Some people are confused about the difference between credit counseling and bankruptcy. Because of the physical, mental, and emotional stress today's global crisis brings to people, many have found their way into legal proceedings without the proper understanding of what they are getting into. This article seeks to shed light on the differences between credit counseling and bankruptcy.
Credit advice is a service offered by several credit counseling firms to individuals who seek professional help as to how they can pay off their current and outstanding debts. These financial advisers are well-trained in teaching people how to manage their finances accordingly.
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Most credit firms require their clients to make use of credit counseling services. This is to ensure payment of debts in a well-organized manner. A credit counselor will go over a person's financial status and create a payment scheme based on the debtors paying capacity. The credit counselor will then offer a proposal to the creditors in behalf of the debtor.
While it deals with finances just like credit advice, bankruptcy on the other hand is the final recourse of people who by any means could not settle financial obligations with creditors. Filing a petition for bankruptcy is a decision that would greatly affect a person's credit report for at least ten years. A bankrupt individual runs the risk of being turned down on future loan applications.
To file a petition for bankruptcy, an individual has to seek professional help from a bankruptcy lawyer. The lawyer will inform the client about every detail on the matter, helps prepare all the necessary documents, and stand for and in defense to the client during court appearances.
A lot of financial experts today would still prefer credit counseling over bankruptcy because it teaches responsibility to the persons involved. Bankruptcy may be the quickest way to ending financial problem, but credit counseling equips the debtor so he or she will not be caught in the vicious cycle of debt.
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