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Sunday, March 28, 2010

Chapter 13 Bankruptcy Vs Credit Card Debt Consolidation

The economic times are trying, with may of us being further in debt than we can conceivably pay on our current salary. There are multiple ways available to us to get out of debt and find some relief from the many calls and demands for payment that we receive.

Depending on the level of debt, the level of income, and what you can conceivably afford to pay, you must select the best option for you based on the best method for your situation.

Among the many other options that you might have are these two, each of which has merits and drawbacks.

* Chapter 13 Bankruptcy: Very much a last resort, the Chapter 13 permits you to get out of debt completely and leave all of your bills behind, beginning with a completely clean slate.

The Up Side Chapter 13 will permit you to have no debts left when you are finished and you will begin owing nothing at all.

The down side: when you are granted bankruptcy the filing is immediately recorded on your credit rating. Depending on where you like, that reversal of your debt can stay on your credit rating for 7-10 years, preventing you from getting a job, from taking a home loan, an auto loan, or even getting a home or apartment to rent. In addition, your property may be sold in some cases to help satisfy your debts. While your home is usually excluded, other personal property may be subject to being taken by the courts.

* Credit Card Consolidation: when you use this option you are required to pay at least part of your debt. A company negotiates for you to gain you a lower pay off rate that may be between 40 and 70 percent of your current debt. The interest rates are also negotiated. You are then given a loan to pay them all off and have just one payment to pay to settle the debt.

The Up Side-Your credit card debt is forgiven to a certain extent, leaving you with less to pay. You can pay off your debts in a far faster time span.

The Down Side-You will take some hits on your credit. They will last possibly several months to a year.

When faced with difficult choices to get your debts under control, you are probably best served to use other solutions first and use bankruptcy as a very last resort when or if you are unable to find any other way to relieve your debt and get your financial situation back on track.

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