Category: Debt Collection

The Benefits and Downfalls of Debt Consolidation

The Benefits and Downfalls of Debt Consolidation

The Benefits and Downfalls of Debt Consolidation

Understanding the Options for a Fresh Start

Debt consolidation is one option for those who are struggling with debt. The process lumps all of the debt a person owes together, and the debtor then pays a single monthly payment. In theory, it’s very similar to the debt restructuring that takes place in a Chapter 13 bankruptcy in Gilbert. However, the process is very different, depending on what option you choose.

Understanding your options for debt consolidation, as well as the advantages and drawbacks of each, can help you better make the right choice for your finances.

Worried couple understanding the benefits and downfalls of debt consolidations with tips from Gilbert Bankruptcy Lawyers blog

Types of Debt Consolidation

Not all debt consolidation is referred to as “debt consolidation.” For example, one of the most common types of debt consolidation that people use is the credit card balance transfer. A person might transfer several smaller balances onto one credit that has a higher limit. Then they pay a monthly payment to one credit card instead of several, thereby reducing the interest they owe.

Other types of debt consolidation include:

  • A home equity loan
  • A personal loan
  • A loan designed specifically for debt consolidation
  • Chapter 13 bankrupty

Home equity loans are often advertised for the purposes of consolidating debt, and personal loans can be used for any purpose you choose. Banks offer debt consolidation loans for those looking to pay off debts, and they look at the debts you owe, as well as other financial circumstances, when deciding whether to award them.

Under a Chapter 13 bankruptcy plan, a bankruptcy trustee analyzes your debts and determines what you are able to pay. You are then ordered to pay one monthly payment to the trustee for a period of three to five years. At the end of that time, your remaining debt may be discharged.

Benefits of Debt Consolidation Plans

The primary benefit of debt consolidation plans, when they are selected and implemented properly, is that they reduce the amount the borrower owes by reducing the interest paid. Usually, the debt consolidation vehicle is chosen for its lower interest rate – such as the credit card that offers a 0 percent rate on transferred balances.

Another benefit of these plans is that the debtor can pay only one payment each month. Even if the amount doesn’t change, the mental relief of focusing on just one payment can be great.

The benefits of a Gilbert Chapter 13 bankruptcy – the most efficient debt consolidation plan of all – is that the creditors have no say in what is paid, and the borrower is not at the mercy of yet another lender. The courts decide what the borrower can pay and sets the terms. An affordable plan is set in place, giving the borrower real breathing room again.

Disadvantages of Debt Consolidation Plans

The biggest disadvantage of a debt consolidation plan initiated by the borrower – such as a credit card balance transfer or a bank loan – is that if the person does not curb their spending habits, the debt will only compound. The person will now owe on the debt consolidation vehicle plus whatever new balances they have run up.

Another disadvantage is that the debt consolidation plan may not actually solve their debt problem. They may miss payments to the loan or the new credit card, incurring new interest and penalties, and continuing to struggle.

A Chapter 13 bankruptcy filing does not come with these disadvantages. Because the debt is included in the bankruptcy repayment plan, the credit cards or other accounts cannot continue to be used. New debt cannot be added. In addition, the repayment plan is based on the person’s ability to pay, so there should be no struggle to keep to the terms of the plan unless change occur, such as the loss of a job or a medical stay.

If you are struggling with debt, we encourage you to call Gilbert Bankruptcy Lawyers to learn more about the debt relief you can achieve through bankruptcy. We may be able to help you get on a debt restructuring plan through Chapter 13 bankruptcy, or we may be able to help you have your debts discharged through a Chapter 7 bankruptcy. A bankruptcy attorney from our team will review your finances and discuss your goals and recommend the best course of action for you. Contact Gilbert Bankruptcy Lawyers today to meet with an experienced bankruptcy lawyer and learn more about your options.

Published By:

Gilbert Bankruptcy Lawyers
Office: 480-448-9800
Email: info@myazlawyers.com
Website: https://gilbertbankruptcylawyers.com

Bankruptcy

The Advantages and Disadvantages of Debt Consolidation to Avoid a Gilbert Bankruptcy

The Advantages and Disadvantages of Debt Consolidation to Avoid a Gilbert Bankruptcy

Having a lot of payments each month can make your debt feel even more overwhelming. Instead of making one payment, you may have to manage 5 or even 10. Not only can that become confusing and stressful, which can cause you to miss payments, but it can also compound your debt with the individual interest rates and fees attached to each account.

