Personal Debt Consolidation or Bankruptcy- What’s a Better Alternative

Did you know 80.9% of baby boomers, 79.9% of Gen Xers, and 81.5% of millennials do carry a credit card debt? A recent study has revealed this fact. However, if you’ve got debt in America, it’s certainly an invitation to chaos into an orderly life. One gets into a debt trap due to colossal tuition/ college fees, soars in hospital bills, some addiction, or rash spending. 

There can be various other reasons as well for people to fall into a debt trap. Yet, the good news is there’s plenty of help as there are some well-known methods to eliminate debt or become debt-free by declaring yourself bankrupt or getting some sort of personal debt consolidation in Texas


Bankruptcy: A Dramatic Alternative

This is the extreme step borrowers will take to get themselves out of debt. Consumers sometimes choose to walk off from their debts, either by defaulting or by announcing bankruptcy. While, at the other extreme, there are debtors who have the ability to afford to pay off their debts over time from their incomes and savings without any modifications to their debt structure. 

However, adhering to this strategy requires “substantial lifestyle changes.”, to be honest, that all can’t afford it. But not everyone is fortunate to find a long-lost millionaire uncle or debt that can be dissolved by cutting some monthly costs that too just for six months. There are good reasons people choose bankruptcy instead of money management debt management

In 2016, the American Bankruptcy Institute discovered that almost 500,000 people filed for Chapter 7 bankruptcy. 95.5% of those people had their debts discharged, meaning they walked off debt-free. In Chapter 7 bankruptcy, with the assistance of a bankruptcy attorney, you can start afresh by disclosing all your assets to a trustee accumulating for creditors. A Chapter 13 bankruptcy is for those with regular income, lets you keep a few assets and pay off debts over time.

A bankruptcy attorney craters the individual’s credit report of 10 years in both situations since your lenders would be paid nothing or a small amount. Additionally, when a person declares himself bankrupt, it’s tough to get a loan during that time. 

And yes, bankruptcy can also bruise your name and goodwill in the market. Bankruptcy judgments are public records that lenders, or anyone hiring for a job, can readily find. Frankly speaking, the fallout can chase you for a long time to come.

Other Options

Suppose one can manage any of the less extreme alternatives associated with personal debt consolidation. In that case, it is recommended by the Federal Trade Commission to employ a credit counselor accredited by the NFCC (National Foundation for Credit Counseling). An accredited counselor offers a 30-45 minute counseling session to discuss budget creation and examine your monthly income & expenses before recommending a debt solution.

Credit counselors at a debt consolidation company like America Debt Resolutions typically present one of three fixes to the clients to address debt concerns: debt management plan, debt settlement, or debt consolidation. 

Debt Management

This is a definite choice for indebted individuals if they can show sufficient income to afford a monthly payment program. The advantage of the money management debt management method is you’re not acquiring a fresh loan. The credit counselor works with your lenders on your behalf to make it simpler and manageable to repay the debt you already have. Counselors can negotiate a lower interest rate & decrease monthly payments, allowing you to pay off the principal amount quickly. Besides, they can work to waive late fees as well. 

Personal Debt Consolidation 

While it’s not as dire as bankruptcy, debt consolidation is risky as well. Personal debt consolidation programs are designed for debtors who really can’t even afford to pay minimum monthly payments to their creditors. Debt settlement/ consolidation companies ask indebted individuals to stop paying their credit card companies and instead transfer funds to them to put it aside and make a one-time settlement proposal to the creditor.

Though debt settlement companies promise to decrease the debt by 50% or more, still, there’s no guarantee for the same. The process often takes 3-4 years, and by that time, you add in the penalties for delayed or non-payment. Moreover, the fee for the service is imposed, you may end up saving maybe 20%. Yet, you ruin your credit report & credit score for the next long seven years.

Final Touch 

Hope you found this feature to be knowledgeable and helpful. If you relate and feel connected that you’re also in a debt trap, call America Debt Resolutions an A+ Rated debt relief Company. We would love to assist you and help you become debt-free with our multiple debt relief programs.

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