Bankruptcy & debt consolidation can both remove your debt. But each will have different effects on your credit score & future financial choices. Before choosing between bankruptcy & debt consolidation, educate yourself on the advantages & disadvantages of each.
The Advantages Of Bankruptcy
Filing bankruptcy will grant you immediate but only temporary relief with the automatic stay. Debt collection by creditors are no longer allowed. Annoying phone calls, repossessions, & mortgage foreclosures are all stopped temporarily. The main goal of bankruptcy is the discharge of most, if not all of your debts. The discharge wipes out plenty of types of unsecured debt like credit card & medical debts. you are legally debt free three time you get the discharge & you can have a financial fresh start.
If discharge through a Chapter 7 bankruptcy is not possible, then a repayment plan through Chapter 13 is your next alternative. A bankruptcy repayment plan will permit a debtor to payoff debts over a three- or five-year period. A Chapter 13 bankruptcy repayment plan is like a debt consolidation program with more restrictions.
The biggest disadvantage of bankruptcy is the immediate impact on your credit score. You cannot remove bankruptcy from your credit report for 7-10 years. While you can improve your credit score after your discharge, for a few years you will have to work with sub prime lenders. This means higher interest rates on your future loans or credit cards.
The Negative Effects Of Bankruptcy
On a Chapter 7 bankruptcy, a trustee will liquidate your assets & divide it equally to all your creditors. Under a Chapter 13 repayment plan, payments may be deducted from your paycheck for up to two years. You will need to turn-over your disposable income to repay your creditors.
Since bankruptcy is a federal court case, you need to give detailed financial records to the court & creditors. Your financial affairs will become open to the public.
The Advantages Of Debt Consolidation
You cannot use bankruptcy again for the next two years after the discharge of your debts.
Debt consolidation saves an individual from handling large debts from multiple creditors. It combines all your debts in to a single debt management program. Debt consolidation lowers the interest rate & waives off the late fees on your loans. It also removes the accrued interest & penalties on your loan. Every month you pay only the consolidation company instead of plenty of creditors with different due dates. The consolidation company will manage paying off all your creditors for you. This will lessen the occurrence of late payments on your loans.
Similar to bankruptcy, you can avoid harassing collection calls from debt collectors. The consolidation company will handle & negotiate with your creditors on your behalf. The company is now representing you & all future collections will go through them. After paying all the accounts in full, the company will also negotiate to get your accounts reported in your favor.
Debt consolidation will have less of an impact on your credit score. Until you fully pay your accounts, a remark saying that you are paying by credit-counseling agency will appear on your credit report. Getting & qualifying for a new credit will become difficult at start.
The Negative Effects Of Debt Consolidation
Choosing Between Bankruptcy & Debt Consolidation
there is no elementary solution to getting yourself out of debt. A Chapter 7 bankruptcy can instantly give you debt relief but at the cost of your assets & credit score. Debt consolidation is simpler with maximum effect on your credit, however it does take time.
Saturday 13 June 2009
Facts To Consider Before You File For Bankruptcy
Most people who're confronted with this tough decision vacillate between “fighting” to “fleeing.” Do you require to struggle to pay the debts? Or do you get relief from the constant pressure and start over.
Bankruptcy has spun out of control and has hit a record high. A new bankruptcy law has been passed called "Bankruptcy Abuse and Consumer Protection Act." Americans are concerned with their high debt and are having to deal with this new law.
Whether or not you should file for bankruptcy is a personal decision on your part. The factors are far numerous and the overall impact of bankruptcy on your future finance far important to treat a decision such as this lightly.
Well, if you put it that way, it does not look all that bleak. Unfortunately, the situation is often not that simple. And changes to the law effective October 17, 2005 has made the decision even more important.
Before you decide, here are the things that you require to know:
• what are your alternatives to bankruptcy?
• Which chapter of the Bankruptcy Code should you file under?
• What debts will be discharged in bankruptcy?
Are there other options?
