When you have more debt than you can handle there are a couple of options to help you become debt free. One of those options is to consolidate your debt, so you only have one payment to make each month. A debt consolidation company will work with your lenders to come up with a repayment plan that fits your monthly budget, and most times the repayment is for less than what you owe. Not all creditors participate in debt consolidation programs, so you do have to be careful about picking this option.
Another option to get out of debt is to file for bankruptcy, but between this option and debt consolidation many people wonder how their credit will be affected. In either case credit certainly does take a hit, but making your decision based solely upon how your credit is impacted will not give you a full picture of the benefits of your options. For example:
- Bankruptcy does get noted on your credit, but if you reaffirm certain debts your credit will reflect that you are still paying the debt. And if you pay on time your credit will begin to rebuild right away. Most people who file for bankruptcy are even offered credit not long after their case is completed.
- If you are behind on payments when you enter a debt consolidation program, your credit has already taken a dip and shows you are not paying on time. And, if not all of your lenders agree to the proposal of repayment, you will be in a deeper hole than when you entered the program and that can also hurt your credit.
- Debt consolidation companies may also ask that you stop making payments in order that they may have more leverage when negotiating on your behalf. This is a risk and does not always work, leaving you with unpaid bills and bad marks on your credit.
Unless you go with a reputable debt consolidation company, the chances of getting results that work by going this route are slim. If you prefer to make one payment per month, you can still do this by filing bankruptcy. Chapter 13 bankruptcy is similar to debt consolidation, but it has the backing of the Court and your lenders do not get to opt out of the process. You will still have to make certain decisions such as which debts to reaffirm and what value to repay on certain secured debts, like your car. But the rules of Chapter 13 bankruptcy will guide you in making these decisions and you can rest easy knowing your debt is being handled according to legal rules and procedures. If you are considering filing bankruptcy, let us give you more information and prepare your case for you.
For help handling overwhelming debt, contact us at www.DsouzaLegalGroup.com. We will help by coming up with solutions that work for you.