Unexpected events happen all the time in people’s lives. Although different in nature, these events may have varying impact on a person’s life, and sometimes, make the situation worse. An accident, a loved one becoming ill, these are just some examples that can have great impact on a person’s ability to repay their debts. The good thing is, there are now options that can help people clear off their debts with ease, including debt agreement and bankruptcy. Some are already familiar about what goes on and what each option entails. But for someone who is new to all these, it is important for them to determine which can best help them in their current situation.
Debt Agreement vs Bankruptcy
There are several things you need to learn and ponder on regarding these two to make an informed decision and choose the most suitable solution for your current situation. For instance, for you to be eligible for a debt agreement, you will need your assets, debt thresholds, and income. You must not have a record of bankruptcy in the recent years as well. With bankruptcy, you don’t need the first three requirements since you only have to petition for one and get approval as long as you were not previously bankrupt. Also, the length of time you need to pay off your debts is only until the stated duration in the agreement. With bankruptcy, you will remain bankrupt for 3 to 8 years. Both will appear on your credit file as well, for a maximum of 7 years. While the latter does not require employment, bankruptcy does, depending on the certain licensing authorities and industry associations. The latter does not have income restrictions as well, while bankruptcy does, if the amount you receive exceeds a certain sum.
Opt for a Debt Agreement before Filing for Bankruptcy
But with all these differences aside, experts suggest that it is best to consider going for a debt agreement first before opting for bankruptcy. The primary reason points to the former being a relatively low-cost option than the latter. Also, you may not have the convenience of having a trustee to manage your finances and the benefit of avoiding the stress associated with the repayment process. But, you will feel at ease knowing that your debts will stop accruing interest as soon as you get the creditor’s approval. It is also better to opt for this option first if you are struggling with your household debts. That way, you can simply consolidate your household debt to avoid further financial struggle. Lastly, this option lets you avoid declaring yourself bankrupt. This is an important benefit because it means that you can still run your business or act as a manager while getting help in paying off your debt. However, you will do so under some agreed obligations.