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Alternatives to Bankruptcy: Information on options

Bankruptcy Alternatives: Information on Debt Settlement, Debt Consolidation, and Credit Counseling

Man thinking about bankruptcy options
Thinking about bankruptcy

Let's discuss three bankruptcy alternatives: debt settlement, debt consolidation, and credit counseling. Bankruptcy is a lawful way for people and companies to have their debts pardoned or reorganized. Although bankruptcy can offer help to those drowning in debt, it can also have adverse effects like adversely affecting your credit report and making it tough to acquire credit in the future. If you are considering bankruptcy, you should explore other possibilities that could be available to you.

Debt Settlement

Debt settlement is a process where you negotiate with your creditors to pay a one-time sum that is lower than the total amount owed. This could be a practical approach if you have a huge amount of debt and can't make your regular payments. However, it is essential to be aware that debt settlement can also cause bad outcomes, such as causing damage to your credit score and being subject to taxes on the amount of debt that is forgiven.

Debt Consolidation

Debt consolidation is a process in which you take out a new loan to pay off your existing debts. The goal of debt consolidation is to simplify your finances by combining all of your debts into one monthly payment. This can be a good option if you have a high interest rate on your existing debts and can qualify for a lower interest rate on a new loan. However, it is important to be aware that debt consolidation does not necessarily reduce the amount you owe and may not be a good option if you have a poor credit score or are unable to qualify for a new loan.

Credit Counseling

Credit counseling is a process in which you work with a trained professional to develop a plan to manage your debts. This can include creating a budget, negotiating with creditors to reduce your interest rates or monthly payments, and developing a plan to pay off your debts over time. Credit counseling can be a good option for those who are struggling to make their monthly payments and need help managing their debts. However, it is important to be aware that credit counseling may not be able to help you reduce the amount you owe or improve your credit score.

Your attorney can help

Often is comes down to the likelihood of success, the amount of debt and the consideration of your assets at risk. An attorney can help you review you situation so that you can make an informed choice.

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