However, since this experience was so terrible for me, and panicked so much. I really thought I may have to file for bankruptcy. Bankruptcy is everyone's last death wish, because granted it takes away all of the debt that you can't pay off. when you really think about what it's doing to your like damn do I really needed to do this.
So I had to sit and think what could be done being a freelance model and the fact that I just got fired from my part time job as a server what was I gonna do. The debt collectors are not going to stop calling me something needs to be done.
After thinking and remembering reading this book that I read called America's Cheapest Family Which talked about this company that helps you get out of debt. Money management International, I admit I was a little worrisome about it. I thought that it couldn't hurt though. What a debt management program is, is a debt consolidation program. Which I believe is after thinking about it is better than filing for bankruptcy.
I decided to write a blog about bankruptcy VS. Debt consolidation, because this experience taught me to just learn and think before you do and to manage your money granted I should preach to the choir but this is still something that's on my mind.
I want to get out debt and this is gonna be my year to do so.
The consequences of not having good credit and being in debt are:
- High interest rates on your credit cards and loans
- Credit and loan applications may not be approved
- Difficulty getting approved for an apartment
- Security deposits on utilities
- You can't get a cell phone contract
- You might get denied for employment
- Higher insurance premiums
- Calls from debt collectors
- Difficulty purchasing a car
Figuring out the best option to get out of debt is probably the best way to go, so after doing some research her's some information that maybe of use to you from
No one ever wants to make the wrong decision make the one by learning your options.
Debt Consolidation
Proponents of debt consolidation often promote this strategy as a simple way to save money and protect your credit rating. When you consolidate your debts, you reorganize multiple debt payments into one payment. You can choose to consolidate debt through a secured loan or an unsecured loan. (To learn more about the types of debt consolidation, visit Nolo’s Debt Consolidation topic area.)
Pros of Debt Consolidation
Here are some of the advantages of using debt consolidation to better manage your debt.
Protect your reputation and credit rating. Unlike bankruptcy, debt consolidation is not a matter of public record. Anyone who looks hard enough will find out about your bankruptcy. Bankruptcy records are viewable through an electronic subscription service called PACER or at any federal bankruptcy courthouse. Although a debt consolidation loan may show up on your credit report, it does not typically lower a credit score like a bankruptcy filing does.
Maintain your access to credit. Unless prohibited by the debt consolidation agreement, you can keep your credit cards. This may be helpful should an emergency arise. However, if you already owe a significant amount of money or are in default, you may not be able to use your credit cards or be approved for additional credit. Also, continued credit card use may defeat the purpose of debt consolidation.
Simplify your debt management. When you consolidate your debt, you no longer have to keep up with multiple payments, at different interest rates, to various creditors. Instead, you make one convenient payment.
Lower interest rate and monthly payment. If you consolidate your debts, you may be able to obtain a more manageable monthly payment, with a lower interest rate. As a result, you will have more cash available each month to meet your high priority needs.
Cons of Debt Consolidation
Although there are some advantages to debt consolidation, it’s not an option to take lightly. You could end up costing you money in hidden fees and tax liability. And more important – you could lose property.
You could lose your property. If you use property such as your home or vehicle as collateral for the debt consolidation loan, you could lose that property if you default on the loan payments.
Also, if a lender gives you a debt consolidation loan, there may be a cross-collateralization clause that allows that lender to take other property it has financed if you default on the debt consolidation loan. For example, let’s say that you have a car loan through your credit union and then the credit union gives you a debt consolidation loan. Under the cross-collateralization clause, if you default on the debt consolidation loan, the credit union could repossess your car – even if the car payments are current. (Learn more about cross-collateralization.)
Beware of hidden costs. Although lower interest rates and monthly payments are appealing, a debt consolidation loan could end up costing you more money. Often, debt consolidation loans help you achieve a lower monthly payment and interest rate in exchange for extending the repayment period. If you stay in debt longer, you may end up paying more over the long term.
Negative tax consequences. Depending on your financial condition, any money you save from debt relief services such as debt consolidation may be considered income by the IRS, which means you pay taxes on it. Credit card companies and other creditors may report settled debt to the IRS, which the IRS considers income.
Bankruptcy
Through bankruptcy, you may eliminate or restructure certain debts while under the protection of the federal bankruptcy court. The most common types of bankruptcy cases that individuals and small businesses file are Chapter 7 and Chapter 13. A Chapter 7 bankruptcy case allows you to eliminate many types of debt. A Chapter 13 bankruptcy case allows you to restructure your debts through a supervised repayment plan. (To learn more about the differences between these types of bankruptcy, see our Bankruptcy topic area.)
Pros of Filing for Bankruptcy
Here are some of the advantages of using bankruptcy to deal with your debt problem.
Protection from creditors. When you file for bankruptcy, you get the protection of the automatic stay. The automatic stay prohibits most creditors and collectors from engaging in collection activity against you. The automatic stay has the power to stop harassing phone calls, lawsuits, garnishments, repossessions, and foreclosures. (To learn more about the automatic stay, see our Bankruptcy’s Automatic Stay topic area.)
You get a fresh start. Through a Chapter 7 bankruptcy case, you may eliminate most unsecured debt such as medical bills and credit cards. You may also surrender real estate or vehicles that you have financed if you don’t want to keep those debts. (To learn more about which debts can be discharged, read Which Debts Are Discharged in Chapter 7 Bankruptcy?)
Through a Chapter 13 bankruptcy case, you repay a portion of your unsecured debts through the court-supervised repayment plan. And depending on your situation, you may be able to pay for your vehicle at a reduced rate. You can also save your home from foreclosure and vehicle from repossession.
Cons of Filing for Bankruptcy
Bankruptcy has its drawbacks as well. Here are a few:
Negative impact on credit rating. A bankruptcy filing lowers your credit score. Depending on the type of bankruptcy case you file, the filing may stay on your credit report for seven to ten years. However, if you already owe a significant amount of money, you may already have a poor credit rating, especially if you are in default. Once you receive your bankruptcy discharge, you will have a clean slate. Some creditors even actively solicit recent bankruptcy debtors because they know that there are time limits on filing for bankruptcy again.
You may have to make some sacrifices. You may have to make some sacrifices in order to qualify for bankruptcy, such as surrendering nonessential or luxury possessions. Also, if you file a Chapter 13 bankruptcy case, you will be on a strict budget for three to five years and you can’t obtain credit during that time without the court’s permission.
Privacy and reputation. Your employer may learn about your bankruptcy case if you permit it to pull your credit report, or if your Chapter 13 plan payments are made through payroll deductions. (To learn whether your employer can fire you because of your bankruptcy, see Post-Bankruptcy Discrimination: Is It Legal?)
Bankruptcy records are available at the federal bankruptcy courthouse where they are filed and through the federal court system’s subscription-only PACER service. However, as a practical matter, your family and friends are unlikely to find out you’ve filed bankruptcy unless you owe them money.
