Debt is a great concern, not only to Americans, but to those around the world. With the global recession, an ever increasing number of people around the world are taking on larger amounts of debt. Although we all know too much debt is a bad thing, sometimes debt becomes inevitable, and the mountains that must be climbed seem insurmountable. If you feel beaten down with debt, there are a couple different paths you can take.
What is Debt Consolidation?
Debt consolidation is a process where a company lends you the money needed to pay off all of your debt. Rather than owing ten different companies money, you now have just one lender. By doing this, the debt consolidation company can collect the interest that would have gone to your previous lenders. Since they now own all your debt, they can set the interest rates that they want in order to make money. If the majority of your debt is in credit cards or some other extremely high interest loan, you may be wise to choose debt consolidation. As any Chicago bankruptcy lawyer could tell you, debt consolidation is typically the preferred alternative to bankruptcy. It has a much less negative impact on your credit score and lending history, making it easier to recover from your debt in the future.
What is Bankruptcy?
There are several different types of bankruptcy, but Chapter 7 bankruptcy is the most common. With this type of bankruptcy, the judge will take a look at all of your debts and begin to eliminate the majority of your debts. Certain types of debt, such as child support, taxes, and student loans will still need to be paid. The bankruptcy proceedings will take the majority of your savings and possessions and sell them in an attempt to pay off your creditors. A good Chicago bankruptcy attorney will be able to tell you which of your debts are likely to be expunged. Bankruptcy should only be considered a last resort as it will stay on your credit record for at least ten years, and will make it difficult to open new credit cards or take out new loans for a car or house. Additionally, you must be very careful to stay out of debt once you file bankruptcy. You may only file for bankruptcy once every six years, and multiple bankruptcies on your record will make it impossible to take out nearly every type of loan.
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