Finding a solution to your debt problems is rarely straightforward. Companies that advertise services that get you out of debt often focus on just one solution, which may not always be the right one for your situation. While debt consolidation and bankruptcy are two common ways of getting out of debt, they work very differently. Below is a basic overview of each.
How Does Debt Consolidation Work?
Debt consolidation is one of the most straightforward ways of paying off your debt. Simply put, you apply for an unsecured loan and use it to pay off all other unsecured debt that you have. The objective is to lower the amount of interest you pay on your debt. That way, more of your money will go towards paying off your debt.
In most cases, debt consolidation loans are considered unsecured personal loans. If you’re looking to consolidate your debts at the lowest possible interest rate, you may decide to get a home equity loan instead. However, this is a secured loan, which means that the lender will be able to foreclose on your home should you fail to make your payments.
What is Bankruptcy?
Bankruptcy is another common way of eliminating debt. There are two main types of bankruptcy, Chapter 7, often referred to liquidation bankruptcy, and Chapter 13 bankruptcy, often called reorganization bankruptcy.
In both cases, filing for bankruptcy will stop debt collection attempts from creditors and lenders and a court-appointed trustee will be assigned to manage your case. Contact an experienced bankruptcy lawyer for assistance during the process, as filing for bankruptcy can be quite complex.
A Chapter 7 bankruptcy will erase most types of debts. However, there are some exceptions, such as student loans, debt created through fraud, back taxes, and child support. You’ll need to forfeit any property that isn’t subject to exemptions to erase your deficits. Not everyone qualifies for a Chapter 7 bankruptcy. Reasons for this include earning more than the median income in your state or failing to attend credit counseling.
Chapter 13 bankruptcy lets you reorganize your debt without having to forfeit any property. Instead, you’ll need to follow a repayment plan for a period that ranges between three and five years. Some debts, such as taxes and child support payments, will be repaid in priority, followed by other secured, then unsecured debts.
Filing for Bankruptcy in Louisiana
If you’re considering filing for bankruptcy in Louisiana, be sure to seek the assistance of a seasoned lawyer with experience handling personal bankruptcies. E. Orum Young Law Offices has filed over 20,000 bankruptcies, the most in Northeast Louisiana. Our team of bankruptcy attorneys can analyze your financial situation and advise you on the most favorable course of action. Contact us today for a free case evaluation. Our Trial Guarantee ensures that we will take your case to trial per your request.