Debt Consolidation Vs Bankruptcy
Debt is a terrible state of being that affects millions of American households everyday and can often put people in the dire position of choosing between paying debts and paying their monthly living expenses. With the obvious choice in front of them, they fall farther and farther in debt making the situation even more dire. Many people turn to bankruptcy as a means to an end without realizing there is another way. Debt consolidation should also be considered before entering into bankruptcy discussions with a lawyer. In fact, if you want to consider both options do it with a credit counselor instead and learn more about each methods of debt relief to find the one that’s truly right for you.
Both chapter 13 bankruptcy and debt consolidation are forms of restructuring debt to come to more manageable terms of repayment for the debtor over a predetermined period. However there are significant differences between these two types of consolidation. Mainly in traditional debt consolidation your debts are grouped into one loan and paid over time at a rate negotiated or set by the consolidating agency. There are some advantages to debt consolidation over bankruptcy, rather than owe many creditors you’ll simply owe one and although the interest rate may be lower the monthly payments may be larger.
Debt settlement companies give you the ability to renegotiate your debt and pay back what you owe at a considerably lower monthly payment. These companies have the ability to negotiate with your unsecured debt holders to lower interest rates, remove or stop over limit and late payment fees and best of all stop the harassing phone calls.
A debt settlement company will work with you and your creditors to establish a repayment plan that benefits everyone involved. Your new monthly payments can be consolidated down to one lump sum per month and often at half the amount of what you are currently paying. Many times you can be completely out of debt within five years as opposed to the twenty five or more it would take making minimum payments to your credit card holders.
While bankruptcy may seems like the quicker way to correct the problems one is facing from a financial standpoint, in that much of one’s debt is discharged, the proper goal in this type of a situation is to fix the situation. Debt consolidation will take longer to fully correct the issue, but will not remain on one’s credit history for as long as seven years, like a bankruptcy will. Debt consolidation gives an individual the flexibility to work within his or her specific constraints and can be fully dispensed, in most cases, faster overall than a bankruptcy.
Doesn’t it sound better to hire a debt consolidation agency that will actually work to repair your credit? When you hire on a reliable agency, they will work to reduce your monthly payments so that you no longer have to struggle. They will also attempt to remove late fees from your delinquent accounts, and get your finance rate lowered to a reasonable rate. In essence, these professionals work for you. Not against you.
Prior to talking to an attorney about bankruptcy, take the time to discuss your situation with a debt consolidation company. A debt expert will go over your situation with you and lay out all of your options. You may find that the debt that was pushing you to the drastic decision of bankruptcy can easily be controlled by a debt assistance program.
Beyond any doubt, debt consolidation is the better alternative to bankruptcy and as you can see is far different from filing bankruptcy.