Getting Out of Debt: Bankruptcy and It's Alternatives

Debt overload is a common source of stress among Americans. Job loss, medical bills, poor financial choices and excessive credit card spending are just few of the many reasons that many people are knee-deep in debt right now. If you are one of these people, do not despair. Getting out of debt is possible with these several ways.

Bankruptcy

Many people see bankruptcy as the only solution to debt problems. Bankruptcy is the legal process of declaring your loss of capacity to fulfill financial obligations. While bankruptcy can eliminate your debts (Chapter 7) or make them more manageable to pay (Chapter 13), it should only be considered as a last resort. Choose this option only if you have failed to settle your debts through various other ways such as those that will be mentioned later on. Remember, bankruptcy can hurt your credit rating from 7 to 10 years. It can also cause for repossession of your home and car. Moreover, it can affect your career and personal life in a negative way. Think many times before going for this route.

Debt Settlement

Debt settlement is another way to get out debt legally. In this process, the borrower makes an attempt to negotiate the terms of the debt. He/she may ask for a lower monthly payment or for an extension on the repayment period. He/she may also seek to offer a one-time large payment to the creditor, typically 60 percent of the money owed, as full payment for the debt. Debt settlement is less painful than bankruptcy but it does not come without drawbacks. For one, you need to have a large sum of money to settle your debt. If you are going to borrow again, you might find yourself in a similar hole where you originally were.

Debt Consolidation

Debt consolidation, meanwhile, entails combining several small loans into one large loan that has a lower monthly payment, extended repayment period, and reduced interest rate. The primary aim of debt consolidation is to make the loan easier and more affordable. Just be wary of exorbitant rates that some debt consolidation companies may charge on your loan. Look for a reputable debt consolidation company that will give you competitive rates and efficient service.

Legal Help

Bankruptcy, debt consolidation, and debt settlement are some of the many ways to get out of debt. If you decide to go for bankruptcy, it would be best to hire the services of a bankruptcy lawyer to walk you through the entire process.

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