Any breadwinner or other debtor feels the burden of the debt, the day of payment has come. This is especially true if you owe more than what you earn each month. In addition to paying regular bills, you need to pay your debts on time and correctly. It can seem like a terrible situation where sometimes you just can’t afford it. Fortunately, there are debt relief options to help you get through the financial crisis.
In this article, we’ll take a look at two of these debt relief options: Debt Consolidation, Bankruptcy
debt consolidation
If you are in debt but still have good credit, you may be able to solve your debt consolidation problems. This includes consolidating your debts into one managed account. With this approach, you take out a personal loan or make a balance transfer to lower the interest rate on your debt. At a lower rate, most of your payment goes to the principal rather than the interest rate, saving you money and getting out of debt faster.
It basically helps eliminate higher interest rate debt, pay lower monthly payments, and let you focus on one payment. However, this does not affect your overall balance in any way. What you will do is transfer all of your debts into one account.
How to consolidate your debt
You can consolidate your debt by getting a loan from a bank, credit union, or other source of funds. If you own your home and have some equity, you can most likely get a home loan and use those funds to pay off all of your other debts. They are called secured loans because you are required to protect them by using the equity in your home as collateral.
If you don’t have a home or are short of funds, you can get a personal or unsecured loan. However, with a personal loan, your monthly payment will be higher than if you took out a mortgage. The good thing about these types of loans is that you get rid of all those bad lenders or debt collection agencies that are bothering you. The downside is that you end up paying more interest in the long run anyway than if you just pay off your debt in the short term. And if you are careful not to incur new debt, you can get back to where you started – struggling to make payments.
Bankruptcy
Suppose you don’t have a source of income or a way to pay off your debts to pay off your debts right now or even in two or three years your last option is to file for bankruptcy. This will cause a serious red mark in your credit history, preventing you from getting a new loan for at least two or three years after bankruptcy, and when you are allowed to take out a loan, it usually has a lower rate. very high interest. You will have to pay more for auto insurance and you might have problems renting a house or apartment. Bankruptcy will be kept on your credit reports for 10 years and on your personal file for the rest of your life. It may even be difficult for you to get a job if your potential employer finds out about your bankruptcy in your credit history.
Types of bankruptcies
You can file for Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy is called bankruptcy liquidation because its purpose is to liquidate your assets to pay off your creditors. Assets such as homes, vehicles, or personal effects are generally not included in Chapter 7 bankruptcy proceedings. In most cases, you cannot actually have assets that can be liquidated.
Also known in Chapter 13 bankruptcy as reorganization bankruptcy, the purpose of which is to allow you to reorganize your finances so that you can pay off most of your creditors.
In order to qualify for any of these types of bankruptcy, you will need to prove that you are simply unable to pay off your debts. You may be asked to obtain credit counseling from an agency approved by the US trustee’s office before declaring bankruptcy. The agency will usually provide you with a certificate of completion and you should use it when submitting.
