If you find yourself in a difficult financial situation with multiple debts you can’t afford to pay, it is time you consider a debt consolidation loan. A debt consolidation loan is a loan you can borrow from a bank or another financial institution to pay out your other debts. In this case you get free from multiple debts to numerous lenders, instead you have a single loan. It’s a viable debt relief solution for people in bad debt situations.

Let us see what different types of debt consolidation loans are offered by different financial institutions. A debt consolidation loan can either be secured or unsecured. A secured debt consolidation loan requires collateral in order to obtain the necessary amount. In most cases people put their homes as collateral to take out the debt consolidation loan. In case of an unsecured debt consolidation loan, there is no requirement of collateral, this type of loan is based on the character and capacity of the debtor to pay out the loan. Now let us dwell on the reasons why people opt for the debt consolidation loan:

All About Bankruptcy In Detail

A federal court procedure designed to help consumers and businesses to wipe out their debts (or pay them under the protection of the federal court) is called bankruptcy. Individuals as well as businesses can file for bankruptcy, and in some instances, a creditor (whether a person or business) who owes funds via an involuntary procedure may force the declaring of a bankruptcy procedure. The second case is rather rare. When you file for bankruptcy, all your debts are then discharged and no legal actions can be taken against you. However, bankruptcy does not discharge all of your debts 

Reasons to declare bankruptcy

• Accidents, act of God: most people filing bankruptcy in the US do this for the reasons of bad and decreasing health condition. Medical bills cause half of the bankruptcy cases in America. Among other reasons are: loss of job, unemployment, accidents, natural disasters or crime. All of that can easily damage or ruin anybody’s bank account.
• Wrong decisions, careless management of personal finance. Our own irresponsible behavior is another reason for bankruptcy. Gambling, thoughtless spending, extravagant lifestyle, risky businesses, as well as divorce can also cause huge financial troubles.

Types of bankruptcies

Bankruptcy is regulated by three chapters: Chapter 7, Chapter 11 and Chapter 13. Most common types of bankruptcies are Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy – a straight bankruptcy or a liquidation proceeding. In this case, the debtor is allowed to keep certain type of property (exempt property), therefore, the property they must give up is called non exempt property. In case you file for bankruptcy according to Chapter 7, you free yourself from your debts in exchange for some kind of property. The non exempt property is then handed to the court trustee to sell these assets and distribute cash to the creditors.

Bankruptcy or Debt Consolidation?

Are you in debt up to your neck and you finally find yourself unable to pay the bills anymore? If yes, then you are probably already considering either of the options – bankruptcy or debt consolidation. And probably, the TV ads are telling you that both declaring bankruptcy and debt consolidation are easy and efficient way to solve your financial problems. If we take a superficial look at both things, debt consolidation seems like a better solution rather than bankruptcy, but there are pros and cons to both approaches. Bankruptcy is not a dead end to your life, you know. However, it does bring some essential changes, most of them are not positive.

Let’s see the facts about debt consolidation. A debt consolidation program (also called debt management) implies signing a contract with a debt consolidation agency. Financial advisors then negotiate on your behalf with your creditors in order to work out a repayment plan with lower interest rates and lower monthly payments. Plus, it will put an end to the harassing phone calls from your creditors.

There are some significant advantages to the debt consolidation, other than lower interest rates and monthly payments. Instead of multiple payments to numerous creditors you will only have to make one payment every month. Most creditors participate in debt consolidation programs, besides if you use the services of a reputable agency they probably have established connections with the major creditors, which simplifies the negotiation process. Your financial expert usually takes care of all paperwork, so you don’t have to deal with the creditors anymore. You will continue receiving statements from your creditors anyway, so you have a chance to track things down. The debt consolidation company may as well offer you a direct transfer of the monthly payment from your account on the same date each month.