Bankruptcy is not always the best solution for those in financial trouble. A bankruptcy can stay on your credit for up to ten years. Moreover, if you file Chapter 7 bankruptcy, you could lose some of your property. By choosing a non-bankruptcy debt relief solution, you can work on getting yourself back on track without your credit score taking a complete nosedive and potentially losing property.
Request a Loan Modification
If your primary financial strain is with your mortgage payment, filing bankruptcy may not be the appropriate action to take. Contact your mortgage company to see if they can provide you with a loan modification. A loan modification is a change in the terms of your loan which would allow you to reinstate your loan. Your lender can possibly change your interest rate and loan payments to make your mortgage more affordable. If the lender is unwilling to work with you, you may want to consider bankruptcy to possibly save your home. Be sure to contact a consumer law attorney or a bankruptcy attorney to determine your best legal option.
Debt Consolidation Loan
You may be able to consolidate all of your loans and credit card accounts into one loan. If you have a home or a car loan that can be used as collateral you can typically get a lower interest rate through a consolidation loan. When debtors are overwhelmed with high interest credit cards and loans, debt consolidation may be an option to consider because the consolidation loan will cut down total monthly payments. However, be wary. There is one important aspect to keep in mind when considering loan consolidation. If you convert unsecured debt, like credit cards, into secured debt by using your home or car as collateral to obtain a consolidated loan, you are at jeopardy of losing your property if you default on the consolidation loan. For that reason, negotiating with your credit card companies may be a better option.
Negotiate a Settlement with Creditors
If credit card bills are the reason you are unable to take control of your finances, it may not be in your best interest to file bankruptcy. Credit card debt is not secured debt, it is unsecured. That means you cannot lose your property by simply falling behind on your payments after a couple of months. The only ways a credit card company could turn your credit card debt into secured debt is to sue you and obtain a judgment or if you consolidated your loans with your home or car. Before a credit company goes to the trouble of suing you over a credit card bill, they would prefer to work out an arrangement with the debtor. Contact your creditors to negotiate a settlement on your account. You can attempt to negotiate a percentage of your debt through one lump sum settlement payment or if you believe you'll have an increase in your income soon, work out a payment plan until you can get back on track. Remember it is always best to seek the advice of a consumer law attorney or a bankruptcy attorney to discuss the legal ramifications of all your options.
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