Consolidating your debt can help you get a handle on your finances and pay down your debt faster. Depending on the option you choose, you could have one debt payment for far less than what you were previously paying collectively, and you could have a lower interest rate, which will save you money and help you pay off debt faster. But all of that is dependent on the type of debt consolidation method you choose. In some cases, simply filing for bankruptcy is a much better option.

It’s important that you talk with a bankruptcy attorney about the pros and cons of debt consolidation compared to filing for a Gilbert bankruptcy to help you make the right decision.

Bankruptcy

Types of Debt Consolidation

You have a few options for debt consolidation. One of the easiest things you can do is request a balance transfer on one of your credit cards. You simply move the balance from one credit card that charges high interest to another credit card that charges lower interest. You can keep doing this as often as you need to while you pay down your debt.

If you own your home and have some equity built up, you can borrow against the equity in your home. You can use that money to pay off the credit cards or other debts, changing out those high-interest debts for a much lower-interest loan.

If you don’t own a home, you may be able to get a personal loan or a debt consolidation loan with a reasonable interest rate. Know that you will either need to have a good credit score (which you likely don’t have with so much debt) to get these loans, or you’ll have to have collateral (such as a car or another item of high value).

Advantages

The primary advantage of choosing debt consolidation over bankruptcy is that you get to pay down your debts without putting a black mark on your credit. A bankruptcy discharge will stay on your credit report for 10 years, and it will bring down your credit score – unless you already have multiple late payments and revolving accounts; then bankruptcy can actually improve your score.

Each of these debt consolidation options can lower the amount you pay toward your credit cards and other accounts by giving you a better interest rate, as well. Of course, when you file for Chapter 7 bankruptcy, you can lower the amount you pay to unsecured debts to zero.

Disadvantages

There are a number of disadvantages to debt consolidation options. If you look at a credit card balance transfer, you have to be very careful about the fine print. You may get a zero percent interest rate, but that rate may reset to something outrageous after the introductory period. You may also have to pay a big fee to make the transfer. You need to watch it closely to make sure you don’t end up spending a lot of money to save money.

If you take out a home equity loan, you instantly lose that equity (since you now have debt against it) and you set yourself up for great loss. What happens if you can’t pay back the equity loan? Or if you get into even more trouble with debt? You can lose your house. Filing for bankruptcy can’t stop that from happening.

If you take out a personal loan or debt consolidation loan, you run the same risk of losing your collateral or of getting more into trouble with debt. Maybe now that you have the loan and free credit card balances, you’ll just charge more instead of paying down debt.

In many cases, the best option for dealing with overwhelming debt is to file for bankruptcy. Chapter 7 bankruptcy allows you to discharge your unsecured debt so long as you meet the means test, which looks at your income and assets. Chapter 13 bankruptcy is a reorganization plan similar to other debt consolidation strategies, except it’s based on your ability to pay and not the overall amount you owe. You may be able to discharge some of your debt, and you’ll have a limit to how long you’ll be paying (just three to five years).

It’s important that you talk to a bankruptcy lawyer about how your situation can be helped, specifically, by filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy. Gilbert Bankruptcy Lawyers is ready to help if you are struggling with debt. A bankruptcy attorney from our team can review your finances with you and help you understand how bankruptcy could help you. Call us in Gilbert today to talk to a bankruptcy attorney about your options.

Published By:

Gilbert Bankruptcy Lawyers
Office: 480-448-9800
Website: https://gilbertbankruptcylawyers.com

Gavel And Books.

How a Gilbert Bankruptcy Lawyer Can Help You Avoid Debt Collection Calls

How a Gilbert Bankruptcy Lawyer Can Help You Avoid Debt Collection Calls

By the time you start thinking about filing for bankruptcy, you are probably used to getting a lot of calls from bill collectors. You likely owe a lot of people a lot of money, and you may feel like they won’t stop calling. You may feel like you get calls at all hours of the day, every day, both at work and at home.

Filing for bankruptcy can put an end to those calls. When you file for bankruptcy, you list out all your debts, and the courts issues an automatic stay, which stipulates that your creditors cannot continue to contact you about your debts. The bankruptcy court will determine what you can pay and which debts will be discharged.

Gavel And Books.

