Getting Credit Card Debt Help

Bankruptcy? Debt Settlement? Consolidation?

Being in over your head with debt can feel suffocating. There are many options available to debtors in need, including bankruptcy, debt settlement and debt consolidation. To determine which option is right for you, you will need to assess all assets, debts and expected future income.

It is also important to look at the impact any debt relief will have on your credit, and whether the option allows you to retain any of your existing assets, including a house if you own one.

Bankruptcy

There are two kinds of bankruptcy typically filed by individual debtors:

• Chapter 7
• Chapter 13

Chapter 7 is the simplest kind of bankruptcy, and it discharges all debts upon completion of proper filing. It may not be available in all situations depending on assets, income, amount of debt and other factors. Chapter 13 is a bit more complicated and includes a repayment plan, through which the debtor pays back a portion of his debts over a specified period of time. Chapter 13 is generally used when an individual has a steady income, but his debts far exceed that income.

Both Chapter 7 and Chapter 13 bankruptcy will negatively impact credit. It is important to get the assistance of a bankruptcy attorney to make sure you file the papers properly, and understand which kind of bankruptcy is right in your situation.

Debt Settlement

Debt settlement is another option available to debtors who cannot pay their bills. You can discuss this option with an attorney or a debt settlement agency. A professional can negotiate with creditors on your behalf to decide on the arrangements of your settlement. Usually, the debtor still pays back a portion of his debts, but the amount may be reduced significantly.

Debt settlement may carry less stigma than does bankruptcy, but it does have negative impact on a debtor's credit. It is also important to watch out for unscrupulous "debt settlement" companies. Only an attorney can legally work out a debt settlement plan.

Debt Consolidation

Through debt consolidation, a debtor's credit, medical and personal loans can accumulated and assumed under one larger loan. This leaves the debtor with one monthly payment instead of multiple payments. States and individual consolidation agencies may differ as to what they allowed to be included under a debt consolidation. It is important to find a reputable debt consolidation agency.

The aim of consolidation is to reduce the total payoff amount by rolling all debts into one loan. This can work if some of your interest rates (especially those of credit cards) end up being higher than the consolidation loan interest rate. Also, if you are delinquent on any of the debts being included in the consolidation, the creditor may waive penalty fees when they are informed that your debt will be paid off. Some consolidation services will negotiate payoff terms with creditors on your behalf.

Debt consolidation is likely to be the least harmful of these three options to your credit, but usually does not actually relieve you of any debt.

Getting Legal and Financial Help

When faced with financial problems that can destroy your credit, it is important to seek professional help as early as possible. Many attorneys offer a free initial consultation and some also offer payment plans. It might seem at first like you can't afford an attorney because you are facing such serious financial difficulties; however, discussing your case with an attorney may help you by providing you invaluable knowledge, peace of mind, and in many cases financial relief.

Talk to a Bankruptcy Lawyer for a free consultation where you can get some legal and financial advice regarding your bankruptcy and debt settlement options.