What Are My Options For Consolidating Debt?
Being in debt is stressful, frightening, and overwhelming. Debt problems can overwhelm every other area of your life. It does not have to be this way. You can get out of debt, recover from a financial crisis, and begin rebuilding your financial well-being in one of several ways. The first step to determine what is the best way to consolidate debt to pay it off the quickest.
A Consolidation Loan
You may see companies on television and social media advertise they can pre-approve you for a consolidation loan that will solve all your problems. Unfortunately, for many people, a consolidation loan may be the beginning of additional problems. Most consolidation companies require security for the loan (i.e. your home). These companies are actually offering you a home equity loan to consolidate your debt.
The main problem with this type of a secured consolidation loan is that you are turning unsecured debt into secured debt. If you do not pay a credit card bill, the company can try collection efforts including a collection lawsuit. However, it cannot usually take your home. On the other hand, if you fail to pay your secured consolidation loan payment, the company can foreclose on your home. Therefore, you should be very careful before using a consolidation loan to get out of debt.
A Consolidation Company
A consolidation company is like a consolidation loan in that it seeks to combine all your unsecured debt into one monthly payment. However, a consolidation company accomplishes this by negotiating with your creditors to lower interest rates, payments, and debt amounts. You pay one monthly payment to the consolidation company, and it divides the amount between your various creditors. However, there are several problems.
First, the consolidation company charges a fee for their services. This fee can be quite expensive. The second problem lies in the ability of the company to negotiate with your creditors. Your creditors do NOT have to accept the terms propose by the consolidation company. Some creditors may refuse to participate in the consolidation plan. Therefore, you may continue to owe several creditors in addition to paying the consolidation company. Third, some consolidation companies are not completely honest with clients. You could pay your payments for many years and still owe thousands of dollars in debt.
Filing a Chapter 13 Bankruptcy Case
A Chapter 13 case is also known as a repayment plan or a consolidation bankruptcy. This chapter of bankruptcy allows you to consolidate your debts into an affordable bankruptcy plan. Your creditors do not have a choice but to participate in your Chapter 13 bankruptcy. A creditor must file a motion for a good cause and receive permission to be excluded from a bankruptcy case.
Chapter 13 bankruptcy cases allow you to accomplish several goals that a debt consolidation may not accomplish:
- Stop foreclosure and repossession to save your home and vehicle
- Allow you to pay a small portion of your unsecured debt rather than 100% of your unsecured debt
- Spread out back child support or alimony debt to get it caught up without going to jail, provided you remain current on future payments
- Spread out tax payments rather than face wage garnishments or asset seizures
- Protect your assets and future income
- Stop creditor harassment and avoid future collection lawsuits
Chapter 13 bankruptcies have many advantages that other debt resolutions simply cannot offer. In addition, you also receive valuation education and resources to allow you to manage your finances better after bankruptcy. The information you learn in a Chapter 13 bankruptcy can help you build a strong financial future for yourself and your family.
Get Help from An Experienced New York City Bankruptcy Lawyer
When you are having debt problems, you need someone on your side who will advise you of your options while putting your best interests first. A debt consolidation company or a loan company may not have your best interest at heart because they want to earn a profit from selling their services.
However, a New York bankruptcy lawyer wants to see you succeed. He wants to help you find a solution to your debt problem that is affordable and beneficial. You can rely on our Manhattan bankruptcy team to give you sound advice that is based on your unique circumstances and needs.
Contact New York bankruptcy attorney William Waldner for a free consultation to discuss how he can help you find a way to get out of debt. Call (212) 244-2882 or use our online contact form. Our office is located in Midtown Manhattan in New York City.