You may find that you continue to get calls even after you file for bankruptcy and the stay has been put in place. This often happens because the creditor sold your debt to a collection agency before you filed for bankruptcy, and you did not know about the exchange. You have to list your debts in your bankruptcy filing for them to be included in your bankruptcy ruling. If you don’t know that your debt has been sold, you can’t list it in the filing, and you will continue to get those calls.

Handling Debts Sold before Your Filing

Hopefully, when a creditor is notified that you have filed bankruptcy, they would forward that notice to the collection agency if they already sold your debt. Unfortunately, many creditors won’t do that. They may just dismiss the notice because they have no obligation for it anymore. They may just shrug it off with the attitude that it’s not their problem anymore, and if you want the notice to get to the proper agency, you’ll do what needs to be done. If that happens, you’ll still be on the hook for the debt.

If your creditor does the right thing and passes on the notice to the collection agency, you may still not find relief. The new agency may claim to have never received the notice – or the notice may have actually gotten lost in the mail. Even if the collection agency does receive the notice, it may be delayed. That delay can cause major problems in your bankruptcy filing. A Gilbert bankruptcy attorney can help you straighten out the situation if this occurs.

Handling Debts Sold after Your Filing

You shouldn’t have to worry about creditors selling off your debt after you file for bankruptcy. The debt is discharged or consolidated in the bankruptcy, so they don’t have a legal right to sell it. However, many creditors have been known to break the rules. Some do it by harassing you in ways they shouldn’t when you owe the debt. Some do it by trying to get whatever money they can by selling off your debt after you file for bankruptcy.

If you get contacted by a collections agency after your bankruptcy filing, your Gilbert bankruptcy attorney can talk to the agency and can file an amended schedule to reflect the new creditor.

Adding Creditors after Your Bankruptcy Filing

You may learn that one of your creditors sold a debt after you have already filed bankruptcy (either they sold it after your filing, or you found out about it after your filing). Or you may have forgotten old debts that are still on your record, and you have already filed for bankruptcy. All is not lost. Your Gilbert bankruptcy attorney can likely file an amended schedule to your filing that includes these other debts.

Filing the amended schedule can cost a little extra money, both in terms of an extra filing fee and additional attorney time. You may be able to get around filing the amended schedule by simply contacting the creditors yourself and letting them know about your filing. You should ask your bankruptcy lawyer about the best course of action.

You don’t have to put up with creditors calling you all the time – especially after you have already filed for bankruptcy. Working with a bankruptcy law office can get those calls to stop. Either you can learn about your rights under bankruptcy, or you can get your bankruptcy lawyer to take action on your behalf, such as by contacting the creditors or filing an amended schedule for you.

If you are overwhelmed with debt and are being harassed by creditors, Gilbert Bankruptcy Lawyers may be able to help you. You may qualify for Chapter 7 bankruptcy or Chapter 13 bankruptcy, and you may be able to either discharge your debts or consolidate them under an affordable repayment plan. Contact us in Gilbert today to talk with a bankruptcy attorney about your options.

Published By:

Gilbert Bankruptcy Lawyers
Office: 480-448-9800
Website: https://gilbertbankruptcylawyers.com

Additional Blog Postings at:

https://mymesabankruptcy.com/

https://myazcriminaldefense.com/blogs/

https://tucsonduilawyer.co/

https://phoenixdivorceattorneys.co/

https://glendalebankruptcyattorney.co/blog/

https://www.myazpersonalinjury.com/blog/

https://injurylawyersmesa.com/blog/

https://arizonabankruptcyattorneys.co/

https://gilbertbankruptcylawyers.com/blog/

https://hendersonbankruptcyattorneys.com/blog/

https://tucsonbankruptcyattorney.co/blog/

https://azfamilylawlawyer.com/blog/

https://bankruptcy-az.com/

https://avondalebankruptcylawyer.com/

https://mesaduilawyers.co/blogs-helpful-articles/

https://chandlerbankruptcyattorney.co/bankruptcy-blog/

https://mesabankruptcylawyers.co/blog/

https://chapterbankruptcylaw.com/blog/

https://legalhelp-az.com/blog

https://vegaszerodownbankruptcy.com/blog/

https://myazlawyers.com/blog/

https://arizonazerodownbankruptcy.com/blog/

https://lasvegasbankruptcylawyer.co/blog/

https://phoenixbankruptcyattorney.co/blog/