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Personal Bankruptcy and personal debt consolidation loan

In this unstable economic climate, more people are considering filing for bankruptcy in order to do away with multiple debts and get a “fresh start”. It may seem like a viable option for someone who is not so certain that all the debts acquired can be paid off. But before you take a stab in the dark and file for bankruptcy, here are some things that you need to know.

What is personal bankruptcy?

Personal bankruptcy is a legal process of wiping out debt and catering means for debt-laden people to obtain a “fresh start” or a clean slate, if you will. In most cases, personal bankruptcy means the wiping out of the debt that you owe to any of your creditors. And the two most common types of bankruptcy are known as Chapter 7 and Chapter 13.

What does it entail?

The filing of Chapter 7 bankruptcy costs about $200 but the lawyer will charge around $800 to $1,200. But if you’re only looking around and weighing your options about whether you should file for bankruptcy or not, some bankruptcy lawyers offer a free initial consultation. And if after the consultation you decide to go ahead, being well prepared can help keep the fees down. You may also attend the meeting with the creditors all alone to keep the fees down but you must check this with your lawyer first as in some states like Massachusetts, lawyers are supposed to attend the Section 341 meeting with the debtors; else attorneys are viewed to have not represented the debtors. But if you still doubt about whether you should declare bankruptcy or not, there’s still hope for you to get past this and get a fresh start and that’s to eliminate all your debts – debt consolidation programs, credit card consolidation programs, etc.

If you choose to eliminate all your debts, it’s crucial that you find a trustworthy agency that is truly dedicated to help you out of your situation. And when you find the agency that you want to work with, the procedure for eliminating your debts is as follows:

1. When applying for any of the available debt elimination programs, the agency invites you for a debt counseling session to analyze the problem at hand and what your financial situation is like. Most companies offer this for free so you don’t have to stress over paying a fee for consultation and you can focus on becoming debt-free.

2. After evaluating your financial problem, the consultant negotiates with the creditors to do away with the sky-high interest rates or late payment fees charged to you. This way, you can get a significant discount which lowers your monthly payables.

3. Debt reduction is then done to minimize the total amount of debt.

4. The agency then consolidates all your debts so all you have to do is to pay for a consolidated debt account as though you only have to pay to one creditor. The agency then takes these payments to your various creditors.

5. Regular debt counseling should be penciled in your planner for you to be able to discuss future financial plans/problems with the consultant.

6. After faithfully paying your monthly debts, you’re on your way to a long-term credit repair – something that you would not have achieved if you chose to file for personal bankruptcy.

Related Article: How does Chapter 7 bankruptcy help you get rid of debt?

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