We all get a little too much debt at one time or another. But sometimes, the debt gets away from us and we have more than we can handle. If that happens to you, you might be finding it hard to pay your bills. Or you might be able to pay every month, but you feel like you aren’t making a dent in your debt and you don’t have money left over for anything else.
Debt consolidation is an option to help you get a handle on your finances. With it, you would get a loan or have your debt be assumed by a program, and you would pay a single payment to one debtor. Bankruptcy is also available to free you from debt, though many people try to avoid bankruptcy because of the stigma that is sometimes attached it. Many people try to use debt consolidation instead. But is it really more effective? Can debt consolidation help you avoid a Gilbert bankruptcy? Here’s what you need to consider:
What Kind of Debt Do You Have?
Your options for managing your debt depend on what kind of debt you have. For example, if you have credit cards, you may be paying interest rates of up to 30 percent. You can consolidate those debts into a loan that has a lower interest rate and save money. Or you could file for Chapter 7 bankruptcy in Gilbert and get all of that debt discharged and pay nothing on it.
If you have secured debt that is burdening you, you have fewer options. That would include things like your mortgage or car payment. You may be able to get a loan large enough to consolidate the debt, but that’s unlikely if you are already struggling. Your credit is likely to be hurt. You can file for Chapter 13 bankruptcy and consolidate your debt under its three- to five-year repayment plan. You can include missed payments on those secured debts in the plan.
How Much Debt Do You Have?
Whether you can consolidate your debt or need to file for bankruptcy may depend on how much debt you have. Say you have $50,000 in credit card debt. Chances are very slim that you’re going to get a loan for $50,000 to pay off that debt and consolidate your payment. However, depending on your income, you can file for Chapter 7 bankruptcy in Gilbert and discharge all of that debt.
You’ll need to assess your debt and figure out how much you owe and how much of it you can actually consolidate. In many cases, filing for bankruptcy is going to be the better option.
What is Your Ability to Pay?
Debt-consolidation options exist, but they can also be costly. You may get a lower interest payment and a smaller monthly payment, but it may still be beyond your ability to pay. Debt-consolidation options are based on how much you owe, not on what you are able to pay.
A Gilbert Chapter 13 bankruptcy repayment plan is designed around your ability to pay. The trustee looks at how much money you make, the assets you have available, and the debts you owe to determine your monthly payment. Some of the debt may even be discharged once the plan is complete.
What Are Your Goals?
You may be thinking that you’d like to buy a house next year. If you file for bankruptcy in Gilbert, you are going to have a black mark on your credit that will make that impossible for several more years. However, if you have so much debt that you are going to struggle to pay it off even under a consolidation plan, you aren’t going to be able to meet that goal anyway.
You have to think through your financial circumstances and your goals to determine what the right solution is going to be. An experienced Gilbert bankruptcy attorney can help you understand the options through bankruptcy and how you might best be helped.
Call Gilbert Bankruptcy Lawyers today to schedule a consultation with a bankruptcy attorney. We’ll carefully review your finances and talk with you about your goals to make the recommendation that’s going to give you the maximum debt relief while also keeping you on track to meet your goals. Call us in Gilbert today to schedule a consultation with a bankruptcy attorney and to learn more about your options.