Americans as a whole have been going through a troublesome spot economically, and some have found a need to make major decisions regarding their finances to get them on better ground. If you have found yourself in these circumstances, do not despair- there are debt relief programs to help you get back on your feet.
Let’s discus the two major options- filing for bankruptcy or initializing a debt consolidation plan.
There are two types of bankruptcy that you can file for: Chapter 7 and Chapter 13. With Chapter 7, you are requesting a court to wipe out the debts that you owe. Please note that Chapter 7 will not help with non-dischargeable debts such as student loans, child support, criminal/misdemeanor penalties or any tax debts. On the other hand, you will not need a steady income to qualify for Chapter 7.
With Chapter 13 you will not lose any property to creditors but it will require you to have a steady income since you will be establishing a repayment plan and it must be high enough to continue to pay your monthly expenses as well as the three to five repayment plan that you have established.
With debt consolidation you will be paying out less each month although you will be paying on the debt for a longer period of time. You will not be wiping out any debt, essentially you will be granted more time to pay off the debt you have with another loan with smaller payments.
Filing for bankruptcy will remain on your credit report for up to 10 years and may possibly affect your job future and loan approvals even after that time has passed.
Debt Consolidation can lure you into believing that your credit is better for you may receive a higher credit line on your credit card during the process. But you don’t have more money to spend. You essentially have less since your total interest rate will possibly be more on the debt consolidation loan from stretching your debt repayment time.
Choose wisely and consult both financial advisors and handlers of bankruptcy and debt consolidation programs before making a choice. Always remember that money management will be needed for both choices and that no way will be an easy way out, although it will be helpful towards your quest to stabilize your financial situation.