Choosing Between Bankruptcy And Debt Consolidation
When contemplating filing for bankruptcy, do not overlook the option of seeking a debt consolidation plan to pay off outstanding balances on the bills. Understand, there is a difference between debt consolidation and a consolidation loan, where debt consolidation can often remove late payment fees and penalties while providing a way of paying off the principal loans at a lower monthly payment.
Going through a loan consolidation loan specialist is also cheaper than bankruptcy procedures and your debts can be eliminated, while also stopping most creditor from harassing debtors for payments. They big difference is that with a Chapter 13 bankruptcy, the creditors have to accept the court’s repayment plan, where in a consolidation plan a lender can refuse to participate.
With debt consolidation, agreeable lenders will calculate the balance owed without most late payment and penalty charges, bringing the total down. Most are willing to do this to insure they receive the majority of debt from the debtor without having to have the court proceedings.
Most creditors also understand that once in Chapter 13 bankruptcy, it is a short step for the debtor to take into Chapter 7, and if the financial obligations become too much, the creditor may receive nothing for the amount that is owed.
Loan consolidation is a viable option to filing bankruptcy, a consolidation loan is not always the best route to take. First, not all creditors will erase the penalties and late fees and the length of the loan is probably going to make the total payoff considerably higher, depending on the loan amount and the interest rate.
Determining The Types Of Bankruptcy For The Individual
Persons overwhelmed by debt, for many reasons may consider filing for bankruptcy, but worry about their future credit report as well as assets they might have. Deciding to take the step into bankruptcy is not usually made lightly and determining if it is even necessary is not a decision to be made without expert help. There are several types of bankruptcy to choose from.
People with serious financial problems can usually arrange a meeting with a personal bankruptcy lawyer to first determine if bankruptcy is an option and then, which type of bankruptcy would be better for their situation, or most agreeable to the court. A Chapter 7 bankruptcy is typically field by persons with few assets and a lot of debt. Low income or unsteady income levels also typically accompany Chapter 7 bankruptcy filing.
Chapter 13 bankruptcy allows debtors to arrange through the court to pay their bills, and generally the folks will have several past due payments on car payments, mortgages and utility bills. While the debtor will be responsible for all regular payments according to their original agreement, past due payments will be paid through a payment plan approved by and administered by the court.
Chapter 7 bankruptcy also allows the court trustee to seize assets above the exempt amount and arrange for their sale with the proceeds going towards paying off the creditors prior to the remainder of the debt being discharged by the court. During Chapter 13 bankruptcy typically there are no assets to be liquidated as the past due payments and other bills can be placed into the payment plan administered by the court.