Debt consolidation consists of combining all of your unsecured debt payments into one. This may involve taking out a loan, entering into a debt consolidation program or Filing Chapter 13 Bankruptcy. Now, what are unsecured debt payments?
There are two types of debt you can incur; secured and unsecured. Secured debt is backed by an asset or property belonging to a debtor. For example, a mortgage is a secured debt because your house is the collateral tied to your debt. Secured debts don’t carry as high of a risk with lending because there is a physical asset tied to it. If you are unable to make payments, your creditor gets to take your asset/property/collateral to sell and pay the debt.
Unsecured debt, on the other hand, isn’t secured by anything as its name suggests. Other than your agreement to make payments, unsecured debts don’t have anything to hold against or take away from you if you are unable to make payments. Examples of unsecured debts include credit cards, medical bills and student loans.
As you can see, debt solutions are laced with complex terminology making it hard to grasp a firm understanding of your options making the light at the end of the debt tunnel seem distant and nearly impossible to achieve. But don’t give up hope, there is Bankruptcy Lawyer Help in MN.
How Do I know if Debt Consolidation is Right for Me?
Talk with a MN Bankruptcy Lawyer to determine if debt consolidation is right for you. You can obtain a no-obligation, confidential financial assessment from a bankruptcy lawyer to determine if debt consolidation is right for you and which solution you should pursue.
There are also some indicators you can look for in your financial reports and across your life habits in general to determine if debt consolidation is appropriate. If you…
- Can’t afford your monthly payments…
- Can’t work out a plausible payment schedule on your own...
- Can’t completely pay off your debt in 10 years or less…
- Don’t have a steady source of income…
- Would benefit from reduced monthly payments…
- Have unmanageable UNSECURED debt…
…debt consolidation may be right for you. The next step is to determine which debt consolidation solution is right for your financial situation.
How Do I Decide How to Consolidate My Debts?
There are three debt consolidation solutions to choose from, each with its own set of advantages and disadvantages.
Chapter 13 Bankruptcy
A Chapter 13 Bankruptcy is a viable debt consolidation option for those struggling with debt. It allows you to prioritize your debt and make payments based on your income and necessary expenses. You will create a repayment plan that fits your budget and addresses your debt.
Property and assets remain in your possession, creditor harassment stops, you can afford your payments and any unpaid debt at the end of your repayment period is eliminated are some of the advantages of a Chapter 13 Bankruptcy. A chapter 13 is a very effective debt consolidation solution that gives you time to pay back some or all of your debt at a pace that complements your life and budget.
Debt Consolidation Program
A debt consolidation program on the other hand is also capable of eliminating your debt, but without many of the advantages of a chapter 13 . For example, you will be required to pay back all of your debt plus any added fees or interest incurred (a “payment” to the debt consolidation company). Additionally, creditors aren’t obligated to participate in your program and they aren’t required to stop collection or harassment actions. The debt consolidation company you work with has control of your payment amounts, timeline for repayment and additional fees for their participation.
Debt Consolidation Loan
Taking out a loan to combine all of your payments may make it easier to manage your monthly payments. However, if you don’t have sufficient funds to pay off your debts individually, a new loan may not ease the stress. It isn’t advisable to go further into debt by taking out a loan to pay off other debts.
All debt consolidation options will address your debt and combine multiple payments into one. Do your research before choosing a solution. Talk to a MN Bankruptcy Lawyer and Read Testimonial from others that have worked through similar situations.