How Can I Get Out of Debt Fast?
The fastest way to get out of debt is to send a check for the full balance of what you owe or negotiate a reduced payoff. If you’re reading this article though, chances are that probably isn’t an option. The next fastest way to get out of debt is to file for Chapter 7 bankruptcy. Many people cringe just hearing the word. Bankruptcy. It’s a bad word in some households, but it really shouldn’t be.
Debt = Stress. Bankruptcy = Fast Relief
It’s true, bankruptcy should be avoided when possible. If you can re-callibrate your budget, trim unnecessary expenses and pay off your debts over a reasonable period of time, you should. Unfortunately, this isn’t an option for many people. They’re looking for a fast way to get out of debt because being in debt is tremendously stressful. Deep, festering past due debt disrupts the normal course of life. Good luck paying bills if your wages are being garnished or if a taxing authority has levied one of your accounts. In many situations, consumers have lost control of their debts and they’re being pursued by numerous creditors simultaneously. Their credit is shot. The status quo is not acceptable. Canceling a gym membership and eating out less won’t do much. They need help and they need it fast.
Chapter 7 Bankruptcy is a Powerful Tool
In many cases, Chapter 7 bankruptcy is the perfect solution. A typical Chapter 7 case lasts about 4 months from start to finish and eliminates or “discharges” all of your unsecured debts. Chapter 7 discharges medical bills, credit cards, personal liability for judgments, which stops wage garnishment, personal liability for mortgages, which prevents deficiency lawsuits, allows residential and business leases to be broken and gives you the opportunity to surrender a home or car you can no longer afford back to the bank with no continuing liability. It is one of the fastest and most thorough ways to get out of debt once and for all.
Debt Settlement: Not as Fast as You Might Think…
Of course, there are other options besides bankruptcy. If you have some available cash, you might be able to buy out your debts at reduced rates. It’s called debt settlement, and it’s only fast and effective if you have the cash ready to go and you work with a competent lawyer. Hiring a debt settlement firm because you’re afraid, or too prideful to file bankruptcy, will usually do one thing: delay the inevitable. Debt settlement firms understand that it takes cash to settle debts. Cash their customers don’t have. So they tell them to start saving it…by not paying any of their debts…sometimes for months or even years. They offer no legal protection and the process certainly isn’t fast. While you save enough money to settle your debts, your creditors can still come after you full bore. Garnishment, lawsuits, judgments, foreclosures, phone calls. For more information about the perils of debt settlement companies, check out this article: Debt Settlement Tax Consequences: Three Rules to Remember.
Chapter 7 Isn’t Cheap, But it Works in Most Cases
While the average cost of Chapter 7 bankruptcy is about $1,800 including lawyer’s fees, the fees charged by debt settlement firms are often much higher. With the Chapter 7 process, your case is overseen by a federal judge. At the end of the process, your debts are discharged by court order. Contrast this with the debt settlement process where you might wait nine months to a year before any “negotiation” takes place and, when it does, there is no guarantee of relief. Chapter 7 bankruptcy is a fast process because there is very little negotiation that takes place. If you’ve entered the process in good faith, there’s not much Your creditors can do. They receive notice of your bankruptcy and their claims are extinguished. You get to start over and don’t have to wait your whole life to make it happen.
Rob Cohen, the Managing Partner of Cohen & Cohen P.C., is a bankruptcy attorney that practices in Colorado and Wyoming. He serves as a Chapter 7 Bankruptcy Panel Trustee, and has to date administered over 8,000 Chapter 7 bankruptcy estates. Rob is a Certified Consumer Bankruptcy Specialist, and was nominated for Denver Business Journal’s 40 under 40 in both 2014 and 2016.