When you begin to struggle with debt you suddenly become aware of all sorts
of commercials with the "key" to your financial solvency. And
while you'll notice that some of them are obviously scams you'll
also realize that that are really two good solutions to your debt problems,
bankruptcy and debt consolidation.
Debt consolidators take all of your debts and arrange a payment plan that
is affordable to you and that they'll accept. Some of your debt consolidators
will get your creditors to write off part of the debt or stop adding interest
and penalty fees. The problem with a debt consolidation plan is that the
consolidation company expects to be paid for their services, this is just
adding more debt to an amount you already can't afford. Additionally,
you may experience severe tax consequences for any debts that are settled,
written off, or forgiven.
Bankruptcy is the other option for tackling your debt and there is even
a type of bankruptcy that is similar to debt consolidation. With a
Chapter 7 bankruptcy you may have some or all of your debts discharged. A
Chapter 13 bankruptcy is like debt consolidation in many ways. With a Chapter 13
bankruptcy a trustee oversees your debt and then approves a repayment
plan that you and your attorney submit. Once this repayment period is
over most remaining debt will be discharged.
Both debt consolidation and
bankruptcy will affect your credit rating negatively and while a bankruptcy stays
on your record for several years it lets you start fresh right away, while
the debt consolidation takes time to dig out of the financial pit you're in.