Understanding Debt Consolidation

Believe it or not, Americans have a Constitutional right to go bankrupt.Bankruptcy is a legal proceeding. You can't declare bankruptcy in the U.S. without getting a lawyer and judge involved. The proceeding becomes part of public record. Bankruptcy is extremely intrusive in that outsiders will now determine how your money will be divided up to pay off debt and what you must sell.Bankruptcy offers an advantage many debtors really love. A court has the power to issue "bankruptcy protection." You may be allowed to write off certain debts. That means some debts just go away; you are no longer https://kredyt123.pl/kredyt-konsolidacyjny obligated to pay them. Furthermore, once you have "bankruptcy protection," bill collectors can no longer pursue you for those debts.The problem with bankruptcy is that it all but ruins your credit. It stays on your credit report for seven years, and it has a way of cropping up even after that. It makes it very tough to get new loans or buy a house. The loans you will be able to get will be at very high rates of interest because you've suddenly become a high-risk borrower.

Bankruptcy will turn your life upside down. If you have secured loans (like car notes or loans to buy electronic equipment), those things can be repossessed. The court may seize or order you to sell certain assets and take the money to pay off other debts. Another requirement is attending money management classes, kind of like being forced to go to debtors' rehab.While bankruptcy does have its place, it is definitely the "last resort."Debt settlement and debt negotiation mean roughly the same thing: you or somebody representing you sits down and talks to your creditors to work out a solution.The principle is that you work out (negotiate) a way to end (settle) your debt. You may be able to get the interest rate reduced or the terms of payment changed (such as getting a couple of months off or extending the terms of the loan). Sometimes you negotiate to try to get the balance reduced. As an example, assume you owe $10,000. You would negotiate with your creditor to try to get him to accept less, say $5,000, and mark the debt paid in full.Why would anyone do that? The main reason a creditor will negotiate a debt is that they suspect you are flirting with bankruptcy and they are fearful that if you go bankrupt, they won't get anything. From their viewpoint, $5,000 may be better than nothing.Debt settlement and negotiation plans will almost assuredly make it all but impossible to get future loans at reasonable interest (if at all).A debt management plan (DMP) is a formal plan where you hand your problem off to a company which then negotiates your debt. You make one monthly payment to the DMP and they handle your problem.While there are legitimate DMP programs out there, these are very treacherous waters. Do your homework and check with the Better Business Bureau as well as a certified credit counselor (nfcc.org) and maybe your bank or credit union. There are programs out there that are outright frauds and a few that are not dishonest but not exactly advantageous to the customer.The last approach is something called debt consolidation.