If you’re in financial trouble and seeking information on resolving your debts, you’ll likely run into quite a few terms that may be unfamiliar to you. Some of these terms can seem very similar to each other and one may get confused as to what they actually mean.
A Few Common Debt Resolution and Bankruptcy Terms
Debt consolidation is a term you will hear a lot of when you’re facing tough financial times. In a debt consolidation, you get a loan for the total amount of debt owed. The interest rate for this loan is generally lower than the average rates for the individual loans you have out. This way, you have just one payment to make rather than several.
Debt settlement is when you arrange to pay off a certain amount (usually not the full amount) within a specific period of time; for example, if you owe $5,000 and a creditor agrees to settle on $2,500 if you can pay that amount within a certain period. Similarly, Chapter 13 bankruptcy allows debtors to work out a repayment plan over a certain amount of time.
Asset liquidation is the selling of assets to pay back creditors. Chapter 7 bankruptcy involves liquidating assets and then paying back creditors with that revenue. Debts are eliminated under Chapter 7 bankruptcy.
Credit counseling and debtor education are requirements of bankruptcy. These help debtors evaluate their personal financial situations and can help them explore alternatives to bankruptcy and develop a budget.
An exemption is an asset that is protected from liquidation during the bankruptcy process. Those filing for bankruptcy may be able to claim a certain amount in exemptions under federal law or Texas state law.
Seeking Legal Help for Bankruptcy
Bankruptcy can be a way to erase certain debts or work out a repayment plan to make a fresh start. A lawyer can help with the bankruptcy process. Speak with a bankruptcy attorney today to get your questions answered and receive the help you need.