Choosing Between Filing for Bankruptcy and Combining Debts
If you are thinking about filing for bankruptcy, don't forget that you could use a debt consolidation plan to pay off your bills. Understand that there is a difference between debt consolidation and a consolidation loan. Debt consolidation can often get rid of late payment fees and penalties while giving you a way to pay off the principal loans with a lower monthly payment.
Going through a loan consolidation loan specialist is also less expensive than filing for bankruptcy, and your debts can be wiped out. Most creditors will also stop bothering you for payments. The main difference is that in a Chapter 13 bankruptcy, the creditors have to agree to the court's repayment plan, but they don't have to in a consolidation plan.
With debt consolidation, lenders who are willing to work with you will figure out how much you owe without most late payment and penalty fees. This will bring the total down. Most are willing to do this to make sure they get most of their money back from the debtor without having to go to court.
Most creditors also know that it is easy for a debtor to switch from Chapter 13 bankruptcy to Chapter 7 bankruptcy, and if the debtor's financial obligations become too much, the creditor may get nothing for the money that is owed.
Loan consolidation is a good alternative to bankruptcy. However, a consolidation loan is not always the best choice. First of all, not all creditors will get rid of late fees and penalties, and the length of the loan will probably make the total payoff a lot higher, depending on how much you borrowed and how much interest you paid.
Choosing the type of bankruptcy a person can file for
People who have too much debt may think about filing for bankruptcy, but they worry about what will happen to their credit report and any assets they may have. Most people don't decide to file for bankruptcy on a whim, and deciding if it's even necessary is not something that should be done without help from an expert. There are different ways to file for bankruptcy.
People with serious money problems can usually set up a meeting with a personal bankruptcy lawyer to find out if bankruptcy is an option and, if so, which type of bankruptcy would be best for their situation or most acceptable to the court. Most people who file for Chapter 7 bankruptcy have few assets and a lot of debt. Most people who file for Chapter 7 bankruptcy also have a low income or a fluctuating income.
Chapter 13 bankruptcy lets debtors work out how to pay their bills with the help of the court. Most of the time, these people have missed payments on things like car payments, mortgages, and utility bills. Even though the debtor will be responsible for making all regular payments as agreed upon in the original contract, late payments will be made through a payment plan approved by the court and run by the court.
Chapter 7 bankruptcy also lets the court trustee take assets worth more than the amount that is exempt and sell them. The money from the sale goes to pay off creditors before the court wipes out the rest of the debt. During a Chapter 13 bankruptcy, most of the time there are no assets that need to be sold because late payments and other bills can be put into a payment plan run by the court.
