Avoid the Tedious Process of Bankruptcy with Debt Consolidation Schemes

People who have a tendency to accumulate huge debts need to very careful. These individuals need to come up with viable ways to pay off such outstanding dues. Moreover, they should do so as soon as possible. Otherwise, their creditworthiness may come into question.

In most cases, their lenders may be compassionate to their plight. However, the defaulters have got to understand these are just crocodile tears. At the end of the day, these creditors operate a business specializing in financial services. They won’t think twice about levying late fees, penalties and interest charges to clients’ account. They got to consider their interests. However, such expenses further add to the woes of the borrowers. Many of them will obviously be anxious to improve their financial position. Opting to take a suitable debt consolidation scheme can help them achieve this objective.

What do borrowers need to know about bankruptcy laws in America?

Financial experts in America say loan and credit defaulters need to understand an important fact. Banks and other similar institutions generally transfer their debts to a collection agency. The officials of this organization take on the responsibility of recovering their outstanding dues. They do whatever it takes to accomplish this task. Even if it means constantly sending them notices to remind them of their obligations. Many of them don’t hesitate to make phone calls. This is certainly not a pleasant situation for these borrowers to find themselves in. Almost all of them may consider it to be harassment. It won’t be surprising if some of these individuals opt to declare themselves bankrupt. 

The professionals explain the general public needs to be aware of relevant laws relating to bankruptcy.  On then can people take a proper decision to proceed with this course of action. Legislators pass the enactments help defaulters start over. However, in reality, they face a totally different situation. The consequences these individuals have to face may come as a shock to them. It generally takes them almost seven years to wipe out an indelible sign of insolvency from the credit report. Moreover, banks and other financial institutions may be reluctant to offer them loans. Even reliable entrepreneurs may have reservations of entering into commercial deals with them. 

Importance of Chapter 7 and 13 of Bankruptcy Laws

Normally, a judge can release any borrower from the responsibility of paying debts. This court official can take such a decision under special circumstances. The provisions of ‘Chapter 7’ of Bankruptcy Law allow him/her to take such a step. The defaulter can possess certain assets to fall under the category of ‘exempt property.’  Unfortunately, the rest is sold off in due course to repay his/her outstanding dues. These can include a second automobile, residential home, bank balance, cash or even stock investments. A trustee which the jury appoints for this purpose carries out this tedious task.

Most defaulters opt to pay off a certain portion of their outstanding dues over five years. In return, they expect their lenders to write off the remaining amount. The jury may agree to such an arrangement according to statutes governing ‘Chapter 13’ of Bankruptcy Law. In this case, the total debt amounts fall below the permissible level under Chapter 7. In the process, the borrowers get to keep all their personals assets.

Is debt consolidation a better option

The specialists point out the most loan defaulters obviously want to avoid declaring themselves bankrupt. It is a long and tedious procedure. Moreover, they ruin their reputation in the process. The experts suggest these individuals opt for debt consolidation instead. Their lenders may agree to this arrangement as it safeguards their business interests.

Moreover, these financiers also get their money. Many service providers specialize in this field.  These borrowers should evaluate their debt consolidation reviews from previous customers on their websites. Only then should they take any decision. The following four important advantages of taking such a step are as follows:

  1. Extends the repayment period 

People who are defaulting on their loan repayments normally face a common problem. The total outstanding amount they need to clear isn’t a serious issue. What bothers them is how soon do they need to clear this debt. In such a case, they should opt to take a scheme which consolidates their all their dues. They get to repay them over a longer period. This goes a long way on easing the pressure of their finances.  

  1. Lower rates of interest 

Most consumer loans have very high interest rates. This is one expense which makes clear their debts on time virtually impossible. Fortunately, most debt consolidation schemes available in the market have very low rates. This is a fact which credit card and loan defaulters can’t afford to ignore. It enables them to save some money. On top of this, it also makes their monthly repayments more manageable. 

  1. Puts an end to the collection notice 

Availing debt consolidation schemes can relieve loan defaulters of their anxiety. They won’t be getting constant notices from collection agencies asking them to pay up their dues.  These individuals can then take charge of their finances. All they need to do is make a single repayment every month. These individuals will continue to make this payment until they wipe out their entire debt. This is why many of them opt to take such a step.

  1. Improve the overall credit score of the defaulters

Many defaulters don’t seem to realize a vital fact. Late payments, interest charges on overdue balances and penalties have an adverse effect on credit ratings. This makes it extremely difficult in getting mortgages at a future date. Fortunately, taking a debt consolidation scheme can put an end to all this. They get a chance to rebuild their finances.

Debt consolidation is a necessity for loan and credit card defaulters rather than a luxury. The above four important advantages prove this fact without any reasonable doubt. It allows them to take control of their finances once again. This is an opportunity which doesn’t come often. In the process, they regain their peace of mind and start rebuilding their credit ratings. It is a decision which they won’t regret making for a very long time.