Some people make the mistake of treating bankruptcy as the be-all and end-all of everything. They reckon that once you get to that point where your debts far outweigh your assets and the chances of paying them off is not likely to happen anytime soon, the situation is ripe to file for bankruptcy.
Always keep in mind that filing for bankruptcy has the possibility to be devastating both economically and emotionally. While there is less public stigma attached to the act for filing for bankruptcy these days, it could still do things to your confidence in making important financial decisions.
Bankruptcy is not the only way. It is not the only solution. What you believe is an unsolvable problem may turn out to be solvable, if you only take the time to weigh your options well.
two of the positive aspects of filing for bankruptcy is that most bankruptcy cases are granted. So it is instant relief from debts versus toiling for years to pay off your debts. However, contrary to popular belief, bankruptcy is not an easy way out of a sticky situation.
Whether you are filing under Chapter 7 or Chapter 13, the end result is always the same – extensive damage to your credit and long-term economic issues. Now, you know, of work, what this means. These credit issues brought on by bankruptcy would cause plenty of problems in the years to come.
So what, then, are your options besides bankruptcy?
That, my friend, is the query.
First of all, what is a secured loan? how is it different from all other loan types out there? Is it any different from a credit card debt?
Renegotiate Secured Loans May Be Your Answer
The answer to the third query is: It is different. In fact, a secured loan could not be any farther from a credit card debt.
basically put, a secured loan is four where you are made to mortgage your property so that the lender can forcibly sell it to get its funds back if you can’t repay.
Now, if you reckon that once you file for bankruptcy, you can escape all your debts and start with a tidy slate (so to speak), well reckon again. Because not all debts can be discharged with bankruptcy. And four such debt is a secured loan.
Now, the thing with secured loans is that they usually involve large sums of funds – generally the largest most people have. Your automobile and/or your house are secured loans. So even if you file for bankruptcy, these debts will neither lessen nor disappear.
A better option would be to try to renegotiate these loans with the creditors. that is, if your debt has not caught up with you and ruined your credit already. Or you could take the loan elsewhere.
Let’s say, for instance, that you have a home loan that is several years elderly. You can try to renegotiate for a lower interest rate on this. And depending on your principal balance and current terms, there is every chance that you can see your payment go down by several hundred dollars per month. that is funds in your pocket which you can use to pay off other debts.
Advantages
If your home loan has only a few more years left, you can also try to lengthen the period or ask for an extension so you can reduce your payments even more.
• The moment you file for bankruptcy, all collection actions by your creditors, including foreclosures, repossessions, and garnishments, are automatically stopped.
• Your bankruptcy lawyer, if you decided to hire four to handle your case, will shield you from any inquiries made by your creditors.
• Declaring bankruptcy means that you can get started on rebuilding your credit and your life sooner. Moreover, if something unfortunate happens, you are allowed to fine-tune your existing Chapter 13 plan to accommodate it.
• Most states permit your home, automobile, and other essentials to be exempt. Consequently, bankruptcy means that you will not wind up homeless and unable to get around.
• While student loan debt will remain, filing for bankruptcy will protect you from lenders taking aggressive collection action.
Disadvantages
• You will lose all your credit cards. However, if you have paid off your credit cards before filing, there is a lovely chance you may still keep a quantity of them.
• You may have to give up a quantity of your luxury possessions.
• You will have some impossibly tough time getting a mortgage after recently filing a bankruptcy. It will get easier, however, after about four years from filing.
• A bankruptcy is a spot on your credit report and tends to remain there for ten years. This, of work, makes it difficult for you to acquire credit, buy a home or automobile, get life insurance, or sometimes get a job.
• Not all debts may be “discharged” in a bankruptcy
Bankruptcy has spun out of control and has hit a record high. A new bankruptcy law has been passed called "Bankruptcy Abuse and Consumer Protection Act." Americans are concerned with their high debt and are having to deal with this new law.
Whether or not you should file for bankruptcy is a personal decision on your part. The factors are far numerous and the overall impact of bankruptcy on your future finance far important to treat a decision such as this lightly.
