Debt consolidation may serve as an alternative to
bankruptcy. The write up below furnishes certain details about bankruptcy and
debt consolidation and shows how they differ from each other.
Debt consolidation and bankruptcy
are not uncommon these days. But before we are accustomed with the debt
consolidation options in, which we may take refuge, a simple understanding of
the terms is necessary.
What is bankruptcy?
Bankruptcy is a legal procedure,
wherein a debtor who is unable to pay back the money he had borrowed is allowed
to “refresh” his financial position. Filing for bankruptcy is as per rules of
the Federal Law.
Bankruptcy damages credit history and causes financial injuries:
Whenever a borrower files for
bankruptcy, no creditor is allowed to demand for the unpaid amount from the
debtor. However, this process looks simple but is governed by stringent
policies of the Federal Court. It also damages ones credit report and may
inflict long term financial injuries to a person.
Bankruptcy is not a cure for all your financial problems!
It is a proven fact that
bankruptcy has caused more harm than good. The following facts support the
same.
Borrowers filing for bankruptcy lose their assets in
most of the cases unless the property is under the “exempt” category.
Bankruptcy is of no use for the debt accounts, which
arise after an individual has filed for bankruptcy.
Bankruptcy cannot protect the co-applicants (or
co-signers) in the debt accounts. If there are two or more than two
applicants for the same debt account, even if bankruptcy relieves the main
applicant, the others will have to pay full or part of the unpaid debt
amount.
Bankruptcy cannot help in certain types of debts (as
per Bankruptcy Law). These may include court restitution orders, certain
types of taxes, alimony, child support and student loans.
Filing for bankruptcy means the financial control is
being transferred to the magistrate handling the case and the fate of the
debtor lies in his hands.
Bankruptcy can also affect ones employment and career
prospects. There are many employers who decline job applications if they
find the applicant is bankrupt.
Bankruptcy affects ones credit history and credit
score. If a credit report is damaged, it remains there for a period of
seven (7) years. It decreases the possibility of getting loans in the
future.
From the social point of view, ones self esteem get
badly affected.
From the above section; it
indicates that bankruptcy should be avoided as far as possible.
A still better option is debt
consolidation.
What is Debt consolidation?:
Debt consolidation involves
repaying the debt amount in a more organized, planned and systematic manner.
There are many options available under debt consolidation programs.
Let us see the alternatives to
bankruptcy, which is widely availed by people and which gives ample scope to
regain ones financial stature at the earliest.
The following options are
available for solving ones debt problems.
Debt
settlement: A borrower is permitted to pay
less than the actual amount. This settlement may be up to 40% to 60% of the
total outstanding amount. The money can be paid on a monthly basis. One may
take the help of a debt consolidation firm.
Self
repayment: By doing some amount of
introspection, it is easy to recognize the areas where expenses can be cut. Working
out a budget and following it is important.
Debt
consolidation programs: It helps a person in debt to roll
up all his debt accounts in to one and finally pay off to one creditor in one
go. It also allows a debtor to pay much less than the amount he was supposed to
actually pay. Debt consolidation firms help in going about the entire process.
Debt
consolidation loans: A kind of personal loan in, which
the person in debt can pay off all his debts in a single payment.
What can debt consolidation do for you?
Debt consolidation can help you avoid bankruptcy.
It can stop all harassing and abusive calls from the
creditors.
It can repair your credit score
Make you debt free by making a single payment to the
creditor.
Help you pay less.
Enjoy lower rates of interest
Help in waiving off fees for defaulted payments
Finally give you peace of mind.
Make you debt free
Debt consolidation agencies guide
individuals in relieving you of debt.
Jason Holmes is an author of repute. His works include
articles like debt consolidation, debt settlement, debt calculator, credit
counseling, debt free, Fingerhut credit and various other topics. He also
writes for the Debt Consolidation Care Community.
