No one wants to be in a situation where they’re struggling to make ends meet. Fortunately, there are debt relief options that you can pursue, so you don’t have to continue to wonder how you’re going to ever get back on top of your bills again.
Two of the more popular debt relief options that individuals pursue include either debt consolidation or bankruptcy. There are pros and cons associated with each. You’ll want to carefully weigh them when deciding which debt relief option may be ideal in your situation.
How does bankruptcy work?
Consumers have two different bankruptcy options to choose from, Chapter 7 or Chapter 13.
Any debtor who chooses Chapter 7 bankruptcy generally has to liquidate their excess assets to repay their creditors. They can generally discharge a large portion if not all of their debts by doing so, however, and the reality is that few debtors in that position actually have “excess” resources to liquidate.
Debtors who pursue Chapter 13 bankruptcy must enter a repayment plan with their creditors and make timely payments to hold on to their assets, but that can help them retain items of value that they don’t want to lose.
What does debt consolidation entail?
Debtors can bring the majority, if not all, of their debts together under one umbrella as part of the debt consolidation process. Many consumers who pursue debt consolidation report locking in lower interest rates by consolidating their debts.
Downsides to these debt relief options
It’s quite possible for individuals who pursue debt consolidation to incur more debt than what they already owe once transaction fees for the loan get tacked on to their balances. Another downside to debt consolidation is that you receive a payoff date for your debts instead of being able to discharge them. You may also need a cosigner to pursue debt consolidation if you want to lock in the most competitive interest rate and payment. Your pursuit of debt consolidation will adversely impact your credit score.
Deciding which debt relief option is right for you isn’t likely to be easy. Some might even describe it as a choice between two unappealing options. Moving forward with one of them will assuredly take some stress off your shoulders.