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Debt Consolidation As An Alternative To Bankruptcy

Have you lost your job like so many of us have and you are tired of getting collection calls all hours of the day and night? If so, you are not alone. You may even have considered declaring yourself bankrupt. However, negotiating debt consolidation may be an alternative to bankruptcy for you.

Here are some facts for you to consider. First of all when you file Chapter 7 liquidation bankruptcy, the bankruptcy stays on your credit record for a minimum of ten years. If that isn’t enough, every loan application has a question incorporated in it that asks if you have ever filed bankruptcy before. If it is longer than ten years ago, it still could count against you. So good luck with establishing your credit once again, or getting a lender to lend you any money!

Debt consolidation doesn’t repair your credit, but it does go away after seven years. Typically a collection or a charge-off drops off from your credit report after seven years. Therefore, if you consolidate your debts on a management program, you can at least show that you did pay something.

What happens with debt consolidation is you modify your balances owed on unsecured credit at a reduced interest rate. This action actually creates a smaller monthly payment that will fit into your budget. Be cautious however, as once you agree to a modification program, you will have to stick to it.

If you don’t, you could be in for some other issues such as a summons into court and having your paycheck garnished. So be careful when looking into these programs to make sure you can meet the new scheduled payment program.

Debt counselors will focus on your unsecured credit as these creditors have a lot more to lose in bankruptcy. Therefore the creditors tend to work with a counselor of choice. Just make sure you do your homework and select a good one.

One thing you might try is negotiation on your own with your creditor first. Sometimes honesty is the best policy and if you explain your situation to an unsecured creditor you may find that they will work with you. This way you avoid any fees charged by a company to do this work for you. A good debt counselor is very hard to find. You know your situation better than anyone so why not give it a try?

If you fail, at least your creditors will be aware of your situation so when they get a call from a debt counselor, they will already know that you are in trouble.

Debt consolidation can relieve you from some of the pressures of collectors. That is worth any effort as well.

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