If you are struggling with high-interest credit card debts and unsecured debts, and you are contemplating bankruptcy, you are not alone. These days, many families and individuals in Arizona and nationwide are also struggling with credit card debts and may be considering bankruptcy to get debt relief and to give them a new lease on life. However, many consumers in similar situations have resolved their debt crisis by exploring other types of debt relief, such as debt consolidation and debt settlement.
Debt consolidation (or a debt management plan) typically involves "consolidating," or combining your multiple, high-interest credit card debt as well as other types of unsecured debts into one, more manageable payment plan made to a credit counseling agency. Another proven option for many consumers is debt settlement, where you are hoping to settle with creditors for a reduced amount of your original debt. For many consumers, both debt consolidation and debt settlement have become popular alternatives to bankruptcy, which can affect one's credit in more damaging and longer lasting ways.
If you are interested in finding out how to get debt relief without bankruptcy, answer a few, simple questions to get a free debt relief analysis and savings estimate today. Start now.
How Does Bankruptcy Work?
Depending on a consumer's financial situation, bankruptcy can typically remove their obligation to pay the majority, or even the entire amount, of their debts. In some cases, bankruptcy may provide relief from foreclosure, stop a wage garnishment, and may even help stop the interruption of utilities.
Chapter 7 bankruptcy is commonly known as a straight bankruptcy or liquidation. Many consumers will typically give up their assets or property that are not covered by exemptions, and see those assets sold to pay off their creditors. One of the most commonly asked questions regarding bankruptcy in Arizona is whether or not the following financial obligations are discharged - these typically include child support, alimony, divorce payments, or student loans. These debts are generally not covered, but like all states, Arizona has its own set of bankruptcy exemptions that you need to be aware of. Exemptions determine what property you may keep in a Chapter 7 bankruptcy, and how much you need to pay creditors in a Chapter 13 bankruptcy.
With a Chapter 11 bankruptcy, debts are typically "reorganized" to allow you to pay back debts with a more workable repayment plan over a certain period of time. Under a Chapter 13 bankruptcy, or what many people refer to as "debt adjustment," consumers typically find relief from their creditors and their debts in exchange for filing a formal plan to pay all or a portion of debts.
As noted earlier, bankruptcy is a form of debt relief for many consumers. However, it is often a last resort option, and does have a more devastating and longer lasting impact on credit scores. That's why it makes sense to explore the variety of debt relief options available to you - such as debt consolidation and debt settlement-so that you can be confident that you are making a wise decision about your financial future.
Benefits of Exploring Debt Relief Options
As noted earlier, there are other debt relief options - besides filing for bankruptcy - that are available to consumers like you who are in financial distress. These debt relief alternatives also allow many consumers to manage and reduce their debts in a way that is less damaging to their personal credit.
One alternative is debt consolidation, or a debt management plan (DMP). The goal of debt consolidation is to provide a single, more manageable, and more structured payment plan made to a credit counseling agency. When you enroll in a debt consolidation program, credit counselors will review your financial situation, including the amount of your credit card debts and your ability to pay off those debts. They will normally come up with a strategy that would allow you to, hopefully, pay off your debts sooner than if you continued to only make the minimum monthly payments at higher interest rates.
Working on your behalf, your credit counselor will typically submit proposals to your creditors requesting reduced interest rates, or the waiving of any late fees and penalties. Creditors that agree to extend those proposals are then placed into the debt management plan. With a new, more affordable and more structured repayment plan in place, you can, ideally, direct more of your payment towards paying off the principal balance on your debts versus just the interest.
Another popular debt relief option for many consumers is debt settlement. Unlike debt consolidation where you pay the entire amount of your debts, just at lower interest rates-with debt settlement, you are hoping to settle for substantially less than what you actually owe. But as the term "settlement" implies, creditors are certainly not legally required to accept the settlement proposal. Many consumers are typically advised to stop paying their credit cards in order to save up funds that can be used to make a reasonable settlement offer to creditors. In these cases, creditors may threaten to sue consumers who default on the terms of their credit card agreement. Plus, those who default on the terms of their credit card agreement may see their credit scores decline.
However, despite the risks associated with debt settlement, the impact to your personal credit is not nearly as devastating as filing for bankruptcy. The bottom line is, it is a smart move to explore all your debt relief options - be it debt consolidation or debt settlement - perform your due diligence when choosing a company to work with. Explore your debt relief options now by requesting a free debt relief analysis and savings estimate - at no cost to you.