Debt management vs. bankruptcy

When people living in Florida find themselves faced with a mountain of debt, they may look into ways of managing it. One option is a debt management program, sometimes known as credit counseling. In these programs, a credit counselor reviews a person’s debts, income and assets, and works out a repayment plan that can last for several years.

While many people benefit from debt management programs, they also have problems. For one thing, there are situations in which it is simply impossible for a debtor to pay off all that he or she owes. This is particularly true of the debtor or a family member is ill, disabled or if he or she simply does not make enough to cover plan payments while also meeting ongoing expenses. In addition, the plan may not provide significant protection against aggressive collection tactics, nor will it stop foreclosure or other legal actions from creditors who do not agree to participate in the plan.

It is understandable, however, that a debtor wants to take responsibility for his or her obligations and repay creditors. An alternative to debt management plans for people who have a regular source of income could be Chapter 13 bankruptcy. In this type of bankruptcy, the debtor agrees to a three to five-year repayment plan. Once the plan is complete, most remaining unsecured debt is discharged. The goal of the plan is to repay as much debt as possible while also keeping the obligations reasonable for the debtor.

Individuals who are behind in their financial obligations may benefit from speaking with an experienced lawyer. Legal counsel can outline the eligibility requirements of the chapter while discussing other forms of debt relief that may be available.