When your creditors are threatening to seize your wages or seize any of your assets, the idea of filing for bankruptcy can be very appealing. The most popular bankruptcy option is called Chapter 7 Liquidation Bankruptcy. It’s popular because it can eliminate most of your debt, including credit card debt. The alternative is Chapter 13 bankruptcy, which is more of a way to restructure debt because it won’t pay off any debt.
While Chapter 7 bankruptcy will eliminate many of your unsecured debts, some debts cannot be forgiven. These include student loan debt, lim support and child support, and most taxes due. Additionally, bankruptcy will tarnish your ten-year credit record, making it difficult for you to get new credit.
Other Debt Management Methods
There are other ways to manage debt that won’t negatively affect your credit, such as filing for bankruptcy. Two of them obtain debt consolidation loans or apply for credit advice. Many people with serious debt problems choose to use debt consolidation loans to resolve their debts. Here you can get loans from banks, credit unions, or online lenders and pay off all debts simultaneously. This frees you from any creditors who may have harassed you. Also, your monthly payment must be less than the total monthly payment you make.
Another way to manage debt is to go to a credit consultancy. Maybe there is one near you. If not, you can find one by searching the Internet for the term “credit advice.” Local credit consultancies are usually non-profit organizations that provide services for free or at a meager cost. Companies you find online usually charge for their promotions, so stay away from them. Just keep looking, and you will find a nonprofit and offer its services for free.
What can a credit adviser do?
Credit advisors will usually assess your assets and liabilities. He or she will help you create a debt management plan (DMP) that will keep you debt-free for about five years. Your advisor will contact your creditors and negotiate with them to accept your plan. He or she will also work hard to lower your interest so that you can get out of debt faster.
A real way to get out of debt
The problem with debt consolidation and debt management plans is that neither can really get you out of debt. They are just ways to transfer your debts from one group of creditors to another and make it easier for you to pay off your debts.
The sad truth is that there is only one real way to get rid of debt: to pay off your debts. One way is to transfer all high-interest credit card debt to new debt with lower interest rates and continue to pay until the balance is reduced to zero. You can do this by doubling the monthly repayment amount to reduce the balance and not just pay the interest charges. It won’t be exciting, but if you stick to it, you can be relieved of your debt in less than three years, and your credit history won’t be strained.