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Debt Help Options
Question: My husband and I have been drowning in our debt due to medical costs and maxed credit cards. We were forced to use the cards to pay for our monthly prescriptions. We have recently increased our income but the past few years have put us in a delinquent repayment situation. We are losing ground fast. What are you suggestions regarding consolidation, settlement or BK13? We do not meet theBK7 means test.
Answer: I am sorry to hear about your situation. Medical debt can accumulate quickly and become overwhelming real fast. You are by no means alone, and you should know that there are numerous types of assistance available to people in your situation. Given your current situation, I can think of a few options that might help you. I will explain each one of these options together with their pros and cons, below:
Debt Consolidation Loan: If you own a home, a secured debt consolidation loan may be right for you. This type of loan is essentially a home equity loan which is used to pay off your other creditors. Secured consolidation loans help many consumers by consolidating all of their debts into a single monthly payment with a lower interest rate and payment amount. Also, be careful before you borrow money against your home to pay off credit cards and other unsecured loans; you will be converting what was previously unsecured debt into secured debt. This could cause you problems down the road if for some reason you are unable to make your payments, or if life circumstances force you to file bankruptcy, as you may not be able to discharge the secured debt as you would unsecured debt. However, secured debt consolidation loans work for many people, so this is an option to consider carefully–the Bills.com Savings Center is a great resource to help you find a lender for this type of loan. Bills.com makes it easy to compare mortgage offers
and different loan types. Please visit the loan page and find a loan that meets your needs at: http://www.bills.com/mortage/refinance.
Negotiated Debt Settlement: Rather than making monthly payments to your creditors, these programs negotiate lump sum settlements with your creditors, frequently reducing your debts by 50% to 60% of your principal balances. These programs usually take only 2-3 years to complete, so this is a good option for many people to rid themselves of debt in a relatively speedy manner. In many cases they can also reduce your monthly payment toward your debt. There is one major drawback to debt settlement programs, though–they will significantly damage your credit while in the program and for at least a year or two afterwards. However, if you are currently unable to afford to pay your creditors, the hit to your credit may be worth the benefit of ridding yourself of credit card debt. Because of your financial difficulties, you may want to stop focusing on the importance of your credit score. Although you may have a good credit score, because of your low income and large debt amount, most lenders will likely see you as a high risk borrower, and may not be willing to extend you credit, so your actual credit rating may not good as you believe. A debt settlement program is probably the fastest way to resolve you debts, and once you repay your debts, you should be able to rebuild your
credit score through careful management of your credit accounts.
Chapter 13 Bankruptcy: A Chapter 13 bankruptcy, also called a “wage-earner’s bankruptcy,” allows you to propose a plan to repay creditors over time–usually five years. Your monthly payment amount will be based on your monthly disposable income as defined by the bankruptcy code. After you have made payments to your creditors for five years, any remaining unsecured debts will be discharged. Chapter 13 is commonly used by debtors whose assets exceed the exemptions offered by state law. It is also used by many consumer debtors who do not qualify for Chapter 7 relief under the means test, which went into effect in 2005 with the Bankruptcy Reform Act. If you are considering filing bankruptcy, you should consult with an attorney to find out if bankruptcy will benefit your financial situation. I encourage you to read more about bankruptcy at the Bills.com Bankruptcy Information page at http://www.bills.com/bankruptcy.
Hopefully, one of the several options I have described above may be able to help you. I encourage you to explore the Bills.com website, http://www.bills.com/debthelp to read more about these and other options available to you.
I hope this information helps you Find. Learn. Save.
Good Luck,
Bill
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Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!
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