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Your Get Out Of Debt Options

Being burdened with a lot of debts simultaneously maturing can be a harrowing experience. Just thinking about the many sleepless nights spent in absolute anxiety is enough to cast fear upon anyone’s soul. Juggling our finances is hard enough as it is. To do so with the specter of gloom brought about by due and demandable debts could really, and literally, drive us crazy.

There are many factors that would contribute to such a terrifying state. Financial management, without a doubt, is one of them. Financial management does not only entail a wanton neglect of a budget plan and an uncontrollably vicious spending streak. Often, it is caused by lack of proper education in the in sound financial planning.

When we find ourselves in such a financial rut, we try to look for available options that would help us get out of the hole we have dug for ourselves. However, options drastically reduce in number the deeper we get buried in debts.

But this shouldn’t be taken to mean that we don’t have any options to resort to. There are some of them that are still available, and they deserve a closer look if we want to get out of our financial troubles.

There are still a number of options available for you. Let’s take a look at them.

Debt Consolidation

You could decide to merge your existing loans into one debt, though not directly. Through debt consolidation loans, the creditor would pay off your subsisting debt. You will then have just one debt to pay, that of your new creditor.

Debt consolidation is often resorted to for the following reasons:

• It would extend the maturity date of your loans under the new consolidated loan.
• You would pay a lower interest rate under one loan.
• It would be easier to manage a single loan than having to pay off multiple ones every month.

Debt consolidation would not necessarily solve your debts per se, but at least, it would buy you the time that you would need to muster enough resources to settle your obligations. It is still a good option, especially when several debts become due and demandable within the same period.

Securing A Second Loan

Not as direct an option as debt consolidation, you could always apply for a new loan to pay off an existing one. This would be a great approach, not only in prolonging the maturity date of your obligation, but also in paying a lower interest in the event that the new loan has a lower rate than the previous one.

Second loans have always saved a lot of debtors from almost certain disaster. Most loans do not ask for the purpose of your desired borrowings anyway. By applying for a new loan, you’d be able to delay eventual payment, and you’d be able to answer the more pressing needs of your life.

Filing For Bankruptcy

Considered as the court of last resort, you could always file for bankruptcy. You would need to have exhausted all available remedies though, and you must prove to the court that your application is done in good will, meaning you have no intention whatsoever to defraud your creditors. You would also have to establish through preponderance of evidence that you cannot fulfill all your obligations once they have become due and demandable.

Your assets would thereafter be placed under the case of a court-appointed trustee. The said trustee would call all your creditors to an assembly, called a 341 meeting, where your assets would be liquidated and distributed among them, in proportion to their respective claims. The portions of the debts that cannot be fulfilled by your assets would be written as losses for your creditors. After this, your debts would be considered dissolved.

Though declaring bankruptcy has its benefits, it also has its share of disadvantages. Among them is the negative mark it would leave on your credit record, which would adversely affect future loan applications as well as when you’re applying for a job.

Also, you must be reminded that your line of credit may be suspended for at least 2 years. It would take quite some time before you could recover from a state of bankruptcy.

UPDATE: Congress has passed a new Bankruptcy Protection Law that now makes it tougher to file and declare bankruptcy. Make sure you understand how it will affect YOU.

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by SolveYourProblem.com : 2006

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