Avoiding Bankruptcy with Debt Consolidation [Alernatives To Bankruptcy]
July 20, 2009
If you are falling behind on all of your bills, you are probably starting to run out of options. Luckily, there are a few options that are available to you. Thought it is important that you spend a bit of time looking at all of your options and choices carefully before you plunge into debt or before filing bankruptcy so that you can be sure you really are making the right choice for your family, as well as your finances. As with all financial decisions, a bankruptcy can have far-reaching consequences and could even result in you losing your home, or your vehicle, which can significantly impact your ability to care for your family, as well as your responsibilities.
A bankruptcy comes in several forms. There are those that allow you to walk away clean with no bills, and there are those that require you to consolidate all of your debts into a single debt that is then paid using a single payment each month. Regardless of the type of bankruptcy that you would prefer to opt for, there are requirements that must be met and long reaching consequences to not only your credit score and ability to get credit, but also your overall finances.
Not sure how your debt adds up? Use our free Debt Calculator to determine where your debt stands against the national average.
A Chapter 7 bankruptcy can allow you to walk away from all of your debts. However, the price to pay is you are required to liquidate all of your assets. This means, you are required to sell your home, any property, vehicles or other valuable items and the money is used to repay as many debts as possible. In this situation, any remaining balance that is often over is essentially forgiven. Sounds like a great idea to many, but in reality, it can be a gut-wrenching process being forced to sell everything that you own to pay off the debts. Many times, there are far more things that you are required to give up than you would have ever dreamed. The expensive computer on the desk or perhaps the valuable collector’s edition items that you have around your home can even be included.
Chapter 13 is another common form of bankruptcy. While this can allow you to keep your possessions, your debts are all consolidated into a single bill and creditors are permitted to file a claim against your earnings. A trustee is appointed to whom you make a payment each month, the trustee then in turn makes payments to your creditors until the debts are repaid at which time you emerge from the bankruptcy debt free. However, typically speaking you are forbidden to obtain any additional credit while in bankruptcy, and you also find that you are required to keep in constant contact with the trustee to ensure that you follow the rules.
A debt consolidation counselor is similar to filing Chapter 13 bankruptcy. You are able to keep your possessions, all of your debts are consolidated and a single monthly payment is made. The difference though, is you are not required to report your spending to the courts, you do not have to give up any additional credit you might want, and your credit report does not show a bankruptcy for the next 7-10 years. This can give you a lot more options to live your financial life, and fewer negative consequences that you will have to deal with.
Related Topics:
Is Debt Consolidation Right For You
Easy Debt Relief Tips
Debt Consolidation Issues Revealed
Avoid Bankrupty Through A Debt Consolidation Program
Debt Consolidation - Good or Bad for your Credit Report
Back to Debt Help Directory
