Debt Settlement Versus Bankruptcy: Which One Should You Choose?

There are no predictable economic cycles. If there were, we would all be wealthy. The economy grows and falls as the result of numerous forces beyond our control. There are signs of risks from time to time, and some are more reliable than others. But, predicting is well outside the reach of most people.

People lose jobs. They run into huge medical expenses. They lose their nest eggs. Some commit to mortgages they cannot fulfill. Still, others accumulate debt that exceeds their ability to pay now or in the future. And, for whatever reason, they find themselves between a rock and a hard place.

In 2008, just under 60,000 people declared bankruptcy according to the American Bankruptcy Institute, a considerable improvement over the years of the Great Recession. In real terms, that can mean deciding what’s better for you: debt settlement or bankruptcy.

Between the financial rock and it’s hard place

Debt settlement and personal bankruptcy are two sides of the same coin. They solve similar problems in different ways. You can take either pay to get out of debt, but the results will affect your future differently. You need to understand what these options mean to you.

  • Debt settlement helps you address your personal finance, family finance that has gotten out of control. It does so by negotiating deals with the creditors you owe. It may not get rid of the debt, but it seeks to settle on an amount you can handle.
  • Bankruptcy is a quick way to get out of debt. A Chapter 7 bankruptcy will eliminate your debt, and a Chapter 13 version will negotiate a plan to repay your creditors. It requires the assistance of a lawyer, federal court hearings, and a lasting negative impact on your credit rating.

The potential and availability of bankruptcy as a solution encourages creditors to negotiate to settle for some return as better than no return.

Why settle a debt?

Reaching a debt settlement does not dismiss your obligation to pay your debt. But, it can reduce the size of the debt.

Negotiating with the creditor can result in your paying only a fraction of what you owe. It helps you avoid the damage that bankruptcy does to your credit record. And, negotiating payments will reduce the time and cost of bankruptcy.

But, negotiating on your own can present problems. Your creditors have no obligation to cooperate. They have the upper hand because you are contractually obligated to pay debts you incurred. So, while debt settlement might be good for you, it’s not the best option for the creditor.

Creditors are positioned to resist any suggestion you make. Still, if negotiating is their only choice when your bankruptcy could eliminate the debt, they may offer solutions. Some creditors have hardship plans which help resolve financial problems arising from personal hardships like a death in the family, major damage to your home, or catastrophic medical expenses. There is no standard solution, but you might request such a repayment plan where they accept a reduced regular payment and forgive late charges.

You might, then, prefer to use a debt settlement service that will take on the negotiations and argue from the advantage of experience and knowledge of the debt structure and possible options. The professional will save you time and represent you with consistency.

Debt settlement providers work with your creditors to reduce the total you owe to a balance you can afford. You make fixed monthly payments to the debt settlement company which it uses to pay the amount and the charges for the company’s fee, typically 20%. And, you should expect the IRS to treat any “forgiven” debt as taxable income.

Finally, you use a reputable debt collection company that does its job and without scamming you. You might confirm their Better Business Bureau rating, check the internet for their reviews like those at And determine if they are members of the American Fair Credit Council and the International Association of Professional Debt Arbitrators

Why claim bankruptcy?

Chapter 7 or Chapter 13, bankruptcy will relieve you from your debt burden, either by settling on a structured repayment plan or wiping out the debt entirely.

While debt settlement may negatively impact your credit history for years, bankruptcy will certainly lower your FICO score. Chapter 7 bankruptcy appears on your credit record for 10 years and will affect your ability to purchase a home or car and to secure credit cards. Chapter 13 will stay on your record for seven years from the delinquency. The amount of settlement or repayment plan is decided by a bankruptcy judge in terms of your state’s laws.

One huge risk in a Chapter 7 filing is the court may demand the liquidation of assets including your house and/or car. In addition, bankruptcy will not eliminate debts owed for student loans, child-support payments, or delinquent income taxes.

The real problem with either form of bankruptcy is the cost of legal representation. You can’t argue bankruptcy on your own so you can expect to pay legal fees from $500 to $6,000.

Debt settlement vs. bankruptcy: What works best for you

As the Chicago Tribune says, “While the economy has recovered to a reasonable standard, wages took a long time to get back to normal. This means that households are still carrying large amounts of debt, often at extremely high-interest rates. If you’re someone who has a large amount of debt, you might be looking for various ways to solve your problem.”

NerdWallet research reports the average American household has an outstanding credit card debt of $15,482. Add this to an average mortgage and other debts of $134,058. When you consider those credit cards accumulate debt with 25 to 29 percent interest rates, you can see how the debt becomes challenging.

Debt Settlement and Bankruptcy can both solve your financial problems. But, if you’re unsure what works best for you, you might first seek advice from a nonprofit credit counseling agency working in your interest to determine the most advantageous, appropriate, and cost-effective route to your solution.

Do You Have What It Takes To Make A Fortune As A Landlord?

You might be looking for ways to boost your income. Well, becoming a landlord is a fantastic possibility to consider. By becoming a landlord, you will add a great cushion of cash to your accounts that will help you deal with everything from unexpected bills to luxury purchases that you wouldn’t otherwise be able to afford. However, there are a few things that you’ll need to consider before you completely commit to this idea. So, let’s look at these issues and make sure that you are ready for the impact being a landlord will have on your life.

Building And Managing A Budget

The first trait of any successful landlord is going to be the ability to handle and manage a budget. You might think that being a landlord is a simple matter of watching the money come in each month, but this isn’t the case. Even if you only have one property to handle, you will still need to deal with a lot of costs and fit them neatly inside a business budget. This means that you need to think about paying for costs such as repairs and maintenance, representation, checks and more. If these costs don’t fit inside your business budget you could actually lose money on your property investment and you don’t want that.

