Bankruptcy - Can You Avoid It?
If you are overburdened with high-interest credit card debts and looking for relief, like many others, you may be contemplating bankruptcy. These days, many families and individuals in Indiana as well as in other states are also struggling with credit card debt, and seriously considering bankruptcy. Fortunately, there are many ways to get relief without declaring bankruptcy - which is typically the option of last resort for many consumers.
One option is a process known as debt consolidation, which typically involves "consolidating," or combining your multiple, high-interest credit card debt as well as other types of unsecured debts into one, more manageable payment plan made to a credit counseling agency.
Another viable option is debt settlement, where you are hoping to settle with creditors for substantially less than your original debt amount. For many consumers, the two options mentioned previously have become popular alternatives to bankruptcy, which can have a more devastating and longer lasting impact on personal credit.
Compare your debt relief options. Request a free debt relief analysis and savings estimate.
Debt Relief Options and Alternatives to Bankruptcy
As noted earlier, there are several methods available to consumers like you who are struggling with credit card debts. Also known as a debt management plan (DMP), the goal of debt consolidation is to provide consumers a single, more manageable, and more structured payment plan made to a credit counseling agency. If you are considering debt consolidation, here's what you can typically expect:
Credit counselors will review your financial situation, including the amount of your credit card debts and your ability to pay off those debts. They will normally come up with a debt relief strategy that would allow you to, hopefully, pay off your debts sooner than if you continued to only make the minimum monthly payments at higher interest rates.
Working on your behalf, your credit counselor will typically submit proposals to your creditors requesting reduced interest rates, or the waiving of any late fees and penalties. Creditors that agree to extend those proposals are then placed into the debt management plan. An account is generally set up where the credit counseling agency draws money from to distribute to the various creditors in the debt management plan.
With a new, more affordable and more structured repayment plan in place, you can ideally, direct more of your payment towards paying off the principal balance on your debts versus just the interest.
Another proven debt relief option for many consumers is debt settlement. Unlike debt consolidation where you pay the entire amount of your debts, just at lower interest rates - with debt settlement, you are hoping to settle for substantially less than what you actually owed. But as the term "settlement" implies, creditors are certainly not legally required to accept the settlement proposal.
Many consumers are typically advised to stop paying their credit card in order to save up funds that can be used to make a reasonable settlement offer to creditors. In these cases, creditors may threaten to sue consumers who default on the terms of their credit card agreement. Plus, those who default on the terms of their credit card agreement may see their credit scores decline.
However, in spite of the risk of getting sued or the impact to their credit score, many consumers still consider debt settlement a popular alternative to bankruptcy - which can have a more negative and longer lasting effect on personal credit.
Review your debt relief options. Request a free debt relief analysis and savings estimate- at no obligation to you.
Type of Bankruptcy
Like other debt relief options such as debt consolidation or debt settlement, bankruptcy is also a form of debt relief. Depending on a consumer's financial situation, bankruptcy can typically remove their obligation to pay the majority, or even the entire amount, of their debts. In many cases, bankruptcy can typically provide relief from foreclosure, stop a wage garnishment, and help stop the interruption of utilities. If you may be considering bankruptcy, it's important to understand the three main types:
Chapter 7 bankruptcy is most commonly known as a straight bankruptcy or liquidation. Many consumers will typically give up their assets or property that are not covered by exemptions, and see those assets sold to pay off their creditors. Indiana bankruptcy exemptions generally include one's "homestead" or personal home, some types of insurance, and certain kinds of personal property such as clothing, family pictures, furniture, and other household goods.
With a Chapter 11 bankruptcy, debts are typically "reorganized" to allow you to pay back debts with a more workable repayment plan over a certain period of time. Chapter 11 is more commonly associated with individuals or businesses. It also allows an individual or a business to maintain some semblance of control over their company, and keep certain property or assets while a court-appointed trustee is on hand to help oversee business operations.
Under a Chapter 13 bankruptcy, or what many people refer to as "debt adjustment," consumers typically find relief from their creditors and their debts in exchange for filing a formal plan to pay all or a portion of debts.
As noted earlier, bankruptcy is indeed a form of debt relief for many consumers. However, it can often have a more damaging and longer lasting impact on one's credit.
The bottom line is, if you are in need of debt relief, help is available. Regardless of whether you choose debt consolidation (or debt management plan), debt settlement, or even consider bankruptcy, make sure that you have a clear understanding of how much money you can potentially save, when you are likely to realize those savings, and how it may affect your credit score.
Compare your debt relief options today and request a free debt relief analysis and savings estimate.