A lot times individuals will reach out to their creditors to try and settle their debt. An example of this hiring a debt settlement firm to negotiate on your behalf. If you can maintain your settlement payment, then you would have saved money over the long run and your debt is now cleared. However, this option is rarely successful and expensive since you’re paying the monthly amount and the fees to your debt settlement firm. Plus, if there’s any forgiven debt, then that is considered taxable income.
Then there’s debt consolidation. Here, you’re trying to combine all your debt into one loan. If you have a great credit score, and you’re able to get a lower interest rate, then this may be a good option for you. But, if your credit score isn’t great, then that option may not be available to you. Also, if you can’t pay off the new loan within a certain time, then you may see your monthly rates go up. Then there are costly fees associated with transferring the old debt into the new loan.
Finally, there are debt management plans that are usually associated with non-profit organizations. Here, a structured repayment program is created with a financial counselor, then you pay a monthly amount to the organization and they in turn pay your creditors. Payments here are usually lower than your monthly payments, and creditors will usually lower rates and fees when you’re enrolled.
I have had clients who have tried these options and they don’t succeed, which is not their fault. This options are just too overwhelming for them. And, in the end, a bankruptcy is the route they take to get control of their life again.
So, if you have any questions about your debt and you’re thinking of filing for bankruptcy, please reach out to Minnesota’s nicest bankruptcy law firm by going to www.lifebacklaw.com. You won’t regret it!