Debt settlement and bankruptcy are both valid debt relief options that individuals and businesses can rely on to decrease or consolidate their debts.
But looking at each option more deeply, bankruptcy is the process that lets businesses or individuals to repay some or all of their debts. The process of bankruptcy is meant to give the debtor another chance to make his or her credit history right after suffering financial hiccups.
On the other hand debt settlement, which is also referred to as arbitration of debts, is the process by which the debtor and the creditor come to a mutual agreement to reduce the amount of debt owed. This option is terms as a very dangerous one because the creditors involved will end up settling for way less than what they should have been paid.
Truth of the matter is, both bankruptcy and debt settlement are very appealing to debtors. However financialadvisors advice individuals who have been struggling with debt to seek possible debt settlement first, this is because bankruptcy might have negative effects on ones credit.
Debt Consolidation After Bankruptcy
Need to climb out of that hole called debt?
Then debt consolidation is your only ladder. Having said that, most individuals ask how one can handle debt consolidation in case ofbankruptcy. Read on for a detailed explanation of how to handle your consolidation loan (or loans) after going through bankruptcy.
For starters, bankruptcy is a very tricky situation to be caught up in financially. But when you are a victim, it is advisable that you undergo credit counseling. And because the laws governing consolidation loans differ depending on where you live, it is advisable that you seek legal assistance when filing for bankruptcy. And the best way to do that is to find a bankruptcy attorney who will advise you on the best type of bankruptcy to file for and how to handle a debt consolidation loan.
Why A Debt Consolidation Loan?
There are numerous advantages that are associated with taking debt consolidation loans. One of the major advantages of consolidation loans is the fact that they will wipe out all your debts at once and help you rebuild your credit score. For instance, if you are overwhelmed with 10 different debt accounts, this will be cumbersome and time consuming for you because you will have to deal with multiple payments and multiple interest rates all at once. But with debt consolidation loans, you can combine those 10 accounts into one account, which will be more manageable and easier to pay.
How To Get A Debt Consolidation Loan After Bankruptcy Discharge
If you have just filed for bankruptcy, it might surprise you to know that you can quickly pickup the pieces, buy a new home, refinance your mortgage, keep track of your expenses and so much more. Filing for bankruptcy is not the end of your lifebecause believe it or not, there is no actual law that discourages refinancing after filing.
Follow these few steps to the letter and have your loan ready in no time:
• Get your discharge almost immediately
The number one rule is to ensure that your bankruptcy does not sit on your credit or on your books longer than it should. Also, ensure that all your bankruptcy duties are completedas failure to fulfill all your obligations will have a negative effect on your credit report.
• Be done with credit counselling
Credit counselling classes should be your next important thing on your to-do list. And because these classes are part and parcel of your bankruptcy duties, you must take full advantage of them. Talk to your credit advisor and ask him to help you understand where you went wrong so that you can learn from your mistakes. Also, ensure that you learnessential budgeting skills, how to use your credits properly and how to manage your expenses.
• Save, save and save
After bankruptcy discharge, you should consider saving as much money as possible before you begin rebuilding your credit score. By so doing, you will keep track of your cash flow and you will know when it’s time to cut back on your spending.
• Make all payments
Regardless of your situation, it is important that you repair your tainted credit. Ensure that you make all payments because defaulting on payments will reflect negatively on your credit history. Always pay your bills in time.
• Reestablish your credit
Once you have saved some good money, it is time for you to begin rebuilding that poor credit. From a financial advisor’s point of view, you can start rebuilding your bad credit with secured credit cards as well as with unsecured credit cards.
• Be careful with your credit
Always be mindful of your credit limit and ensure than you do not use more than 3o% of that limit. On a monthly basis, pay for small bills, wait for the statement to run and then pay off the balances in full. By so doing, you will be able to keep your monthly balances low and reduce the chances of accrued interest rates.
• Take on available loans
After restoring your credit score, you can start taking on loans as long as you have some savings. Note that your bankruptcy stays on your credit report for close to a decade. And even after the 10 years, you should inform your lenders or loaners that you have declared bankruptcy at some point in life.
And although disclosing that information might affect your chances with lenders, there are personal loan lenders who focus mainly on individuals who have declared bankruptcy before. Fact is, any individual who has declared bankruptcy is a good candidate for a debt consolidation loan.
Good news is, at the end of the day, you will have a fresh start, and your credit rating which was almost dead will start to pick up and within no time, you will be perfect for a debt consolidation loan.