Debt consolidation is often a good choice when you think your only choice is bankruptcy. You may very well qualify!
When you are enrolled in debt consolidation, your creditors will have the option of reducing interest rates, forgoing late payments and accepting minimum monthly payments from you. They do this on the good faith that you'll make timely monthly payments to them. They often won't make calls to you and will not threaten you with collectors or courts.
Creditors often agree to do this because they want at least some of their money owed. They realize if you are seeking out debt consolidation, you may be also considering Chapter 7 in which they may get paid nothing. Therefore, it's in their best interest to take what you can afford to give them each month.
When you're behind on your bill payments, you can get calls at all time of the day and night from collectors. Sometimes you can nicely explain your situation to your creditor and all will be understood and handled accordingly. However, many debt settlement companies are not willing to work with debtors. It seems as if some have a brutal reputation to live up to and go to any length to make the debtor's life miserable.
Creditors do have the right to contact those who owe them money. However, they cannot harass them. According to the law, using foul language or calling constantly with the intent to annoy the debtor into making payments is considered harassment. Calling at odd hours, calling work after they have been advised not to do so or calling friends and family members without permission is also considered harassment. In addition, if the debtor asks only to be notified of the debt by mail, the collector can no longer make a call to the debtor, in most states.
Debts can come from vehicle payments, home mortgages and credit card bills. All of these debts can be discharged in bankruptcy. Debts are divided into secured and unsecured debts in bankruptcy.
Secured Debts
A secured loan in which the borrower pledges an asset(s) such as a vehicle, home or property as collateral is put towards the loan. The assets then become secured debt that in the event of a borrower defaulting on loan payments the assets are used as collateral and sold to pay off debts owed.
Unsecured Debt
Debts that are unsecured are those in which in the risk of default, money cannot be secured through assets. Unsecured debts are bills for credit cards, utility bills or cellular phone bills, etc. Unlike in the situation of a home mortgage, credit cards cannot be taken and sold to replenish the money lost in payment default.
Both unsecured and secured debts can be discharged in chapter 7 or consolidated and paid off in chapter 13 of bankruptcy. Debts such as those involved in alimony, child support and student loans cannot be discharged and must be paid by the debtor. Having these and other bills consolidated through a debt consolidation service is helpful in making payments. Interest rates can be lowered or removed with this method. Credit harassment will cease and your bills will be gathered into a single monthly payment that is based upon your budget. You are able to take back control of your finances in this way and do so without credit report blemishes like those involved in bankruptcy.
If you file for bankruptcy, the calls should stop within a week. If they don't stop, the collector can be fined for harassment.
