Chapters 7 and 13 of the United States Bankruptcy Code offer individuals and families in our country with sweeping debt relief, but for many this approach is not an option. Whether you are concerned to avoid the negative credit consequences of a bankruptcy filing or if you would prefer to attack your problems with debt from another angle, there are several other strategies which may work for you.
Bankruptcy makes it possible for a debtor to discharge most or even all unsecured debts, as well as potentially freeing up financial resources to catch up on secured loans such as a home mortgage. It is perhaps the most immediate and comprehensive form of debt relief available, but it also brings negative repercussions-bankruptcy can negatively influence your credit for up to 10 years, making it difficult, though not impossible, to secure a loan in the future. For some, this is enough to keep them from choosing to take this course of action. Others would prefer to resolve their debts without bankruptcy as a matter of principle, and still others may be swamped in debt but do not yet feel desperate enough to decide that bankruptcy is the necessary approach.
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One of the first options you may want to consider for attacking your problems with debt is negotiation or settlement. Consumer debt has become such a rampant problem in our country that countless creditors are faced with default and the options of either selling the account to a debt collection agency, engaging in litigation to recover the outstanding balance or simply writing off the amount. What many people fail to realize is that by taking a proactive approach they may be able to avoid such a negative outcome. You-or an attorney acting on your behalf-may be able to negotiate with the creditor to settle the debt at a reduced balance.
If your debts have made it difficult or impossible for you to stay current on your home loan, it may be possible for you to avoid the disastrous credit damage caused by foreclosure and to keep your home by taking a similar approach to the one mentioned above. Banks will sometimes agree to a loan modification which could result in a reduced balance, an extended loan period or a reduced interest rate, any one of which would leave you with a more afford able monthly payment. In the event that your house is under water-worth less on the real estate market than the amount you owe-an attorney may be able to negotiate a short sale, which would allow you to sell the house at the fair market value without being liable to the lender for the deficiency, or the difference between the loan balance and the sale price.
These are only a few of the many strategies available for resolving debt. Whichever one you choose, the most important thing to remember is that you must take action now. Failure to address the situation will only allow it to get worse, but by tackling the problem you may be able to get out of debt sooner than you realize.
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