the debtor's assets, with the proceeds used to pay off creditors.

If bankruptcy is the best option, an attorney could assess a client's debts, income and assets to make a recommendation for what kind to file for. There are eligibility requirements for both types that the attorney will describe.

Source: FTC, "ebt Relief or Bankruptcy?", November 20, 2014

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