Which is best—debt consolidation or chapter 13?
Question by Jay: Which is best—debt consolidation or chapter 13?
I have about 13K in unsecured debt. I need either debt consolidation or chapter 13. Which is best and how do you recommend? Thanks
Best answer:
Answer by Credit Chef
First off I must tell you that I am not an attorney. I do however have intimate knowledge of the Bankruptcy Process.
With the recent changes to the Bankruptcy laws, it is more and more difficult to have unsecured credit card debt charged off. (Thank all of the banking and credit card lobbyists for that little gem)
The topic of whether or not to file a Ch 13 versus a Ch7 is a subject all to itself and there are some excellent books on the subject.
Having said all of that, here is a suggestion for you:
If your 13K is from major credit issuing companies (banks, retail stores, etc) you should call each of them and speak to a manager/supervisor in the collections or recovery department.
With the economy in such bad shape right now, you are not alone on being behind on payments to your creditors. MANY of them realize that people simply can not pay and are willing to accept 10% to 30% of the debt..
While bankruptcy is a serious consideration and should be taken only as a last resort, it is also not the “gloom and doom” end of the world as so many portray. Besides the fact that your credit scores will suffer greatly whether or not you file a Chap 7 or Chap 13, they both impact you negatively.
My humble suggestion is to call the creditors and find out the person or department you need to speak to with regards to working out an “Accords and Satifaction” agreement.
This is basically trying to negotiate paying a lesser percentage of the debt than is outstanding.
Add your own answer in the comments!
Tagged with: bestdebt • Chapter • Consolidation
Filed under: Debt Consolidation Loans Unsecured
Like this post? Subscribe to my RSS feed and get loads more!
Real simple…Keep paying as agreed the minimum amount you owe and quit sweating it. Neither debt consolidation or bankruptcy over such a small amount is wise. You can try to contact your creditors to negotiate a smaller APR however if youve been late on any payments fat chance of them working with you. Keep doing the right thing and karma will see you through.
I think debt consolidation would be the best option as compared to bankruptcy.
Coz if the individual is listed as having filed for bankruptcy, it results in a 160-220 point deduction on their credit score. If a delinquent account is added to the individuals credit file, 70-120 points are subtracted and it stays on your credit report for more than 10 years and later on you would face problem building your credit and in getting loan or purchasing or leasing…
Debt consolidation can help you consolidating all your debts into one. They would negotiate with your creditors for lowering your interest rate or debts and would give you an affordable debt management plan wherein you have to pay only one monthly installment which these companies distribute it among your creditors.
Here is a debt consolidation company named http://ezconsolidation.com for your reference.
Depends on your situation. Try careonecredit.com. Put all the info in and they will tell you how much you will pay monthly. If you can afford it, then great.
If you can’t the bankruptcy is for you. Yes it is harder to file. Google “means test”, do the free one, and it will give you an idea based on how much you make, if bankrupcty is an option for you.
I have seen many people file for bankrupcty and 2 years later get a house with a good loan. Take it seriously as a fresh start. It was meant to be a good thing!
Confused;
Filing for bankruptcy over $ 13,000 would be, in my opinion, an unwise move.
You would be best to figure out how to pay off the debt the cheapest and fastest way possible while doing as little damage to your credit score as possible.
You mentioned debt consolidation as an option. The term debt consolidation can be a confusing one. Many people think it is a loan to pay off your existing debts. This is not the case. When you hire a debt consolidation company they will in turn try and negotiate lower interest rates with your creditors and act as a buffer between you and those same creditors. You make one “consolidated” payment to this company each month and the make the payments to your creditors on your behalf.
Another option, (and if you are considering bankruptcy this option may work for you), is debt negotiation. Debt negotiation or debt settlement as it is also known, differs from debt consolidation in that the actual amount of debt that you owe is reduced, not just the interest rate.
You can find a more in depth discussion of these options along with some recommended resources here… http://www.debt-elimination-guide.com/debt-elimination-options.html
Best of luck Confused