I am struggling with my debts, what options do I have to make things easier?
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If you are struggling with your debts, do everything that you can to make bankruptcy a last resort. This is because bankruptcy has severe repercussions, such as not being able to retain many of your assets, not being able to go on a vacation, and not being able to hold a high position within your company. If that seems bad, then you need to explore your options.
One option is debt consolidation. This is where you take out a single personal loan to take the place of your loans and credit cards. In other words, you are consolidating everything into one payment. This helps you to eliminate the high interest charges that you are paying on credit cards in particular. This means that you are saving money each month and saving money in the long-term. Depending on how much the loan is for, you can have a repayment period between 12 months and 7 years.
You can also try an informal arrangement, which is an arrangement with your creditors. They are contacted and informed of your financial situation. This is when they decide to give you more time to pay, they may re-negotiate the amount that you owe, they may freeze the interest, or they may settle for a lesser sum. The only problem with the informal agreement is that it isn't legally binding, so the creditor can pull out of the deal at any time. This is why a debt agreement may be the solution because it is legally binding.
A debt agreement involves a proposal that includes paying less than the full amount, a moratorium on payment of your debts, a transfer or property to satisfy some or all of a debt, or periodic payments. You just have to make sure your income is under the specified maximum, that your debts are less than the maximum amount, that you are insolvent, and that you have not filed bankruptcy or a Part X Agreement within the past 10 years.
A Part X Agreement resembles bankruptcy in a lot of ways. Your creditors have to have a formal meeting and vote upon your proposal regarding how to resolve unsecured debts. Unsecured debts are those that are not secured by some sort of collateral such as a car. You have to have a vote of 75% in order for a Part X Agreement to take effect.
Another option includes refinancing your mortgage so that you can borrow from the equity and use that money to pay off your debts. However, this may not work for someone who has bad credit. The bank may decide not to refinance the mortgage. There is a chance, though, if mortgage payments have been made on time for the life of the loan that they bank will grant refinancing. It is always worth a try, but now you know that you do have other options if this is something that doesn't work out for you or you do not own a home that you can refinance.
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