Credit Counseling vs. Bankruptcy in Tacoma
We are frequently asked about credit counseling and debt consolidation services in Tacoma, Washington. Everyone considering filing bankruptcy in Tacoma wants to know if Chapter 7 bankruptcy or credit counseling has more of an impact on your credit and what are the pros and cons of each.
Chapter 7 bankruptcy in Tacoma.
This is designed for people unable to pay their debts. Chapter 7 eliminates most existing unsecured debts.
- You wipe out all your unsecured debts in Tacoma. These include credit cards, personal loans, and medical bills.
- Generally, you may be able to keep your home and cars
- You get a fresh start to credit usually six to eight months after you file
- You can usually qualify for home loans in Tacoma two to three years after filing
- It will relieve a lot of financial pressure
- The bankruptcy stays on your credit report for the next 10 years
- You may have a hard time getting credit or pay higher interest rates for a while
- It could make it more difficult to get certain jobs in Tacoma
Credit Counseling in Tacoma
Credit counseling is an alternative to bankruptcy. With credit counseling, you make a monthly payment to one company, which in turn pays your creditors.
- You may be able to avoid bankruptcy in Tacoma.
- Your bills are consolidated into one payment.
- Credit counseling doesn’t work for more than 50% of the people who try it. Most people cannot follow the strict payment plans and budget constraints make it too difficult
- Creditors will still consider you a bad credit risk. Credit counseling will be reported on each account in the repayment plan. Potential creditors see this and will not lend you money
- Credit counseling in Tacoma will take longer for you to re-establish credit because a typical credit counseling re-payment plan in Tacoma will last 3 to 6 years thus, delaying your ability to re-establish credit until your plan has been paid off
- Like bankruptcy in Tacoma, credit counseling may prevent you from getting some jobs
- You might not be able to consolidate all creditors. Some creditors in Tacoma are unwilling to work with credit counseling agencies. In that case, you would pay those creditors the full amount you own them directly. If you cannot do this, you may end up filing bankruptcy anyway
- Your credit score may be affected the entire time you are in credit counseling
- There is a great deal of fraud in credit counseling. Many credit counseling agencies are not properly licensed and often do not follow the rules. Many so-called agencies have taken money from people without paying a dime to creditors and then disappear.
The notion of credit counseling and what it can do for people may sound good, but when you look at how the benefits of credit counseling in Tacoma stacks up against Chapter 7 bankruptcy in Tacoma, Chapter 7 bankruptcy may be the best choice for people with financial problems in Tacoma. Chapter 7 bankruptcy simply gets you back on the road to financial recovery faster. It also wipes out debt that credit counseling cannot, but when you consider the failure rate of credit counseling, Chapter 7 bankruptcy is the best choice for most people facing financial problems in Tacoma.
If you have gone the credit counseling route and it didn’t work for you or if you have looked at your options and think bankruptcy in Tacoma may be the way to go, give our Tacoma bankruptcy lawyers a call.