On behalf of Law Office of Paul Mankin on Thursday, March 9, 2017.
Debt that you cannot pay can be overwhelming, suffocating and completely stifling to your professional and personal relationships. Many people who have debts deal with depression, anxiety and anger issues from the constant stress of trying to pay off creditors. Fortunately, you have options when you decide it is too much to bear and w ant a fresh financial start.
Debt can be the result of a lost job, medical bills from an unexpected illness or injury, or even just simple overspending. You may get offers in the mail from companies that claim they can save you from your debts, but always read between the lines. Getting rid of debt is rarely that simple, and every situation is unique.
What is debt consolidation?
You can combine all your unsecured debts during debt consolidation. This may include medical bills, credit cards, payday loans and personal loans. These payments are combined into one bill so you only pay one creditor every month rather than several. Debt consolidation can help you eliminate mistakes that come from paying bills, such as late payments or incorrect amounts.
Debt consolidation comes in three forms: debt consolidation loans, debt settlement and debt management plans. Debt consolidation is best for those who want to simplify the process of paying off debt, but the debts are not forgiven and must still be paid.
What is bankruptcy?
Bankruptcy is the process by which you repay or eliminate debts through a legal process. Chapter 7 and Chapter 13 bankruptcies are most common for the average consumer. Chapter 7 bankruptcy requires that you liquidate some of your assets to help pay your outstanding debts. Chapter 13 bankruptcy is the process by which you slowly pay back your debts but get to keep your possessions.
How do you know which one to choose?
Debt consolidation may be beneficial for you if you have the income to pay your bills but lack the organization to do so. You may also be required to come up with a large sum up front when you combine your bills. Bankruptcy is an option for those who cannot see the light at the end of the tunnel and fear there is no way out.
As both can affect your credit score and financial future, you should seek the advice of someone who understands the process when you face it. If you are drowning in debts you cannot pay and are considering bankruptcy or debt consolidation, we encourage you to consult an attorney immediately.