In the U.S., there are several ways that individuals can resolve debts. Debt settlement through a third-party program is often aggressively advertised as the “best” way to work out debts, but that route comes with many caveats, including significant additional fees. Other debt work-out systems include debt management plans through a credit counselor, debt consolidation, and, of course, bankruptcy. While a bankruptcy case might not be the right choice for resolving everyone’s debts, making the decision to file a petition can be one of the most effective, fastest, and longest-lasting ways to find debt relief. If you’re looking for the best kind of debt work-out in St. Peter, MN and the local regions, Behm Law Group, Ltd. can help. Our attorneys will work with you to determine if bankruptcy will be an effective option and which type of bankruptcy chapter to file. We provide guidance, support, and legal protection for all our clients from the start of their cases to the end.
Debt Work-Out
Debt work-out systems outside of bankruptcy have their uses, but they’re also heavily restricted in the debts they address, the individuals that qualify, and the debt amounts that are resolved. For example, when it comes to debt consolidation, debtors can only qualify if they meet rather strict credit score requirements.
How Consolidation Works
Debt consolidation processes take your debts and combine them into a single account. That account is then paid off slowly with your own monthly payments, or you may have the option to receive a consolidation loan. A consolidation loan is provided through a bank, credit union, or online lender. Those loans usually range between $1,000 and $100,000 and carry interest rates as high as 36%. That loan amount is used to repay your consolidated debts, and you begin to payoff that lender in single monthly payments. The amount of your consolidation loan depends on your credit. If your credit is too low, you may not be eligible for a consolidation loan at all.
Consolidation Problems
Using consolidation for debt work-out is usually only a good option for people with high credit (usually 650 or better) and specific debts (like credit card debts, mortgages, and medical bills). Debt consolidation systems are very complicated. They frequently incorporate nuanced methods of debt treatment like balance transfer cards, conversion of unsecured debts to secured debts, and other “loop-hole” processes. These methods can carry significant hidden fees and often have unexplained and unintended consequences. In addition to using complex systems with inaccessible fine print, debt consolidation programs will impact your credit in varying ways depending on the amount of debt owed, credit history, and the various types of your credit accounts. In addition, debt consolidation programs are often funded and sponsored by various credit card companies. Credit card companies don’t want you to file for bankruptcy relief and they often want to squeeze as much money as possible from you through debt consolidation programs.
Overall, debt consolidation is a tricky process that might leave you with more fees and headaches than the filing of a bankruptcy petition.
To learn more about using bankruptcy for debt work-out in St. Peter, MN and why it might be better than debt consolidation, please contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.
