In today's economy, many residents of Arizona and across the nation are experiencing financial hardships. Whether the problem began with a job loss, a serious health setback or simply from overspending, there are several solutions to help people become free from their debts.
A credit counseling program is one solution for those whose cash flow is restricted due to an excessive amount of debt. A professional credit advisor can suggest ways to reduce debt through a debt management plan or through consolidation. However, debt consolidation involves opening another line of credit, which could potentially lead to more debt. Moreover, consolidation is not an option for many people with poor credit scores.
Filing for bankruptcy is another option for many people struggling with serious debts. By declaring bankruptcy, the debtor may be able to get their debts lowered or completely discharged, depending on the type of bankruptcy chosen. The two basic types of bankruptcy filings are Chapter 7 and Chapter 13. Before the federal protection can be granted, the individual seeking the relief must qualify for the particular filing. In a Chapter 13 bankruptcy, the filer can retain their assets through a three- to five-year payment plan, but they must have a consistent income to qualify.
The Chapter 7 bankruptcy is more appropriate for people who wish to eliminate their debts completely because they cannot afford to pay them off. A trustee collects and sells all the debtor's non-exempt assets, and the money is used to satisfy the debtor's creditors. The federal protection restricts creditors from making any attempts to collect from the debtor, such as wage garnishment.
Sometimes, circumstances happen that can cause an individual to acquire huge financial debts resulting in a foreclosure or a vehicle repossession, for example. In an effort to recover from their debts, many people in similar situations retain a bankruptcy attorney to help them through a bankruptcy process.
Source: Credit.com, "Debt Consolidation Vs. Bankruptcy: Which Should You Choose?," Karin Price Mueller, March 29, 2015