You Debt Relief Options: Filing Chapter 7 and Beyond

If you do not meet the means test requirements for filing Chapter 7 bankruptcy, but still need debt relief help, there may be other options available.

Most of these take the form of debt management or debt settlement plans.

Debt management plans typically involve having a third party negotiate lower interest rates and fees for the debtor and incorporating them into a payment plan in order to pay off creditors.

With debt settlement, the debtor ceases all payments they were previously making to their creditors while the settlement firm attempts to negotiate lower balances with the creditors.

According to a recent story in the Washington Post, many debt settlement firms can charge up to 15 percent of the total outstanding debt owed and many people are unable to continue the program to pay off their bills.

Also, debt forgiven by creditors can be taxable if over $600. So while this may sound like a gift from heaven, having your debt forgiven could put you further in debt – this time with the IRS. It’s important to keep in mind that credit card debt is relatively easy to deal with – particularly when filing chapter 7 bankruptcy. But IRS and tax debt may only be included in your bankruptcy case under certain circumstances.

According to the Federal Trade Commission, there are some illegitimate debt settlement companies who offer a great package of services for a profit. But once consumers sign up for the program, they offer little to no service and the customer is stuck paying a high bill.Some companies are being prosecuted for their practices in Alabama and West Virginia.

But there are good organizations out there as well that provide not only debt management but counseling and education. They also have manageable monthly fees that the debtor cans afford to pay.

When looking for debt management as an option over bankruptcy, consumers may want to consider organizations accredited through the National Foundation for Credit Counseling or the Association of Independent Counseling.

There are pros and cons for the various forms of debt relief. Every situation is different and doing the research into debt relief options may help people determine their best possible options.