Well, if you put it that way, it does not look all that bleak. Unfortunately, the situation is often not that simple. And changes to the law effective October 17, 2005 has made the decision even more important.
Before you decide, here are the things that you require to know:
• what are your alternatives to bankruptcy?
• Which chapter of the Bankruptcy Code should you file under?
• What debts will be discharged in bankruptcy?
Are there other options?
Some people make the mistake of treating bankruptcy as the be-all and end-all of everything. They reckon that once you get to that point where your debts far outweigh your assets and the chances of paying them off is not likely to happen anytime soon, the situation is ripe to file for bankruptcy.
Always keep in mind that filing for bankruptcy has the possibility to be devastating both economically and emotionally. While there is less public stigma attached to the act for filing for bankruptcy these days, it could still do things to your confidence in making important financial decisions.
Bankruptcy is not the only way. It is not the only solution. What you believe is an unsolvable problem may turn out to be solvable, if you only take the time to weigh your options well.
two of the positive aspects of filing for bankruptcy is that most bankruptcy cases are granted. So it is instant relief from debts versus toiling for years to pay off your debts. However, contrary to popular belief, bankruptcy is not an easy way out of a sticky situation.
Whether you are filing under Chapter 7 or Chapter 13, the end result is always the same – extensive damage to your credit and long-term economic issues. Now, you know, of work, what this means. These credit issues brought on by bankruptcy would cause plenty of problems in the years to come.
So what, then, are your options besides bankruptcy?
That, my friend, is the query.
First of all, what is a secured loan? how is it different from all other loan types out there? Is it any different from a credit card debt?
Renegotiate Secured Loans May Be Your Answer
The answer to the third query is: It is different. In fact, a secured loan could not be any farther from a credit card debt.
basically put, a secured loan is four where you are made to mortgage your property so that the lender can forcibly sell it to get its funds back if you can’t repay.
Now, if you reckon that once you file for bankruptcy, you can escape all your debts and start with a tidy slate (so to speak), well reckon again. Because not all debts can be discharged with bankruptcy. And four such debt is a secured loan.
Now, the thing with secured loans is that they usually involve large sums of funds – generally the largest most people have. Your automobile and/or your house are secured loans. So even if you file for bankruptcy, these debts will neither lessen nor disappear.
A better option would be to try to renegotiate these loans with the creditors. that is, if your debt has not caught up with you and ruined your credit already. Or you could take the loan elsewhere.
Let’s say, for instance, that you have a home loan that is several years elderly. You can try to renegotiate for a lower interest rate on this. And depending on your principal balance and current terms, there is every chance that you can see your payment go down by several hundred dollars per month. that is funds in your pocket which you can use to pay off other debts.
Advantages
If your home loan has only a few more years left, you can also try to lengthen the period or ask for an extension so you can reduce your payments even more.
• The moment you file for bankruptcy, all collection actions by your creditors, including foreclosures, repossessions, and garnishments, are automatically stopped.
• Your bankruptcy lawyer, if you decided to hire four to handle your case, will shield you from any inquiries made by your creditors.
• Declaring bankruptcy means that you can get started on rebuilding your credit and your life sooner. Moreover, if something unfortunate happens, you are allowed to fine-tune your existing Chapter 13 plan to accommodate it.
• Most states permit your home, automobile, and other essentials to be exempt. Consequently, bankruptcy means that you will not wind up homeless and unable to get around.
• While student loan debt will remain, filing for bankruptcy will protect you from lenders taking aggressive collection action.
Disadvantages
• You will lose all your credit cards. However, if you have paid off your credit cards before filing, there is a lovely chance you may still keep a quantity of them.
• You may have to give up a quantity of your luxury possessions.
• You will have some impossibly tough time getting a mortgage after recently filing a bankruptcy. It will get easier, however, after about four years from filing.
• A bankruptcy is a spot on your credit report and tends to remain there for ten years. This, of work, makes it difficult for you to acquire credit, buy a home or automobile, get life insurance, or sometimes get a job.
• Not all debts may be “discharged” in a bankruptcy
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