Hands-Off Or Hands On?

As a landlord, you’ll need to decide how hands-off or hands-on you want to be. If you’re hands-on you need to make sure that you are always available to deal with any issues that are impacting your tenants. For instance, this could be a problem with health and safety. Or, it might be ensuring that there is someone lined up to fill an empty property.

If you want to be hands-off, you need to make sure that you are arranging the services to keep the property in tip-top shape. For instance, you might have a lift as part of your property. If that’s the case, you need a solution such as Hin Chong lift maintenance services to make sure that it keeps running effectively. This is just one of the services that you’ll need to make sure is in place to keep your property in the best condition possible for tenants.

Choosing The Right Tenants

Once you have a property, it’s entirely your choice who you accept as a tenant. It’s well worth taking advantage of this right because you want to make sure it’s someone that will pay on time and keep the property tidy and clean. Remember, it is possible to run background checks as a landlord to make sure that there are no red flags with a potential tenant that do need to be addressed.

You might even want to consider using a legal advisor. With a support service like this, you will always be aware of your rights and responsibilities as a landlord. Basically, it can make sure that you do stay on the right side of the legal line.

Now that you’ve read this article, you should have a clear understanding of whether life as a landlord is the right investment choice for you.

With The Return Of Stock Market Volatility, Should You Invest In Private Equity?

The stock market is surprisingly volatile right now. After a pleasant 2017 when stocks rose consistency throughout the year many expected 2018 to be pretty much the same, thanks to tax cuts, increased company profitability and a generally healthy economy.

But that’s not the way it turned out. Instead, we had a year of ups and downs, with stocks potentially rounding out the year lower than they were at the start.

Investors, however, need to ask themselves whether any of this is surprising. Let’s face it: stocks right now are expensive. Current P/E ratios are getting close to where they were in the run-up to the dot-com boom. And to be good value (for investors who follow Warren Buffett and Benjamin Graham), they need to be priced lower than the discounted present value of their future profit stream returned to shareholders after tax. Given current prices, buying shares in public companies means that you believe that profits will continue to soar in the future. The current prices seem to indicate that the market thinks that they will.

But there’s a problem: household income just isn’t rising at the rate that the economy needs to sustain those higher profits across the board. Salaries are going up much more slowly, if at all, meaning that the demand from the middle-class is unlikely to materialize in the way that stock prices seem to be suggesting.

It’s this concern about incomes (and possibly a trade war with China) that led to the volatility that investors created in the public markets in February and October this year. Investors worried that companies were too expensive, that they wouldn’t generate the promised profits in the future, and that they should seek returns in other areas. Many risk-averse investors also wanted to invest in assets with more favorable risk profiles for themselves and their clients: pensioners, for instance, do not want their assets fluctuating 40 percent in value from one year to the next.

Private equity offers an alternative strategy for investors. Rather than invest in the volatile public markets, private equity allows investors to escape many of the big swings that one sees in public markets and invest in long-haul projects designed to pay off in five, ten, fifteen years – and possibly longer.

Private equity is a different animal to buying stocks and shares in publicly traded companies. For starters, it’s not something that many investors ever do: it’s just not as easy as buying a stock or a share (for which there are dozens of brokers and apps). Instead, an investor has to go and visit the company, see whether it offers the potential for return, and then become an owner by buying private shares.

The upside, however, is that there tend to be more extreme opportunities to make money in private equity. Relatively few investors (at least compared to the public markets) are seeking profits in the sector, meaning that there’s a higher likelihood of finding a hidden gem: a company that could generate ten times the initial investment in a short space of time. Companies do exist on the public exchanges which offer ten times return in a single year, but they are fabulously rare, and their gains tend to peter out relatively quickly. Private firms tend to be under less scrutiny by analysts than those on the public exchanges, and so profitable opportunities are not competed away as much.

Lack Of Information

One of the reasons many retail investors shy away from investing in private equities is the lack of information available on privately trading companies. Reporting requirements for these companies are minimal, and so it can be hard to find out much about them to decide to invest.

Although it may sound counterintuitive, this is a boon for investors. As discussed, fewer analysts have their eyes on privately traded companies and, therefore, there are more opportunities for savvy investors to make incredible returns.

Take the example of Peter Thiel, for instance. Back in 2004, Thiel invested $500,000 in the then private, Facebook in return for 10 percent of the company. Thiel invested some of his money from the sale of Paypal in the firm, believing that eventually, Facebook would hold an IPO. Thiel then sold 16 million of his shares at the Facebook IPO in 2012 which valued the company at more than $100 billion, generating $638 million.

But Thiel had connections and knew his way around the tech industry pretty well. What about the average retail investor without access to this kind of information?

It turns out that there are still options. Investors, for instance, can work with a private equity firm – an investment broker who deals specifically with the issue of private equity. These institutions open up a whole new world of possibilities to the average investor, without the need for them to go and do their own research into private companies (which often restrict access anyway).

High Initial Investments

Investing in a private company often comes with “high-minimums.” High minimums mean that you have to stump up a minimum amount of cash to even be allowed to invest in a firm. Firms do this because of the high transaction costs involved in transferring private equity, and because they want to make sure that the people investing in their firms have proven financial acumen.

Minimums can be extraordinarily high. Some companies demand minimums more than $10 million, well outside of the range of most small retail investors. However, high minimums don’t necessarily mean that it’s the end of the road. Again, retail investors can go to private equity firms, pool their money together, and have the private equity firm act on their behalf when investing in private companies. Then, when the time comes to sell, the private equity firm can take the money from the sale, and distribute the profits among those who initially invested.

In short, retail investors should consider the benefits of investing in private equity. It offers fabulous returns and shields portfolios from the vicissitudes of the public markets.