Debt Consolidation: Is It Right for You?
We all carry a little debt from time to time (or all the time). But at times, our debt becomes unmanageable. Either we weren’t careful with our finances and those balances creeped up on us until we were struggling to pay them all every month, or we run into an obstacle that throws everything into chaos, such as unexpectedly losing a job, getting a divorce, or becoming seriously ill.
Fortunately, there are options for getting debt relief, depending on your particular circumstances. It’s important for you to learn about all your options, including meeting with a bankruptcy attorney, to determine whether debt consolidation is right for you.
Here are some questions you’ll need to consider:
How Much Do You Owe?
Do you have two credit cards that have about $1,000 on them together? You likely don’t need to pursue debt consolidation. You can continue paying those off as you are. However, if you want to get your costs down as much as possible, you can apply for a balance transfer, which could have a zero percent interest rate for up to a year or more.
Do you have multiple credit cards that have tens of thousands of debt on them? You likely need to look at debt consolidation. You may be able to get a personal or home equity loan, but bankruptcy may be the better option. Talking to a bankruptcy lawyer will help you know how to get the maximum debt relief.
How Much Can You Pay?
Maybe you have only a few thousand dollars in debt. However, maybe you also recently lost your job and aren’t able to find another. Now you’re living on unemployment compensation that doesn’t even cover your basic living expenses or you have no income at all. Debt consolidation may be necessary to keep yourself out of trouble with your creditors that will only make your situation worse.
If you have a good job but you’re just struggling to pay your debts, you may be a good candidate for debt consolidation. Chapter 13 bankruptcy around Mesa can put you on a more affordable repayment plan that will end in just three to five years, and it can discharge some debt at the end of that period.
What is Your Credit Score?
You may not have many options for debt consolidation if your credit score has already started taking the plunge. Traditional debt consolidation options include applying for a credit card balance transfer, taking out a personal loan or home equity loan, or getting a specialty debt consolidation loan. All of these will lower the amount you pay on your debt (by lowering your interest rate and fees), but all of these require you to have a good credit score to be approved.
You can file for bankruptcy no matter what your credit score is. If you qualify, you can file for Chapter 7 bankruptcy in Mesa and get a total liquidation of your unsecured debts, such as credit cards and medical bills. If you can’t qualify for Chapter 7, you can likely apply for Chapter 13 bankruptcy, which will put you on an affordable repayment plan for your debt.
Do You Have Any Assets?
If your credit is terrible, you may still be able to get a loan to consolidate your debt if you have some collateral, such as a home, a car (that you own, not finance), or some other valuable item. However, you put that item at risk if you end up defaulting on the loan.
If you file for bankruptcy in Mesa, you can keep these assets if they do not exceed the exemption limitations. Therefore, if you don’t have much equity built up in your home, for example, you won’t need to worry about the house being sold to satisfy your creditors. You can get debt relief while also keeping those assets.
You have options to help you get your debt under control, but you really need to understand the pros and cons as they apply to your situation to know what options are right for you. Talk to a financial counselor and a bankruptcy attorney to get tailored advice about what solutions will work best for your circumstances and your goals.
My AZ Lawyers is ready to help if you are thinking of filing for bankruptcy in Mesa, Glendale, Tucson, or Phoenix. We will carefully review your finances to help you understand how bankruptcy may be able to help you. We’ll also explain whether you would get the most benefits from filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy. Our goal is to get you the maximum debt relief possible while experiencing the fewest adverse effects. Call us today to learn more!
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