If you are drowning in debt, there are a few options to keeping your head above water such as consolidating your debts through an official debit consolidation agency or filing for bankruptcy. However, negotiating with creditors and credit card companies before filing bankruptcy is most likely your best move. If they are willing to reach agreement that works with your budget, you can eliminate the need to file bankruptcy and save your credit.

Negotiation and Debit Consolidation

Explore other options to save your secured debt before considering bankruptcy. To save a home, you might want to try a forbearance, refinancing, loan modification, short sale, or deed in lieu of foreclosure. If you aren’t concerned about keeping your secured debt, try negotiating with all your creditors instead. Credit card companies are often willing to work with customers who want to settle debt. With older credit card debt, waiting for it to fall off your credit report may be less damaging than filing bankruptcy and restarting the clock.

When you overcharge or rely too much on your credit cards to cover shortfalls in your budget, your monthly debt payments can become more than you can manage. Debt consolidation is something you can use to regain control. Consider credit counseling if you are unable to strike a deal with creditors. Counselors can help you create a budget and even negotiate with creditors on your behalf. Legitimate non-profit organizations that are certified in credit counseling can help you with a debit management program, and they do not charge you for first visit.

Checking the National Foundation of Credit Counseling is a good start. Debt consolidation is the process of combining multiple debts at the lowest possible interest rate. Instead of paying several different accounts every month, you only have to worry about one. The goal here is to get the lowest interest rate possible and in a way that you can afford. But usually you need to freeze your credit cards.


Bankruptcy should be a last resort since it destroys your credit score. With this option you actually have two options: Chapter 7 or Chapter 13. Chapter 7 bankruptcy wipes the slate clean. When you file Chapter 7 bankruptcy, your debt is discharged. You are required to liquidate assets to satisfy debt.

Chapter 13 bankruptcy allows you to keep certain assets, including your home or vehicle, provided you are able to make the monthly payments. If you fall behind on your secured debt, it is important to continue making your regular payment to the creditor. It doesn’t lower your existing payments, but it restructures past-due balances.

You will need to pay both secured and unsecured debt, including credit cards, and usually you are required to make monthly payments to the court appointed trustee. The amount of your payment is based on your debt and disposable income. Your disposable income is the money leftover each month after your expenses.

If you are unable to fulfill the terms of your repayment agreement, your debt isn’t discharged. Your creditors can resume collection activity and can file a lawsuit against you to collect the money you owe. If you have a mortgage, the lender can begin the foreclosure process if you fail to make your regular payment or trustee payments. It is important to ensure you can afford all our current obligations in addition to repaying the debt. Take into consideration the risk of losing your job or unexpected financial emergencies. If you decide to file for Bankruptcy, you can do it yourself, but if that is too overwhelming you can choose to hire professional legal assistance for a smoother process.

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