A number of options exist for Wisconsin residents looking to escape debt, and not all of them involve filing for bankruptcy. Two debt relief options that do not involve filing for bankruptcy are credit counseling and debt settlement.

With credit counseling, people work with a non-profit agency that can help them establish a budget. Sometimes, these agencies can also help to negotiate lower payments or have fees removed from an account. While the process can take three to five years, the budgeting skills gleaned and low cost make credit counseling an attractive option for individuals aiming to budget more intelligently and streamline their payments. Debt settlement often involves a third-party who negotiates with creditors, and it can also help reduce interest rates and principal balances, but it can leave a bad mark on one’s credit report.

Chapter 7 and 13 bankruptcies are both court-supervised, and they allow people to eliminate or reduce most of their debts. Chapter 7 involves selling non-essential assets to pay off creditors; once this is done, most, if not all, debt is cleared. Chapter 13 gives people time to pay back their debts may be able to help them prevent foreclosure on their homes as well. However, it is important to note that there are certain types of debt that neither type of bankruptcy will cover, including child support, unpaid back taxes and government secured education loans.

Going through bankruptcy may be able to help people get back on their feet again, but the process is not always straightforward, especially when someone is filing for Chapter 13. For this reason, it could be helpful for people considering filing or going through the process of filing for bankruptcy to speak with an experienced bankruptcy attorney, who may be able to help people understand the process of filing for bankruptcy.

Source: Fox Business, “Choices for Debt Relief,” Fred O. Williams, Feb. 8, 2013