Whether a person is deeply in debt or has only a few bills to pay, he can turn to a number of solutions to make payments more manageable. Some of these methods involve restructuring the way in which the bills are paid off, while others involve reducing the amount of money that the person pays on the bills. All of these methods have their financial advantages and disadvantages.
Debt Restructuring
Sometimes the easiest way to pay off an individual's bills is to ask his creditors whether he can restructure his payment plan. For example, if a person is having difficulty paying off his bills because his monthly payments are too large, he may want to ask a creditor if he can extend the loan for a longer period of time in exchange for making smaller monthly payments on the debt.
Debt Consolidation
A person may find the sheer number of bills he is paying to be too complicated, causing him to be late in payments and to incur additional fees and higher interest rates. This person may consider consolidating all his debts with a new lender who will issue him a new loan to replace his old accounts. Although this may increase the person's overall debt load, some consolidators can decrease the total amount the person pays per month in addition to simplifying the payment process.
Debt Settlement
If a person can find no other way of making payments on a debt, he may wish to negotiate directly with his creditors and see if they will settle for only partial payment. Many finance companies are willing to accept some money in lieu of having the debtor pay nothing or have his debts dismissed in bankruptcy. However, settling a debt for an amount less than he originally agreed to pay back will hurt a debtor's credit rating.
Bankruptcy
A last resort for people who are deeply in debt is the declaration of bankruptcy. In the United States, there are two types of personal bankruptcy, Chapters 7 and 13. Under Chapter 7, a person may be required to give up some personal assets; however, some of his debts may be dismissed entirely. Under Chapter 13, debts are reorganized. Only some people are eligible for bankruptcy filing. The downside is that bankruptcy badly damage a person's credit rating.
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