No matter how hard you work, you may find yourself suddenly unable to manage all of your bills. A sudden medical expense, reduced work hours or a vehicle breaking down often create financial emergencies. Faced with these financial disasters, people in Florida may need help with their debts. When deciding which type of debt relief works best for you, consider both the positives and the negatives.
Debt consolidation involves rolling multiple debts into a single payment. This typically involves the use of a personal loan or a low-interest credit card. Debt consolidation may offer relief to people with decent credit scores.
People often choose debt settlement in order to avoid filing for bankruptcy. However, the process may involve risks and may not provide enough relief for your debts.
The pros of debt settlement include:
• Repay your debts more quickly
• Avoid charge-offs
• Prevent being sued
The cons of debt settlement include:
• Impacts your credit score
• May be required to put a large sum into escrow
• May have to pay taxes on the settled debt
• Creditors may refuse
• Overall debt may increase
While most people try to avoid bankruptcy, some financial situations make it the best choice. Several bankruptcy types are available, though most individuals use either Chapter 7 or Chapter 13 bankruptcy: Chapter 7 focuses on eliminating unsecured debt, while Chapter 13 is a repayment plan.
Consider these pros of bankruptcy:
• You may eliminate most of your debts.
• Filing grants an automatic stay against creditors.
• It prevents further legal action.
Consider these cons of bankruptcy:
• You cannot eliminate taxes, child support or student loans.
• Co-signers for any of your debt will be left with the debt.
• Your credit score may drop significantly.
When choosing the right debt relief, you should consider the long-term effects. Consider what your financial goals for the next ten years are, and choose the debt relief solution that will help you achieve those goals.