Take Refuge in Debt Consolidation Not Bankruptcy

By: Jason H

Debt consolidation and bankruptcyare not uncommon these days. But before we are accustomed with the debtconsolidation options in, which we may take refuge, a simple understanding ofthe 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 allowedto “refresh" his financial position. Filing for bankruptcy is as per rules ofthe Federal Law.

Bankruptcy damages credit history and causes financial injuries:

Whenever a borrower files forbankruptcy, no creditor is allowed to demand for the unpaid amount from thedebtor. However, this process looks simple but is governed by stringentpolicies of the Federal Court. It also damages ones credit report and mayinflict long term financial injuries to a person.

Bankruptcy is not a cure for all your financial problems!

It is a proven fact thatbankruptcy has caused more harm than good. The following facts support thesame.

  • 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; itindicates that bankruptcy should be avoided as far as possible.

A still better option is debtconsolidation.

What is Debt consolidation?:

Debt consolidation involvesrepaying 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 tobankruptcy, which is widely availed by people and which gives ample scope toregain ones financial stature at the earliest.

The following options areavailable for solving ones debt problems.

  • Debt settlement: A borrower is permitted to payless than the actual amount. This settlement may be up to 40% to 60% of thetotal outstanding amount. The money can be paid on a monthly basis. One maytake the help of a debt consolidation firm.
  • Self repayment: By doing some amount ofintrospection, it is easy to recognize the areas where expenses can be cut. Workingout a budget and following it is important.
  • Debt consolidation programs: It helps a person in debt to rollup all his debt accounts in to one and finally pay off to one creditor in onego. It also allows a debtor to pay much less than the amount he was supposed toactually pay. Debt consolidation firms help in going about the entire process.
  • Debt consolidation loans: A kind of personal loan inFree Articles, whichthe 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 guideindividuals in relieving you of debt.

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