If you are deep in debt, what are your options?

Debt Settlement

Debt Settlement is also called debt negotiation. Debt settlement is the process by which you negotiate with your creditors to lower the overall debt amount and in return pay the new settled amount as a lump sum. This can save you 40-60% of your total debt. You will save a significant amount of money as the whole point of debt settlement is to lower your overall debt and help get your Debt to Income adjusted.

Debt Counseling

Debt counseling is a service where consumers pay for financial advice on what to do with their current debt situation. The debt counselor helps you put together a budget, gives tips on avoiding certain debt pitfalls, and even helps you develop a long-term debt reduction plan. This is a way for many credit card companies to disguise their collection techniques.

Debt Consolidation

Debt consolidation is when you take out a loan to cover the debts that you owe on your other loans and credit cards and you then pay all those off with this new loan. You then make one monthly payment on one loan at a fixed rate. Done on your own, this may be a good option for people with good enough credit to get a loan at the size they need. However, going through a consolidation firm can also have long-term effects on your credit.

Filing for Bankruptcy

This is a matter of last resort.  If you can find another way out, pursue it because bankruptcy can ruin you.  And attorneys charge exuberant fees. There are two popular types of personal bankruptcy: Chapter 7 (liquidation) and Chapter 13 (reorganization).

Chapter 7 Bankruptcy is when much of your non-exempt property is sold to pay off as much of your debt as possible. This will essentially clear you of your unsecured debts. There are strict rules on who can qualify for Chapter 7.

Chapter 13 Bankruptcy is also called "wage-earner" bankruptcy. It is when you submit a new payoff plan for your current debts to be paid off over the next 3 - 5 years.

Doing Nothing

Many consumers choose this option. By doing nothing you will undoubtedly be drowning in debt and destroy your credit. You will be harassed by debt collectors and possibly sued. Eventually, you will end up choosing one of the above debt relief programs or risk losing everything.

 

 

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