When anyone arrives at the realization that they may be encountering financial difficulties. There are two options: ignore it, or consider the alternatives that may solve the problem. There are many options, even if you are not in the position for a debt settlement, including a debt management plan or debt consolidation loan. Many companies offer the former option, which may help since a consolidation loan combines problematic debts into one payment rather than several. Bankruptcy is another viable option, with a similar advantage in Chapter 13 cases of consolidating debt payments into one monthly payment.
A debt consolidation loan consolidates several debts into a new loan. The new loan is typically at a lower interest rate than the individual rates of the debts consolidated, which provides some savings on finance charges. While debt consolidation may work for some, it may not for others. Based on how the new loan is structured, it may result in a consumer expending more time and money to pay it off over time.
Once a debt consolidation takes place, debts stop getting paid. As a result, creditors may refer debts to collections, which may affect a consumer’s credit rating. By the time any consolidation is worked out and payments begin, a consumer’s credit rating may suffer because the creditor has not yet received any payments. Then, a creditor may choose not to settle for less than 100% of the debt and turn to file a lawsuit to ultimately garnish wages.
A Chapter 13 bankruptcy case provides the advantages of debt consolidation without the inherent disadvantages. A Chapter 13 plan of reorganization allows the consolidation of several debt payments into one monthly payment. However, it has the advantage of the protection of the automatic stay, which prevents creditors from maintaining or intensifying collection efforts after conventional debt consolidation. Thus, creditors may not pursue a lawsuit nor ultimately garnish wages.
If you have several unpaid debts subject to security interests or taxes, discuss your situation with an experienced bankruptcy attorney at the Morrison Law Group. You can discuss your situation at a free consultation to determine whether a Chapter 13 repayment plan of reorganization is your best option. Theron Morrison has helped 8,000 people file bankruptcy and gain a fresh start. Call 801.456.9933 to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.